• Unconstitutional proceedings under SARFAESI act/ Fraud case

We bought a property (its agriculture land as per revenue records) in July-2014 in UP. 2 years later, a local PSU bank informed us that this property is already mortgaged (equitable) with them against a CC limit of 25 lakhs. Actually Seller had cheated on us by saying that original sale deed is lost and he will get a certified copy from sub-registrar while original Sale deed of the property was with bank only.
Some events and facts of the case are as follows
1)	There is no loan on the property as per sub registrar office (We have Non-encumbrance certificate)
2)	Bank has not registered the land with CERSAI which is a compulsory requirement since 2011 as per sub section 1 of section 20 of SARFEASI act-2002 (CERSAI was formed with an intention to stop multiple-mortgage fraud cases happening with financial institutions and property buyers).
3)	Mutation is in our name.
4)	May-2016: Bank sent us a notice informing us about the loan and attached a copy of notice 13(2) that was sent to borrower earlier that month.
5)	We sent a reply to bank within 60 days (from the day we received the notice) under section 13(3A) of SARFAESI Act.
6)	After that we mailed the bank a no of times about the irregularities done by branch officers in whole process but we didn’t get any reply even after following up for more than 3 months.
7)	Few months later we got to know that property was put on auction twice. Though we didn’t get any notice/communication (Despite the bank knowing that mutation is in our name) from the bank after the one stated in point 4. Actually bank didn’t make us a party in the case, though we were supposed to be. 
8)	We filed the complaint with concerned Banking ombudsman and investigation is being done by them.
9)	After putting the property on auction, bank approached district magistrate for physical possession of the property. We somehow got to know about that. False facts were produced by bank in the application like presently, property is in physical possession of borrower only, there is no dispute on the land etc.
10)	We filed an objection application with DM against the application of bank for physical possession on the facts that SARFAESI act can’t be imposed on agriculture land and Central registry compulsorily needs to be done for equitable mortgage. Hopefully decision will come in our favor by next week.
11)	Guarantor also is a defaulter of same bank for crores.

•	As per CERSAI notification, any bank/bank officer in default of non-compliance of filing of mortgage with CERSAI, may be imposed with a penalty of Rs. 5000/day. 
•	Secondly, SARFAESI Act should not be imposed if its guidelines are not followed (like CERSAI)
•	We were supposed to be party for all the notices like 13(4), intimation of auction etc as bank was fully aware that we had bought the property and registry was in our name.
•	SARFAESI act is not applicable on agriculture land.
•	What can bank do if DM denies to provide assistance for physical possession of property to bank
Parallely we had filed a criminal case against that borrower, but that will take time and we need to stop the actions being taken by banks under sarfaesi act. 
Now we are planning to do following. Please give your inputs.
1)	Take a stay order from High court on SARFAESI act being imposed on property or on auction.
2)	File a caveat before DRT.
3)	Wait for DM’s order for physical possession
4)	Wait for Banking ombudsman’s decision
We had contacted CERSAI also for this case informing them about the non-compliance of cersai by bank. But we didn’t get any positive response. What can I do to make them take actions against the bank as per their circular/policy.
Had the mortgage been registered either with Sub-registrar or with CERSAI, we would not have bought the property. It’s clearly a fault from bank’s side.
Please give your valuable inputs and advise.
Asked 6 months ago in Property Law from Muzaffarnagar, Uttar Pradesh
Religion: Hindu
1) if bank is unable to obtain physical possession it file application before DRT against borrower and seek   recovery certificate against borrower and stay restraining borrower from selling the land 

2) however as per section 31 of SRFEASI act  bank  cannot auction agricultural land 

3) you can seek stay order from HC 

4) wait for DM order and banking ombudsman decision 
Ajay Sethi
Advocate, Mumbai
32554 Answers
1795 Consultations

5.0 on 5.0

Dear Querist
My opinion on your queries are as under: 

1. Take a stay order from High court on SARFAESI act being imposed on property or on auction.
Opinion: high court has no jurisdiction.
You have to file a S.A. before DRT along with interim application for stay.

2)	File a caveat before DRT.
Opinion: can be filed.

3)	Wait for DM’s order for physical possession
Opinion: before that filing SA will be better.

4)	Wait for Banking ombudsman’s decision
We had contacted CERSAI also for this case informing them about the non-compliance of cersai by bank. But we didn’t get any positive response. What can I do to make them take actions against the bank as per their circular/policy.
Opinion: file a writ petition before high court for direction and compliance of circular.

Had the mortgage been registered either with Sub-registrar or with CERSAI, we would not have bought the property. It’s clearly a fault from bank’s side.
Opinion: yes, bank is on fault and you can get benefit for that.


Feel free to call
Nadeem Qureshi
Advocate, New Delhi
4213 Answers
176 Consultations

4.9 on 5.0

1.  You have been cheated by the seller of the said property.

2. If there are buildings constructed in and around the same area where your property is situated, then it will not be considered as agricultural land whereupon SARFAESI Action is valid.

