LEGAL OPINIONS & VALUATION are the two rails of a Railway track on which the trains travel. As long as the rails are running parallel, the passengers can reach the destination safely. If any one of the rail deviates, what will happen? The same principle has been applicable to lending institutions also. Giving loans are not only the target of the financial institutions. Safer loans are also one of the important factor to put in mind. Starting from Ketan Parekh, Harshad Mehta to Sneham Finance in Tamil Nadu, we have seen many frauds in the finance sector. Have we learned a lesson? Few scams which have shakened the foundation, of our country in the financial sectors are Insurance scam, Securities scam, UTI scam, Fake stamp paper scam, Satyam scam etc. In many cases it is single person greed or a small group consparey.
After the globalisation many private sector bank and NBFCS were started in India. The Government has given licence to local as well as multinational to open money shops. There is a cut-throat competition, since major financial market is in the hands of Nationalized Banks. In order to grab the customers and to enter the market, they came with attractive schemes. Customers run towards the private sector banks. Not only the genuine customers, fraudulent customers also joined in the game. How the banks attract the genuine customers, the same way the fraudulent customers also attracted the banks. By producing false IT returns, encumbered property, collusion with valuers and lawyers, manipulation of statutory approvals etc. the loans were disbursed.
In the private sector banks, target is a knife hanging over everybody head. The ultimate motto of the institutions is to make more and more profit and to reach the number one position.
The direction of the wind changed. Many lending institution now face trouble. Starting from Lehman Brothers to ICICI facing unprecedented loss in Sub Prime Mortgage Crisis. Later it was found that accounting manipulation is also not of the reasons.
These are the trailers of the main film. I had an experience with a lending institution, which I thought I can share with you. The entire communications were though mail. The name of the FI is concealed for want of privacy.
Financial Institution: Find the attachment of Legal opinion for Loan proposal of ABC private Limited. Pls check and release the report on priority basis.
Valuer: Please refer to the above subject. Till we receive the legal opinion, we are not aware of the availability of the approved plan. We have been told that there was no approved plan. In order to establish the road access, we have called for the legal opinion. After we received the legal opinion, we came to understand that the approved plan has been provided for the Panel Advocate and it was mentioned in the legal opinion on page No. 2 Item No. 14. Please provide the plan.
2. As per page Number 5, paragraph 3, it is mentioned that the quarrying licence from 9th July 2007- 8th July 2012 stands cancelled automatically, Since Mr. ‘X’ has not been carried out the quarrying.
In the 4th paragraph, it is said that there is no evidence for the cancellation of the above said agreement.
There is no permission has been sought form the government for selling this land. The lawyers advised FI to take an indemnity from the borrowers.
In the 5th paragraph the lawyers advised to ensure the direct access to this property.
At present the lands were not having access. It is a locked land. During the site visit, we have been told that the company is planning to provide a direct access to this land through Survey Number 1 & 2 , which is said to be belonged to the same owners. (Currently under mortgage with another FI)
In view of the above, we suggest that not to do this case. Else please confirm the access with proper documentary proof. If the plan approval is available, it has be verified that it is approved by a competent authority. Finally, as per sale deed the land is a dry agricultural land with does not come under SARFAESI.
Financial Institution: The property has been visited by our credit head and have confirmed that property has clear access to that. With regard to all legal points had got clear instruction from our lawyer on how to proceed with this and the same has been taken care of. We can’t wait and more kindly release the report.
Valuer: Please refer the above subject. The valuer’s main responsibility is to indentify correct property and to check feasibility of taking possession, and to the property in open market, if the account goes delinquent. With the available documents, we are not in a comfortable position to release the report due to the following reasons:-
- (i) Approved plan not produced
- (ii) No designated access to this property. At present it is a locked land.
- (iii) This is an agriculture land, SARFAESI cannot be imposed.
- (iv) The last but least, the agreement between the earlier owner and the Government is not property closed.
In view of the above we are not comfortable in doing this case.
Financial Institution: Approved plan has already been furnished during first initiation how came this has been missed from your end, moreover once the approved plan has been obtained from competent authority then how come there cannot be SARFAESI. The lease agreement which you are referring was executed in 2007 for a period of 5 year and the same had got expired one year back. For which we had obtained necessary declaration from customer to protect our interest. Our customer is in possession and has obtained all the necessary valid document and it is recorded in mutation certificate also.
Valuer: We have not received the plan. As per your mail I too agree if the plan is available, I need not worry about the land classification and SARFAESI provided the plan is approved by the competent authority. The site was inspected on 23rd December. We got the FMB on 24 December. Other than that no other documents are provided. However to bring the issue to an end kindly provide the plan, so that we can go forward.
Financial Institution: Ok Sir, will organise the same.
Valuer: I have received the plan sent through Mr. ABC. The plan is approved by Deputy Chief Inspector of Factories, of area concerned. This is one of the requirements for the factories. This plan is obtained for the regulation of industrial safety it is no way connected to local body approval for building plans. The correct procedure is to obtain the approval plan of building from Commissioner of Panchayat Union. For more details please advise the customer to approach Panchayat Union.
Financial Institution: Please find attached the agreement made for passage by client.
Valuer: we have received the agreement for the passage. As long as the agreement is accepted by the panel advocate, and this can be enforced in the event of necessity. I have no objection about the access. However on this date of agreement the properties were mortaged to another FI. Are the owners having the rights to execute this agreement in a mortgaged property?
About the agricultural lands issue, I have not received any supporting documents for the conversion. (CLU) Even in the enclosed agreement, it is very clearly mentioned as agriculture land. Kindly send the supporting documents.
Ref: - Top 10 financial scams in India.
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