Can law allow bank to give loan based on photocopies of sale deed?
iamprem
(Querist) 04 February 2012
This query is : Resolved
Hi,
First of all my thanks to the forum members where wonderful article, guidance, legal insights etc.
Question:
Can Law allow bank to give loan based on photocopies of sale deed?
If so, what is the use of original documents and whatif that person keep original in some other place to cheat?
reason is lower court judge not applied his mind in above Q, but passed verdict in favor of bank which colluded with its customer and let him free.
background:
Person A mortgaged his house in 2003 by depositing its original documents (sale deeds etc) in Bank A.
Subsequently in 2004, Person A took overdraft loan from CanaraBank Bangalore by depositing "photocopies" of some of the documents, (but not all, this seems to be clear collusion between him and bank managers, otherwise a) how they can give loan on photocopies b) not putting enough effort to recover the money)
In 2006, i bought that property through home loan where my bank did legal verification, cleared the loan from Bank A and took over the papers, paid the rest to Person A. There is no encumbrance including 2004 transaction nor any such info from seller A.
When matter stood thus, in 2009 CanaraBank filed a case against its customer A to recover the money. Since he ex-partied from first instance onwards and they added me as 2nd defendent since i bought the property.
Bank cheated the court from day 1, by stating they gave loan based on "original" documents. Whereas the FIRs filed by the bank, plaint documents, evidence, cross examination everything proved that they have "photocopies". The trial went on from jan'09 to jun'11. The 1st defendant never appeared nor court/bank/police took any action.
Yet lower court judge without applying his mind gave the verdict as, 6month time to 1st defendant to pay the money and in the event when he fails, sell my house to recover. 6month passed and the person not paid money nor Bank tried to recover. Since bank officials colluded, they are determined to recover money from me.
I appealed in High Court and got the stay.
I am not able to digest, whether our law is so pathetic? where,
a) it allows the banks to give loan based on photocopies?
b) not taking any action against the ex-parte defendant #1
c) not at all taking the facts of innocent bonafide purchaser, the 2nd defendant.
So my question again is, Can Law allow bank to give loan based on photocopies?
If so, why there is a concept of original documents, registration departments, stamp duty etc.
Your guidance, citation etc. is highly appreciated.
Thanks in advance,
Prem.
iamprem
(Querist) 04 February 2012
In the instant case, it is between two individual. no society or layout or builder where sometime the question can get diluted as, not all can get original.
So the actual question is, Can the law allow a bank to issue a loan based photocopies of a house property held by an individual?
R.Ramachandran
(Expert) 04 February 2012
Dear Mr. Iamprem,
There are many persons who can give loan without even taking any collateral. NO LAW PROHIBITS THAT.
IF SOMEBODY HAS GIVEN A LOAN ON THE BASIS OF PHOTOCOPY (IT IS ONLY YOUR SURMISE) IT IS THEIR CHOICE. NO LAW WILL PREVENT IT. OFCOURSE, WHEN ANY PROBLEM ARISES IN RECOVERING THE LOAN AMOUNT, THEN THE CONCERNED PERSON(S) IN THE BANK WILL BE TAKEN TO TASK.
[There are many unscrupulous persons at many places. In the above case, it will not be difficult for any person to cajole a bank manager to part with the original title deeds for a few hours or days on one pretext or other, and the said person could have produced the same before another bank for their verification and return!]
WHEN SUCH THINGS HAPPEN, then there is Court to come to the rescue of the persons who have law on their side. In this case, though the trial court was not in your favour, at least you got relief from the HC.
As you may be aware, until recently, there is no requirement for registration of documents when equitable mortgage is created by depositing of the title deed. Therefore the prospective buyers can only rely upon the sub-registrar's office records to check whether there any encumbrances! However, such checking will not bring to light any of the equitable mortgages. The purchaser will have problem in such cases.
However, now the Government has made it compulsory to get such Equitable Mortgages registered with CENTRAL REGISTERING AUTHORITY under SARFAESI Act. Thus, hereafter whenever one has to make an encumbrance check they have to check both at Sub-Registrar's office and also at the Central Registering Authority under SARFAESI Act.
prabhakar singh
(Expert) 04 February 2012
i agree with detail opinion expressed by Mr.Ramachandran.
Devajyoti Barman
(Expert) 04 February 2012
Yes this is not a question of law but the Credit Policy of Bank.
The submission of original copy of sale deed is mandatory when equitable mortgage is created in favour of the Bank in lieu of which the loan is granted.
If the Bank is ready to grant loan not on the basis of equitable mortgage but on other security like personal guarantee of third person or bank guarantee of borrower of third person then original sale deed may not be required.
