Yashodha Holdings (Pvt) Ltd loses mortgage battle against People’s Bank
View(s):The Supreme Court recently permitted People’s Bank to proceed with disposing the mortgaged property belonging to a benefitted director of Yashodha Holdings (Pvt) Ltd, which was mortgaged to the bank as security for a facility granted to Yashoda Holdings Pvt Ltd by the bank.
The particular case had been filed by Yashodha Holdings (Pvt) Ltd challenging the acquisition of the mortgaged property in terms of People’s Bank Act 29 of 1961 as amended, the bank said in a statement this week.
Having considered legal arguments from both the parties, the Supreme Court decided to permit the bank to proceed with the disposal of the mortgaged property. This judgment by the learned court by lifting the corporate veil, further confirmed that a director cannot hide under the disguise of the company name and a property of a benefitted director of a company, which is mortgaged to a bank is also subject to be Parate Execution. “Lifting the corporate veil” is a legal definition which refers to a situation where the courts set aside limited liability and hold a company’s investors or directors personally liable.
While this judgment enables People’s Bank to recover a part of the debt which had been defaulted by Yashodha Holdings (Pvt) Ltd for over two decades, it was noted that this is a good precedent for all commercial banks under the parate execution regulations with directors held liable for the actions of their companies when debts have to be recovered.