T.N. Cyber Crime: People should not download loan apps and other cyber frauds

By Fiona Mehta

 

Director General of Police, Amaresh Pujari, who is in charge of the Tamil Nadu Police’s Cyber Crime Wing, issued a warning against downloading loan apps from unreliable websites to prevent falling victim to scammers. He also went into detail on victim hotlines and new trends in online fraud.

People who took out minor loans have experienced harassment and blackmail from those in charge of predatory loan apps.

Whenever such loan apps come to their notice, they take up the matter with the app provider to take it down. This year, they came across 273 loan apps on Google Play Store. After sustained follow-up by the Cyber Crime Wing, Google has taken down 211 apps. Efforts are being made to bring down the remaining 62 apps. The problem, however, is compounded by the fact that people download such loan apps from various websites too. He strongly urges people not to download any app from unverified websites as it can contaminate their mobile phones and lead to loss of money.

Many people have fallen victim to what has come to be called the ‘Boss Scam’. Fraudsters use photos of senior officers in Display Pictures (DPs) on WhatsApp to impersonate and send messages to people working in particular offices, requesting money or asking them to click a link for gift cards. He urges people not to respond to such messages unless it is from known numbers of their bosses or colleagues.

Another scam is ‘Sextortion’. In this scam, the victim receives a video call from an unknown number. Once the person accepts the call and starts talking, the scamster on the other end, typically a woman, starts stripping. Later, screen records of this video call are used to blackmail the victims. People should refrain from accepting video calls from unknown persons/numbers. Many people receive fraudulent messages to pay electricity bill dues or complete KYC verification for their bank account. People should not respond to such messages and verify it with the Electricity Board office or their bank managers.

 

What are the redressal mechanisms for people who fall for such scams?

One of the quickest redressal mechanisms for a common man who loses money to fraudsters is to dial their toll-free helpline number 1930. This number is handled by their trained staff in the Cyber Crime Wing Headquarters. The team will get the necessary details from the victim and initiate freezing of the fraudulent transaction so that money could be returned to the victim by the bank. The earlier the people report the incident to the helpline, the more the chances of them getting back their money.

Complaints can also be lodged on the portal: www.cybercrime.gov.in or through the mobile App ‘Kaval Uthavi’.

People can also approach the Cyber Cell at their nearest police station. Cyber Support Officer (CSO) at the police station will help them in lodging the complaint.

Earnest money cannot be forfeited: MREAT

By Adv Fiona Mehta

In the matter of Rekha Navani vs Omkar Ventures Pvt. Ltd (2019) (AT006000000021465)

Facts of the Case: The dispute concerns the reservation of an apartment in Omkar Ventures’ project in Andheri, Mumbai. While booking the flat at an exhibition, the channel partner of Respondent promised that in case she is found ineligible for housing loan, the amount paid will be refunded. The Appellant received a letter of allotment from the Respondent on December 5, 2017, after which the Respondent sent demand notices for the remaining amount due on the property. Since the Appellant was unable to obtain a loan from a bank, she requested that the Respondent cancel the reservation and reimburse the entire money. Despite numerous follow-ups, the Respondent only repaid Rs.1 lakh, with the remaining Rs.6.95 lakhs forfeited.

As Respondent did not oblige, the Appellant filed a complaint (“Complaint”) with the Maharashtra Real Estate Regulatory Authority (“MHRERA”) against the Respondent, requesting a refund of the entire amount plus interest under Section 19(4) of the Real Estate (Regulation and Development) Act, 2016 (“RERA Act”). The Appellant specifically stated in

the lawsuit that Respondent could not forfeit any sum paid to it because no such clause was included in the assignment letter, and so she was entitled to a refund under Sections 18 and 19 of the RERA Act.

On the other hand, Respondent argued that even though Respondent was entitled to forfeit 10% amount of the consideration price of the booked flat as per the Clause 3(l)(ii) of the Allotment letter, Respondent forfeited 5% amount as Appellant had paid only 5% amount of the total consideration, After observing that, since no agreement for sale is executed, Section 18 would not apply to the matter to grant refund to Appellant the Authority disposed of the complaint vide impugned order by directing refund of amount, if any, to Appellant subject to terms and conditions of Allotment letter.

However, Respondent purposefully interpreted the Application Fee as total consideration for the flat in the allotment letter, and later interpreted the “EOI” and “Application Fee” together as earnest money in the allotment letter, making it difficult for the Appellant to understand the implications of such terminologies mentioned in the allotment letter/application form, and such arbitrary and one-sided implications have made the contractual obligations unfair and inequitable.

MahaRERA’s Judgement: MHRERA, disagreeing with the Appellant’s arguments, dismissed the case, stating that the Appellant was not entitled to any refund under Section 18 of the RERA Act because there was no agreement of sale between the parties. Appellant filed an appeal against MHRERA’s Order with MHREAT after being aggrieved.

