By Accommodation Times News Services
Q. Can the property of Guarantor be attached ?
A. Yes, You can attach the Guarantor’s property as long as Bank has the charge on that property and such properties can be attached irrespective of belonging to he borrower or guarantor. What is required is property must be charged to the bank and while issuing notice of 60 days, you must ensure that borrower as well as guarantors are served with Sec.13 Notice, without exception.
Q. In certain cases, charged properties are sold or assigned by the borrower, in that case what is to be done ?
A. If after receipt of the Securitisation Notice, during the period of 60 days or thereafter, if the borrower or guarantor sells assignment is an illegality and therefore the Purchaser or the Act, if any person contravenes or abets the contravention, the provision of the Act or any rule made thereunder, he shall be punishable with imprisonment, which may extend for a period of one year or with fine, or with both. Therefore, if anybody transfers or sells the charged properties after getting the Securitisation notice, the person who is the Purchaser, the Borrower and the guarantor 9in which the bank has a secured interest), and if disposed, they may be prosecuted under Sec.29 before the Judicial Magistrate 1st Class Court. Sec.29 provides that not only the contravention of the provisions of the Act but also rules made therein. Therefore, it is difficult for the Offender to escape from the clutches of law, if any monkey business is done by him disposing of the secured assets charged to the Bank, after getting the Notice u/s 13 (2) of the Act.
Moreover, in case of immovable properties, those are charged to the Bank are normally charged by creation of a Equitable or Registered Mortgage and almost all the Original Title Deeds are with Bank, as such, no. Original title deeds are left with the Mortgagor. Hence, he cannot sell or dispose off the immovable properties, if done the Purchasers right to the property will be subject to Banks first claim being satisfied. However, Banks right to declare the sale/assignment as invalid cannot be denied to the Bank. Even criminal case can be filed by the Bank against all concerned.
Q. If at the time of creation of Equitable Mortgage, whether drawing of MEMORANDUM OF ENTRY is required ?
A. Yes, if the State in which such Equitable Mortgage is made, there is a State Stamp Act, which prescribes stamp duty to be paid on such Equitable Mortgage created in the State, you must draw Memorandum of Entry and affix the requisite stamp duty and keep it with the title documents. If no stamp is affixed on the Memorandum of Entry which is required under State Law, the Stamp Officer of the State can enter the Bank and take physical possession of all those mortgaged documents, thereby the bank will bereft of the security. Not only the Bank should draw the Memorandum of Entry and affix stamp as required by State Law, but also the Memorandum of Entry must be entered in a Register maintained by the Bank for that purpose. Avoiding to pay Stamp Duty on Memorandum of Entry is AKIN to sitting on a volcanic point.
Q. Can the mortgage of immovable property be created by deposit of title deeds of the properties in a State where no stamp duty is prescribed on Memorandum of Entry ?
A. Yes. This can be done but it will be a moral wrong on the part of the Bank as the intention is very clear to evade the legally payable State revenue, as if avoided to help the Borrower. However, when the Equitable Mortgage is created in a State where there is no prescription of stamp duty payable on MOE, it will be a perfect mortgage even if the property is situated outside that State. But, besides the aforesaid moral wrong, the Bank if it wants to invoke Securitisation Act or any other legal proceedings and rely upon the mortgage created outside the State, it is necessary that, within 30 days of these original documents being brought in the State in which here is prescription of stamp duty payable on such mortgage, the stamp duty must be paid, and then only the mortgage can be recognized in a Court of Law or Tribunal, or for the purpose of taking action under Securitisation Act, in the state where there is a requirement of paying stamp duty on MOE.
Where in a State, there is prescription of stamp duty to be paid on MOE, if not paid, the documents will not be admitted in EVIDENCE in the Court. Moreover, documents are liable for impounding. Therefore the Evidentiary value of the mortgage will be Nil, unless prescribed stamp duty is paid. Getting the MoE stamped at the time of going to Court is not a good practice as it may expose that the Bank is not stamping the MoE when executed, which is against law and attract serious reactions from the Government.
Even when such mortgage documents are presented in the Court, the Court can impound the documents and send it to the State Authorities for non-stamping of those documents, which require such stamping under that State Law. Once such a document is impounded by the Stamp Authorities of that State, fine is to be paid many times of the duty not paid with further penal interest on such non-payment and Stamp Authorities may enter the Bank and take away the documents as the Stamp Officer has got Authority under the Law, to do so.
