• Equitable mortgage

A property was jointly owned by my mother and X, X sold her share to Y who further sold it to Z. However later we came to know that X before selling her share to Y has taken a loan on the property under equitable mortgage. My mother and Z were unaware of this till May 2015. X has kept registry of plot with bank to take loan. However the property has kila and khasra no and was transferred to Z in revenue records (considering old mutation) and the mutation is also in the name of my mother and Z. Bank has not informed revenue officer neither lien has been reflected in revenue records.

While we inquired bank on how loan was granted on property with my mother's consent, bank showed us a photocopy of sales agreement showing that my mother has sold her share of land to X which X has deposited with bank. The said sale agreement is fake as my mother never signed it. 

As of now bank has suspended its manager and has filed an FIR against X. Bank is not giving any records to us despite the fact that we have filed RTI in this regards.

1. Can a bank grant loan under equitable mortgage in case of join ownership property without calling co-owner to sign in bank manager's presence?

2. Can a bank grant and disburse loan on sale agreement?

3. In equitable mortgage for rural property with kila / khasra no, is it necessary for bank to check mutation before release of loan and intimate revenue department to register lein on property and not to allow further sales?

4. In equitable mortgage cases, how Y or Z can check that there is a loan on property as rural property can be sold with mutation records?

5. Till date mutation is in the name of my mother and Z, who is legal owner of plot?
Asked 1 year ago in Property Law from Gurgaon, Haryana
Religion: Hindu
1) bank has to satisfy itself that co owner has given consent for creation of equitably mortgage 

2) if as per sale deed property was sold to mr X by your mother bank should insist on inspection of original sale deed

3) take search in sub regsitrar office . based on title search report then sanction loan 

4) earlier days equitable mortgage was not required to be compulsorily regd . bank would on production of original documents sanction loan by deposit of title deeds 

5) Y or Z should not have purchased property without asking for original documents of title 

6) your mother retains her 50 per cent share in property 
Ajay Sethi
Advocate, Mumbai
23267 Answers
1219 Consultations
5.0 on 5.0
1. The mortgage is bad. 
2. No unless the sale agreement is registered one.
3. Yes, checking of mutation is a must.
4. They can check with local registration office. Moreover in absence of original title no property should be bought.
5. Your mother is the legal owner.
Devajyoti Barman
Advocate, Kolkata
5219 Answers
54 Consultations
4.9 on 5.0
1) bank will recall loan granted to X in case fraud is discovered and file case to recover loan amount with interest 

2) the sale in favour of Z is vitiated by fraud and is liable to be set aside 

3) let Z worry about his title to the property . 

4) issue legal notice to bank to furnish documents on basis of which loan had been sanctioned 

5) z should file suit to recover the money paid to Y as per indemnity clause in sale deed entered into with Y 
Ajay Sethi
Advocate, Mumbai
23267 Answers
1219 Consultations
5.0 on 5.0
1. Can a bank grant loan under equitable mortgage in case of join ownership property without calling co-owner to sign in bank manager's presence?
No it is illegal and invalid.

2. Can a bank grant and disburse loan on sale agreement?
Sale agreement cannot be an instrument that can be relied upon for granting loan

3. In equitable mortgage for rural property with kila / khasra no, is it necessary for bank to check mutation before release of loan and intimate revenue department to register lein on property and not to allow further sales?
Generally bank do not register the mortgage hence they are totally unaware of the external happening.

4. In equitable mortgage cases, how Y or Z can check that there is a loan on property as rural property can be sold with mutation records?
No property can be sold on the basis of some revenue records, anyone purchasing the property on such basis cannot claim ownership legally without registry on his name.

5. Till date mutation is in the name of my mother and Z, who is legal owner of plot?
Revenue records will not confer title to the property nor they can be held as title deed. 


For all your further questions, a few answers have been given by yourself that the bank has initiated criminal action against those people who criminally manipulated with the help of fake records.
The revenue records alone will not confer the title, hence you may ask your mother to make a registered settlement deed on her share in the property in your favor so that the property is getting a new lease or life in a different legally valid form or to approach court for declaring her title of the property in which she owns 50% share. 
T Kalaiselvan
Advocate, Vellore
14056 Answers
127 Consultations
5.0 on 5.0
1. The bank is entitled to grant loan by way of equitable mortgage of a joint property even in the absence of one of the joint owners. 

2. The banks grant loan only on the basis of the registered title deed and not the sale agreement.

3. It is the duty of bank to exercise due diligence before the sanction of loan, which will include a fact finding inquiry as to the antecedent title to the property and also the mutation entries.

4. Y and Z are under a legal duty to carry their own due diligence before purchasing the property. 

5. Mutation in favour of your mother and Z does not validate their ownership if the antecedent title is not clear. The bank can recover the possession from your mother and Z by taking out appropriate proceedings in the court, which attempt can be repelled by them by seeking a stay order.
Ashish Davessar
Advocate, Jaipur
18151 Answers
448 Consultations
5.0 on 5.0
1. It is surprising that the bank sanctioned loan on the basis of a mere sale agreement. Be that as it may, if the sale agreement is fake then it vitiates the entire chain of ownership flowing upwards.

2. As I said earlier, the bank is entitled to take the possession of the property. The title of your mom and Z can be challenged by the actual owner as the chain of ownership is vitiated.

3. You should do not do anything at this stage, If your ownership is challenged or the bank begins to take possession then you may claim to protect it on the ground that you purchased it without notice of the defect in title.
Ashish Davessar
Advocate, Jaipur
18151 Answers
448 Consultations
5.0 on 5.0
1. Invalid
2.Z
3.No
4. Cancel the loan
5. Complain with police and bank.
Devajyoti Barman
Advocate, Kolkata
5219 Answers
54 Consultations
4.9 on 5.0
1. Recordings with land revenue department  dos not indicate ownership of the property, registered Title Deed does. bank can not mortgage a jointly owned property without taking signature on the mortgage letter by both the owners. Here your mother's share was shown as sold to X for which Bank has taken signature of X only ,

2. Bank can disburse amount based on sale agreement also but in that case there will be no mortgage of property and the said loan will be unsecured,

3. Bank will not and need not check the revenue records. It is required to search about the title holder from the Registry Office,

4.   It was not possible earlier. but now a days the buyers can chvk through CERSAI site. CERSAI i,e, Central Registry of Securitisation Asset Reconstruction and Security Interest of India is a company wherein all Banks register details of all the properties which are mortgaged with them,

5. No. Be it rural or urban, title of the properties are not established by mutating names in revenue records.Only recording names as before he Registrar by paying stamp duties and registration fees buyers establish such ownership. In the instant case the sale deed of your mother in favour of X has been forged. So, the matter ends there. Bank should hve made registry check before mortgaging the property. It is a bad mortgage. keep an eye on the Demand and posession notice which will be served upon X and pasted on the property under SARFAESI Act,2002. On receipt of the Possession notice u/s13(4) of the Act, your mother shall have to file an application u/s17 of the Act before the local DRT challenging the mortgage.
Krishna Kishore Ganguly
Advocate, Kolkata
12113 Answers
231 Consultations
5.0 on 5.0

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