Delhi High Court Rules SC/ST Act Inapplicable to Mortgaged Bank Properties

The Delhi High Court has clarified that the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act, 1989 cannot be invoked to prevent a bank from enforcing its lawful mortgage rights over a property belonging to a member of the Scheduled Castes (SC) or Scheduled Tribes (ST) community.

 

The Court observed that the provisions of the SC/ST Act are meant to penalize wrongful or forcible occupation or dispossession of property belonging to SC/ST individuals — not to restrict a bank’s actions when it is lawfully enforcing a mortgage created voluntarily by the property owner.

 

Background of the Case

The case originated from a complaint filed by a borrower from Maharashtra who had mortgaged his property to a bank as security against a loan of ₹16.69 crore. When the borrower defaulted, the bank initiated proceedings under the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) to recover the dues by taking possession of the property.

 

The borrower later approached the SC/ST Commission, alleging that the bank’s recovery actions violated provisions of the SC/ST Act, which prohibit wrongful dispossession or occupation of land owned by members of these communities.

 

Court’s Observation

The High Court held that invoking the SC/ST Act in such cases is legally untenable, as the mortgage was created voluntarily and the bank was merely exercising its contractual and statutory rights. It emphasized that Section 3(1)(f) and Section 3(1)(g) of the Act apply only in cases involving wrongful dispossession or illegal occupation, not where property is lawfully mortgaged and enforcement is in accordance with the law.

 

The bench noted that the SC/ST Act’s intent is to safeguard members of these communities from exploitation, not to interfere with legitimate financial transactions. The bank’s recovery action, undertaken after repeated defaults, was deemed consistent with established banking and legal principles.

 

Significance of the Ruling

This ruling provides crucial clarity for financial institutions, affirming that mortgage enforcement by banks cannot be equated with an atrocity under the SC/ST Act. The Court’s decision strengthens legal certainty for lenders and borrowers alike by drawing a clear distinction between commercial obligations and criminal violations.

 

Legal analysts say the judgment will prevent misuse of social justice laws in financial disputes while ensuring that SC/ST protections remain applicable only in genuine cases of coercion or discrimination.