Bank Can’t Attach Grantee’s Land Under Karnataka SC/ST (Prohibition Of Transfer Of Certain Lands) Act For Loan Default By GPA Holder: High Court

The Karnataka High Court has held that a bank cannot enforce a decree for attachment of property against a land grantee under Karnataka Schedule Caste and Schedule Tribes (Prohibition of Transfer of Certain Lands) Act, for loan default made by the Cooperative Society holding the general power of attorney for such land.

A single judge bench of Justice Suraj Govindaraj said,

“When a grantee has not received any benefit of the loan, the question of there being any privity of contract between the Bank and the grantee would not arise…The Society not having any right in the property has mortgaged the property to the Bank and the Bank has accepted the said mortgage knowing fully well that the Society is not the owner and does not have any right, title or interest.“

It held thus while dismissing a petition filed by the Bangalore Rural and Ramanagara District Central Co-operative Bank Ltd, questioning the order of the Assistant Commissioner which held that award passed in favour of the bank by the Joint Registrar of Co-operative Societies was not binding on the grantee Muniyamma.

Javahar House Building Co-operative Society Ltd had availed a loan of Rs.2 crores from the bank to purchase lands for the formation of layouts. On default of repayment of the loan, the Bank raised a dispute before the Joint Registrar of Co-operative Societies and an award came to be passed against the Society. Joint Registrar later permitted execution of the award by attachment of the properties as regards which the Society had entered into various agreements of sale.

Muniyamma, the grantee, then approached the Assistant Commissioner which passed the impugned order and held that the transaction between the Society and the grantee was an independent transaction, and the transaction between the Bank and Society was an independent transaction. Thus, the award passed in favour of the Bank would not in any manner affect the claim of grantee and no attachment of land could be made.

The Bank contended that it would have all authority to proceed against the property, in case of loan default, even if it is granted under PTCL Act.

On the other hand, counsel for the legal heirs of the grantee contended that there is no transaction which has been entered into by the grantee or legal heirs in favour of the Society much less the Bank.

Amicus curiae submitted that as no prior permission was obtained from the Deputy Commissioner under the Act, the execution of agreement of sale between grantee and society itself is a non est. Moreover, the agreement of sale has been executed within the period of prohibition of 15 years.

Referring to the provisions of the Act, the court noted a grantee of the land though is prohibited from alienating the property or transferring the property, such grantee is not prohibited from raising a loan on the said property from an entity, including a bank. In the event of non-payment, a decree or award can be enforced. In such cases provision prohibiting sale/transfer of granted land would not apply.

Following which it observed “In the present cases, the grantee has not borrowed any loan from an organisation qualifying the requirement of the Bank under Subsection (1) or Section 3. The grantee had only entered into an agreement of sale with the Society, and it is the Society who has allegedly mortgaged the property in favour of the Bank at the time of borrowing monies from the Bank.”

Since the grantee is not a party to the agreement between bank and society, it said, “When a grantee has not received any benefit of the loan, the question of there being any privity of contract between the Bank and the grantee would not arise…The Assistant Commissioner and Deputy Commissioner under Section 5 and 5A of the PTCL Act, has properly exercised power by discharging any alleged encumbrance created by the Society as regard the land belonging to the grantee and restored the property without any encumbrance to the grantee is proper and correct, does not suffer from any infirmity requiring interference at the hands of this court.”

Accordingly it dismissed the petition.

Appearance: Advocate Somashekar, for petitioner,

AGA Savithramma, for R1, 5 and 7.

Advocate R. Vijaya Kumar, for R2.

Advocate Praveen S.L, for Advocate Ananda K, for R3.

Advocate Archana K.M for R6.

Citation No: 2024 LiveLaw (Kar) 348

Case Title: THE BANGALORE, BANGALORE RURAL AND RAMANAGARA DISTRICT CENTRAL CO-OPERATIVE BANK LTD AND Assistant Commissioner & Others

Case No: WRIT PETITION NO. 29196 OF 2014 (SCST) C/W WRIT PETITION NO. 17857 OF 2015 (SCST) WRIT PETITION NO. 17858 OF 2015

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