Flat is mortgaged, Do i need to to go for Sale Deed or not.

Hi All, I have booked a flat in Bangalore, Builder said reputed nationalized bank will approve the loan . Initially I paid token Amount & taken photocopies of the property details & got checked by local Lawyer. Local Lawyer said go ahead & pay 10%. I paid 10% entered sale agreement. The reputed nationalized bank sanctioned the loan amount. After Bank Sanctioned me the loan, i paid another 10%(Total 20%). When I checked the EC with survey Number no EC detected. But yesterday when I checked the with Municipal Number of the property, i found the flat(property) is mortgaged to other Bank. When i inquired to the Builder, now builder is saying the flat is mortgaged & he will provide NOC for the flat. But the NOC is not provided by the Bank where the flats are mortgaged, it is issued by Trusteeship Services. Please let me know, what to do, do i need to drop the deal & ask Builder for return the 20% or Do i need to go ahead & get the flat registered.