Home truths

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (54 of 2002) enables a bank to take possession of assets pledged as security if borrowers do not repay the loan even after notice is served. A bank sought possession of the “secured asset” — a premise occupied by a bonafide tenant — and called upon the tenant to look for alternative accommodation.The Karnataka High Court held that the Act does not entitle the bank to throw out a lawfully inducted tenant. The court directed the bank to take symbolic possession of the property, and ruled that for taking actual possession the bank has to proceed in accordance with the provisions of the Transfer of Property Act (Hutchison Essar South Ltd vs Union Bank of India).

Food for thought

The Kerala High Court has held that electricity tariff applicable to a commercial establishment cannot be imposed on a canteen run by an educational institution, as profit-making is not the objective of the canteen. The Electricity Board contended that as in this particular case the canteen is run through a contractor, commercial charges should be applicable. Rejecting the submission, the court held that so long as the canteen meets the needs of students and college staff, the nature and character of the canteen will not change simply because it is run by a contractor (NSS Hindu College Changanacherry vs Chief Engineer and others).

Shock therapy

A company bought an immovable property, which was certified to be free of all encumbrance, by public auction. When it applied for an electricity connection, however, the electricity board asked it to first clear arrears amounting to Rs 17 lakh. The company contended that it was not bound to pay the dues of the erstwhile owners. Agreeing, the Madras High Court quashed the notice for such payment. Holding that the auction purchaser and the previous owner are two different entities and that the present owner is in no way connected with the liabilities of the previous one, the court directed the board to give the electricity connection (M/s Leitner Shriram Manufacturing Ltd vs Chairman, Tamil Nadu Electricity Board and another).

SOLON