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.
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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
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
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.
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.
Thank you everyone for your valuable suggestions and advices @ Krishna Kishore Ganguly Sir and T Kalaiselvan Sir, Wrt to your response (point no 3), I want to tell you that registration of equitable mortgages is mandatory since april-2011. However some relaxation was given for filing of old entries. Some of the notable notifications wrt subject matter are as follows: 1) Gazette of India dated 31.03.2011 (Ministry of Finance) informing about the establishment of Central Registry 2) CERSAI/CR/14268/2013-213 dated 10.09.2013 3) CERSAI/CR/2015-727 dated 09.02.15 4) Section 39 of SARFAESI Act-2002 Registration of equitable mortgages with CERSAI is mandatory from day 1 itself. A bill “The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill 2016”, which was passed in Rajya Sabha in Aug-2016 clearly states that any secured creditor won’t be able to invoke the provision of SARFAESI act unless property is registered with central registry. This bill was passed in September-2016. Notices of 13(2) and 13(4) were served before sept-16 while application for physical possession of property before DM was put in November-2016. Now as physical possession is also a part of SARFAESI Act, can ADM/DM deny to assist bank in taking physical possession of the land as no central registry is done by bank. Also the application of physical possession was put after the amendment bill-2016 was passed. Also please advise where should we move now? In HC or DRT? Please advise the forward path. Regards ([deleted] [deleted])
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
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.
Application for physical possession of the property filed by bank before DM under section 14 of SARFEASI act has been disposed off. Highlights of the order are as follows; * Some of the facts presented by the bank in the application are false. Property is not in the possession of borrower (as stated by bank). Property has been purchased by third party and presently is in his possession. This fact was hid by bank. * Bank did not carried out proper investigation during loan processing process. Loan was approved for a valve greater than the value of property. Neither it was registered with sub-registrar. As it was agriculture land at the time of granting the loan, it had to be a registered mortgage instead of equitable mortgage. * It is not registered with central registry (CERSAI) while it is mandatory for all equitable mortgages created after march-2011. (In fact it was asked to all banks in 2013 as a mandate to file registration of security interests with central registry created before 2011 also). * As per section 26D of SARFAESI Amendment act-2016, SARFAESI Act can not be imposed unless central registry of the security interest has been done. * Third party (we) is the bonafide purchaser of the land. * Help for obtaining physical possession can not be provided. * If bank wishes, it can recover its dues from the borrower from its other properties. DM has thoroughly studied the case with the help of advocate and passed this order. 1) What are the options left with the bank. Can bank appeal against the order of DM before DRT/High court/ Commissioner? Apparently bank will not appeal against this order as they are at fault. 2) What actions should we take now as a precautionary measures like filing caveat in DRT/HC? 3) If bank wants to recover its dues by attaching other property of the borrower, what will be the procedure followed by bank. Can it be done by DM or they will have to approach DRT/high court? 4) We wish to sale this property. Will it be safe now if we transfer the ownership of the property to some other person who is buying this property. 5) What is process to ask for compensation from the bank for mental, financial harassment caused to us (due to illegal proceedings done by bank under sarfaesi) 6) Meanwhile we are trying to file FIR against the fraud borrower, and hopefully within next few days FIR will get lodged. 7) Then branch manager had certainly taken the bribe to process this loan. For that we are planning to file a complain with CVC, Bank's vigilance cell, MoF against the bank. 8) This investigation report and order passed by DM will be helpful for us in getting the FIR registered against bank and Borrower. 9) Additional suggestions to get this case resolved at the earliest. Thanks
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
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.