Buying a car still under hypothecation

A colleague is buying a few months old car which is still hypothecated to a bank, and EMI's still being made.

The seller said that he could take the payment, and take care of things from his end, however my colleague is wary, and not too sure, since he is not familiar with the seller.

Is it possible to transfer the loan from the seller to my colleague?

Otherwise, i think the seller has to close the loan by paying it off , for which he will need the money which the buyer, my colleague is not willing to pay up front.

Whattodo

look for another car & dont get messed up with the procedure.

greenhorn, this is what I did when I went to buy a flat, already mortgaged with a bank - There was a tri-partite agreement between the seller, the buyer and the bank from which both loans were approved. The flat was handed over with loan disbursement going partly to his account and partly to his loan account (the bank knew the split because it had the seller's loan account going with it) The registration papers of the flat go to the bank, with a copy to you.

Now I know a flat and a car have to be different in some aspects, but the principle should work. The payment should never be handed over to the seller but the lender bank should be made a party and it should be agreed in the agreement itself that this amount, out of the loan, should go to the seller and this should go towards the balance in the seller loan account.

Added to that, there should be the usual formalities of registration and insurance transfers.

The major difference between the two cases, as we all know, is... House is mortgaged (immovable property) while vehicle is hypothecated (movable property).

In case of vehicles, such agreements are generally not done/encouraged - unless the case is of commercial vehicle/loan.

1 & 2) In both the cases - police & lawyer - the bank will come in picture & take possession of the car.

3) The proposistion will not be acceptable to the bank.  It will issue NOC only after the loan account is fully liquidated.

4) Driving the car without name transfer is not an offence (we can drive anyone's car - provided we have valid driving license). The seller / legal owner (on paper/records) is very unlikely to challenge possession of the car with you.  That's because he is at fault & has gone against the terms of mutual agreement on paper (whatever).  Also because you have paid him by cheque.  The problem could arise only in case of accident / insurance claim.

It's better to get the matter resolved.  Impress upon him through mutually known people (if any).  Avoid seeking help of police or lawyer for reason discussed before.  To him, you may, however, tell that you would otherwise be constrained to take legal action.

By the way, is he paying the Loan EMI regularly - is the A/C regular?

Nope he is not paying the EMI from last 6 months. I saw his bank statements.

I'm trying to address & resolve this matter through a mutual know person. However he is trying to run away from this issue. 

Why cant the bank go & get the person who did the fraud ? I can give his phone number, or his relatives number/ address. 

Well, the account must have turned NPA.  If he doesn't pay-off the dues, it may complicate the matter for you too, as the car is in your possession.  When you give the contact details to the bank, bank will obviously ask your interest & other details.

The problem, as discussed before, is that at this juncture you don't benefit from seeking help from police/lawyer, as the bank would come in picture & take possession of the car.  You cannot deny, as you are not the legal owner.

I would say, till the bank initiates any action etc., you give your best & somehow impress upon the seller to settle the account.  I understand it is difficult, as he isn’t cooperating but the fact is that the other recourse will not help you.

Also take a legal opinion from some lawyer known to you.