Appeal: According to the Tribunal’s ruling on 29th June 2020, the terms listed in the application form and allotment letter sent to the homebuyer do not adhere to the regulations of the Real Estate (Regulation and Development) Act, 2016, and they are also ambiguous, one-sided, and inequitable.

MHREAT’s Judgement: The MHREAT while dealing with the issue that “Whether the Appellant is entitled for refund of the paid amount paid along with interest”, held that the terms prescribed by Respondent in its allotment letter and application form are not only in derogation of the provision of RERA Act and rules framed thereunder but are also one-sided, ambiguous and inequitable. The MHREAT further held that RERA Act is a welfare legislation enacted to safeguard the interest of the allottees, and as such Respondent cannot be allowed to act against the RERA Act by formulating formats which are one-sided, ambiguous and inequitable.

Final Judgement: The MHREAT vide its Judgment dated June 29, 2020 allowed an appeal setting aside an Order passed by the MHRERA, and directed Respondent to refund the forfeited amount to the Appellant. This ruling would force RERA authorities across the country to adhere to the RERA Act’s stipulations and reconsider their decision not to provide refunds.

Lecture: Benami Property Act: Penalties and Prosecution

Reverse Mortgage

By Dr Sanjay Chaturvedi, LLB , PhD.

A reverse mortgage is a loan available to senior citizens, and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves the property.

Reverse mortgage encompasses a range of non-recourse mortgage loans which help a borrower get liquid funds against his home equity, without having to move out or having to make any repayments, till he dies or sells the house or moves out. Since bulk of the savings at retirement is typically locked in home equity, it is a powerful device to increase the incomes of the elderly.

In a typical mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term the mortgage is paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.

If a property has increased in value after a reverse mortgage is taken out, it is possible to acquire a second (or third) reverse mortgage over the increased equity in the home. But in certain countries (including the United States), a reverse mortgage must be the first and only mortgage on the property.

Concept:

A borrower starts with a very high equity in his house. The lender extends a non-recourse loan secured by the house property. The borrower may choose to receive the proceeds through A lump sum at the beginning Monthly payments till a fixed term or a lifelong annuity Establishing a credit-line with or without accrual of interest on credit balance A combination of the above

The borrower need not move out of the house or make any payment to the lender, as long he is alive and continue to live in the house or does not sell it. Therefore the loan and interest accumulates till maturity. There is no credit or income requirement to be satisfied. Even if the accumulated loan and interest goes above the realizable value of the house at disposal, the repayment is capped at that value only. Hence reverse mortgage is a case of ‘raising debt, falling equity’.

The amount of loan will be a function of Age of the borrower (life expectancy/ mortality risks) The current value of the property and expected property appreciation rate (real estate market risk) The current interest rate and interest rate volatility (interest rate risk) Closure and servicing costs Specific features chosen: fixed or floating interest; shared appreciation; interest earning credit-line; and mortgage insurance, if any.

Conceptually the reverse mortgage idea is not restricted only to the elderly. However, the product is particularly suited for old people: the older a person is, the more attractive the scheme is. It is attrac- tive to only people with insufficient current income and little financial savings- by implication, retired persons For a given property value, the lower the life expectancy (older the person is), higher is the additional income through an RM. Public policy support including tax incentives is more likely if the borrowers are the elderly. The elderly are particularly likely to attach significant psychological/ emotional/ sentimental value to ‘ageing in place’ without moving out. In fact, the longer they have stayed in their current home, the more valuable this is likely to be, considering the benefits of a familiar neighborhood .

The Indian scenario :

India is a young country. The average age of its citizens is about 26. Moreover, its population is expected to grow at 1.6 per cent annually. The proportion of the working-age population will rise for a long time and remain at a high plateau for a longer time. Therefore, India’s economy would continue to grow at over 6.5 per cent at least until 2040. The demand for housing, as a result, will remain high. The capital value of seasoned housing stock will rise at least as fast as incomes. Insurance companies would not have to dread any decline in home values for the next 35 years.

This also means that those who are 60 now will enjoy rising incomes or very certain incomes until they are 95. Homeowner in reverse mortgages will be protected against inflation. When capital value adjusts to inflation, incomes too can be adjusted upwards. Goods and services will remain affordable to retirees.

Reverse mortgage is made for India. It is a bankable scheme that takes away the sting from defined-contribution pension plans.

Defined-contribution schemes impose two risks on savers: They may earn insufficient returns. Retirees may live unexpectedly long.

At the same time, reverse mortgage is a good bet. It retains the principal flavor of a defined-benefit scheme and provides a guaran- teed base income.

