Legal documents to be obtained from builder and bank

Ravi (Querist) 23 October 2015 This query is : Resolved
Respected Sir/Madame,

I purchased an apartment in Chennai from a so called reputed builder who has simply siphoned the money and stopped the construction.I took loan from AXIS Bank towards this apartment.

However, the builder or the banker didn't advise me of the below details at the time of entering in to agreement with the builder and AXIS bank 3 years back. The builders project was financed by Bank Of India. Recently the building was sealed by the local panchayat and removed by them recently.

1. Can AXIS bank approve a home loan when the property is already pledged to BOI by the builder? If they should not approve, then what type of crime has AXIS Bank committed?

2. What are all the legal and mandatory checks that AXIS bank should have performed prior to approving the home loan.

3. Should the builder show me the NOC before i entered into agreement with them in Chennai or should they disclose it to AXIS Bank directly?

4. The bank never sent me a copy of the tripartite agreement which I entered with them at the time of taking home loan with them. Till date they have not provided me a copy of the same. Is it mandatory that AXIS bank share a copy of the tripartite agreement with me?

5. Should the builder disclose in his construction agreement/agreement for sale that the property is pledged to BOI and that NOC is obtained from BOI for the UDS that is alloted to me in the agreement?

6. The bank failed to provide me bank engineer signed stage certificate which is a mandatory check that each Bank had to carry and send a copy to the customer that the bank's engineer had visited the site and is satisfied that the construction is happening and that I can release the next payment to the builder. However, AXIS Bank failed to provide a copy of the same before releasing the payment to the builder. Please advise under what section should i file a case against the bank, is it criminal or consumer court?

7. What are the mandatory documents that the builder should have disclosed before entering into agreement.

8. What are the legal documents and checks that I should have insisted from the builder before entering in to the agreement.

9. What type of case should I file against AXIS Bank for not being transparent with me when I entered in to Home Loan agreement with them.

Please advise for all the points as I am wishing to proceed legal actions post your advise.

Thanks for your help.

Regards,

Ravi

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Parthasarathi Loganathan (Expert) 23 October 2015
Primafacie it appears that you have not been provided all sanction and other related loan documents. Since you have availed loan from AXIS Bank, they are required to furnish you all the relevant information including Tripartite Agreement copy, Terms and conditions of sanction, etc. Please explore all avenues escalating the matter to the bank's controlling office before initiating legal action.

Ravi (Querist) 23 October 2015
Dear Mr. Parthasarathi, good day! Thanks a lot for your kind advise.However, I had requested this to bank since Oct 2013, however, the bank never provided the details I requested, instead they responded saying that they sanctioned the home loan purely based on my financial capability. The buildings construction approval got expired by April 2014 and the builder never shared this info with us.In Sep 2015, the building was sealed and the same month end, the seal was removed.Again, I requested Bank to provide me the details as mentioned above in my earlier query, they never responded. I asked the builder to provide me a copy of NOC, for which the builder responded they would only give at the time of handover and that they have handedover the NOC copy to AXIS Bank. Wish to know what are the hidden willful fraudulent intentions committed by the bank to me when they approved this home loan. Thankful, if you can please help me by advising to the earlier points I raised.
Regards,
Ravi

MAMTA (Expert) 23 October 2015
you can file RTI Application asking to provide copies of all the documents and keep copy to Higher authority also as well as RBI also.

Ravi (Querist) 23 October 2015
Thanks a lot for your kind advise Ms. Mamta.

K.S.Srinivas (Expert) 23 October 2015
The required information can be obtained by filing rti application.

Ravi (Querist) 23 October 2015
Thanks Srinivasan sir. Should I approach the local panchayat where the builder is located and apply the details through RTI?

Parthasarathi Loganathan (Expert) 23 October 2015
It seems every aspect is handled only based on verbal discussions with bank as there is no concrete proof to suggest that there is any denial on their part in writing to suggest deficiency in service; As per Fair Practice Code for Lenders bank is obliged to furnish all details with regard to loan sanction including documents executed. Please approach their Head Office threatening legal action through Banking Ombudsman and Consumer Court. I understand that the said account must be NPA now due to factors mentioned in your post.

