HC should not stall recovery proceeding

When disputes over mortgaged land are pending before the debt recovery tribunal (DRT) a high court shall not pass orders lifting encumbrances on the land or part of it, the Supreme Court stated in the case, Maharaj Educational Trust vs SGS Constructions & Development Ltd. The trust had taken a loan from HUDCO but it defaulted in repayment. The housing development corporation moved the tribunal seeking sale of part of the land invoking the Securitisation (‘SARFAESI’) Act. A builder who had an agreement with the trust objected to it and moved the Allahabad High Court asking it to demarcate certain areas as unencumbered. The high court acceded to the request. The trust and HUDCO appealed to the Supreme Court. It quashed the high court order stating that the high court could not have adjudicated on the question of rights over the property. The judgment said that “it was not open to the high court to enter into the question which of the property is unencumbered and to be sold in realisation of the debt. It is the outlook of the recovery officer of the tribunal where the proceedings are pending.”