SARFAESI not meant to override rent control laws

By Vivek Vashi, Shreya Ramesh, Bharucha & Partners
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In a judgment delivered on 20 January in Vishal N Kalsaria v Bank of India and connected civil appeals, the Supreme Court considered the clash between the scope and application of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), and the Maharashtra Rent Control Act, 1999, and/or other state rent laws.

Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Shreya Ramesh is an associate.
Vivek Vashi is the mainstay of the litigation team at Bharucha & Partners, where Shreya Ramesh is an associate.

The difficulty arose since the SARFAESI Act, enacted with the express object of providing banks with means to recover their security interest and collateral assets from debtors, contains a non obstante clause at section 35 which gives the provisions of the SARFAESI Act an overriding effect over any inconsistent provisions contained in any other act in force.

Misplaced reliance

In the instant case, the chief metropolitan magistrate and the high court, through a misplaced reliance on the Supreme Court’s judgment in Harshad Govardhan Sondagar v International Assets Reconstruction Co Ltd (2014), held that unless tenants demonstrate proof of execution of a registered instrument of tenancy in their favour, they are not protected under the rent control laws.

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