• Car sale with existing car loan - on stamp paper agreement

I'm selling my used car to a buyer, who has agreed to pay the pending loan amount on my car. I have an existing loan of INR 10,40,000 on the car. The buyer has offered me INR 500000 for immediate pre-payment of loan and to pay off the remaining EMIs. For that, we would be getting into an agreement on the stamp paper, that all liability of car would be buyer's and that he is liable to pay the remaining part of my car loan. 
Once the loan is paid off and the bank issues NOC in my name, then the buyer can initiate transfer from RTO.
I wanted to check the validity of this agreement and in case of any misdeed by the buyer, what would be my legal action in that case.
Asked 1 year ago in Civil Law from Delhi, Delhi
1) dont accept any cash payments

2)inform the bank about sale of the car . the loan can be transferred in favour of the purchaser with bank consent 

3) you cannot create any third party rights on car without bank consent 

4) there is no guarantee that buyer after taking [possession of car will pay off the EMI 

5) you would loose the possession of the car and be saddled with bank liability 

6)you would have to file suit to recover outstanding dues from purchaser if you go ahead with your agreement 
Ajay Sethi
Advocate, Mumbai
23369 Answers
1224 Consultations
5.0 on 5.0
1) since the car would be standing in your name you would be liable in case car meets with an   accident .

2)you can rely upon your agreement to show that car has been sold by you .

3) better option is for you to repay the loan then sell the car . let buyer transfer car in his name in RTO records 

4) since you would be shifting abroad it would be difficult for you to take recovery proceedings in event of default in repayment

5) buyer may default in repayment knowing that you have shifted abroad 

6) dont keep any Damocles sword hanging over you head

Ajay Sethi
Advocate, Mumbai
23369 Answers
1224 Consultations
5.0 on 5.0
I have informed the bank of the same, however, they say that it is not within their authority to transfer the loan?.

There is no obligation on the part of the bank to transfer the loan to a third party, hence it would be better you repay the entire loan and get the vehicle transferred to the buyer through RTO.   


Also, apart from the loan liability, would I still be liable for accident/crime on the same car despite the agreement on stamp paper.

The loan agreement and record of transferring or handing over the possession of the vehicle may help you absolve from the accident or any other liability.



I'm relocating abroad, so I might not be in a situation to file a suit if the purchaser does not pay up the EMIs.

Once you are not in the country, it would be very difficult to pursue the recovery process.  Taking advantage of your absence in the country, the buyer may play havoc by which all your efforts to recover the same from a remote location may not yield any fruit.  Therefore do not under take a risk of entering into a  loan or EMI  short of  a thing which may result into  loss to you.
T Kalaiselvan
Advocate, Vellore
14151 Answers
127 Consultations
5.0 on 5.0
1. The agreement would bind both the parties.

2. The bank cannot transfer the loan to the prospective buyer of the vehicle. The vehicle cannot be sold till such time that hypothecation is cancelled on the repayment of loan amount.

3. After the vehicle is sold the buyer is to execute a delivery note in your favour, whereupon an intimation is to be sent to the RTO about the transfer of ownership of the vehicle. Till such time that the RC of the vehicle is transferred to the buyer you will continue to remain liable under civil and criminal law for any accident or crime committed with the use of the car. 

4. Your relocation abroad will not make you immune from the legal process in India as the coercive process of law can be set in motion against you.
Ashish Davessar
Advocate, Jaipur
18183 Answers
449 Consultations
5.0 on 5.0
DO NOT GET INTO such agreement, as the bank is not willing to transfer the loan, do not leave your loan or EMIS on somebody else to pay. As you would leave from the country this person would most possibly not pay the loan and enjoy the car too. Also as the EMI's would not be paid your financial rating would go do and you will never be able to avail a loan in India. Better to clear all dues before you leave. 
Atulay Nehra
Advocate, Noida
443 Answers
15 Consultations
4.7 on 5.0

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