Ravi (Querist) 23 October 2015
Dear Parthasarathi, thanks for understanding my real situation. Yes, nothing was disclosed from bank's end,everything was based only on verbal discussion and they collected all details from my end only.I requested the same from AXIS Bank in 2013,however, the banks legal responded as below.

I asked the bank two questions which they failed to provide.

1. The stage certificate which I should get from the bank duly signed by the bank's engineer.they never responded.
2.I asked the bank whether they issued any cheque favoring Bank of India to obtain the NOC since they are holding my Sale Deed, for which no response till date.

I sent an email mentioning all the points I have mentioned in my previous query plus the above 2 points for which the bank responded as below on Oct 2013.

Dear Sir,

We refer to your complaint raised to the Honourable Office of the Banking Ombudsman raising concern over non-completion of the housing project by the Developer and subsequent delay in handing over the apartment booked by you, against which the housing loan has been availed from the Bank.

In this context, we wish to submit our pointwise clarifications/findings as detailed hereunder:

1). You had been sanctioned a loan for purchase of an apartment post receipt of an application from your end and we confirm that till date an amount of Rs.32,25,500/- has been disbursed by the bank.

2). The loan had been sanctioned on the basis of your financial eligibility . After sanctioning process, we had received requisite documents related to property purchase viz Agreement of Sale dated 04.04.2012 and the Construction Agreement dated 04.04.2012 executed between you and the Owners/Developer alongwith a Tripartite Agreement dated 15.07.2012 entered into between yourself, the Developer and the Bank, wherein you had authorized the bank to make payments directly on your behalf to the developer. On the basis of the aforesaid documents, the bank had proceeded to serve the due payments to the builder and the same is in accordance with Annexure A1 on page no.16 of the Construction Agreement.

3). Further, the validity and marketability of the title to the project was approved by the panel Advocate of the Bank and the feasibility and valuation of the apartment was also examined by the Panel Valuer as per the policies underlined by the Bank. The said legal and technical valuation is done by the Bank and is based on the various policies formulated by the management of the bank from time to time. The Bank’s role is limited to ascertaining the eligibility of the quantum of loan of an applicant( in event of the applicant proceeding to accept the terms and conditions of the Bank) and executing the required documents thereof, to honour the terms of Agreement between the customer and the Developer, deposited by him/her at the time of executing the loan documents.

4).It is pertinent to mention that the Bank is in no way concerned about the financial aspects in the Agreement(s) entered into between you and the Developer and the same depends solely on the bargaining capacity of the two parties to the Agreement.

5). We also wish to highlight that as per the Agreement, you had agreed to opt to claim damages calculated at Rs. 5/- per sq.ft., per month from the Developer and hence, any damages suffered by you could be recovered only from the Developer .

6). We would like to emphatically submit that the Bank cannot be made liable/responsible for the mistakes of the builders if any in construction work given the fact that we do not have any role/control over the construction of the building. Also, any such sort of dispute (about the construction) between you and the builder does not entitle you to avoid repayment of the loan availed from us. We advise you to kindly ensure regular and timely repayment towards the loan availed by you so as to avoid any adverse impact on your credit score.

In view of the above, we regret our inability to extend any compensation in this regard and wish to suggest that you may, at your discretion, choose to initiate necessary proceedings against the builder directly, in the event of mistakes/flaws identified in the construction work.

The above details have been duly intimated to the Office of Banking Ombudsman as well for their reference and records.

In point 2, they mentioned that the loan had been sanctioned on the basis of my financial eligibility and I am not sure if that is the only reason why they released the home loan to me, please correct me if I am wrong. They have also mentioned that I had authorized the bank to directly pay to the builder, which never happened, the builder sent me the request and I sent it to bank and bank later dispersed to the builder.

I asked the bank to submit the evidences as they have mentioned in Point3, but they never did.

Also on point 6, they have clearly mentioned that the bank cannot be held responsible for the mistake of the builder.