So the moot question is what was the basis of granting of loan?
Do answer this question for further reply.
Raj Kumar Makkad
(Expert) 04 February 2012
As you purchased the property from a by seeing and obtaining his original sale deed and after obtaining no encumbrance certificate, you are bonafide purchaser and ultimately law shall come in your support. Let Canara bank suffer for its illegal involvement with A.
iamprem
(Querist) 05 February 2012
Esteemed members,
First my sincere thanks for the quick response and I appreciate your help/reply. God bless you folks.
Note: My intention is not to get free consultation here, but to share my case and to know what law says on issues like this.
I trust my new lawyer (as i did with my ex-lawyer) and confident that High Court will give Justice, but concerned at the pace at which CanaraBank manipulating court by giving all kinds of reference to protect its employee mistake.
I agree that it is upto bank choice to give loan on ANY grounds and recover it.
I do aware of SARFAESI and govt effort on Central Property Registry, but i doubt banks in Bangalore/other prats does due diligence in verifying any such.
Like two/4 wheeler loan, if the Sale deed carries, loaned by so and so bank, almost 90% of the fraud will go away. Even CIBIL is not much of use about loan defaulters.
Current state:
In the HighCourt CanaraBank did not appeared 3 times and that Hon' Judge gave stay after i gave my house as surety and next trial will start on 3-3-2012.
Now CanaraBank has filed one Statement of Objection claiming,
a) They can give loan based on photocopies.
b) The fact is, the original was with VijayaBank in 2003 which i took over in 2006. Whereas CanaraBank without knowing that, gave loan in 2004. Yet they claim, they don't have to get the permission from VijayaBank when first charge is there, to create second charge.
Since there so called 'mortgage' is before my purchase, i am liable to pay for its customer fraud.
c) Without putting any significant effort to recover money from its customer and also let him free, they accuse me of got cheated by its customer and hence i am liable to re-pay.
they have cited this,
http://www.indiankanoon.org/doc/1909684/
http://www.indiankanoon.org/doc/1579610/
Background#2
Here is what CanaraBank bangalore did,
2004 - Gave over draft loan of 5Lac to its customer based on photocopies.The loan application clearly states ONLY Xerox copy of the doc has been deposited.
2006 - Gives 1Lac top-up loan for 30days.
01/2009 - Bank not put enough effort to recover the money, though he has been living in very big own house. Instead files one money recover suit in court.
04/2009 - Files one FIR against its customer stating he has cheated them by depositing photocopies and asked police to take action against him and recover the money. But after that Bank not at all interested in following up the case.
06/2009 - The lower court trail started and he never appeared once ie. ex-parte
08/2009 - Bank cleverly marks photocopies as exhibits and mentioned will do original submission later.
11/2009 - Since i am the purchaser of the property, they requested court to add me as supplemental defendant, fooling the court by stating, they gave loan based on original documents. I was added in 1/2010
12/2009 - The actual trail started for me and my ex-lawyer filed Written Statement in detail about the CanaraBank false details.
During evidence deposition, CanaraBank gave phocopies to court and whereas i gave original documents which is still with lower court custody.
During cross examination the bank managers agreed that those are photocopies, enquiry has been conducted against its officer and so on. We put all the points in Written Argument, Re-buttal to Plaintiff Bank written argument etc.
Yet at the end of the day, the lower court judge ignored all the facts and gave the verdict not only in favor of CanaraBank, but also its fraud customer. Otherwise a person who has taken loan in 2004, not even appeared the trial for 2.5yrs, yet given 6month time to pay, if not recover money from me, and if that is not sufficient, then only go after his other properties.
I changed my lawyer and filed appeal in High Court and got the stay against money decree.
iamprem
(Querist) 05 February 2012
Note: The FIR copy filed in 2009 by CanaraBank clearly admits their fault of getting cheated by its customer. But cleverly they marked this only in Sep.2010, that is almost after 2year after the trial.
Again, their own plaint document (submitted in 1/2009) in which loan application copy also one which clearly says, its customer deposited only the Xerox.
It is just that my ex-lawyer not fought enough and also the Judge not applied his mind and gave the verdict.
I have put my 13yr of hard earning of 40Lac to the house and very badly affected by the lower court verdict.
The reason for my concern is not only for my own issue, but whatif this can be referred by CanaraBank or other such, where loan can be issued by photocopies and the next bonafide purchaser can be harassed and milked like this. That is my worry.
For CanaraBank mistake and its customer fraud of Rs.6Lac, i have already spend 3Lac+ for legal expenses, 2.5yrs of my time, peace of mind etc.
My only hope is High Court.
