• Mortgage of property as collateral for bank loan (sarfaesi act)

I have 2 Questions regarding the property that can be mortgaged as collateral for Bank Loan and its Coverage under SARFAESI Act.

1) If a property(Land/Building) which is a Non Agricultural Land, situated in city limits and which do not have any approved layout(Since the property is with the mortgagor for past 40 years & it has already been allotted a CMC No. by the Corporation) can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???

2)  If a property(Land/Building) which is a Non Agricultural Land, situated outside city limits and which has an approved layout approved by Mandal Panchayat can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???

3) If a property(Land/Building) which has no records of Conversion to Non Agricultural Land (Since there is evidence that the said property was never a Agricultural Land, For Eg: Area of Bidar old city ruled by Nizams, where the Fort is situated, there is no NA Conversion records but the Title is there in the Mortgagor's name) and has no approved layout can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???
Asked 1 year ago in Property Law from Bidar, Karnataka
Religion: Hindu
1. Any property on non agricultural land having clear marketable title (not on lean/tenancy and/or lease)can be mortgaged and taken as a collateral security on which SARFAESI proceeding is applicable,

2. Yes, provided it has a marketable title,

3. There should be evidence that the said land and the adjoining area is not having any agricultural activities since long and have building constructed thereupon. The mortgaged property should have marketable title to enable the mortgagee Bank to sell the said property with due process of law for recovery of its dues.
Krishna Kishore Ganguly
Advocate, Kolkata
13602 Answers
292 Consultations
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1. Generally while making collateral the clarity in title is not not much paid attention. Only the ownership over the property is checked. So in this case I find no irregularity in making this property as collateral for giving loan.
2. Yes
3.Yes.




Devajyoti Barman
Advocate, Kolkata
6916 Answers
78 Consultations
4.9 on 5.0
1) unless title is clear and marketable bank would not take it as security for bank loan . 

2) NA land which has approved layout can be taken as  security for bank loan 

3) if title to land is in mortgagor name it can be taken  as security for bank loan 
Ajay Sethi
Advocate, Mumbai
27383 Answers
1488 Consultations
5.0 on 5.0
1) If a property(Land/Building) which is a Non Agricultural Land, situated in city limits and which do not have any approved layout(Since the property is with the mortgagor for past 40 years & it has already been allotted a CMC No. by the Corporation) can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???
If the borrower has marketable title and the bank legal panel finds no adverse issues related to the property, the bank may sanction loan on the basis of opinion and recommendation of the legal advisor of the bank. 



2)  If a property(Land/Building) which is a Non Agricultural Land, situated outside city limits and which has an approved layout approved by Mandal Panchayat can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???
NA land or property having clear and marketable title vested on the borrower, if the bank is satisfied about the title, may grant loan and if the loan amount exceeds Rs. 10,00,000/- and classified as NPA, recovery under Sarfesi Act can be initiated by bank at its discretion. 



3) If a property(Land/Building) which has no records of Conversion to Non Agricultural Land (Since there is evidence that the said property was never a Agricultural Land, For Eg: Area of Bidar old city ruled by Nizams, where the Fort is situated, there is no NA Conversion records but the Title is there in the Mortgagor's name) and has no approved layout can be taken as security for Bank Loan and weather it is recoverable under SARFAESI Act...???
If there is no evidence of agricultural activities in the land ed property or any property in the adjoining areas, then the bank may at its discretion, if found to be genuine with a satisfaction about the title, grant loan and for default, if applicable sarfesi act can be implemented. 
T Kalaiselvan
Advocate, Vellore
17540 Answers
166 Consultations
5.0 on 5.0
1. Both the properties i.e within and outside city limits can be recovered under SARFAESI Act as long as they are non-agricultural. 

2.  Sale of agricultural land is against the provision of Sarfaesi Act. A Bank can not sell agri land under Sarfaesi.  To show that it is agricultural land you have to produce the yearly revenue records to show the cultivation of the land along with a certificate from revenue authorities that the land/property is Agricultural and not non-agricultural land and it is still continued in revenue records as agricultural land. 
Ashish Davessar
Advocate, Jaipur
19628 Answers
507 Consultations
5.0 on 5.0

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