One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Mr.X and his family purchased a property in City A in DD/MM/YYYY from Mr.Y, who had originally acquired it from Mr.Z in DD/MM/YYYY. For over three decades, they resided peacefully on the property without any legal complications. Eventually, Mr.X’s family relocated and sold the property in DD/MM/YYYY to ABC Developers Ltd. The developer commenced construction of residential units, completing the structural framework and selling 40% of the units. However, during this process, an equitable mortgage claim emerged from XYZ Bank, alleging that Mr.Z had created an equitable mortgage by depositing title deeds decades ago. The bank approached the Debt Recovery Tribunal claiming the property as security for an outstanding loan, creating a complex legal situation affecting all subsequent purchasers and current unit buyers.

Advice in Such Cases

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Immediately obtain certified copies of all property documents from the registration office to establish the chain of title. Verify if any equitable mortgage was actually created by checking bank records and deposit receipts. File for intervention in the DRT proceedings as an affected party if you are a subsequent purchaser. Consider approaching the consumer forum if you are a unit buyer who was misled about clear title.

Applicable Sections of Law

This case involves multiple legal provisions. Under the Bharatiya Nyaya Sanhita (BNS), Section 316 deals with criminal breach of trust if developers concealed mortgage information. The Recovery of Debts and Bankruptcy Act, 1993 governs DRT proceedings. The Transfer of Property Act, 1882 defines equitable mortgages under Section 58. The Bharatiya Nagarik Suraksha Sanhita (BNSS) provides procedural guidelines for evidence collection and witness examination in related criminal matters if fraud is established.

If You Are the Complainant

File a detailed application in the DRT with all supporting documents proving the equitable mortgage creation. Submit original title deeds and loan agreements as primary evidence. Provide bank statements showing loan disbursement and subsequent defaults. Include property valuation reports to establish the security value. Prepare witness statements from bank officials who handled the original mortgage transaction.

If You Are the Victim

Immediately file an intervention application in the DRT proceedings to protect your interests as a bona fide purchaser. Gather all sale deeds and payment receipts to prove legitimate purchase. Obtain title insurance if available to cover potential losses. File a complaint against the seller for non-disclosure of encumbrances. Consider joining with other affected unit buyers to file a collective complaint against the developer for misrepresentation.

How the Police Behave in Such Cases

Police generally treat this as a civil matter unless clear evidence of criminal fraud exists. They may be reluctant to register FIRs initially, referring parties to civil remedies. If criminal elements are proven, they will investigate under cheating and criminal breach of trust provisions. Documentation and proper legal advice are crucial for police cooperation in such complex property disputes.

FAQs People Normally Have

Can an equitable mortgage be created without registration? Yes, by depositing title deeds with the bank as security. What happens to subsequent purchasers? They may lose the property if the mortgage is proven valid and prior. Can DRT proceedings be challenged? Yes, through appeals to Debt Recovery Appellate Tribunal. What is the limitation period? Generally 12 years from the date of default for mortgage enforcement.

What Evidence Is Required?

• Original title deeds and their deposit receipts with the bank
• Loan agreements and disbursement records
• Property registration documents showing chain of ownership
• Bank statements proving loan defaults
• Property valuation reports at different time periods
• Correspondence between bank and borrower
• Witness statements from bank officials and property dealers

How Long Will the Investigation Take?

DRT proceedings typically take 2-4 years depending on case complexity and document verification requirements. Initial hearings may commence within 3-6 months of filing. Appeals to DRAT can extend the timeline by another 1-2 years. Settlement negotiations, if successful, can resolve matters within 6-12 months.

Advocate Sudhir Rao, Supreme Court of India