Legal Question in Banking Law in India
A mortgager mortgaged the property in favour of the bank and deposited the partnership agreement, encumbrance certificate, and registration extract of sale deed along with a letter informing the bank that the original sale deed was lost by the contractor. The bank failed to make relevant enquiries. The contractor subsequently created an equitable mortgage of the same property in favour of Mr. A and delivered to him the original sale deed of property. Mr. A was also informed of the subsisting prior equitable mortgage. Decide whether Mr. A can have a valid claim over the claims of the bank
2 Answer from Attorneys
Bank will have a prior claim. For equitable mortgage, there is no way a person can find out whether it is created or not. When the title holder issues a letter stating that he has lost Original Document, and then subsequently creates a mortgage with a third party it is cheating and fraud, and previous mortgage shall prevail.
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