ANDHRA PRAGATHI GRAMEENA BANK HEAD OFFICE :: KADAPA Circular No. 130-2006-BC-CD Date:25.11.2006 OBTAINING OF LEGAL OPINION AND SEARCH REPORT Attention of all the branches is invited to the captioned subject and various circulars, wherein detailed procedure to scrutinise the title deeds to the property offered as security for advances of borrowers was advised. Of late, it is observed that certain branches are forwarding incomplete legal opinion and no attempt is made to verify whether the opinion given is in accordance with the guidelines issued by the bank. This lapse on the part of the Managers is giving scope for unnecessary correspondence and delay in scrutiny and sanction of loans at various levels. For the information of branches and their standing lawyers, we are furnishing here below the procedure to be followed in the scrutiny of title deeds to property offered as security for advances. LEGAL OPINION: Whenever a customer approaches the branch for advance for which the legal opinion is required, the Branch Manager shall advise the customer to bring the following papers, if he is satisfied that the customer is otherwise eligible for availing the loan. a) Original title deed of the property offered as security;. b) Link documents (original/xerox copies/certified copies, as the case may be) for the past 25 years. c) Encumbrance Certificate (EC) for 25 years. d) Pattadar pass book and title deed pass book, in case agricultural lands are offered as security. e) Tax paid receipts. f) Proceedings of the Grama Panchayat/Municipality/Municipal Corporation permitting for construction of house/commercial complex/factory building/ school building as the case may be if the loans is for the above purposes.. 2
g) Copy of approved plan. 2 h) Sale agreement in case of purchase of ready built house. i) Death certificate and Legal Heir Certificate in case the registered owner of any link document is deceased. j) Partition deed in case the registered owner of any link document attains the right through the partition. k) If the properties are ancestral properties, proof for ownership/possession in the form of 10-1 extract/pattadar pass books/copy of 1B-Register, property/ land tax receipts paid, possession/enjoyment certificate, etc. l) Bye-laws and resolution of the Board on decision taken to avail the loan and empowering the specified office bearer/s to apply for the bank loan to the specific bank and for specific purpose/s and execute the documents on behalf of society/mortgage, the property, etc., in case the applicant is a society. m) Articles of Association and Memorandum of Association and Resolution of the Board requesting for sanction of loan in case the applicant is a Company. Also, the resolution of the Board empowering the specified officials/ Directors to execute the documents/mortgage properties, etc. to be obtained. n) Copy of Judgement/Will, in case the registered owner of any link document attains the right over the property through Judgement/Will. o) Any other documents/papers relevant to the loan proposal. After getting all the relevant documents mentioned above, Branch Manager/ Officer (Adv.) shall verify the documents/papers and handover them to the legal advisor of the branch through a letter (specimen enclosed as Annexure-I) under acknowledgement. Under any circumstances, the documents shall not be sent through borrower to the lawyer. The lawyer, on scrutiny of title deeds and other documents, shall give his opinion in 5 parts as detailed below. PART-I LIST OF DOCUMENTS SCRUTINISED: A) The lawyer shall give the list of documents scrutinised with a clear description of documents and other relevant papers produced by the applicant through the Branch Manager and their validity. Description of the documents shall be clearly stated.. 3
3 Example: i) Original/Xerox copy/certified copy (strike out whichever is not applicable) Sale Deed No.. executed on.. by in favour of for a valuable consideration of. ii) iii) Encumbrance Certificate given by. Sub-Registrar Office, for.. years from to in respect of the property offered as security. Proceedings of the Grama Panchayat/Municipality/Municipal Corporation,. No.. Dated for construction of.. by. In the same way the remaining documents/papers shall also be described in detail. B) Lawyers shall ensure that the documents/papers submitted are sufficient to establish borrower s title over the property. If the material produced is insufficient and any further information is required, the same may be called for. The lawyer shall express his/her satisfaction over the submission of information/papers necessary to establish the title. PART-II DESCRIPTION OF THE PROPERTY OFFERED AS SECURITY: A vivid description of property for which title is scrutinised such as Survey No./Door No., Village/Street, extent of land, boundaries of property, etc. shall be given. The identity of the property shall be got established. PART III- FLOW OF TITLE: In this part, a detailed analysis of the flow of title for the last 25 years shall be given and explanation about the derivation of the title to the applicant. Sometimes, the registered owner in respect of any link documents might have been deceased and his/her legal heirs might have executed the sale documents. In such cases, the death certificate and legal heir certificate shall be got verified to establish the flow. The advocate should verify as to whether all the legal heirs including female members have executed the sale deed/partition deed, etc.. 4
