Re: Opinion regarding the proposal to sell the hypothecated vehicles by the legal heir of the deceased defaulter, Mr. X, A/c. Company 1
We refer to your letter vide No dated February 03, 2008 on the above subject.
From the facts it appears that as per your instruction we filed the Artha Rin Suit vide 09/2008 (the “Suit”) against the legal heirs of the deceased proprietor of M/s. Company 1. After filing of the Suit, you received a letter from Mrs. A (the “defendant”) wherein she informed you that she arranged the selling of vehicles which are in the possession of the defendants but hypothecated with the Bank 1 (the “Bank”) against the loan liability of the defendants of the Suit. In the said letter the defendant also informed the Bank that they would deposit the sales proceeds in the captioned account to reduce their loan liability. It is mentioned here that the Bank is now holding the documents of the hypothecated buses as security of the captioned loan and the defendant requesting the Bank to release those documents so that registration with the BRTA in the name of the proposed purchaser of the vehicles can be done.
In these circumstances, you require our legal opinion regarding whether you can accept the proposal to sell the hypothecated vehicles by the defendants and allowing them to deposit the sales proceeds in the loan account to reduce the loan liability. You also require us to give opinion whether the sales proceeds will be deposited in the loan account or the Bank’s DAD account.
Section 12(3) of the Artha Rin Adalat Ain 2003 states as follows:
“If any financial institution sanctions loan against security of mortgage of immoveable property or hypothecation of moveable property of the defendant and at the time of mortgage or hypothecation, power is given in favour of the financial institution to sell the mortgaged or hypothecated property, no suit shall be filed in the Artha Rin Adalat without selling the said property and adjusting the sale proceeds with the outstanding loan or without trying to sell the said property and failing to sell the same.”
From the above mentioned provision we understand that the financial institution is given power to sell the mortgaged or hypothecated assets. As long as any property or asset is mortgaged or hypothecated, the mortgagor or hypothecator can not sell or transfer the same before paying back all outstanding loans and got the redemption letter from the financial institution officially. During the continuance of the mortgage or hypothecation, only the financial institution or the lender can sell the property or assets in order to recover the outstanding loan. In the instant case, the Bank could not sell the hypothecated vehicles before filing of the Suit for some reasons. Since the matter is now pending before the learned Court, no step should be taken without the concern of the Court. Accordingly, the Bank shall inform the learned Court that they are going to sell the hypothecated vehicles in order to adjustment/partial adjustment of loan liability of the defendants. The Bank can offer the defendant(s) to come forward with the proposed purchaser, if the Bank thinks that they would get better price from the proposed purchaser of the defendant. The selling of the hypothecated vehicles should be done by the Bank, not by the defendants. The Bank should not hand over the hypothecated documents to the defendants anyway. Otherwise, there is a possibility of not depositing the sales proceeds in the loan account to adjust the loan liability. In the circumstances, if the defendant(s) is not willing to proceed with the Bank’s offer, the Bank should file an attachment petition in the Court immediately to take the possession of the hypothecated vehicles. After selling of the hypothecated vehicles, the Bank may deposit the sales proceeds in the loan account to update the outstanding loan liability of the defendants.
If you have any further inquiries please do not hesitate to contact us.
For: “The Lawyers & Jurists”