Regards,

Ravi

Parthasarathi Loganathan (Expert) 24 October 2015
Please address to the following queiries:
1. Did the Bank raise any demand for repayment of EMI and Interest?

2. Did you obtain any commitment from the Builder setting time frame for actual possession / handing over the flat with terms of Construction and Sale Agreement?

3.Did the Construction Agreement has been ratified by the Banker?

4. Did the Tripartite Agreement state that in case on default on the part of the Builder, he will refund the payment in full to the Banker? (which is a mandatory clause)?

5.Did the bank conduct stage wise inspection of the project before release of instalments?

6.Bank cannot disown its liability as a financier to state that it is not responsible for any mistake on the part of the Builder. Hence, Bank can be made a party to the suit.

7.There are blatant submissions by the banker which can be quashed in a court of law.

Hence, it appears there are lot of procedural irregularities in the sanction and disbursement of loan. Hence, engage a local lawyer who is well versed with the Banking Regulations to file a case against the Builder and the Banker. I can take up if it is in Bangalore. Please arrange to send a legal notice immediately disowning your liability to the loan since you have not taken possession of the flat till date due to breach of terms in the construction agreement executed.

Anirudh (Expert) 24 October 2015
Dear Mr. Ravi,

Answers to your queries is as under (given in bracket):

The builders project was financed by Bank Of India.

(There is nothing wrong in it and there is no requirement that the builder shoud disclose his source of funding to the project to you)

Recently the building was sealed by the local panchayat and removed by them recently.

(That is between the builder and the Municipality, you are not concerned - though you get affected ultimately.)

1. Can AXIS bank approve a home loan when the property is already pledged to BOI by the builder? If they should not approve, then what type of crime has AXIS Bank committed?

2. What are all the legal and mandatory checks that AXIS bank should have performed prior to approving the home loan?

(for points 1 and 2 above: The bank should have seen whether the builder has clear title to the land in question on which the project is being developed. His having got finance from BOI by pledging the property will not in any way undermine or impinge upon his title to the land in question. Therefore no one has committed any crime, whatsoever).

3. Should the builder show me the NOC before i entered into agreement with them in Chennai or should they disclose it to AXIS Bank directly?

5. Should the builder disclose in his construction agreement/agreement for sale that the property is pledged to BOI and that NOC is obtained from BOI for the UDS that is alloted to me in the agreement?

7. What are the mandatory documents that the builder should have disclosed before entering into agreement.

8. What are the legal documents and checks that I should have insisted from the builder before entering in to the agreement.

(for points 3 and 5 to 8 above: It is for you to insist and get the documents prior to entering into agreement. Having entered into agreement without doing this due diligence, you cannot raise it now. As said earlier, Axis bank has nothing to do with the NOC etc.)

4. The bank never sent me a copy of the tripartite agreement which I entered with them at the time of taking home loan with them. Till date they have not provided me a copy of the same. Is it mandatory that AXIS bank share a copy of the tripartite agreement with me?

(Again it is for you to get a copy of such an agreement. Even now you can ask for and get it)

6. The bank failed to provide me bank engineer signed stage certificate which is a mandatory check that each Bank had to carry and send a copy to the customer that the bank's engineer had visited the site and is satisfied that the construction is happening and that I can release the next payment to the builder. However, AXIS Bank failed to provide a copy of the same before releasing the payment to the builder. Please advise under what section should i file a case against the bank, is it criminal or consumer court?

9. What type of case should I file against AXIS Bank for not being transparent with me when I entered in to Home Loan agreement with them.

(for points 6 and 9 above: This will apply only if the builder raises the stage-wise invoice on the bank directly. In this case it is seen that the builder had sent the invoice to you and you in turn had sent the same to the bank to release the payment to the builder. In fact, it is you, who ought to have visited the site, checked the progress of construction before sending the invoice to the bank for making payment to the builder. You cannot shift this burden to the bank at all, unless you will prove that it is the responsibility of the bank as flowing from the Tripartite Agreement. You are flying too much without having appropriate documents in your possession. Therefore the question of criminal action against the bank is highly premature and misconceived.)