4 If there is any deficiency the advocate has to suggest the remedial step and got it rectified, before giving the final opinion. These certificates (death certificate and legal heir certificate) shall also be included in the list of documents in Part-I. And in some cases, the property might have been partitioned, in such cases, the partition deed shall be verified and it shall be included in the flow of title and also in the list of documents in Part-I. PART-IV- METHOD OF CREATING THE CHARGE: In this part, the manner and method of creating charge over the properties in favour of the Bank as security of advances shall be stated by the lawyer clearly. Example: Un Registered Equitable Mortgage/Registered Equitable Mortgage/ Registered Simple Mortgage, etc. PART V CONCLUSION: In the conclusion part, the lawyer shall give his final opinion and also inform the party/ies who is/are competent to effect the mortgage i.e. whether the applicant alone or any other who has also got right over such property. All the Managers are advised to inform the lawyers on the procedure to be followed while giving the opinion on the above lines. The Manager shall ensure the following points while verifying the legal opinion. 1. Flow of Title for the last 25 years is to be observed i.e. who was the owner of the said property 25 years ago, how and when the title flowed to the applicant, stage by stage. In proof of such flow, whether all relevant documents produced by the borrower/s are verified including Death certificate, Legal Heir certificate, Partition deed, Judgement copy, Will, General Power of Attorney (GPA), etc., if any. 2. On verification of current year s assessment, tax receipt is to be obtained to ascertain that there are no arrears of land/house tax. 3. It is to be verified whether all the documents/papers submitted are valid, the executants are competent to execute, the documents are properly stamped and registered by the competent authority. It is to be noted whether the lawyer is satisfied of the above points while describing the title deeds/ documents/papers submitted by the borrower/s under Part-I.. 5
5 4. If agents have executed the documents, lawyer shall obtain and verify the copy of Power of Attorney to ensure whether agents are empowered to execute the documents. This should also be listed under Part-I. 5. It is to be ensured that all original documents/papers are available. If not, registration copies shall be obtained with proper explanation for the absence of original documents in the form of Notarised Affidavit engrossed on requisite stamp paper. 6. If there are no original title deeds covering 25 years period, EC for 25 years must be carefully examined to ascertain the flow of title. 7. It is to be ascertained whether the applicant belongs to Joint Hindu Family. 8. When the title is sustained on the ground of inheritance, the family geneology must be ascertained and flow of title shall be considered as per provision of succession law as applicable to the borrower. The family geneology must be sworn to by memos of an affidavit by the party or the eldest member of the family. A shared partition deed of proposers shall be obtained as proof of the applicant s share in the ancestral property. In the absence of such partition deed, a willingness letter about the applicant s share in ancestral property and their no objection to mortgage the said share of property relinquishing their right over the same from all co-parceners of the family who has got right over that ancestral property shall be obtained in the form of a notarised affidavit. 9. After the receipt of EC, it is to be verified whether all the known/existing transactions of sale/purchase/mortgage/charge, etc. are finding place as entries in EC. 10. Lawyer shall got himself clarified even if he has a small doubt while scrutinising the title to property. 11. It is to be ascertained whether the identity of the property is established. 12. In case the property belongs to a Company, then the charges created by the Company and registered with the Registrar of Companies should also be got ascertained.. 6