To save for retirement, people have to become better at guessing how much they need and how long they will live. Both guesses are tricky. Most people underestimate their longevity and financial needs.

 

Reverse mortgage overcomes a significant part of these problems. It spurs economic activity, provides security and retains the principal flavor of a defined-benefit scheme.

DHFL – India’s First Reverse Mortgage:

India’s second-largest private housing finance company, Dewan Housing Finance Corporation Limited (DHFL), is the first off the block In India with a reverse mortgage scheme. The scheme, called ‘Saksham’ is targeted at retired senior citizens above 60 years of age. The scheme is similar to a housing loan except that in a home loan the borrower pays a fixed EMI to the lending institution, while in reverse mortgage the lender pays the borrower a fixed sum of money on a monthly (or quarterly) basis, the total payment being equal to the value of the property and the interest on the loaned amount. After the death of the borrower and the borrower’s spouse, the housing com- pany sells the property to recover the amount paid out along with interest at a rate similar to interest on housing loans. The scheme is designed to supplement the monthly income of senior citizens. This scheme is offered to retired people above the age of 60 years who own property and have been living in it for at least one year.

The loan amount is sanctioned based on the: Age of the borrower Average value of the property Rate of interest on the loan The payment method chosen by the borrower

The eligibility for a reverse mortgage loan is simple. The borrower should be 60 years of age, living in self-owned property, which is free of any other encumbrances, and is an approved construction. The amount loaned would depend on the estimated value of the property (minus the interest cost) its condition and life. The loan does not apply to ancestral property. Saksham allows customers and their spouses to live in the property as long as they are alive, without the fear of eviction even after the tenure expires. The surplus amount is

 

then paid to the legal heirs of the borrower. The legal heirs also have the option to repossess the property after the demise of both customers and their spouses.

 

Guidelines – The National Housing Bank (NHB):

A subsidiary of the Reserve Bank of India (RBI), is preparing the guidelines on reverse mortgage. Although the finer aspects of re- verse mortgage have still not been finalized, some things have been made public

Loans will be given only to those who have a clear title on their property. This rule applies to both stand-alone houses as well as flats. In case of inherited property, all claimants to it will need to give their consent in writing. Sridhar says that if the property is inherited, the lender (banks or HFCs) will be guided by legal advice on the borrower’s clear rights or title. Another requirement is that prospective borrowers will be able to pledge their house only if they are using it as their permanent primary residence. Sridhar says it may not be possible to provide reverse mortgage for houses on power of attorney. As per the present rule, the lender will take possession of the house, sell it and adjust its dues if the borrower dies. It doesn’t specify what course would be taken if the children of such borrowers neither have the financial means to reclaim the house nor are willing to vacate it.

To take into account any change in the value of the property during the tenure of the loan, there will be a provision for its revaluation at least once in five years.

The rules, however, might need a few modifications to ensure smooth operation of the scheme. One clause that is drawing a lot of criticism is the one that fixes the maximum loan tenure at 15 years. The NHB will need to address the concern of borrowers over their predicament if they outlive the credit period. At present, the rules say that a

 

borrower’s supply of income will be severed if he survives the loan tenure. However, he can continue to live in the house till his/her demise. The response to the product will be affected if this state of affairs persists. There exists a big segment in Tier-II and Tier-III cities and semi-urban areas waiting to be tapped.

Unlike in the West, joint families are still prevalent in many parts of India, although their number has shrunk. In many cases, the culture of joint families persists even after nuclearisation. In this scenario, many parents would still prefer to bequeath their house to their chil- dren rather than live off it. Reverse mortgage is a product that re- quires a great degree of regulation and transparency, both of which are missing in India.

 

Regulation:

Under the existing regulatory regime, banks come under the RBI and HFCs under the NHB. However, the recommendations of the regulator are only advisory in nature. The NHB plans to provide guarantee to borrowers against default by lenders by starting a loan mort- gage company. The company would also safeguard the interest of lenders in case borrowers default the terms of the agreement. The extent to which the potential of reverse mortgage gets realized in India will depend a lot on the guidelines that will govern it. Much will also depend on how Indian society takes to it. But there is no doubt that it can lend dignity and peace of mind to elders by opening a financial lifeline for them.

 

Basic guidelines for reverse mortgage:

  1. When applying for a reverse mortgage, all owners must apply and sign the The applicants must be at least 62 years old, own the home, and must generally live in the dwelling. One note though,

 

mobile homes are usually not eligible for reverse mortgages.

