Mortgaged property to Co-operative banks are implicitly enforceable even on restriction to alienation of 25 years under the Ashraya Scheme, held High Court of Karnataka
South Canara District Central Co-operative Bank Ltd Vs The State of Karnataka and others
WP No. 25040 of 2023
Justice M.I. Arun
As per the Karnataka Land Grant Rules, 1969, properties or land granted to economically weaker sections under the Ashraya Scheme of the state are subject to a 25-year restriction on alienation to ensure that beneficiaries do not misuse the grant for other purposes. However, Rule 9 permits beneficiaries to mortgage the property to co-operative banks for loans to construct houses. A dispute arose regarding whether the bank was entitled to enforce the mortgage and sell the property in the event of default, despite the restriction on alienation. The Karnataka High Court held that when the law permits a mortgage, it implicitly authorizes the bank to enforce it (recover the loan) if the borrower defaults. While the State is free to take legal action or penalize the beneficiary for misuse of the grant under the Ashraya Scheme, it cannot deny the bank permission to sell the mortgaged property.
Decided on 05.11.2024