• Property developer has sold the plot and mortgaged the land

Property Developer had made 50 plots from the 2 acres DC converted land. He had sold the 50 plots to individual owner in the year 2009-10 and the same has been registered via sale agreement. In the year 2012 The land owner has mortgaged the 2 Acres land as guarantor to another Industrialist for sum of 4 Crore. 

The Plot was resold from plot owner A to  B person in the year 2013 with sale registered. In 2015 Bank issued notice to Person B stating that industrailist had defaulted on the loan and the land owner has mortgaged the  entire 2 Acre land for a sum of 4 crores as an surety and they are the willful owner of the property and have every rights. Bank also stated that criminal case has been registered against the land owner for making fraudulent transaction.

Can you please guide me  what is the step i need to take further and can I have right of ownership to property.
Asked 1 year ago in Property Law from Bangalore, Karnataka
Religion: Hindu
Hi, you have to reply the notice to the bank that you are the independent owner of the property, land owner has already sold the property to you so question of mortgage the property does not arise.

2. Secondly if they file a application before the DRT then you have to contest the case on merits as you have good case on merits.

3. It is not clear whether you have received the notice under SERFASI Act, if you received notice under SERFASI Act then you have to file appeal under SERFASI Act before the DRT.
Pradeep Bharathipura
Advocate, Bangalore
4105 Answers
133 Consultations
4.3 on 5.0
1) once developer has sold 50 plots to individual purchasers by regd sale deed they would be absolute owner of said plot 

2) developer must be having registered irrevocable power of attorney in his favour . 

3) further development agreement must have authorised developer to  develop and sell the plots in 2 acres of land 

4) your query is completely silent on said aspect . 

5) if contrary to development agreement landowner has mortgaged 2 acres of land to industrialist he has committed case of cheating , criminal breach of trust . 

6) how could A sell plot to B when he has executed development agreement and also mortgaged  plot to bank 

7) you have not stated whether you are one of the plot  owners or  another aggrieved party 

8) you have to file declaratory suit that you are absolute owner of the plot of land 

9) contact a local lawyer . the  various documents have to be perused to advice further 
Ajay Sethi
Advocate, Mumbai
23264 Answers
1219 Consultations
5.0 on 5.0
1 Without seeing the complete set of papers no effective advice can be given on this issue.
2. Prima facie the buyers have bought the encumbered land and hence then will be bound by the result of attachment proceeds which the bank may take
In other words if the property is sold to recover the loan amount the buyer will get nothing and they can not do anything on this .
Devajyoti Barman
Advocate, Kolkata
5217 Answers
54 Consultations
4.9 on 5.0
1. A mortgaged property cannot be sold unless the mortgage is cleared except with the consent of the mortgagee. It seems that B did not conduct due diligence before purchasing the property. The rights and liabilities in relation to the sold property transfer from the seller to the buyer.

2. The bank is legally entitled to recover the possession of the property and auction it at a throwaway price to apply the sale proceeds towards the repayment of the loan. The recourse with B is to seek a stay order against the possession and sale of property by bank on the ground that he did not had knowledge about the creation and existence of mortgage on the property which he purchased. This apart, B should also file a criminal case for cheating and fraud against A.

3. B should also file a lawsuit against A to recover the consideration of the property with compensation from A.
Ashish Davessar
Advocate, Jaipur
18151 Answers
448 Consultations
5.0 on 5.0
The act of mortgaging as collateral security by the guarantor i.e., the landowner to Bank cannot be held as legally valid especially when the property already stands converted by DC permission and plotted as well as sold to the individuals by the developer.  
Is your sale agreement registered and have you obtained bank loan after getting proper opinion from a legal advisor of the bank?  If yes, then the it is evident that the landowner has thoroughly cheated the bank as well as the developer.  By the way it was the bank which accepted the collateral security should have ensured the marketable title of the guarantor to the property offered as security through its legal advisor especially when the landed property was already converted to plotted property in the year 2010 and have been sold to different buyers vide registered documents, there is no question of existence of the original landed property offered as security at that time in the year 2012, therefore it is clear cut fraud and cheating offence well knit by the landowner in connivance with the bank officials.  Now the bank cannot enforce its rights on the plotted properties and cannot ask the occupants to vacate.  The buyers, on receiving a notice form bank on this issue may reply through the lawyer about its non-maintainability and also can file a suit for mandatory injunction against the bank restraining them from indulging into any such act based on the fraudulent act committed by the landowner at the time when he was not a owner to the property after having disposed the property to various buyers. 
Consult a good lawyer and proceed as per his further advise.
T Kalaiselvan
Advocate, Vellore
14046 Answers
127 Consultations
5.0 on 5.0
1) developer has played fraud on the bank and plot owners 

2) the plot owners should reply to the notice mention they are bonafide purchasers of value and that sale deed executed in 2009 

3) developer was no longer owner of Said plots and could not have mortgaged the said plots 

4) file declaratory suit and seek injunction against bank auctioning the plots 

5) you have good case on merits 
Ajay Sethi
Advocate, Mumbai
23264 Answers
1219 Consultations
5.0 on 5.0
It will not be possible to prove the commission of fraud by the bank unless there is specific evidence. The subsequent owner should seek a stay order against the proceedings under SARFAESI Act and also file a lawsuit against the seller to seek the declaration of illegality of the sale. 
Ashish Davessar
Advocate, Jaipur
18151 Answers
448 Consultations
5.0 on 5.0
Land owner and  developer is the same single person ( there are not different person) , since the land was legally registered  under landowner name (no G.P.A) and plotted after D.C conversion in 2007-08.
In the above circumstances, it can be construed that the landowner/developer has intentionally defrauded the bank by offering the non-existent land as security, a criminal case for cheating and fraud can be lodged against him by the bank. 




The plots were sold to  people from  year 2009 and bank has also provided loan to the plots. All plots were officially registered and also the E.C also states their name as the legal owner. 80% of plots were sold before mortgaging.
Whether or not, the landed property wa converted into plotted property by obtaining permission from the competent authority therefore once the landed property has been converted the status of landed property (2 acres) becomes non-existent, more so, when the plots have been sold by registered document.



After the document was mortgaged to bank as collateral security by the land owner  in year 2012 to industrialist as 2.5 acre DC converted land. Around 20% of the remaining plots were registered to the plot owner. Secondly some resale of the plotted  property also happened were as the first  registration happened in 2009.
under the given situation the landowner can offer only the property lying on his name and not the ones sold out.



The Notice was received under SERFASI Act. 
To whom this notice was issued? individuals or to the landowner?



It seems to me that bank officials along with industrialist were involved in the fraud and loan has been sanctioned by pledging the document.
It cannot happen without the knowledge of the bank officials, so the bank will also be held liable for not taking legal opinion.



Does the bank still have any rights, Can you please guide will I be able to win the case.
The bank has no rights to claim the property which was not existing because at the time of offering the same as collateral security the properties were sold to different people.  The documentary evidences in your possession will be very good support to win the case.
T Kalaiselvan
Advocate, Vellore
14046 Answers
127 Consultations
5.0 on 5.0

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