  1. A borrower must seek counseling from a HUD approved counseling agency prior to applying for a reverse This counseling is mandatory. During this meeting, the process is explained and a determination of eligibility is made.
  2. A borrower can request regular monthly payments, a credit line, or a lump sum distribution of cash. A combination of these payment plans can also be
  3. Typically, a reverse mortgage loan requires no repayment for as long as you live in your home. If the home is sold, the borrower moves, or the last living borrower dies, the loan must be repaid. Usually the home is sold to repay the
  4. Since you still own your home, you are responsible for repairs, taxes, and insurance. A default on any of these could cause your loan to become payable in
  5. There are certain costs involved in a reverse The lowest cost mortgages are through the state and local governments and the highest through private lenders. Some costs include application fees, closing costs, insurance, appraisal fees, credit report fees, and pos- sibly a monthly service fee.
  6. A reverse mortgage could affect eligibility for federal or state assistance. There could also be an impact on an estate when the owner dies. The home is usually sold to repay the loan or the heirs can choose to repay. If the home is sold and the selling price exceeds the amount of the balance owed, the excess goes to the heirs.
  7. Money received from a reverse mortgage is tax-free and does not affect social security or medicare benefits. It could affect Medicaid or other state assistance programs.

Many senior adults are finding it hard to live on their fixed retirement incomes and are looking for ways to supplement those incomes. For

 

some, the largest asset they own is their home, but they do not want to sell their home and move. For these individuals, there is an option called Home Equity Conversion (HEC).

One type of home equity conversion is a reverse mortgage. The equity or cash value of the house is used to provide income to repay the loan. All reverse mortgage options are not the same. They have different eligibility requirements, income amounts, timing of payments, interest rates, and/or initial costs. Homeowner should compare the different options, keeping in mind their goals and needs.

Advantages: The value of your house, not income, is used to deter- mine eligibility. One can receive a lump sum, a line of credit, or a monthly amount, without having to make a monthly repayment. One does not have to sell ones house and move – one can continue to live in the same familiar surroundings. One does not have to worry about losing one’s house to foreclosure since the payments are made out of equity in the home, not from your income. The loan must be repaid when the house is no longer used as your personal residence. However, the lender can only look to the proceeds from the sale of the house for repayment. They cannot go to your heirs if the house sells for less than what was borrowed. Money can be used for any purpose. The senior citizens are entitled to regular cash flows at their choice – monthly, quarterly, half yearly and annually. The loan is given without any income criteria at an age where normal loans are not available. No loan servicing or repayment required during the lifetime of borrower and spouse. If the borrower dies during the pe- riod, the spouse will continue to get the loan amount for 15 years. Tax treatment of a RML will be as loan, not income, so no tax will be payable on the regular cash flows. The borrower and their spouse can continue to stay in the house till both die. Heirs of the borrower will be entitled to get the surplus of sale value of the property. Borrower/heir can get mortgage released by paying loan with interest without having to sell property at any time. Prepayment of loan is allowed. NHB to guarantee obligation of banks/housing finance companies to pay the committed loan amount as regular sums over a period of time.

Reassessment of property value will be done periodically, or at least once every 5 years. Borrower can cancel the mortgage within three days of approval/disbursement, subject to return of loan amount.

Disadvantages: Interest for a reverse mortgage is compounded, and cannot be deducted on income taxes until you repay it. The income one receives decreases the equity in one’s home and the equity may not be adequate for ones future needs or for ones estate. Inter- est rates and initial costs (application fees, points and closing costs) are usually higher for a reverse mortgage than for other equity loans. Income ends when one sells ones house or no longer uses it as a principal residence. Payments may affect Supplemental Security Income and Medicaid payments. One may need to pay off ones existing mortgage out of the proceeds of one’s reverse mortgage. One will be required to maintain the house, pay the taxes, and carry property insurance. This loan product has a maximum tenure of only 15 years. If the borrower outlives this period, the regular cash flows will stop. Basis of property valuation is not clear. Requirement of clear title to property in the name of the borrower to get the loan. Three days period to cancel loan is too less. Should be at least 15 days to go through the fine print. Various fees to be added to borrower’s liability, which can be quite substantial.

Eligibility:

One could be eligible if one owns one’s own home, use the home as one’s principal residence, and are at least 60 years of age. One must also have adequate equity in the home.

 

A lender looks at the equity in the home plus any expected appreciation or depreciation in the value of the home to calculate a base amount. The costs associated with any reverse mortgage loan (application fees, interest rates, closing costs, initial charges, sales commissions, and homeowner’s insurance) also must be considered.

The lender and the homeowner must work together to determine the type of payment, the payment amount, and the time period.

Risks for Lenders:

The risks associated with offering any new product or service in a market can be substantial. Costs have to be recovered from revenue and a required level of sales achieved to turn a profit.