3. There are thousands of such cases where the creation of security interest have not been registered with CERSAI.Registration with CERASAIt was not mandatory during the year 2014.

4. Mutation certificate does not indicate ownership of the property.

5. It is a fact that you are not a party to the SARFAESI action initiated by the Bank and they have sent all their notices to their defaulting borrower. The reply to the 13(2) notice shall have to be sent by the Borrower and not you.

6. You shall have to file a SARFAESI Application (S.A.) u/s17 of SARFAESI Act,2002 before your local DRT within 45 days from the date of the 13(4)  notice sent to the borrower and published in two local Newspapers challenging the SARFAESI proceeding initiated by the Bank praying for a stay order till the application is disposed of. If 45 days thereof have already been crossed, wait for the copy of DM's letter calling you for investigation (in many places, DM calls the borrowers/mortgagors before passing order for taking possession) to file the said S.A before the DRT. if you do not get any letter from DM, wait for the sale notice and on receipt of the same also you can file the said S.A. within 45 days thereof.

7. If you fail to get favourable order from the DRT, you can approach DRAT and/or high court seeking remedy and you won't have to deposit the 25%  of the outstanding dues before the DRAT for filing the appeal since you are neither the borrower nor the guarantor/mortgagor.
Krishna Kishore Ganguly
Advocate, Kolkata
14664 Answers
340 Consultations

5.0 on 5.0

1.  You have to exhaust the remedies available with  DRT and DRAT before approaching high court for any such relief.

2.   You can file caveat before DRT but whether the bank will approach DRT for relief is to be seen


3.  DM may not pass any order giving protection to bank for taking physical possession due to the objections received in writing.

4.  It is upto you.

The property document need not be mortgaged, however memorandum of deposit of title documents could have been registered.
Please note that Central Government has notified new CERSAI Rules on 22nd January 2016 only.
T Kalaiselvan
Advocate, Vellore
22741 Answers
221 Consultations

5.0 on 5.0

ADM? DM can deny to assit bank to take phsyical possession as no central registry has been done by the bank 

2) further application for taking phsycial possession has been made after amendment bill was passed 

3)you can  file writ petition in HC 
Ajay Sethi
Advocate, Mumbai
32554 Answers
1795 Consultations

5.0 on 5.0

1. If you have been sent any notice for hearing of the application filed by the bank u/s14 of SAFAESI Act,2002 for taking physical possession of your property (some DMs send such notice though it is not mandatory), then you can raise this issue before the DM in writing filingbyour objection.

2. You shall have to file a SARFAESI Application (S.A.) before the DRT with in 45 days from the date of receiving the possession notice issued by the bank u/s13(4) of the Act or notice from DM against application filed by the bank u/s14 of the Act and pray for setting aside the entire Sarfaesi Proceeding initiated by the bank since they have created a bad mortgage of the said property.
Krishna Kishore Ganguly
Advocate, Kolkata
14664 Answers
340 Consultations

5.0 on 5.0

1) bank will not appeal against order of DNM 

2) bank would take recovery proceedings against borrower before DRT 

3) no need to file caveat as exparte orders are generally not gioven by court 

4) bank will have to move DRT for attachment of other properties of borrower 

5) borrower can sell other properties which are not mortgaged to the bank 

6) file complaint against bank before CVC , bank vigilance cell 
Ajay Sethi
Advocate, Mumbai
32554 Answers
1795 Consultations

5.0 on 5.0

1. As per sec 14(3) of the amended SARFAESI Act, DM's order can not be challenged. So, you have own the battle. Congratulations.

2. There is no scope for your approaching any Court since the DM's order has gone in your favour. Based on the said order you can file a Writ Petition before the High Court praying for setting aside the entire SARFAESI Action the Bank has initiated in connection with your property and now attempt to recover its dues by filing O.A. for selling the borrower's other properties.

3. The Bank shall have to file Original Application (O.A.)  u/s19 of Recovery of Debts due to Banks and Financial Institution Act,1993 praying, inter alia,  for direction upon the Borrower for disclosing his other assets both movable and immovable.

4. Since it has been implied by the DM's order that it was a bad mortgage created in favour of  the Bank, you can now safely sell of the said property.

5.  File a damage suit claiming the said damage and cost.

6. Negotiate with the Bank and ask them also to lodge a police complaint against its Borrower.

7. You shall not gain personally or legally by lodging such complaint in the particular matter. However, you can make the said complaint if you so desire.

8. Yes, the DM has put nails in to the coffin of the Bank's claim on your property.

9. Get the SARFAESI Action set aside by getting it declared that the Bank had taken a bad mortgage from the Borrower. It will permanently seal the matter in your favour.
Krishna Kishore Ganguly
Advocate, Kolkata
14664 Answers
340 Consultations

5.0 on 5.0

Ask a Lawyer

Get legal answers from top-rated lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a Lawyer