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L.N. Revathy

Coimbatore , Nov 22

VISUALISE this -You buy a plot and construct a house. When almost complete/ready for occupation, you learn that the seller of the property had defrauded you by offering the plot on which your house now stands as an equitable mortgage, even before the sale took place.

The financial institution/bank that had extended the assistance issues a notice for attachment of the said land towards recovery of dues. When they arrive at the site, they find that the land had been sold as plots to different individuals, who had in all ignorance built structures on it.

Imagine the plight of the financier and the consumer. This is not imagination though, but a practice that, according to some consumer activists here, is widely prevalent.

Some unscrupulous borrowers have taken advantage of the procedural tangle.

As per the present practice prevailing in banks and financial institutions, borrowers create an equitable mortgage of landed properties without registering the same, since it entails heavy stamp duty. The borrower just deposits the original title deeds of the property with the bank, with the intention of creating an equitable mortgage for the credit limits sanctioned to him.

The mortgage is not registered with the Registrar office. Therefore, if an encumbrance certificate is obtained from the Registrar in respect of the said property, the creation of an equitable mortgage with the bank/financial institution is not reflected in the certificate.

According to the Coimbatore Consumer Cause, this lacuna in the procedure has facilitated the owners to further alienate the land to others without the knowledge of the bank.

The buyers of the land are blissfully ignorant of the development, as there is no indication of an earlier encumbrance, as the property had been offered as an equitable mortgage and the title deeds deposited with the bank.

The seller sells the land by furnishing only photocopies of the original title deed, on the plea that the original document could not be handed over to the buyers, as the land was divided into smaller plots and sold to various persons.

Based on the photocopy, the buyer obtains the certification about the clear title.

When the account turns irregular, the bank takes the legal route, only to find that the property had been divided into plots and sold to unsuspecting victims, who had even built houses and occupied them.

There have been instances of properties being sold out by the defaulters intentionally, with a view to defrauding the bank and the buyers.

It is reliably learnt that some unscrupulous borrowers after depositing the original title deed with the bank, obtained a duplicate document copy from the registration department, contending that the original had been lost.

An analysis of the problem revealed that to obviate such frauds being perpetrated on innocent buyers, the equitable mortgage should be registered and be reflected on the document.

The Secretary of the Coimbatore Consumer Cause, Mr Kathirmathiyon, has in a communication to the Finance Ministry and the Government, suggested that the procedure for creating such equitable mortgage should be registered with the Registrar for a nominal fee. This would protect the interest of the bank and the buyer, besides nabbing wilful defaulters of bank loan, he added.

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