You are clearly in a bind. In my view, you clearly have cause of action against the builder, but certainly not against the bank.

Ravi (Querist) 24 October 2015
Dear Mr. Parthasarathi, thanks a lot for spending your valuable time towards my plight which I am facing because of this errantc fraudulent builder and the AXIS bank who were hand in gloves with this builder. It has now come to the kind attention of various government bodies that the builder has made such tie ups with many private banks including Scheduled Banks from Chennai.

Please find my responses to the questions you raised:

1. Did the Bank raise any demand for repayment of EMI and Interest?

Ans - Yes, the bank did raise the demand for EMI and Interest since May June 2012. in May 2012, the bank granted the loan. From 2012 - June 2013, I paid Pre-EMI and from 2013 till date paying EMI. Since last month, I stopped paying EMI as I am unable to continue paying EMI+Rent+Personal Loan that I had taken to repay my friends and relatives towards the 20% advance I paid to the builder. I requested bank to provide me the documents they checked against the builder, but till date they never provided the details.

2. Did you obtain any commitment from the Builder setting time frame for actual possession / handing over the flat with terms of Construction and Sale Agreement?

Ans - Yes, by June 2013 with a grace period of 3 months, beyond which I would be given a Rs.5 per sq.ft compensation on the total sq.ft I had booked my flat.

3.Did the Construction Agreement has been ratified by the Banker?

No, the bank never commented anything regarding that. They simply said their legal panel team have already done the necessary checks before approving the loan to me.This project was pre-approved by Bank when they granted the loan to me.

4. Did the Tripartite Agreement state that in case on default on the part of the Builder, he will refund the payment in full to the Banker? (which is a mandatory clause)?

Ans - Apart from the below point mentioned, I have separately posted the tripartite agreement copy for your quick reference.

AXIS Bank Tripartite extract:

a. It is hereby specifically agreed and confirmed by the parties to this agreement that in the event of default on the part of the Borrower as mentioned in clause 4 above, the Bank shall in addition to the remedy available to the Bank, as is stated in clause 4 above, also have legal right to demand from the Builder the interest due to the Bank from the Borrower by recovering the interest amount upto 90 days from the Borrower’s margin money that was paid by the Borrower in his/her capacity as the customer of the Builder at the time of booking of the subject flat/plot. The Builder agrees and confirms that the Builder shall not object to the Bank’s course of action in recovering the Bank’s interest by demanding from the Builder the margin money as stated hereinabove. Upon any such demand made by the Bank to the Builder, the Builder shall without any protest or demur pay to the Bank, the demanded amount from the margin money paid by the Borrower in his/her capacity as the customer to the Builder. The builder shall, however, retain the earnest money paid by the borrower as per Flat/Plot Buyers Agreement from the margin money and over all consideration of the subject property.

b. It is further specifically agreed by the Builder that in the event of failure on the part of the Builder in honoring the payment so demanded by the Bank as stated in clause 6 above, the Bank shall have the right to take all such necessary steps to recover the such an amount from the Builder that would also include filing of necessary suit against the Builder for recovery of the said amount.

5.Did the bank conduct stage wise inspection of the project before release of instalments?

Ans - Pin drop silence from AXIS for this particular question which I am raising since 2013.

6.Bank cannot disown its liability as a financier to state that it is not responsible for any mistake on the part of the Builder. Hence, Bank can be made a party to the suit.

Ans- Extract of the point made by AXIS Bank in Tripartite agreement:

It is agreed by the Borrower/s that the Bank shall not be responsible or liable to ensure or ascertain the progress of construction and mere demand for payment
would be sufficient for the Bank to effect disbursement as aforesaid. Without
prejudice to the above & notwithstanding anything the contrary contained herein, the Bank may in its sole discretion refuse to disburse the loan until Bank
has ascertained the stage of construction.

7.There are blatant submissions by the banker which can be quashed in a court of law.

Ans - Yes sir, they are blatant lies and manipulation of agreement done by the builder.

