Introduction

In India, many property sellers believe that once the sale deed is registered, the transaction is complete and payment is assured. This assumption is dangerous. In practice, there are situations where registry is done but the seller does not receive payment, particularly when the buyer is purchasing the property through a bank loan.

This blog is written purely for public awareness—to highlight how and why such situations arise and how they can be avoided.

Registry Completion vs. Receipt of Payment

A registered sale deed legally transfers ownership from seller to buyer. However, registration and payment are two separate legal events.

Once a sale deed is registered:

• Ownership generally passes to the buyer

• The seller loses control over the property

• Any unpaid consideration becomes a matter of recovery, not ownership

This means that registry does not automatically ensure payment.

How Banks Can Stop Payment Even After Registry

In loan-based property purchases, banks release money only after satisfying themselves about legal and financial risk.

Even if:

• The loan is sanctioned

• Registry is completed

• Drafts are prepared

A bank can still withhold disbursement if, at any stage, something in the sale deed raises concern.

Sometimes this issue is discovered after all formalities, while reading:

• Endorsements

• Clarifications

• Notes written at the back of the sale deed

Such notes may relate to:

• Past surety or guarantee

• Old litigation

• Earlier financial liability

• Conditional payment clauses

Even if the matter mentioned is already resolved, banks do not act on assumptions. They act strictly on written records.

Why Even Closed Matters Can Create Problems

Many people assume that if a case or guarantee is over, it no longer matters. Legally, that is not always how banks view it.

If a sale deed mentions:

• Any form of surety

• Any past obligation

The bank may insist on:

• Documentary proof of closure

• Clarification through additional legal instruments

• Fresh confirmations or rectifications

Until then, payment can be stopped, even though the seller has already signed and registered the deed.

The Real Risk for Sellers

The biggest risk arises when:

• Registry is done first

• Bank payment is expected later

If payment is delayed or stopped:

• Seller is no longer the owner

• Property is already transferred

• Legal remedies take time

This situation is especially common when:

• Transactions are rushed

• Sale deeds are drafted casually

• Sellers rely entirely on property dealers

Risk to the Buyer: An Overlooked Reality

Such situations do not affect only the seller; buyers also face serious legal and financial risk, even after the bank has sanctioned the loan. In most property transactions, buyers pay around 20–25% of the sale consideration as bayana (advance) and proceed with registry on the assurance that the remaining amount will be paid by the bank. Often, the loan is approved, legal opinion and encumbrance certificate are cleared, and draft numbers are even recorded in the registered sale deed, creating a strong belief that payment is guaranteed. However, if the bank withholds disbursement at the last moment—sometimes after noticing a line written at the back of the registry—the buyer is left exposed. The seller, having not received the recorded consideration, may initiate cancellation proceedings of the sale deed or recovery litigation. This places the buyer in a difficult position: ownership is disputed, loan funds are frozen, advance money is at risk, and prolonged litigation can begin despite the buyer acting in good faith.

Why This Becomes a Dispute for Both Sides

Banks generally sanction loans only after:

• Title verification

• Legal opinion

• Encumbrance certificate clearance

Yet, it is not uncommon for banks to re-examine the entire registered document after execution, including handwritten or typed notes at the back of the registry. Certain writings—often originating from old bail, surety, or procedural endorsements—may trigger fresh concern. Even when such matters are already closed, banks may still halt payment until further clarification is provided. This delay or refusal can convert a completed transaction into litigation for both buyer and seller, despite neither party intending any wrongdoing.

How Such Situations Can Be Avoided

For safe property transactions:

• Ensure complete legal vetting of the sale deed before registry

• Do not rely only on verbal assurances regarding bank payment

• Avoid language that suggests future or conditional payment

• Resolve and document all past liabilities, even closed ones

• In bank-loan cases, ensure simultaneous registry and disbursement

A Word of Caution for Buyers and Sellers

Property transactions are not just commercial deals—they are legal transfers with long-term consequences. A single overlooked line in a registered document can:

• Delay payment

• Block bank loans

• Create disputes

• Lead to litigation

Final Message

Every property transaction should conclude at an advocate’s table, not at a property dealer’s office.

Legal scrutiny at the right time protects:

• Sellers from unpaid consideration

• Buyers from defective titles

• Banks from future disputes

Public awareness and proper legal guidance can prevent years of avoidable trouble.

— Sachar Law Firm

Disclaimer

This article is published solely for general public awareness and informational purposes. It does not constitute legal advice, legal opinion, or solicitation of any kind. The situations discussed are illustrative in nature and do not refer to any specific individual, property, bank, or transaction. Property laws and banking practices may vary based on facts, jurisdiction, and documentation. Readers are advised not to rely on this information as a substitute for professional legal consultation and to seek independent legal advice before entering into or acting upon any property transaction.