Dispute over mortgaged property: HC seeks clarity on apartmentalisation in Chandigarh

The DM had refused the bank’s request for possession, holding that permitting bifurcation of floors would amount to “apartmentalisation” and “fragmentation” of a single residential unit, an act prohibited under Chandigarh’s rules and earlier upheld by the high court.

However, the petitioner argued that the DM had exceeded his jurisdiction. Section 14, the counsel submitted, allows the DM only to verify the borrower’s affidavit and assist in enforcement; it does not empower him to adjudicate merits. “The power is ministerial, not judicial,” the bench was told.

Ban on fragmentation

The larger legal question, however, turned on whether the ban on fragmentation applies uniformly across Chandigarh or is limited to Phase 1 sectors. The petitioner cited a Supreme Court ruling which clarified that the restriction extended only to sectors 1 to 30 (Phase 1), whereas the mortgaged property falls in Sector 44, part of Phase 2.

The bench pressed both sides to produce documentary proof from the Chandigarh Master Plan to establish how “Phase 1” is defined. “If the prohibition is confined to Phase 1, the DM’s reasoning cannot hold for Phase 2,” the court observed, noting that an incorrect reading of the law could frustrate banks’ remedies under Sarfaesi Act.

At the same time, the judges cautioned that striking down the DM’s order without clarity could “allow another illegal order” unless the scope of the fragmentation ban was conclusively established. The Union territory administration was directed to place on record the relevant master plan provisions and amendments.

The matter will now turn on two critical issues: whether the DM can go beyond procedural verification under Section 14, and whether Chandigarh’s no-fragmentation rule applies to properties outside Phase 1.

Section 14 of SARFAESI Act

The Sarfaesi Act, 2002, empowers banks and financial institutions to recover dues without having to file a civil suit. Section 14 specifically deals with the role of the DM when a secured creditor seeks possession of a mortgaged property after the borrower defaults on payments.

• Ministerial role: The DM is only required to verify that all documents are in order.

• No adjudication: The provision does not allow the DM to go into the merits of the borrower’s objections or interpret property laws.

• Purpose: The section ensures a swift, administrative process so that banks can take possession of secured assets without delay.

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