Karnataka High Court allows banks to sell mortgaged land in case of loan repayment default by allottees.

The Karnataka High Court has made a significant ruling regarding land grants and mortgage enforcement. In a recent case, the court held that if the state government allows land granted to be mortgaged to raise a loan for constructing a house, the bank can sell the property to recover the loan in case of default, despite the non-alienation clause in the grant.

The case involved Poornima, who received a free site under the Ashraya scheme, a government program aimed at providing housing for poor persons. She mortgaged the property to raise a loan from the South Canara District Central Co-operative Bank Ltd but defaulted on repayment. The bank sought to enforce the mortgage by selling the property, but the authorities refused permission due to a 25-year restriction on alienating the land.

The court intervened, stating that the conditions of the grant and Rule 9 of the Karnataka Land Grant Rules, 1969, permitted the mortgage. The court noted that the allotment under the Ashraya scheme is made to provide poor persons with a place to construct a house and live, and the 25-year restriction is intended to prevent speculative activities.

- Mortgage Enforcement: The bank can enforce the mortgage and sell the property to recover the loan in case of default.

- Non-Alienation Clause: The 25-year restriction on alienating the land does not apply when the allottee mortgages the property to raise a loan from a Co-operative Bank.

- Purpose of Allotment: The Ashraya scheme aims to provide housing for poor persons, and the court's decision ensures that the purpose is not defeated by speculative activities.

The court's decision provides clarity on the rights of banks and allottees in cases of default, ensuring that lenders are not left without remedy. with the need to ensure that banks can recover their loans.