For Reverse Mortgages, however, additional risks are inherent be- cause the contract may last for anywhere up to 30 years or more. Financially, the lender must consider a myriad of possible factors when determining the price and conditions associated with the loan. A miscalculation of the rates and amounts offered may lead to the accumulated amount owed to the lender being greater than the house value. Given that reverse mortgage contracts generally guarantee that the borrower will not pay back more than the house value, this situation will lead to the lender making a loss on the contract. Interest rate variations are an area of primary concern. An increase in rates over the loan term will add substantially to the amount owed to the company due to the compounding nature of the debt. If rates increase for a long period the accumulated debt may exceed the house price and a loss on the loan may eventuate. While some lenders are attempting to remove this risk by the use of fixed interest rates, this may be a hindrance to marketing by making the product appear less attractive.

Also known as home equity release schemes or home income plans,

 

a reverse mortgage allows a home owner to receive a lump sum payment and/or income stream.

These payments to the home owner represent loan payments which accrue with interest until the owner moves house or die. At this point the accumulated loan is repaid from the proceeds of the house’s sale. Because of its structure the reverse mortgage can be very relevant for asset rich, cash poor individuals and offers a way for retirees to supplement their income. Given the above trends and market size it is unsurprising that there is increasing interest in this product from both providers and customers. Further evidence of this interest is in the number of providers, which has increased substantially this year.

Undoubtedly other providers are currently testing the water and will follow shortly. However, while the time for marketing and sales may be right, there are still significant risks to any company wishing to enter or operate in the reverse mortgage market. House price variations are a risk on the asset side of the equation. If house prices for instance were to fall or remain static over an extended period of time, once again lenders may find themselves making losses. Further complexity occurs with house prices since they are influenced by many factors. The type of dwelling (house/flat/townhouse), the construction method, the suburb, the city, the level of maintenance and even the houses’ individual characteristics will all influence the cur- rent and future price. Increasing longevity, leading to the possibility of increased tenure in the family home places a risk on the lender. The longer the reverse mortgage contract runs, the greater the effect of the compounding interest and the greater the probability that the loan will exceed the house value. Other risks such as bad publicity, fraud and the level and accuracy of customer advice are not to be underestimated. The US reverse mortgage market is only now recovering from the mis selling of products in the 1980s. Some customers who received poor advice at the time subsequently had their homes repossessed when interest rates turned against them. While the outcome of these risks cannot be directly expressed mathematically they still warrant careful attention and must be considered when designing the product offering. Only by fully understanding the risks involved and designing their product

Example

A wide variety of loan options are available depending upon your age, the amount of equity available, the time period of the loan, and the way payments are disbursed.

For example, Mary Jones, a 75-year-old widow whose home is her principal residence, is looking at a ten-year reverse mortgage that will provide her with additional monthly income of approximately $450. At the end of the ten years the monthly income payment will stop. But because her loan is through an insured lender (loans offered by HUD approved lenders have government guarantees), the loan will not have to be repaid until she sells the home, moves, or dies.

Indian Mortgage System

By Dr Sanjay Chaturvedi, LLB PhD.

Mortgage of Immovable Property

Mortgage is the term usually confused between Pledge, Charge or Lien. Mortgage is a charge created by borrower in favor of lender as security for loan taken.

Every creditor wants the money lent by him to be secure so that in case of the borrower’s failure to repay the amount borrowed, he may rely on the security. Immovable property is a good security.

This is not perishable and not subject to wild fluctuation in the market. Creditors particularly banks and financial institutions insist on immovable property either as primary or collateral security. The method of taking the immovable property to secure the payment of the money lent is Mortgage. The transfer of property Act (Act IV of 1882) deals with Mortgage.

The relevant sections are 58 to 104 of Chapter IV. Mortgage in simple terms means transfer of the interest in the immovable property to a creditor to secure the payment of money lent. It is essential that both the parties, the owner of the immovable property and the creditor, are living persons.

The living persons include company or association or body of individuals. They may be incorporated or not. The immovable property, the interest of which is transferred to the creditor, must be specific in description with boundaries. It should be easily identifiable. The debt or money lent is an important component of mortgage. It is the payment of the debt, which is secured. The debt may be money advanced, or to be advanced, or existing or future debt. It also covers the performance of an engagement, which may give rise to monetary liability. The purpose of the mortgage is to secure the payment of the money lent or to be lent.

The person who transfers the interest in the immovable property is Mortgagor. Generally, Mortgagor would be borrower who owns the immovable property. But any other person may also transfer the interest in this immovable property to the lender to secure the payment of money by the borrower. The person to whom the interest in immovable property is transferred is mortgage who is creditor or lender. The principal money and the interest, the payment of which is secured, is mortgage money. The document executed by the mortgagor transferring the interest in immovable property to the creditor is called Mortgage Deed.

 

Persons competent to create a Mortgage

Any person competent to enter into a contract can create a mortgage. This excludes minors and lunatics. Guardian of a minor on obtaining permission from the Court can create a mortgage. Joint owners of property, partners of firm, Kartha of Hindu Undivided Family, can create mortgage.