Under any circumstances, if there is no MOE made by the Bank, a fresh MOE must be made and given for stamping and stamps as well as penalties must be paid and the documents can be presented in judicial proceedings as Evidence. In certain cases, Banks do take a Power of Attorney to create such Equitable Mortgage in favour by the Bank officer himself. This is a danger situation in as much as if the Mortgagor dies or becomes lunatic or is legally unable to contract, the power of Attorney issued by him to the Bank Officer cannot be acted upon. Therefore, it is strongly advised that while creation of Equitable Mortgage, proper MOE must be drawn and signed only by the Bank Officer and witnesses of 2 other persons are taken and MOE must be properly stamped and Alongwith that title documents of the property must be taken and alongwith Affidavit and Undertaking by the Mortgagor stating that he has deposited the title deeds with the Bank and created the mortgage and he shall up-keep the property in proper order to safeguard the interest of the Bank. If such documents are taken, the Bank will have an absolute security as Evidence.
Evading stamp duty to be paid on MOE is a very risky situation. However, some Solicitor Firm or Advocates may give an opinion favourable to the Bank, who look for tailor-made opinion, and such Legal Advisors give advice in writing that stamp duty is payable only on MEO and if no MEO is drawn, the mortgage is valid. Therefore, no stamp duty needs to be paid. But stamp Act is very clear that if an Equitable Mortgage is created in a State, the Stamp Act apply, whether MOE is drawn or not. Therefore, obtaining such legal advice and acting on that is like a cat drinking milk by closing its eyes.
Q. Whether MEO can be signed by the Mortgagor ?
A. No. MOE must be signed by the Bank Manager who accepts the title deeds in a Notified Area under the Transfer of Property Act; with an intention to create a mortgage and with that intention the Mortgagor has handed over the documents. Therefore, Mortgagor should not sign this MEO but he has created mortgage of his property in favour of the Bank. On the MOE, the Mortgagor and the Mortgagee both should never sign as it would amount to an Agreement and that attracts stamp duty, again. The declarations and undertakings to be taken from Mortgagor is annexed to Notes on Mortgages in this booklet.
Q. Whether Bank can take two actions for recovery, under DRT Act and Securitisation Act simultaneously ?
A. Yes. There are a number of Court decisions to that effect Copies of such decisions of DRAT and High Courts is enclosed for your information. Please read these Judgements carefully.
Q. Whether deposit given by the Bank for leasing premises can be recovered under DRT proceedings ?
A. As per DRT-II judgements dated 2/4/2004 reported in 2005 (II) DRT –133, which is confirmed by he DRAT, such money cannot be recovered by filing recovery proceedings under the DRT, as DRT has held that this is not an amount recoverable under the DRT, as definition of “Bank Activity” cannot be imparted in the present case. Copy of the Judgement is enclosed.
With due respect, we defer with this judgement of the DRT and confirmed by DRAT, in as much as, once the Leave and licence Agreement is terminated, the deposit lying with the Lessor becomes a debt due this matter upto Supreme Court to get a final judgement on this issue.
Q. What are the basic title documents that the Mortgagor has to give to the Mortgagee so as to make the mortgage effective ?
A. The Transfer of Property Act, Sec.58 (f) deals with creation of mortgage but does not specifically speak about the title deeds that needs to be given at the time of creation of Equitable Mortgage. However, the Bank must always insist upon all Original Documents of title with that Link Documents of earlier transaction so that mortgage will be foolproof. However, a copy of the Legal Opinion given dated 23/11/2004 and also copy of our Legal Opinion dated 03/12/2004 are enclosed to cover all aspect of law.
Q. Whether a “Nominee” made in the society record or in any property, whether be becomes the owner of this property after the death of the person who nominated him? Can a person who acquired the property from a deceased in the capacity as a “NOMINEE”, whether that property can be alienated or mortgaged by that “Nominee” to third party ?
Nominee is holding the property in exercise of a fiduciary power. Therefore, Nominee has got no title other than holding the property in a fiduciary capacity while holding office of the Nominee. Our Opinion dated 21/5/2002 in enclosed.