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Sunday, 30 January 2011

MUMBAI High Court say Banks can't use cops to evict defaulters

MUMBAI: In a landmark ruling that will prevent banks from forcefully dispossessing a flat owner who has mortgaged the property, Bombay HC has ruled that secured creditors, like banks, cannot unilaterally use police force to evict the defaulting borrower. The use of police force can only be authorized by a magistrate, a bench held last week.

In a case where the State Bank of India had taken possession of residential premises in Malabar Hill here, the bench said, "Our legal system is governed by the rule of law. If the borrower does not hand over possession voluntarily after a notice has been served on him, the only remedy open to the bank is to seek an appropriate order from the chief metropolitan magistrate or district magistrate," said the judges.

The SBI had, last July, served a possession notice to a private company Clarity Gold, which was received by its accounts manager. The company said 20 policemen had barged in, along with bank officers, to take forcible possession of the flat without court orders and after an invalid notice. But SBI denied the possession was forcibly taken. The HC upheld the bank notice as valid and ruled that the SBI did not act unlawfully, but remanded the matter to a tribunal.

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