In case of joint owners, all the co-owners, all the partners in case of a partnership firm, and in case of Hindu undivided Family all the male members, widows of the deceased male members, and daughters who have been conferred property rights by the state, government have to sign the mortgage deed.

Types of Mortgage

  1. Simple Mortgage Mortgage by Conditional Sale 3. Usufructuary Mortgage 4. English Mortgage 5. Mortgage by Deposit of Title Deeds
  2. Anomalous Mortgage.

Simple Mortgage and Mortgage by deposit of title deeds are popular types which are discussed here.

Simple Mortgage

Section 58 (b) of the Transfer of Property Act, defines the Simple Mortgage / Registered Mortgage. In this mortgage (1) there is transfer of interest in the immovable property to the mortgagee to secure the payment of the money lent (2) There is no delivery of possession of the immovable property to the mortgage (3) Mortgagor binds himself personally to pay the mortgage money (4) Mortgagor agrees expressly or impliedly, that in case of his failure to pay the mortgage money as agreed, the mortgagee (creditor) has the right to get the immovable property sold and the sale proceeds adjusted towards the payments secured.

 

It is to be noticed that the borrower binds him personally, fully agreeing to repay the amount borrowed. Only in case of his failure to repay the money, the right to recover the mortgaged money arises. It is very important to note that the act uses the words “cause to be sold”, which means the property can be sold only through intervention of the Court. The deed of simple mortgage required to be attested by two witnesses. It also needs to be properly stamped. Registration is necessary if the principal amount is Rupees one hundred or more. Only the principal amount is the criteria and not the interest.

The stamp duty payable on simple mortgage is Ad-valorem that is based on the value. It varies from state. Stamp duty payable in Karnataka is 3% on the amount secured with a maximum of Rupees three lakhs. Registration charges are 2% of the amount secured with a maximum of rupees two lakhs.

Certain states including the State of Karnataka have exempted / given concession in stamp duty and registration charges in case of agricultural loans. The remedies available under the simple mortgage are personal decree against the mortgagor and decree for the sale of the mortgaged property. The limitation is twelve years from the date when the mortgage money becomes due (Sec. A 62 of Limitation Act).

Mortgage by Deposit of Title Deeds

This is also known as equitable mortgage. Section 58 Clause (F) defines the mortgage by deposit of title deeds. In this type of mortgage the mortgagor delivers the documents of title to the immovable property to the creditor in notified places with intent to create security thereon. The essential features of mortgage by deposit of title deeds.

  1. The debt : The money, the payment of which is secured may

 

be an existing debt or a future one. It may also be a performance of engagement, which gives rise to monetary liability.

  1. There must be deposit of title deeds : The Mortgagor (the borrower/owner of the immovable property) delivers the documents of title to the mortgagee (creditor). The delivery may be physical or constructive. The documents delivered should be of title to the immovable This refers to the documents, which establish and confer the title of the immovable property to the mortgagor. IT is to be noted that copy of a document is not a document of title. However as far as possible only original documents should be accepted for deposit. If any original document is reported to be lost, proper enquiries should be made.

Property documents are of two types :

Primary documents and Secondary or Supporting documents.

 

Primary Documents :

These documents confer title. Sale Deed, Gift Deed, Partition Deed, Exchange Deed, Deed of Grant, Lease Deed, Sale Certificate, Share Certificate or Membership Certificate with allotment letter in case of Society with no objection letter, Patta of land, fall in this category.

Secondary / Supporting Documents :

These documents do not confer any title, but only support the title conferred by the primary documents, Katha Certificate, Tax Paid receipts, Encumbrance Certificate,

Revenue Records and Village Records, Allotment Letters, Tax Paid receipts, Possession Certificates, Tax Assessment Order etc., fall in the category of Secondary /Supporting Documents.

Deposit of Documents :

Documents must be deposited / delivered in notified centres : The

 

Transfer of Property Act mentions the cities of Kolkata, Chennai and Mumbai as notified centres. In addition state government may notify other places as notified centres for deposit of title deeds. At present most of the places up to the level of Taluka centres are notified centres. This restriction applies only to the places where the documents are to be deposited, but not to the place where the immovable property is situated. Documents of the property located in Mangalore may be deposited in Bangalore. Documents of the property situated in non-notified places may be delivered in notified places.

Deposit must be with the intention that the title deeds shall be security for the debt. The intention is very important here. Documents delivered for safe custody to obtain legal opinion will not establish such intention. As such a forwarding letter stating that the documents are delivered with the intention to create a security for the debt is to be obtained from the mortgagor. Care should be taken not to mention the amount of debt, and the rate of interest in the letter. Such letter should be obtained subsequent to the date of depositing the title deeds and dated accordingly. These measures obviate the implications of Stamp Duty. Deposit of title must be by a Mortgagor or his agent with the Mortgagee or his agent.

