• Sarfaesi Act - clarification requested

Dear Sir.  I went to a nationalised bank in Bangalore with the intent of buying a property (apartment flat) under bank auction (auction date is 10th feb) . I went thru the documents and I found that the sale deed between the builder and the borrower is missing. I could only see the sale agreement between them.  Astonishingly when I questioned this,  the manager became rude and irate and sent me out and asked me not to take part in the auction. 
Still, I went to see the property-8 flats are built in 2400 sqft and surprisingly all of them have intentionally defaulted for different banks and none of them had sale deeds between them and the builder. I suppose the builder has ran away without conveying the properties to the concerned buyers. 
My question is - when the ownership of the secured property in question is not all conveyed to the borrower, how could the bank take possession of the same and sell the same by the means of auction. Please advise. 
Thanks and Regards, 
Srinivasa.
Asked 2 years ago in Property Law from Bangalore, Karnataka
1) if the original sale deed between builder and borrower is missing then borrower does not have clear and marketable title to the property .

2) the bank generally does not sanction loan unless original sale deed is deposited with the bank 

3)dont participate in auction 

4) it appears there is collusion between bank and the builder . 

5) bogus borrowers must have obtained loan as builder must not have been able to sell the flat . they must have paid one or two installment and then defaulted . 

6)bank must have sanctioned loan to borrowers on basis of MOU or agreement for sale between builder and borrower . undertaking must have been taken by bank that as when regd sale deed is entered into it would be deposited with the bank
Ajay Sethi
Advocate, Mumbai
23367 Answers
1224 Consultations
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1. It is the sale agreement the proper document pertaining to the each  Flat and the sale deed is something of the land beneath the building where all flats are. The title  can be checked and verified , if  a registered and sufficiently  stamp duty paid  sale agreement  along with the other documents of Municipal/ local body permission i.e, commencement certificate, competition certificate, Occupancy certificate, and other clearance certificate  if it is in BBMP, is there .
2. The conveyance has to be done by the builder/developer who transfer the title and ownership of the land beneath the building to the members association /apartment owners association/ housing society whichever formed and registered under the existing act. conveyance or sale deed is not given to each individual member's name .
3. However you should check all the documents, and get a legal help to check whether the construction is legal , any  other encumbrances are existing for the flat which you purchase.
4. The bank can disqualify your application stating any reasons . so if you are not satisfied with the  terms do not participate in the auction.
5. In case you are interested in the auction take an advocate with you and check the documents in the bank and proceed if the title is clear other than the existing loan.
Thresiamma G. Mathew
Advocate, Mumbai
1316 Answers
85 Consultations
5.0 on 5.0
Hello,
1) Conveyance means the transfer of ownership or interest  in real property from one person to another by a document, such as a deed, lease/ or mortgage. Further any written document which transfers(conveys) real estate property or real property interests from one party to another. This must be registered before the registrar to make the document legally binding and capable of further transfers.

2) At the time of sale , especially under construction it is but a practice where the Sale Agreement between the builder and the borrower forms the basis of sanctioning of loan by the bank and hence the bank has by virtue of the agreement between the borrower and the bank, to take possession of the flat and sell it by an auction to recover the debt.

3) As far as buying the flat in auction is your discretion and you shall not be at any loss as the bank will be bound to provide you with all the relevant documents including conveyance certificate,commencement certificate, occupancy certificate ,layout plan,blue print etc.
S J Mathew
Advocate, Mumbai
1954 Answers
65 Consultations
5.0 on 5.0
1) agreement for sale does contain a clause that sale deed would be executed within specific period 

2)your decision not to participate in auction is absolutely correct . 

3) you may if you so desire complain to CVC / bank HO if you so desire
Ajay Sethi
Advocate, Mumbai
23367 Answers
1224 Consultations
5.0 on 5.0
1. Security interest is created on the mortgaged property while providing loan to the borrower,

2. Mortgage of a property is created by depositing the original Title Deed of the property,

3. In the present case there has been no title deed deposited  with the lending Bank,

4. So, it is a bad mortgage or no mortgage,

5. It may also happen that sale deed for the said flat has been registered which have been deposited with some other Bank to mortgage the same while taking loan from the other Bank,

6. In the above event the sale certificate to be issued by the selling Bank will be invalid since the property has not been mortgaged with them,

7. Buying this property will be very risky.
Krishna Kishore Ganguly
Advocate, Kolkata
12143 Answers
233 Consultations
5.0 on 5.0
1. No. Bank can not take possession of the said property based on the sale agreement since sale agreement does not give title of the property,

2. Registered saoe deeds convey title of the property,

3. I face several such cases where Bank has been defrauded by submitting sale agreement and fake sale deed,

4. Do not go for this property.
Krishna Kishore Ganguly
Advocate, Kolkata
12143 Answers
233 Consultations
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The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, allow banks and financial institutions to auction properties  when borrowers fail to repay their loans. It enables banks to reduce their non-performing assets by adopting measures for recovery or reconstruction.

If a borrower defaults on repayment of his/her home loan for six months at stretch, banks give him/her a 60-day period to regularise the repayment, that is, start repaying. On failure to do so, banks declare the loan an NPA and auction it to recover the debt.

Buying these properties is a risk.

However, these properties are sold by bank on an ‘as-is’ basis. There may be pending dues or even litigations. These liabilities, unless checked carefully, can get transferred to you automatically.In your case no title deed deposited with the lending Bank means a valid mortgage is not created with bank. So you have to suffer a lot when you buy this land
Ajay N S
Advocate, Ernakulam
1916 Answers
19 Consultations
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Hi, as per your narration there is some legal risk in participating in auction and secondly if the builder does not  execute sale deed to the borrower is missing then borrower has no right over the property.

(2) It is better you once check the EC for 10 years in the Sub-Register then you may know that is there transaction is between builder and borrower if the transaction in the Encumbrance certificate reflect then you may participate in the auction.
Pradeep Bharathipura
Advocate, Bangalore
4105 Answers
133 Consultations
4.3 on 5.0

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