The disputed property, located in Maninagar, Ahmedabad, in my case was mortgaged to a bank and was subsequently sold by the owner without the bank's knowledge. Can such a sale be challenged and what rights does the bank have over a mortgaged property that was transferred without consent?
No, a mortgaged property generally cannot be validly sold without the mortgagee bank's knowledge and consent, and attempting to do so exposes both seller and buyer to serious legal risk, since the bank's charge over the property survives the sale and can be enforced regardless of the transaction between seller and buyer. Under Section 58 of the Transfer of Property Act, 1882, a mortgage creates an interest in specific immovable property as security for a loan, and this interest is not automatically extinguished by a subsequent sale — the property remains encumbered by the mortgage until the loan is fully repaid and the charge formally released, meaning a buyer purchasing mortgaged property without clearing or properly accounting for the mortgage takes the property subject to the bank's continuing rights.
If a mortgagor sells the property without informing the buyer of the existing mortgage, or without the bank's knowledge, this can constitute fraud or misrepresentation under Section 17 of the Indian Contract Act, 1872, entitling the buyer to remedies against the seller, while the bank retains full rights to proceed against the property itself, including under the SARFAESI Act, 2002, for recovery, or through a mortgage suit under Order 34 of the Code of Civil Procedure, 1908, seeking sale of the mortgaged property to recover the outstanding debt, regardless of the intervening unauthorised sale.
Where a mortgagor wishes to sell with the bank's cooperation, the standard and legally sound process involves obtaining a No Objection Certificate from the bank, either after the buyer's payment is used to clear the outstanding loan directly to the bank at the time of sale, or through the bank's formal consent to the transaction with continuing security arrangements, ensuring the sale deed can be validly registered with a clean title.
If you are a buyer who has unknowingly purchased mortgaged property, or a bank pursuing recovery against a property sold without your consent, prompt legal action is essential — for representation before Ahmedabad's courts, the Top Property Lawyers in Ahmedabad | Aapka Legal Advice directory can connect you with suitable counsel, and reach out via Aapka Legal Advice for guidance on your specific situation.
In conclusion, no, mortgaged property cannot be validly sold free of the bank's charge without its permission in Ahmedabad — the mortgage survives the sale under Section 58 of the Transfer of Property Act, 1882, and the bank retains full recovery rights against the property regardless of any unauthorised transaction.