This type of mortgage is treated at part with other legal mortgages and shall have priority over the mortgages subsequently created, and even registered. This mortgage will be in force so long as title deeds deposited are in possession of the mortgagee. If the mortgagee parts with the possession of the title deeds, the mortgage is extinguished.

Registration of Documents

This type of mortgage and the letter evidencing the deposit of title deeds in the nature of a forwarding letter or acknowledgment does

 

not attract stamp duty and registration (Sec. 59 of TP Act). However, certain states like Maharashtra, Gujarat stipulate that even the mere deposit of title deeds with forwarding acknowledgment letter needs stamping and registration. If the terms of the contract or the deposit of title deeds are reduced to writing such mortgage in Karnataka attract stamp duty at 1% on every Rs. 5,000/- that is Rs.50/- with a maximum of Rs. 50,000/- Registration charges are 0.5% with a maximum of Rs. 10,000/- Urban cooperative banks have concession of 50% on stamp duty and registration fee. This type of mortgage is popular, as it is easier, quicker, less expensive not subject to stamp duty and registration formalities except in few states and there will not be undue publicity. The concession available to urban cooperative banks if extended to all banks may help many borrowers. The remedies available to the creditor under this type of mortgage are l Personal Decree Against the Mortgagor

  • Right to sale with the intervention of the Court Right to appoint a Receiver with the intervention of the
  • Right to take possession with the intervention of the Court. Limitation available is 13 years under Article 62 of the Limitation Act 1963. When the mortgage is created by a limited company over its property such mortgage must be registered with the registrar of companies within 30 days of its creation irrespective of the type of

Right of Mortgagor (Sec 60 of TP Act)

Mortgagor after fulfilling his part of the Contract, that is by paying the money secured, may required the mortgagee to deliver the mortgage deed and all documents relating to the mortgaged property, If the mortgagee is in a position to deliver back the possession and executed required document and at the cost of the mortgagee.

This right of the mortgagor is called Redemption of Mortgage.

 

However, such right of redemption can be invoked before the mortgagee files a suit for enforcement of mortgage.

Limitation period available is 30 years from the date on which the mortgagor performs his part of contract, paying the money secured. (Article 61 (1) of the Limitation Act, 1963).

Concept of Transfer of Development Rights TDR

By Dr Sanjay Chaturvedi, LLB, PhD.

Transfer of Development Rights (TDR) and FSI

Imagine the buzzing city of Mumbai, clean and green, not congested having playgrounds and recreational grounds, affordable housing and well developed public amenities and utilities, and above all clear of slums.

Sounds amazing, but a distinct possibility with this concept of TDR (Transferable Development Rights). Well implemented, this concept has the potential to completely transform the urbanization process and quicker it let us see how it works.

The Legislation

TDRs are governed by Regulation 34 read with Appendix VII of the Development Control Regulations for Greater Bombay, 1991, (known as the DC Regulations), framed under the Maharashtra Regional and Town Planning Act 1966, as amended for time to time.

The Background

Prior to the above amendment, any portion of land which war reserved for a public purpose in the Development Plans was deemed to be a Municipal Reservation, and had to be compulsorily handed over to the Bombay Municipal Corporation (BMC) for a consideration

 

which was a minuscule percentage of the prevailing market price.

Any opposition from the owner involved a long and cumbersome legal procedure.

This obviously led to untold delays and the concerned land then becoming encumbered by slums.

The concept of TDR

With the amendment, when the owner or lessees of such a reserved land, hands it over to the Planning Authority, namely, the BMC, what he gets in return instead of monetary compensation is an equivalent amount of FSI so handed over. This awarded FSI is called TDR, which he may utilized himself or transfer to any other person. He is thus provided with development rights in the form of TDR, which is nothing but additional FSI, to construct additional floor space over and above the prevailing FSI limits. In other words this enables him or his nominee(s) to build additional housing property in a given area, by carrying put additional construction either on vacant plot of land over and above the existing FSI, or on an existing building, in accordance with the DC Regulations. The owner thus stands compensated. As you can see, it is ‘win-win’ situated for all concerned. The BMC gets reserved lands, free of cost, free of encumbrances, the owner stands adequately compensated; the public benefits form the provisions of ready to use utilities and amenities, additional housing stock benefits developers, it means additional revenue for the BMC, and above all to the consumer public additional housing stock would mean lower prices.

