A Legal Guide for Flat Purchasers and Allottees in Bangladesh
Protecting Your Dream Home:
What to Do When Your Developer Mortgages Your Flat to a Bank.
A Legal Guide for Flat Purchasers and Allottees in Bangladesh Presented by The Justice Corner
You have invested your life savings into purchasing a flat. You signed an agreement for sale or allotment document, paid the installments, and may even have received possession or started interior work. Then suddenly a bank notice arrives. You discover that the developer has mortgaged the project, or even your allotted flat, to secure a loan, defaulted on repayment, and the bank is now attempting to auction the property.
This situation has become increasingly common in Bangladesh. A flat purchaser is then caught between the developer’s breach of obligation and the bank’s attempt to recover its dues under the Artha Rin Adalat Ain, 2003. However, a purchaser is not without remedy. The law provides several civil, statutory and criminal routes to protect the purchaser’s investment.
1. Immediate Remedy Before the Artha Rin Adalat
If the bank has already obtained a decree against the developer and has started execution proceedings, the purchaser should immediately intervene before the Artha Rin Adalat.
Under section 32 of the Artha Rin Adalat Ain, 2003, a third party claiming an interest in the mortgaged or attached property may raise an objection in the execution proceeding. Such objection must be supported by proper documents, including the agreement for sale, allotment letter, payment receipts, possession documents, correspondence with the developer, utility papers, and any registered deed or registered agreement, if available.
The purchaser must also comply with the statutory requirement of furnishing security equivalent to 10% of the decretal amount, or 10% of the unsatisfied decretal amount where the decree has been partly satisfied, or an equivalent bond, as required by section 32(2). Without such compliance, the objection may be rejected.
The High Court Division in Dr. Md. Habibuzzaman Chowdhury vs Bangladesh, 64 DLR 281 recognized that a bona fide purchaser may seek remedy under section 32, particularly where the purchaser is willing to clear proportionate dues to save the property.
2. Civil Suit for Declaration and Injunction
Since the Artha Rin Adalat is primarily a special forum for recovery of bank loans, it may not always be the proper forum for finally deciding complicated questions of title, prior allotment, fraud, collusion, or competing rights between the bank, developer and purchaser.
Accordingly, the purchaser may file an independent civil suit seeking declaration that the mortgage, auction process, or any step taken against the purchaser’s allotted flat is illegal, void, ineffective or not binding upon the purchaser, depending on the facts.
The purchaser may also seek temporary injunction restraining the bank, developer or auction purchaser from selling, transferring, dispossessing, or otherwise disturbing the purchaser’s possession.
However, this remedy is strongest where the purchaser can show that the flat was allotted before the mortgage, consideration was paid, possession was delivered, or the bank had notice or failed to conduct proper due diligence. If the bank’s mortgage was created before the allotment, and the purchaser bought the flat without obtaining bank NOC or release of mortgage, the purchaser’s claim may become weaker.
The Appellate Division in Md. Sekandar vs Janata Bank Ltd., 3 LM (AD) 448 / 38 BLD (AD) 129 recognized that a third party may maintain a suit to establish right, title and interest in respect of mortgaged property where such right is affected by sale in execution.
3. Protection Against Dispossession
If auction has already taken place, or if possession has been delivered to an auction purchaser, the purchaser may still have remedy under Order XXI Rules 100 and 101 of the Code of Civil Procedure, as applicable in execution proceedings.
In Sanaullah vs Bangladesh, 17 BLC 481, the High Court Division held that the Artha Rin Adalat does not become functus officio merely because possession has been handed over to an auction purchaser. The Adalat may still examine an independent claim of possession and grant appropriate relief.
Therefore, even after auction or delivery of possession, the purchaser should not assume that all remedies are exhausted.
4. Caution Against Premature Writ Petition
A writ petition under Article 102 of the Constitution should not be the first remedy in ordinary cases. The High Court Division may refuse to interfere where the law provides alternative and efficacious remedies, such as section 32 objection, civil suit, or remedies in execution.
A writ petition may be considered only in exceptional cases involving lack of jurisdiction, violation of natural justice, patent illegality, or actions taken without lawful authority. Otherwise, premature writ proceedings may waste valuable time and weaken the purchaser’s overall strategy.
5. Remedy Under the Real Estate Development and Management Act, 2010
The Real Estate Development and Management Act, 2010 gives statutory protection to flat purchasers.
Section 16 restricts a developer from mortgaging allotted real estate without the purchaser’s consent. It also requires the developer to release the real estate from mortgage before execution of the transfer deed.
If a developer mortgages real estate in violation of section 16, the developer may be punished under section 23 with imprisonment up to one year, or fine up to Tk. 5,00,000, or both. Where the developer is an incorporated company, section 31 may also impose personal liability upon the owner, director or officer who knowingly participated in the offence.
However, offences under this Act are compoundable, bailable and non-cognizable under section 32. Therefore, criminal pressure may be useful, but it should be pursued carefully and alongside civil and Artha Rin remedies.
Final Advice:
A bank’s auction notice does not automatically extinguish the rights of a bona fide flat purchaser. If the purchaser has prior allotment, payment records, possession, and evidence of developer fraud or unauthorized mortgage, the purchaser may resist auction, seek declaration of title, obtain injunction, and initiate proceedings against the developer.
But timing is critical. Delay may allow auction, sale certificate, registration, and delivery of possession to proceed, making recovery far more difficult.
If you have received an auction notice, or if you suspect that your developer has mortgaged your allotted flat without consent, you should immediately collect all documents and seek legal advice. Prompt intervention before the Artha Rin Adalat, civil court and appropriate criminal forum may be necessary to protect your home and investment.