Indemnity Bond
Berk Jamal
(Querist) 28 March 2011
This query is : Resolved
Sir,
Does the vendor need to sign indemnity bond for the property he is selling to the purchaser's bank, the bank says it is mandatory to give such document to release payment to vendor.
R.Ramachandran
(Expert) 28 March 2011
You are selling the property to the purchaser or to the bank of the purchaser. If you are selling it to the purchaser, then the sale deed itself would contain requisite indemnity covenant. Therefore there is no necessity for you to give any separate indemnity bond to the bank. In fact as a vendor, you have nothing to do with the bank at all, except that the bank will give the consideration to you direct, on behalf of the buyer.
Guest
(Expert) 28 March 2011
The question arises, in what way the vendor is concerned with the purchaser's bank? The transaction is necessarily between the seller (vendor) and the purchaser. The bank should have concern ony with his client (purchaser) and not the third party.
If the bank says the bond is mandatory, ask the bank to show the act or any rule under which the vendor has to enter in to any indemnity bond with the bank on behalf of the purchaser. Vendor, as the seller should not become the witness to any transaction between the bank and the purchaser, otherwise, in the case of any default in payment by the purchaser, the bank would try to involve the vendor later.
It may be a conspiracy of the purchaser and the bank employee to cheat the bank in connivance and later to involve you on intentional default by the purchaser. It happened with one of my clients also where the purchaser purchased movable property with bank loan and the the purchaser even by selling his house left his residence along with movable property without paying even a single installment of the loan to the bank and the vendor had to pay the amount due to the indemnity bond.
SO, Please avoid entering in to the indemnity bond with the bank on behalf of the purchaser at any cost.