6 13. When the property belongs to a Society, ensure whether there is provision in byelaws to avail loans and who is competent to create charge on the property/ies belonging to the society. Otherwise a resolution of the General Body amending the by-law of the society attested by the Registrar of Societies is required. And also ascertain the information whether the Board is elected by the General Body. Obtain the latest resolution and ensure the enforceability of the present Board. 14. The lawyer shall establish the names of the present owners of the properties who are competent to create charge over the properties. 15. Any covenants for and on behalf of minors are to be examined. If so, whether the minor was properly and validly represented is to be ascertained. It is to be carefully observed whether such covenant is liable for attack at the hands of such minor after attaining majority. It must also be seen that if such covenance is after 1956, whether the necessary court permission has been obtained in the case of Hindu Family. 16. Wherever the properties are situated in Panchayat/Municipality/Municipal Corporation limits, party shall produce required proof of payment of tax to such authorities for the latest year. SEARCH REPORT Along with the legal opinion, branches have to obtain a SEARCH REPORT/ CERTIFICATE OF SEARCH AT THE REGISTRAR S OFFICE from the lawyer who has given the legal opinion. The lawyer concerned has to confirm that he has conducted search of records at the Registrar' office in respect of immovable property/ies in question and that there is /are no encumbrance/s on the said property/ies. If any encumbrances are noticed (during the search) on the property/ies to be taken as security, the lawyer has to furnish the details of such encumbrances in the Search Report. The original fee receipt paid, if any, at the Registrar s office, for conducting the search, may also be obtained from the lawyer and kept along with the legal opinion. The attested copies of search report and the fee receipt shall be sent to RO/HO, as the case may be, along with the legal opinion. The search charges/fee have to be borne by the party concerned. All the Managers are advised to go through the above guidelines carefully and obtain the legal opinion and search report from the lawyers accordingly. They shall avoid the practice of simply forwarding the legal opinion without verifying.. 7
7 The Managers are further advised to certify that the legal opinion is in accordance with our guidelines as per proforma (Annexure-II) enclosed to this circular. IMPORTANT: The branch should receive the legal opinion and the documents perused by the advocate directly from the advocate and never be parted with subsequently even during the period between the receipt of the legal opinion and creation of mortgage. This precaution is to be observed to prevent replacement of the original genuine documents perused by the advocate with fake documents before creation of mortgage. Clarifications required, if any, on the circular, may be sought from HO-Credit Department. (M.OBULESU) CHAIRMAN Encl: As above
ANNEXURE-I Encl. to Circular No. 130-2006-BC-CD (Form of Letter to be addressed by the Branch to the Lawyer, forwarding title deeds for scrutiny and opinion) ANDHRA PRAGATHI GRAMEENA BANK BRANCH Ref. No. Date: To Sri/Smt..... Dear Sir/Madam, Sub: Mortgage proposal of Sri. Charge to be created by ************** We enclose the following documents relating to the property/ies of Sri.. Please examine the documents and advise clearly whether Mr./Mrs./M/s. has/ have not/valid title to create a charge on the properties in our favour. In the case of any of the items offered, if there is any deficit in title, state clearly to what extent the title is defective and how you advise us in the matter of getting over the deficit. If any additional information is required by you to arrive at a final decision, the same will be supplied on hearing from you. You may also trace out the derivation of the title for the past 25 years for each item of property offered. We shall be obliged if you advise us on the advisability or otherwise, of our proceedings with the proposal after careful scrutiny of all the required records and on ascertainment of all other information. Your report may be sent in duplicate along with all the documents/records perused by you directly to us.. 2
2 Sl. No. List of documents enclosed for scrutiny and report with Ref. No. of the documents No. of sheets Yours faithfully, Branch Manager I acknowledge receipt of documents shown in letter No., dt... Signature of the Lawyer
ANNEXURE-II Branch: Date : To The Regional Manager/Chairman Andhra Pragathi Grameena Bank. Region/HO Dear Sir, Sub: Loan proposal of Sri. for Rs. for the purpose of ********* With reference to the above, we send herewith the legal opinion obtained on the title over the property/ies of the captioned party. We certify that the opinion is in strict conformity with the guidelines given by our Head Office from time to time. Yours faithfully, Branch Manager