Legal Question in Banking Law in India
Protection of Third Party Interests in Recovery Proceedings
SA entered into a purchase deal of prpperty belonging to company IDSL and also took possession. The unregistered agreement taken for obtaining permissions was never returned. SA suspecting mortgage to bank SB obtained stay from high court in a civil suit. SB and IDSL make ante-dated fake papers of mortgage and through DRT obtain sale/auction of the property. Recovery Officer dismissed objection saying possesseion taken in part performenc eof unregistered contract not protected. Suit for specific performance still pending. Whether the Recovery Officer can take possession without following due process of law.
4 Answers from Attorneys
Re: Protection of Third Party Interests in Recovery Proceedings
No
Re: Protection of Third Party Interests in Recovery Proceedings
what the Recovery Officer does in enforcement of the Recovery certificate is also in due process of law. SA has to make a claim petition to the Recovery officer of the DRT on the basis of agreement to sell. If he dismisses his claim, a civil suit is possible or an appeal can be filed to the DRT. In any case even if the property is sold it will be subject to lis pendens,provided the Bank is made a party to the suit. If the Bank is a party, then even an auction purchaser in the Bank's proceedings can be defeated on the basis of lis pendens.
Re: Protection of Third Party Interests in Recovery Proceedings
No authority is permitted to proceed except in accordance with law. However, your perception of "what is law" may differ with that of the authorities.
Re: Protection of Third Party Interests in Recovery Proceedings
Where suit is pending, property cannot be transferred. Principle of lis pendens is applicable. Transfer of Property Act prohibits such types of transfers. It is correct that no public officer/servant can go beyond the limits of law.
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