MORTGAGE ENFORCEMENT VS. ALIENATION RESTRICTIONS UNDER KARNATAKA LAND GRANT RULES

This Judgment was delivered by a Single Bench of the High Court of Karnataka comprising Hon’ble Justice M. Nagaprasanna on November 5, 2024, in the Case of South Canara District Central Co-operative Bank Ltd. v. State of Karnataka, Writ Petition No. 30302/2024. The South Canara District Central Co-operative Bank Ltd. (Petitioner) has filed a Writ Petition against the State of Karnataka and other Respondents. In this case, the Petitioner challenged the Tahsildar’s refusal to permit the sale of mortgaged property due to the 25-year alienation restriction under the Karnataka Land Grant Rules, 1969. The dispute centers on whether the restriction prevents the enforcement of the mortgage.

FACTS

In this case, the Respondent No.5 was allotted the land under the Karnataka Land Grant Rules, 1969 which was subject to certain restrictions; one of them includes a 25-year prohibition on Alienation. The grant permitted the property to be mortgaged to cooperative banks or institutions for raising loans. Respondent No.5 mortgaged the granted land to the Petitioner, South Canara District Central Co-operative Bank Ltd., to secure a loan. Upon default in repayment, the Petitioner sought to enforce the mortgage by selling the mortgaged property. The Tahsildar (Respondent No.4) rejected the Petitioner’s request for permission to sell and mentioned the 25-year restriction on Alienation.

ISSUES

1. Whether the restriction on Alienation under the grant and Rule 9 of the Karnataka Land Grant Rules, 1969, bars the Petitioner from selling the property to recover its dues.

2. Whether the mortgage of the property for securing a loan amounts to Alienation.

CONTENTIONS BY BOTH PARTIES

PETITIONER CONTENTIONS

Petitioner argued that the mortgage to a cooperative bank is not considered Alienation under Rule 9, and he claimed that the bank has the right to enforce the mortgage and recover its dues.

RESPONDENT CONTENTIONS

Respondent (State) contended that the 25-year restriction prohibits the sale of the property, even in cases of default, as the grant is meant for the allottee’s benefit and highlighted the exception allowing mortgage only to raise loans for development and not for subsequent sale of the property.

DECISION BY KARNATAKA HIGH COURT

The High Court of Karnataka quashed the endorsement issued by the Tahsildar, stating that the Petitioner’s (the Bank’s) request to sell the mortgaged property was impermissible due to the 25-year alienation restriction. The Hon’ble Court clarified that, the Karnataka Land Grant Rules, 1969, allowed the mortgaging of land granted under the Ashraya scheme to Co-operative Banks, and such a mortgage does not amount to Alienation and the Bank is entitled to enforce the mortgage and sell the property for loan recovery, despite the 25-year restriction on alienation, as the mortgage falls within permissible exceptions. The Writ Petition was allowed, and the impugned endorsement was set aside.

BADDAM PARICHAYA REDDY

ASSOCIATE

THE INDIAN LAWYER AND ALLIED SERVICES