If a mortgaged property has been sold by Borrower to Third Party, then the Third Party has to face the consequences | Prior to execution of the Agreement to Sale, the Third Party should have verified the contents and validity of the transaction – Sri G. Gopala Rao Vs. The Authorized Officer, Union Bank of India – DRAT Kolkata

In this case, the mortgage was created on 01.03.1996 and Agreement to Sale was dated 28.03.1998. Hon’ble DRAT Kolkata held that it is settled proposition of law that any transaction subsequent to the mortgage would always be subject to the mortgage of deed. It could not be disputed that mortgage was created in favour of the Bank prior to Agreement to Sale. If Agreement to Sale was executed by the borrower fraudulently in favour of the Appellant, then Appellant has to face the consequences. Prior to execution of the Agreement to Sale, he should have verified the contents and validity of the transaction but there is nothing on record to that extent. Since the Agreement to Sale is subsequent to the mortgage Deed, all the actions would be subject to the mortgage. Bank has first charge over the secured assets.

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