LI Network
Published on: February 17, 2024 at 21:31 IST
The division bench, comprising Justices Sanjiv Khanna and Dipankar Datta, declared the NGT’s stance as both unacceptable and legally unsustainable.
The case involved Punjab National Bank extending a loan to a borrower, with a property in Chanakya Place (Property No. 33 Block A3) mortgaged to secure the loan.
The Chanakya Place Residents Welfare Association raised concerns about several nearby factories operating without environmental clearance and sought closure of these units. The NGT, in response, issued directives to cease illegal activities, including workshops, servicing, repairing, denting, painting, and junk dealing, within a month.
Consequently, the mortgaged premises were sealed. The bank, in response, filed an application stating that the property had been auctioned to a new buyer who committed to refraining from any unlawful activities. The bank sought the de-sealing of the premises based on this change in ownership.
However, the NGT rejected the bank’s plea, asserting that the loan was granted for an illegal commercial activity in the residential area of Chanakya Place in New Delhi.
The NGT contended that the bank, without proper inquiry, provided financial support to a person engaging in commercial/industrial activities in a residential space, which is impermissible by law.
The NGT labeled the bank as an abettor of the illegal activities and suggested that the bank should be proceeded against for its involvement.
Challenging this decision, the bank approached the Supreme Court.
In its ruling, the Supreme Court emphasized that the auction purchaser must provide an undertaking to conduct business and commercial activities in compliance with the law.
The Court allowed the bank to transfer the property and, in doing so, permitted the removal of any existing seals. The purchaser is required to submit the undertaking to the Tribunal’s Registrar within six weeks, and the Court emphasized that the purchaser is bound by this commitment.
Additionally, the Supreme Court cautioned the NGT against passing similar orders without adequate reasoning, urging the tribunal to consider the specifics of each case before holding banks or financial institutions responsible for the actions of borrowers.