The lender’s right is always protected during the redevelopment period, the Bombay High Court has observed while laying down guidelines for the housing society, developer and lender when a flat is mortgaged with the lender in view of redevelopment.
A division bench of Justices Gautam Patel and Neela Gokhale recently said that the court does not require the lender bank to execute a fresh mortgage deed and therefore no direction can be issued, compelling it to execute a fresh mortgage.
The HC was hearing a petition filed by Jaylon Impex and its three directors – Jai, Karan and Pushpa Kaushik – who had a flat in Nugget Co-operative Housing Society Ltd in Khar, which was to be redeveloped. As the flat was mortgaged with Punjab National Bank (PNB), the bank’s NOC was required for redevelopment. Of the 32 flats, NOC was obtained for 30 flats.
In 2010, PNB extended credit facilities to Jaylon for Rs 24 crore; this was secured by an equitable mortgage of flat No. 9 in the housing society. By 2018, Jaylon’s account was declared a non-performing asset (NPA). PNB initiated recovery proceedings before the debt recovery tribunal.
The society received a notice from the BMC in August 2020 stating that the building had become “old, dilapidated, dangerous and unfit for human habitation” and was directed to take immediate steps. A structural audit report stated that there was extensive damage, including fractured plumbing, vegetation growth due to leakage, cracked columns and more. The society, in its special meeting on Sept 29, 2021, appointed Aum Lifespace developers for redevelopment.
Society Was Refused For NOC By PNB
As the flat was mortgaged with PNB, they approached the bank for NOC, which was refused, apprehending that its security would be lost, even if transitorily, during redevelopment. It also said that without an entirely fresh set of documentation such a permission is not contemplated in law. Further it expressed apprehension that it would be impossible to create a fresh mortgage of a redeveloped residential unit that is yet to be brought into existence.
The petitioners assured the bank that its mortgage over the flat is continuing and shall further continue even in the new allotted flat. They even said that the developer has agreed to pay them Rs29,98,200 as hardship compensation, which they would credit directly into Jaylon’s account with PNB.
The court said there would be a need to ensure that the security in favour of PNB continues unbroken not only for the old flat but for the newly redeveloped flat as well.
