legaluserTN 03 May 2018

Legal hold of property

I am kumar from Tamil Nadu having a property issue as described below.
Party A sold house to Party B on Aug2004.
Later in Aug2005, Party A cancelled the Sale Deed(of aug2004) that he had with Party B.
In Jul2006, Party A sold the same property to Party C.
In Oct2007, I (Party D) bought the property from Party C.

I was able to see above details on the EC that i got online from Registration Dept Website last week.

Recently, a Financial institution (like bank) told us that they have original documents of the propery since they gave loan to Party B. Also, since they could not trace party B, they would need to sell the property through auction.

But, When I check EC while buying house in 2007, I didn't see any entries related to Party B eventhough the EC got/printed for a period of 15 years. So, I bought house in 2007 (without taking a loan) since I felt that the title is clean.

Questions:
1. As the Financial Institution eagerly wanted to see my documents, I have a doubt that about their hold on the property. Can Party A sell property to Party C when there is a loan?

2. One of the friend said, we can file a case against registration dept since they also involved in this fraud as they could have edited EC details before printing it for my request in 2007. He is saying that registration dept paid fine in the past against court order for a similar case. Is that possible?

3. If Financial Institution has full rights to sell the property, what actions I can take at this time to avoid losing my property.

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4 Replies

R.Ramachandran (Advocate) 03 May 2018

In India, information on the encumbrance on a property (especially mortgage of the property towards availment of loan) is known only to the borrower and the lender due to fragmented registration system.

As a result, people could obtain multiple loans on the same property. Some people used to take one loan from one bank, which would hold the deed papers. Then they used to take several more loans from other banks using attested copies of the deed, by claiming that they had lost the originals. Some people also used to obtain loans using entirely fake title deeds or by using colour photocopies of the original title deed. Properties with unpaid loans were also being sold without informing the buyers of the existing liability on the property.

YOU SEEM TO BE THE VICTIM OF THE ABOVE KIND OF FRAUD.

In order to protect the interests of gullible buyers, Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) was formed under the Chapter IV Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It was registered as a government-licensed company, under the Section 25 of the Companies Act, 1956. CERSAI become operational on 31 March 2011.

All the Banks and Financial Institutions who lend money by taking mortgage of the property (equitable mortgage by deposit of title deeds) are supposed to register with the CERSAI within a certain time limit after giving the loan. Thus, all the buyers are required to check about the property which they are buying not only by obtaining EC from the sub-registrar's office, but also by accessing the CERSAI Site by paying certain fee. Non-checking from CERSAI site will mean that the buyer has failed to do due-diligence.

Your case falls before formation of CERSAI.

Therefore, you have no remedy except against the seller. But limitation issue will have to be checked.

Answer to your queries:

1. Yes, it is possible. That's how the frauds take place.

2. You cannot take action against / file a case against the Registration Department, as it is not their fault.

3. Very little.

Better consult a local lawyer.

legaluserTN 03 May 2018

Can Party A cancel Sale Deed when there is a loan taken by Party B ?

Kumar Doab (FIN) 03 May 2018

'Buyer Beware' applies to property deals.

It shall be appropriate to get proper legal opinion from a very able LOCAL senior counsel of unshakable repute and integrity specializing in revenue/property/civil/DRT matters and well versed with LOCAL applicable rules/laws and having successful track record…. and worth his/her salt , before signing or making payment.

This may cost some FEE but can defend long term interest and hard earned monies.

Kumar Doab (FIN) 03 May 2018

Approach your own very able senior LOCAL counsel of unshakable repute and integrity specializing in revenue/civil matters and having successful track record ….. and worth his/her salt …and discuss in person to proceed in best of your interest..

If FI has a charge on property IT can proceed...