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kaushal (Advocate)     09 September 2017

Bank's liablity


I purchased a flat in NOIDA in a Construction Linked Plan and also took a loan of around 25 lacs on the same. As and when the builder raised demand, I used to forward the same to the bank which would disburse it directly to the Builder. As far as I know, the Bank is required to inspect the property and check whether the construction has reached that stage of demand and then only disburse the payment. I have already paid 90% of the cost and also paying EMI to the bank of around 20000 p.m.

Now, the project has delayed and the Builder has given 2019 as tentative date of possession (around 4 years delay). Can we make bank liable for not conducting the inspection properly and disbursing the money without verifying the stage of construction? I'm planning to file the case before consumer forum against both builder and the bank. Against bank, I want that my EMI must be stopped till the construction reaches a stage for which I have already made payment. Is it possible? Kindly give me some legal backing on this? If there are some judgment, please let me know




 5 Replies

G.L.N. Prasad (Retired employee.)     10 September 2017

Read the agreement obtained from the Bank, the Bank is just financing you for purchasing a house, and ensuring end use of funds correctly.  Bank is not a servant to supervise construction and ensure quality.  Buyer beware is the principle.  It is your responsibility and do not invent allegations against a Bank that helped you in getting a residence.  You are the person that has choosen the building, builder and bank has at your request financed you, and instead of paying the amount to you, paid the amount to builder as per your standing instructions.

As far as requests to Banks are concerned, you have every right to represent to the bank and make a formal request for postponing the EMI, but the more the period will be , the more interest you have to pay.  Requesting Bank  for postponing EMI is different from compelling them to accept your demand as mandate.

It is true that Bank has to release amount depending on progress of construction, step wise, if it is really ensured in practical, banks require many Engineers only to inspect so many home loans. Obligations are different from practice.


1 Like

P. Venu (Advocate)     10 September 2017

Yes,   primary responsibility in ensuring the progess of the work rests on your shoulders. Having failed in your duty, you cannot shift the responsibility to the shoulders of the Bank.

SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     10 September 2017

There is no liability to bank from your side. Yes bank officials are liable as per their internal rules for having released the money without conducting the inspection. Bank's failure to conduct inspection shall not in any way  give a right to you to claim that had the bank done inspection, the money would not have been paid to builder.  It is your primary responsibility to check, verify and and inspect and after your satisfaction only request the bank to disburse the money sought by builder. Having shirked your responsibility, you cannot pounce on bank (which only helped you by financing in your time of need) to put your responsibility on them. Banks only verify your claim but they are not your agents to get your house constructed.

kaushal (Advocate)     11 September 2017


Thanks for your inputs. However, I have come across a notification to RBI notification ( As per the Clause 2(b)(c) and 2(b)(e), the Bank is required to appoint an Architect to certify the stages of construction and then only disburse the money.  

Can we make Bank liable in the light of aforesaid RBI notification?



SIVARAMAPRASAD KAPPAGANTU (Retired Manager)     02 February 2018

Bank does not appoint any Architect. Bank has a Panel of Architects and accepts certificate from such empanelled Architects only. In fact you are engaging the services of the Architect but not the bank.  Bank is only telling you that they shall accept certificate from so and so Architects only.

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