Does SubRegistrar Office register land that is mortgaged?

[ramashome]

Does the Sub-Registrar Office allow Buying of a land that is already mortgaged to a Bank? I mean do they register a property even though it has a bank mortgage?

I recently bought 2.42 acres of land in the district of Krishna Giri in Tamil Nadu, out of this 2.42 acre land 12 cents is under bank mortgage, the land owner says he and his other relatives took a Tractor, that was 4 years ago and as they haven't paid the installments properly the Bank took back the Tractor.

5 Years passed since he mortgaged this property.

The owner told us that he will clear the mortgagee for us and also in the Sale Agreement in which the Owner signed there is a point clearly mentioned that the property being sold to us is clear without any legal issues and if there are any issues that come up in future then it is the responsibility of the owner and their legal hiers to clear them up for us.

The 12 cents was owned by the father and the rest of the 2.30 acre was owned by his 2 daughters. Now we own the land. The land registration has happened in our name.

But when we took the Encumbrance certificate for the 12 cents land it shows that there is mortgage during year 2007.

As per the money we paid, The cost of the 11 cents comes to Rs.30,000/- where as the cost of the tractor is 5 Lakhs. But the bank already took the tractor 4 years ago.

The registration happened successfully in the sub-registrar office. The sub-registrar office didn't put any restriction to buy this 12 cents that was already mortgaged to a bank.

Now I am worried if there will be any problem in future from the Bank.

Please share your views what I could do now.

[biju.thomas]

A Mortgaged property cannot and should not be registered by Sub-Registrar when there is an existing mortgage on the property. You must get a release order from the Bank or that must have been part of the documents submitted by the old owner before you bought it.

In your case the vehicle was seized by the bank for non-payment of loan. You must get a release statement for the mortgage from the Bank or if you have the loan account number...go to the bank and verify the status of the loan.

[msn1270]

In India, you cannot believe/depend on the sub-registrars. They register every/any transaction as long as they get the stamp duties and their payment. Hope you might have read last year news, where a peice of big size land near Begur whose actual owner stays in Gulf Region, was sold by two different people(one as original owner and another as a GPA Holder) within a weeks time in the Madiwala Sub-Registrar's office.

You're suppose to take the encumberance Certificate during documents verification stage (Before registration) itself. So that you would have noticed this issue. If i'm right, when someone mortgages any property with Banks, the original property documents will be held by the bank. So how did you got the original papers for the peice of 12 cents land which was mortgaged. ?

Even though Bank has seized the tractor for non-payment of the dues, it doesn't automatically closes the bank records formally. The dues and penalties have to be paid to close the records.

All you can do now, is to approach the seller and ask him to settle the things at his expense. Else you can file a cheating case against the seller.

[tvsh]

How can a bank take a piece of property that is worth only Rs 30000/- as colateral for a tractor loan worth 5 lacs? My guess is that there might be other properties that have been pledged as well. The bank will typically auction off the tractor and go after the colateral for recovery of the balance amount. In your case, your 12 cents is at risk, if it is pledged along with other properties by the owner of the tractor. If only the 12 cents of land is pledged, the bank would write of the loan as the amount they recover from auctioning of the 12 cents is too little for them to justify taking action (going through the process of auction).

[ramashome]

Dear Sirs,

Thanks a lot for all your replies, I really appreciate all of you taking time to clarify my doubt.

The land being purchased was from a village where my grandmother and grandfather were born. The seller of the land is my relative. There were mediators(brokers) who involved in this transactions were relatives too. All of them clearly told us that they will get the Bank mortgage cleared for us. Based upon their trust we purchased the land as both the seller and broker is our relative. Frankly speaking I am completely new to buying of Land, Infact this is the first land that I bought in my life. I have no idea what documents I have to check. I haven't seen the Parent Deed of the 12 cents land, but I checked only the xerox copy of the Parent Deed of the 2.30 acre land but it is in tamil so I didn't understand anything. But I engaged a Lawer/Advocate, he checked the document what the seller showed him and gave me a go to buy the land. The lawer told me that there wouldn't be any problem in future as for 12 cents land no bank will come to do auctioning and more over the Tractor for which they have given the Loan has already been taken back by the bank. The lawer told me that even if somebody comes in future he will take care of the issue, In the sale deed the Lawer mentioned a point that says

"That the property is not subjected to any encumbrances, mortgages, charges, lien, attachments, claim, demand, acquisition proceedings by Government or any kind whatsoever and should thereby and the Vendor shall discharge the same from and out of his own funds and keep the Purchaser indemnified."

And also one more thing is that the Survey of that land has not been done till date, we bought the land as per the measurement specified in the document and as specified by the government document for those particular survey numbers, as there was sugarcane planted that time and became practically difficult to get the survey done.

This transaction has been done purely in trust.

More over as the Senior Lawer gave a go so I bought it.

I haven't sensed any immediate problem there as of now but I am just worried. I am planning to sell off this land as I am worried about the Bank mortgagee. Should I have to take any necessary actions before buying?

Thanks a lot once again.

[tvsh]

Most agricultural property have one issue or the other when it comes to documentation. So it is very very difficult to find a piece of agricultural property that has all the documents in order ( my experience is limited to lands in karnataka). your 12 cents out of 230 cents is at risk of bank auction. So it is 5.2 % of the land that is at risk. Even if you plan on selling this land and buying another property, the transaction cost would far exceed 5.2%. If I were you, I would not worry about the status of the 12 cents.

[ramashome]

Dear Sir,

The total land measures 2.42 acre (12 cents + 2.30 acre), As per the Sellers words I have knowledge that the 12 cents land comes in the front that touches the main road. My worry is because if the Bank comes and auctions the land(12 cents) the people will be ready to buy as it will have a road which will be flexible for them to construct their own houses. My grandmother already owns a 70cents land in the same village for which there is no road, people are asking this 70 cents land for 2 lakh ruppees. so my 2.30 acre land if there is no road (after the bank auction) comes down to less value than for what I purchased which is 3.4 lakh per acre.

[tvsh]

There is a remote chance that the bank would conduct an auction to dispose off the 12 cents of land.(unless it is part of other lands that are pledged). Your options are

1. Ignore the issue and be happy
2. Get the original owner to clear the loan and get a Re-conveyance deed done. This will remove the mortgage from the RTC and EC.
3. Talk to the bank and tell them that the value of the land is 30,000 rupees and you would pay it off and get the mortgage released.
4. Wait for the auction and bid for it. I am sure it makes sense for you pay more than anyone else.

Forget the lawyer, There isn't much he can do. He is telling you that he will take care of it only to calm you.