• Sarfaesi act and protection of buyer with home loan

A Developer mortgages land in Joint development project as security and takes loan of 25 CR from Bank A. Bank A & Developer gives NOC for flats yet to be constructed towards consumer for availing Home Loan from Bank B. Bank B disburses Home Loan and in half way project gets halted due to escalation cost demand. Now Bank A issues possession notice of whole project under SARFAESI Act. Consumer has been paying EMI regularly to Bank B. As escalation cost is in tune of 60% of original cost consumer cannot afford and asked for refund. Developer is also not refunding money to consumer stating no fund.
Que. How consumer can protect his investment and what legal advice he has?
Asked 1 year ago in Property Law from Bangalore, Karnataka
Religion: Hindu
1) flat purchaser should cancel the agreement and seek refund . if builder fails to pay move consumer forum against builder and seek refund of money paid with interest 

2) also all flat owners should get together and file criminal complaint against builder for cheating and criminal breach of trust . 

3) in the alternative  builder can catch hold of another developer to complete the project , repay bank loans and deliver possession of flats to the purchasers 
Ajay Sethi
Advocate, Mumbai
24613 Answers
1320 Consultations
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since there is a charge created by Bank B on the property sought to be purchased by you, even though Bank A has invoked SARFAESI provisions, in the event Bank A were to attach and sell the property they have to list the liabilities attached with the property and on realizing the amounts disburse the same on priority. 
Since you have opted out of the said project, you will have to seek for refund by filing a consumer complaint A SAP implead the bank as well so they cannot sell the property without your consent.
Kiran N. Murthy
Advocate, Bangalore
793 Answers
54 Consultations
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1. Bank is right in initiating SARFAESI proceeding and issuing possession notice u/s13(4) of SARFAESI Act,2002 claiming possession of the mortgaged land and any construction thereupon,

2. The consumers can jointly file a complaint case before the local District Consumer Dispute Redressal Forum alleging deficiency in service and unfair business practice claiming refund of the entire money paid with interest, damage and cost.
Krishna Kishore Ganguly
Advocate, Kolkata
12698 Answers
261 Consultations
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The bank may invoke the provisions of sarfesi act to recover the amount due and stands default as on the date of initiation of the action as envisaged in law. 
The buyers may cancel the agreement and seek refund from the builder, if he fails to respond or not complying with the demand, he may be dragged to consumer forum seeking relief against the grievances he caused including compensation for mental agony due to this. 
Mobilise all the affected buyers together and  lodge a criminal complaint against the builder for the offences of cheating. 
T Kalaiselvan
Advocate, Vellore
15202 Answers
138 Consultations
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1. The consumer has the right to get back his earnest money with compensation from the developer. Unless there is default in the payment of EMIs by the buyer the bank does not have any legal right to take possession under SARFAESI Act. 

2. The remedy available to the consumer is two fold-against the developer and also the bank. The buyer can file a lawsuit to seek specific directions from the court to the developer to complete the project and deliver the possession to him in a time bound manner. Alternatively, he can claim the recovery of money with compensation and interest from the developer.

3. The consumer can also move DRT to seek a stay order against the bank to stop it from taking the possession.
Ashish Davessar
Advocate, Jaipur
18828 Answers
472 Consultations
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