Equitable mortgage
Arif Iqbal
(Querist) 17 May 2023
This query is : Resolved
A property has been leased out for 10 years.
Two conditions of the lease deed are as follows:
a) When the Lessee/Second Party for the purpose of establishing or developing the industry on the demised property seeks to obtain loan from a bank or other Financial Institution by mortgaging his Lease-hold interest on the demised property in favor of such Bank or Institution, permission will be given by the Lesson/First Party to this affect provided such mortgage does not affect the rights and powers of Lessor/First Party under this Deed.
b) In case of mortgage of such land to the Bank/Financial Institutions by the Entrepreneurs/Industrial houses (i.e. Lessee/Second Party) with prior permission of the concern authority under industries Commerce Department. (i.e. Lessor/First Party) for purpose of taking loan/Financial Assistance the bank/Financial Institutions will have a limited right to utilize the land till expiry of the lease period on failure of the Entrepreneurs/Industrial houses to settle the loan/Financial Assistance.
Now my question is if the Lessor gives NOC, can the Lessee create EM in favour of Bank. If yes then if it is enforceable under trhe SARFAESI?
T. Kalaiselvan, Advocate
(Expert) 18 May 2023
Recently, vide judgment dated 23 December 2021, the Punjab and Haryana High Court (High Court) in the case of M/s Pal Alloys & Metal India Private Limited and others v. Allahabad Bank and others1 , has held that section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) (as amended by ‘Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016’ (Amendment Act), with effect from 1 September 2016), merely restricts the secured creditor from effecting any further transfer or assignment of the secured asset, and does not extinguish the mortgagor’s right of redemption even upon the acceptance of the highest bid by an auction purchaser, which right would continue till issuance of sale certificate in favour of the purchaser.
