1. Transaction between A and B happened in 2004. The 2004 sale deed would be deposited with the bank as security for the loan given by bank to B.
2. What was the bank doing all this while?
3. Since you got the details from the registration website, it appears to me that the cancellation deed between A and B for cancelling the 2004 transaction, was duly registered with the sub- registrar.
3. Once a document is registered then it comes in public domain and all members of the public including the bank are deemed to have knowledge about such document.
4. So the bank definitely had knowledge about the cancellation of sale transaction between A and B.
5. Once the original sale transaction is cancelled, the bank cannot exercise it's right of lien or charge over the property for which it had lent a loan to B.
6. For recovering the loan taken by B, the bank has to follow B and his personal properties, which does not include the subject property.
7. The bank is trying to play mischief with the original sale document between A and B which must have been deposited by B with the bank as security against the loan granted to B.
8. Now your queries-
1. Had B retained the property and wished to sell the same to another party say C, then in that case B would be obligated to obtain the NOC from the bank before effecting the sale transaction in favour of C. In your case, A had not taken any loan from the bank. He merely entered into a sale deed with B and later on cancelled that transaction by executing a registered sale deed. So A was no way debarred from selling his property to another party, in this case C.
2. The bank must have secured the loan by retaining the original sale document between A and B with it. The bank does not enter into any registered document with the borrower and so the registration department does not have details of any such loan transaction for the property. Anyway I will cross check this further and get back.
3. For the time being you need not do anything. Let the bank initiate legal action. The bank may issue you a legal notice since you are now the owner on record. Basis the contents of the legal notice and demand made therein, appropriate steps can be taken for giving a fitting reply to the bank. Let me also check if bank can initiate legal action after a lapse of so many years and thus would be exempted from the law of limitation. Assuming there is no such exemption in favour of bank; if it initiates any legal action against the property now, then it would be clearly barred by law of limitation since an aggrieved party has to take legal steps within a maximum period of 3 years from date of default.
9. Also please inform, when you bought the property from C, did C give you the originals of all the previous documents? Like sale deed between A and B, cancellation deed between A and B and sale deed between B and C?