Also, the tripartite agreement states that: "This Agreement is executed in Delhi and only Delhi Courts will have jurisdiction".

Once again thanks for spending your valuable time towards my case.

Regards,

Ravi

Ravi (Querist) 24 October 2015
Dear Mr. Anirudh, thanks for taking time to read through my sad plight and guiding me with valuable points.

May God bless you with all opulence...to serve victims like me who are suffering because of not meeting Impeccable people like you who know in and out about man made erratic law.

Good day!

Regards,

Ravi

Ravi (Querist) 24 October 2015
Dear Mr. Parthasarathi,

Copy of the tripartite agreement..

a) The Borrower/s desires to purchase property at
____________________________________________________________ from
Builder and for financing the same has applied to the Bank for Housing Loan.

b) The Borrower/s and Builder and the Bank have also entered into separate respective Agreements with each other, which shall be duly observed by the concerned parties.

c) The Parties are executing the present Agreement setting out mutual obligations
required to be necessarily performed forming consideration for each other.

1. In consideration of Builder and the Borrower/s performing their obligations under the Agreement/Allotment letter executed/issued by the builder in favour of the borrower, the Third Party i.e. Bank has agreed to give a loan of
Rs.______________________
(Rupees_____________________________________) to the Borrowers in terms
of the loan Agreement dated____________ and on payment of interest, processing
fee, administration fee etc. as agreed/ contracted.

2. The Borrower/s have mandated and have authorized the Bank i.e. the Party of the
Third Part, to pay the loan amount, sanctioned by the Bank, directly to Builder The Borrower/s unequivocally and expressly acknowledge and consent that
payment to the said Builder shall be deemed to have been done directly to the
Borrower/s.

3. In case there is any delay in payment of installment by the Bank or the
Borrower/s, in either case it shall be treated as a default on the part of the
Borrower/s, and the Borrower/s shall be liable to pay penalty to Builder on the
delayed installment as per the terms of the Allotment Letter issued by the Builder.

4. It is agreed by and between the parties to this Agreement that in case if the BORROWER fails to honour the commitment, the developer/BUILDER shall
inform the BANK and the BANK shall have the right to pay the balance Sale
consideration with other applicable charges etc. and get it registered either in BANK’s name or its nominee. Likewise in the event the Borrower defaults in
payment of installments then, in such an event also, the Bank shall have the right
to inform about such default on the part of the Borrower to the Builder and shall
accordingly have the right to write to the Builder for cancellation of the Allotment by the Builder in favour of the borrower, whereafter the Bank shall have the right to pay the balance Sale consideration and other applicable charges etc. and get the subject property registered either in the Bank's name or in the name of the Bank's nominee.

5. The Borrower agrees and confirms that in the event of the Bank enforcing its
rights as stated in clause 4 above, the Borrower shall not object/contest the same in any manner whatsoever and the builder shall stand discharged form its
obligations qua the borrower.

6. It is hereby specifically agreed and confirmed by the parties to this agreement that in the event of default on the part of the Borrower as mentioned in clause 4 above, the Bank shall in addition to the remedy available to the Bank, as is stated in clause 4 above, also have legal right to demand from the Builder the interest due to the Bank from the Borrower by recovering the interest amount upto 90 days from the Borrower’s margin money that was paid by the Borrower in his/her capacity as the customer of the Builder at the time of booking of the subject flat/plot. The Builder agrees and confirms that the Builder shall not object to the
Bank’s course of action in recovering the Bank’s interest by demanding from the
Builder the margin money as stated hereinabove. Upon any such demand made by
the Bank to the Builder, the Builder shall without any protest or demur pay to the Bank, the demanded amount from the margin money paid by the Borrower in
his/her capacity as the customer to the Builder. The builder shall, however,
retain the earnest money paid by the borrower as per Flat/Plot Buyers
Agreement from the margin money and over all consideration of the subject
property.

