A bank has the right under the Securitization Act, 2002 to seize the asset mortgaged on failure to pay the dues. While doing so, it need not be detained by the fact that the mortgaged property is owned by the borrower only in his fiduciary capacity.
The Gujarat High Court in Central Bank of India vs Prabhuram Mansang Thakkar did not agree with the contention of the respondent that even though the property was registered in the name of his son, the borrower, the funds used in acquiring the property were his.
In other words, he had purchased the property in the name of his son and, therefore, his son was not the actual owner. He went on to contend that it would be a grave injustice if he were evicted from the property by the bank for non-payment of dues by his son.
The court, while allowing the appeal, held that the Securitization Act had the objective of securing speedy recovery of dues and a bank cannot be detained from collecting its dues through coercive proceedings by diversionary tactics and red-herrings such as actual source of funding of the mortgaged asset.
(The author is a New Delhi-based chartered accountant.)