The Bombay High Court has dismissed a petition by Central Bank of India seeking to change the reservation of two mortgaged plots in Mumbai's Chandivli area from recreation grounds (RGs) to allow their sale. The court termed the plea "completely meritless," noting that the bank had failed to verify the property's status before accepting it as collateral.
Bank's Loan Recovery Efforts Halted by RG Reservation
Central Bank of India had sanctioned a loan to a private company, which later defaulted. The bank initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and obtained physical possession of the two plots, cumulatively measuring 1,400 square meters, in 2018. However, when the bank attempted to auction the properties in September 2018, it discovered they were reserved as recreation grounds under the city's Development Plan (DP), preventing any sale.
The bank then approached the Bombay High Court in 2019, seeking directions to drop the RG reservation. The petition was opposed by the Brihanmumbai Municipal Corporation (BMC), represented by counsel Dhruti Kapadia, who argued that the reservation could not be altered at the behest of a single party.
Court's Blunt Rejection
In a June 10 order, Justices Bharti Dangre and Manjusha Deshpande dismissed the bank's plea on two counts. First, the petition was filed solely because the bank could not sell the mortgaged plots due to the RG reservation. Second, "development plans cannot be changed and modified at the whims and fancies of any particular party at any particular point of time," the judges observed.
The court also noted that no lawyer appeared for the bank during the hearing. The BMC had filed an affidavit in 2019 opposing the petition, but it was "inadvertently" not placed on record, the HC remarked.
BMC's Position: Rigorous Process Required
The BMC cited the Maharashtra Regional and Town Planning Act, arguing that the Draft DP 2034 was prepared after a rigorous process involving public suggestions and objections. Any modifications to the reservation would require exceptional circumstances and a similar rigorous process, the civic body stated.
The court agreed, emphasizing that the bank should have exercised caution before accepting the mortgage. "The bank ought to have been careful before accepting the mortgage… and in ensuring that the property does not fall within any reservation zone, so that the bank could not be in a position to realise its amount if at all there was a failure on part of the borrower and the guarantors to discharge its obligation," the HC said.
Impact on Loan Recovery
The dismissal leaves Central Bank of India with limited options to recover the loan amount from the defaulting borrower and guarantors. The Chandivli area, where the plots are located, has a dense population and scarce open grounds, making the RG reservation particularly significant for public use.
