Bombay High Court held that the mortgage of leasehold industrial property without the prior consent of MIDC was not void, and further ruled that subletting charges demanded by MIDC were legally unenforceable in the absence of statutory backing.
On 26 May 2025, the Division Bench of the Bombay High Court comprising Justice A.S. Chandurkar and Justice M.M. Sathaye, while adjudicating multiple petitions and applications, held that a mortgage of leasehold industrial property created without the prior consent of the lessor (MIDC), though in violation of lease terms, is not ipso facto void but constitutes a contractual breach that must be enforced by the lessor in accordance with the lease provisions. The Court further held that MIDC lacks statutory authority under the 1975 Regulations to impose subletting charges, and such charges cannot be levied solely on the basis of internal circulars that do not carry the force of law.
In this writ petition, the Bombay High Court considered the challenge raised by the Maharashtra Industrial Development Corporation (MIDC) against the judgment dated 18/01/2011 passed by the Debts Recovery Appellate Tribunal (DRAT), Mumbai in Miscellaneous Appeal No. 25 of 2009. The dispute pertained to the mortgage and subsequent auction of a leasehold industrial plot originally allotted by MIDC to M/s. Benelon Industries (BI), which was later mortgaged to Union Bank of India (UBI) without obtaining prior consent of the MIDC, as required under Clause 2(t) of the lease deed. After default by BI, the property was sold in public auction to Kalindi Properties Pvt. Ltd. (KPPL), against which MIDC sought to assert its regulatory rights and claim subletting charges.
The Court noted that although the mortgage was created in breach of the lease covenant, the MIDC failed to take timely steps to enforce its rights under Clause 4 of the lease deed, such as termination or re-entry. It held that the DRAT rightly concluded that while the mortgage was in breach of contractual terms, it was not void in law, and the MIDC’s inaction weakened its claim. The Court also observed that the reliance placed by MIDC on the Supreme Court’s ruling in State of U.P. v. United Bank of India was misplaced, as that case dealt with Nazul land and different statutory requirements.
Regarding the claim for subletting charges, the High Court agreed with the DRAT that the MIDC lacked statutory authority under the Maharashtra Industrial Development Corporation Disposal of Land Regulations, 1975, to levy such charges. Referring to a Division Bench decision in Prakash Fabricators Pvt. Ltd., it held that the MIDC circulars demanding such charges did not possess the force of law. However, since KPPL did not challenge the DRAT’s direction to pay subletting charges for the limited period between 18/08/2007 and 10/10/2008, those directions were maintained.
The MIDC’s contention that the decree obtained by UBI was vitiated by fraud was also rejected, as this argument had not been raised before the DRT or DRAT, and involved disputed questions of fact that could not be adjudicated in writ jurisdiction. The Court further observed that KPPL had paid all dues, including the sale consideration and differential premium, but had not received vacant possession due to encroachments, which could be addressed in parallel civil proceedings.
Concluding that there was no perversity or legal infirmity in the DRAT’s order, the High Court dismissed the writ petition, upheld the directions issued by the DRAT, and discharged the rule without any order as to costs. All pending interim applications were disposed of accordingly, leaving parties to pursue remedies before appropriate forums for any ancillary disputes.