In the said property both bank and builder is concealing the material facts. This can lead to long drawn litigation from both the sides. In this case both parties have right in the said Acts bit it is better to avoid such property for peaceful possession.
Auction under Sarfaesi
I intent to purchase a flat through auction conducted by bank , The flat was mortgaged by the borrower after obtaining NOC from the builder. The flat value was Rs.1.82 crores and after paying a sum of Rs. 5 lacs to the builder a agreement for sale was registered in 2014. The bank has released a sum of Rs. 50 lacs to the builder. The borrower failed and neglected to pay the remaining outstanding of Rs.1.27 crores to the builder and also failed and neglected to pay the bank the installments. The builder periodically demanded from the flat purchaser to pay the outstanding. OC was received recently. The bank made an application u/s 14 of the act to the Magistrate and obtained an order for forceful possession and the bank has took forceful possession of the flat after breaking open the lock. The bank has nit disclosed to the magistrate the claim of the builder .The builder has filed an application before the DRT u/s 17 of the Act. After advertisement the bank is auctioning the flat. The bank has not disclosed the claim of the builder and or the pendency of the DRT proceedings. On enquiry, the bank is stating that No permission is required from the builder and the bank has power under sarfessai act and they can issue a sale certificate which will be final document passing title to me. Please answer whether the contention of the bank is correct.
Asked 6 years ago in Property Law
Religion: Christian
14 Answers
hello,
the SARFAESI Act came in 2002 to reduce NPAs of the banks and to extract money from defaulters speedily without interference by the courts. this flat was taken over by the bank under the provisions of the act. the bank has the possession and has full authority to issue sale certificate and you will have the right title and interest of the flat. the bank is right. you don't have to worry, the bank is auctioning the flat to recover its dues.
regards
It is true that bank can issue sale certificate which confers clear and marketable title to property
2) however there are outstanding amount payable to builder
3) ask bank to furnish you copy of application made before DRT by builder
4) consult a local lawyer before you participate in the auction
1. It is to be seen whether sale agreement between builder and buyer was registered or not.
2. The bank can not get more than what it lent to the borrower.
3. Since the builder has done sale agreement only the purchaser did not become its owner and the builder still has got right, title and interest over the property.
4. So the bank can not ignore the claim of the bank nor it can usurp the whole auction sale price.
5. Even it auctions it can not take more than the money lent and interest accrued thereto.
6. The remaining money will have to be paid to the builder who still retain ownership due to non execution and registration of a sale deed between the builder and borrower.
7. So the contention of the Bank is not right. Do not buy this property.
This will be a problematic deal as builder has first priority to receive is money out of the sale from the property the Transfer of Property is not clear to the narrower as he has not paid the total consideration amount.
Firslty, the act of the Bank is as per law, there is nothing in which we can say that the order with the bank has some infirmity.
Secondly, if you go ahead and buy the property there would be no problem for you as Bank has issues advertisement in the newspaper as well as having the order under section 14 of the act.
Thirdly, it is the builder who may now go to the court under different jurisdiction where he may not succeed.
1. the builder's dues are still unpaid to the tune of Rs. 1.27 crores with interest
2. the builder will create issues against you for passing of a clear title to you
3. has the bank disclosed any reserve price in the ad below which the flat cannot be auctioned?
4. what is that amount
5. the bank wants 50 lacs plus interest and builder wants 1.27 crore with interest
6. so are you bidding above the aforesaid amounts which is sufficient to take care of the dues with interest of the builder and bank?
7. if not then it is not advisable to bid
8. bank is only concerned with its 50 lacs plus interest. Once it gets that amount the surplus will be paid to either purchaser or builder.
9. if there is any shortfall in the amount realised through auction then builder will surely trouble you
No,
Actual sale has not yet effected in favor of borrower. Agreement to sale dose not effect transfer of ownership.
What if any interim stay/order granted by tribunal.
Property under dispute and still under ownership of builder.
Disputed property - unavoidable litigation. until no deal between bank and builder.
1. Banks have irrefutable right to duly Auction off the defaulters property and issue of Sale Certificate to the successful Auction bidder, on as it is condition basis.
2. HOWEVER, the purchaser would have to check any other pending litigiations and any other outstanding dues related to the auctioned property, which in a way can be confirmed from the bank.
Keep Smiling .... Hemant Agarwal
Already stated that the AFS is registered. The reserve bid is Rs.1.5 crores. The claim of the bank as on 14 June 2018 (78 lacs) against original AFS value of Rs. 1.82 crores. The bank states that the balance auction sale consideration will go to the borrower A/c and not to the builder. Is the contention of the bank as stated above is correct and the builder has to file a suit to recover its dues. What are the steps the builder has to take other than the DRT proceedings. Will it be a money claim by the Builder and whether the successful auctioneer will be dragged to the court.
Asked 6 years ago
hello,
the bank will transfer the flat in your name. it will recover its dues from the auction sale. the builder has to take his money from the bank. this is a transaction between the builder and the bank. your right title and interest would be given to you and hence you don't have to worry about the builder as long as you get the papers of the property regd in your name. it is a regular procedure which is followed and hence there is no need to worry.
regards
Builder has to take legal proceedings against original purchaser to recover his dues
2) you would also be made party to suit proceedings by builder
1. From the auction money realised by bank, the bank will clear its dues of Rs 78 lacs
2. Balance will be given to builder
3. So the builder dues still remain unpaid. Builder only got 55 lacs as against 1.82cr in agreement
4. If the builder has not obtained any stay in DRT against the auction sale and the sale goes through, then builder will obviously file a money claim suit against borrower to recover his dues. He will also make the auction purchaser a party.
5. Builder will want his balance outstanding plus interest OR his flat back. He will forfeit some amount from the amount paid to him, as per agreement, and balance he will return to borrower purchaser
6. This flat after purchase will be embroiled in litigation
7. You will be a purchaser with notice of builder’s claim
8. Ask bank if private treaty is possible between builder, borrower, bank and you?
Sale certificate from Bank alone will not be the title document, the bank has to execute the registered sale deed in your favor.
The bank has to deliver physical possession of the proeprty.
The bank has to clear the pending litigation before DRT.
You should not be the sufferer due to bank's mistake.
The bank will flout all the rules and will be hurrying to somehow sell the property and bring the sale proceeds to their books, it will not be bothered if the purchaser will be facing hardship to run between court and bank and other places seeking relief and justice.
Since you know that there is a pending litigation, better take the advise of a local advocate and then proceed if you find the property is worth buying and free from all problems.
The builder in order to get back his money will put pressure on the purchaser also by impleading him in the recovery suit.
He may obtain an order of injunction against you, which will become a head ache till the disposal of the pending case.
In my opinion, even the cases where there is no pending litigation, there arises problem in one or the other form, but in this case there is already a litigation pending, hence you have to take careful steps in furtherance.