7. It is further specifically agreed by the Builder that in the event of failure on the part of the Builder in honoring the payment so demanded by the Bank as stated in clause 6 above, the Bank shall have the right to take all such necessary steps to recover the such an amount from the Builder that would also include filing of necessary suit against the Builder for recovery of the said amount.

8. The Borrower/s shall be obliged to pay to the Bank the entire loan amount in
accordance with the loan Agreement dated __________ and the Bank can recall
the entire loan from the Borrower/s on any default made by the Borrower/s and/or
in circumstances detailed/ set out in the said loan Agreement not affecting the
Borrower’s obligations to the Builder under the Agreed terms with Builder.
9. The Bank Will be at liberty to substitute a ‘ New Borrower ‘ in its sole direction after payment of transfer charges if any to Builder, in accordance with necessary Govt. directives in this behalf . The Housing loan advanced to the Borrower/s by AXIS Bank Ltd. Shall be Secured by first mortgage of the residential flat/floor/plot to be acquired in the said Project from Builder and the Borrower/s here by subrogate all their rights in the said flat/floor/plot in favor of the Bank.

10. Builder Would deliver to the Bank the Sale Deed/Sub lease deed relating to the
flat/plot in question as & when executed and registered and shall also inform the
Bank in writing at least a week in advance regarding the time date & Venue of registration so that Bank can Send its representative to collect the original sale deed/sub lease deed on Registration. The Borrowers expressly and irrevocably
authorizes Builder and the Bank in this regard Builder shall not deliver and/or
cause to deliver the Sale Deed/sub lease deed as and when executed and registered
to the Borrower/s without the written consent of the Bank.

11. Upon the expression and irrevocable consent/authorization of the Borrower/s,
Builder recognizes and acknowledges the Bank as a duly authorized agent of the
Borrower/s for the purpose of implementation of this Agreement.

12. Builder Specifically agrees that in case of cancellation and/or termination of the Agreement/ Allotment by the Builder in favour of borrower/s and/or in the event of death of Borrower/s, the Builder shall, after retaining the amounts due to Builder under the terms of the said Allotment, refund amount to the Bank within

a reasonable time of the termination/cancellation/death as the case may be. The Builder further agrees that possession of the flat/plot as and when completed will not be handed over to the Borrower/s without the written consent of the Bank.

13. It is agreed by the Borrower/s that the Bank shall not be responsible or liable to ensure or ascertain the progress of construction and mere demand for payment would be sufficient for the Bank to effect disbursement as aforesaid. Without prejudice to the above and notwithstanding anything the contrary contained herein, the Bank may in its sole discretion refuse to disburse the loan until Bank has ascertained the stage of construction.

14. The Borrower/s has paid his own contribution in full to the Builder i.e. the cost of the dwelling unit (including escalation charges if any) less the loan and excluding 5% of the consideration and other applicable charges payable at the time of offer of possession. However, this would be without prejudice to any right available to Builder against the Borrower/s under the Agreement/ allotment letter executed/issued by the Builder.

15. Builder will maintain a separate account for the Borrower/s and adjust payment of housing loan received by it from the Bank/Borrower/s against the cost of the particular category of flat/plot applied by them.

16. The Borrower/s will not further mortgage/ charge the said property to any person/ financial institution for raising any loan without the prior written consent of the Bank.

17. This Agreement is executed in Delhi and only Delhi Courts will have jurisdiction.

18. This Tripartite Agreement would come to an end upon occurrence of any of
following event:

a) Registration of Conveyance Deed/ sub lease deed in favour of the Borrower and
deposition of the same with the Bank by the Builder.

b) Termination of the allotment of Residential Unit to the Borrower by the Builder in terms of Documents of Allotment and this Tripartite Agreement and payment of the refundable amount (as refundable by the Builder to the borrower under the terms of allotment) by the Builder to the Bank.

In witness whereof the parties hereto have signed this Agreement on the day, month and
year first above written in the presence of the following witnesses

WITNESSES:
Party of the First Part

Party/ies of the Second Part

Party of the Third Part

Note: My Tripartite copy is not yet received. So I am sure the court jurisdiction must be mentioned as Chennai only.