HC grants bank rights over mortgaged property under acquisition

The high court has ruled that banks can now be considered as “person interested” under Section 64 of the new Land Acquisition Act 2013, if the property mortgaged is acquired under the act.

The petitioner bank stated that a borrower had mortgaged certain land in Hiriyur taluk in Chitradurga as security to the loan availed.

When the mortgaged land was acquired for the railway project, the bank submitted representations to the Special Land Acquisition Officer (SLAO) requesting to consider its claim.

The bank also requested the SLAO to remit the compensation amount to the loan account of the borrower, as the loan has been declared as a non-performing asset (NPA).

The bank moved the high court when the SLAO did not consider the representations.

The court noted that the amended provisions of Section 73 of the Transfer of Property Act, 1882 becomes invokable when a mortgaged property is acquired.

It said Section 73, sub sections (2) and (3), is an instance of incorporation application of the ‘doctrine of substituted security’, an applied idea to protect the interest of secured creditors.

Process of law

The court further said that if by a process of law or by a compelling situation sanctioned by law, the security given is changed into something other than the property, the mortgagee gets rights over it.

Justice Krishna Dixit said that the SLAO ought to have referred the dispute to the jurisdictional court, for adjudication since the mortgage is shifted to the compensation in lieu of the mortgaged property.

The court has now directed the Special Land Acquisition Officer, Tumakuru-Chitradurga-Davanagere New Direct Railway Line Project to refer the bank’s claim to 1st Additional District Court, Chitradurga, with all necessary papers.