Lawstreet Journal

Will Charge of Bank on a Leasehold Plot Mortgaged as Loan Security Have Priority Over Third Party Charges? Madhya Pradesh High Court Answers the Question [READ ORDER]

Lawstreet Journal 6 Nov 2020 11:07pm

Image courtesy: Lawstreet Journal Judiciary Will Charge of Bank on a Leasehold Plot Mortgaged as Loan Security Have Priority Over Third Party Charges? Madhya Pradesh High Court Answers the Question [READ ORDER]

The Madhya Pradesh High Court in the case of Bank of Baroda v. State of Madhya Pradesh has held that a charge of Bank on the leasehold plot mortgaged as security towards the loan will have priority over other charges of the third party, including the State. 

This observation was made by the court in reference to the SARFAESI Act 2002 and Recovery of Debts and Bankruptcy Act, 1993.

 M/s Anmol Agro Pvt. Ltd. had availed the credit facilities from the Bank and for securing the repayment thereof, it sought to create a mortgage of various immovable proprieties in favor of the Bank also including leasehold rights of the property 

 Upon failure of the firm to repay the loan, the Bank auctioned the property and sought transfer of its leasehold rights in favor of the bidder.

 The District Industrial Centre then refused such permission to the bank on the ground that M/s Anmol Agro Pvt. Ltd. has not repaid the subsidy amount received by it from the Department and has not paid lease rent. 

The Bank then approached the High Court seeking transfer of lease-hold right in favor of auction purchaser on the ground that the mortgage deed was executed after obtaining NOC and that the auction proceedings were under the SARFAESI Act, 2002 for recovery of outstanding dues against the Bank.

 The District Industrial Centre argued that as per stipulation in Clause 41 the State Government has the first charge over and above any financial institution. 

It further urged that even while granting NOC for creating… Continue Reading...


Tagged: Madhya Pradesh High Court  
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