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srinivas (CA final Student)     05 November 2008

When can indemnity clause be excercised?

Mr.A defaults repayment of housing loan taken for purchase of a site and construction. The nationalised bank calls for an auction in its premises and sells the site to Mr.X in the auction. Mr.X has paid full consideration for the site but the bank has not yet registered the site in the name of Mr.X even after 22 months from the date of auction. When Mr.X verified the property documents which were with the bank which the bank did not give before the auction the bank did not have all the documents required for registration of the property in his X name. so Mr. X insisted the bank to induct the indemnity clause into the certificate of sale and to provide all the necessary documents required for registration but the bank is just deny Mr.x that they cannot give any documents nor they will induct the indemnity clause. When Mr.X verified a copy of the sale deed of Mr.A which Mr.X received from the bank , Mr.X came to know that the bank officials have released the loan to Mr.A even for construction when there is no construction at all and they are fearing that if they induct any indemnity clause they may be in trouble for any future problems that may araise in the future.

What measures can Mr.X take to get the site registered in his name?

Several requests to various officials of the bank have failed to get any response from the bank.(at the regional levels & h.o.level)


 2 Replies

K.C.Suresh (Advocate)     06 November 2008

Approach the High Court or file a criminal compalint for cheating U/s 420 IPC, Breach of trust U/s 409IPC , misappropriation U/s 403 of Indian Penal Code against Bank officials. The cause of action arises when they allowed the loan amount disbursed to Mr. A when the construction was not started. This omission to verify the the site is an illegal omission which amounts to an offence. This can be taken as part of criminal conspiracy U/s 120B IPC.


So dear Srinivas you have well dfined options to do. No bank can wait for 22 months. so start criminal action by filing a petition in the concerned HC to get the matter investigated by CBI as the Bank staff comes under the jurisdiction of Central government employees. When you get a favourable order to investigate the matter by CBI the bank will fall down on your foot

ravikumarbcombl (advocate)     06 November 2008

Dear Srinivas,

your question is when can be the indemnity cluase excercised..... right? actually that indemnity will applicabe only at the time of the indemnified sustained any loss or damage, the other party as indemnifier has to compensate or make good for the loss. it's for simple understanding........ usually in every agreement and various deeds this indenification clause will be there for this foreseen general not mandatory.... but the bank once they issued the sale certificate by an auction it can be registered at anytime, the sale deed of the  previous vendor is the title document Mr.X already got it right?   for mere registration no other documents are required... i think so...... only Mr.X further has to get the revenue records like Patta, tax receipts in the name of the previous vendor. etc. otherwise the sale certificate only the title document in the name of Mr.X and the same would be registered before the concern Registrar... that part to be done by the bank, they have the resonsibility in that.


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