The utilization of TDR

It can be seen that the development potential of a plot of land is separate form the plot itself (called the ‘originating plot’) and is transferred to some other plot (called the ‘receiving plot’) as additional

 

FSI. Technically, in order to utilize TDR, it has been provided that receiving plot has to necessarily be located wholly or partially to the north of the originating plot. This means that the plot on which the TDR is to be utilized has to necessarily be located to the north of the plot from which the said TDR originates, or be located in the same ward as that of the plot from which the said TDR originates. The idea behind this is to ensure more balanced development of the suburbs and to move towards decongesting the island city. Besides, the Planning Authority has identified certain areas as congested areas, and has not permitted any use of TDR on them.

These are called ‘non-receiving zones’.

The Non-Receiving Zones

These are the areas where no TDR is permitted to be utilized. However, as an exception, and as incentive to develop slums, only ‘Slum TDR’ is allowed to be utilized is non-receiving zones, to the full extent of 1.0 FSI.

Appendix VII, inter alia, lays down the following non-receivable zones.

  1. Where permissible FSI is less than 0,
  2. Where permissible FSI is less than 0,
  3. On plots falling within 50 of roads on which no new shops are permitted, more particularly described in Regulation 53(2) of DCR 1991;
  4. Coastal Areas, No development zones, tourism development zones.
  5. Areas for which MMRDA and MHADA is the Special Planning Authority.
  6. Anywhere in the Island
  7. Between the tracks of Western Railway and V.Road..
  8. Between the tracks of Western Railway and Western Express Highway
  1. Between the tracks of Central Railway and LBS

 

Who can utilize TDR

TDR can be utilized in part or in full by any owner / lessee in whose favor it is granted by the BMC, on his receiving plot, or by any other person/nominees upto whom he has transferred it and who is in possession of land in the receiving zone.

The categories of TDR

There are presently four variants of TDR (one must bear in mind here that presently there are more than 42 categories of reservations under the Development Plan)· ‘Green belt’ reservations like recreation grounds playgrounds, parade grounds, etc. are grouped along with Municipal Schools , Municipal Hospitals, Welfare Centres etc., and

  • additional FSI (i.e. 40% of the net plot area) is permitted against their
  • Reservation for road widening and for new roads are permitted further 0.4 FSI
  • ‘Slum’ TDR, wherein the Slum Redevelopment Authority (SRA) being the Appropriate Authority, sanctions TDR against rehabilitation of slums, is permitted further 2 FSI, in receiving zones and full 1.0 FSI is non receiving zones (as mentioned earlier). This makes the total additional FSI component by utilization of TDR, equal to 1.0 over and above the existing FSI in a receiving zone.
  • In the Island City (i.e. between Colaba and Mahim in the western suburbs and upto Sion in the eastern suburbs) only ‘Heritage’ TDR can be This is a type of TDR issued against development of properties designated as ‘heritage’ and /or ‘heritage precincts’.

The Development Rights Certificate (DRC)

TDR is issued by the BMC in the form of a Development Rights

 

Certificate (DRC), which is very much like a share certificate, freely transferable by way of lodgment (with the BMC) and transfer (by the authorized / designated officer of BMC, presently the Municipal Commissioner).

The Building Proposal

TDR is utilized by submitted a proposal in the prescribed form to the Building Proposals Department of the BMC, giving all the necessary details of the TDR, details of the plot, the proposed building plans etc., which are then scrutinised by the department and approved on merits.

In Conclusion

It can be seen that TDR has thus enabled the policy makers to ‘effectively’ increase FSI without increasing the ‘FSI’, thus paving the way for an increase in housing stock, consequently bringing down prices.

This step is complemented with an effective state level abolition of Urban Land Ceiling, pragmatic changes to the Bombay Rent Act which, inter alia, should open the doors to rented housing, and lowering of stamp duty rates to practical present-day market prices levels, would go a long way in providing Mumbaikars with good quality affordable housing, amidst adequate green spots, accessible by neat and wide roads, devoid of slums.

In India, 84 cities have already adopted TDR concept.

Register your Property Documents or else it can be confiscated

By Dr Sanjay Chaturvedi, LLB, PhD

The Indian Registration Act

Another Act which is very important in matter of real estate is the Indian Registration Act. The said Act provides for the law relating to registration of document. The very important section is Section 17 of the said Act. Part III of the said Act governs the law of registrable document. Section 17 of the said Act reads as under :

“17. Documents of which registration is compulsory. (1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely :-

  • Instruments of gift of immovable property;
  • Other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest,

whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;

  • Non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interests; and
  • Lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent
  • Non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property:

Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this subsection any lease executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees.

  • Nothing in clauses (b) and (c) of subsection (1) applies to –
    • any composition-deed; or
    • any instrument relating to shares in a Joint Stock Company notwithstanding that the assets of such company consist in whole or in part of immovable property;

or

  • any debenture by any such Company and not creating, declaring, assigning, limiting or extinguishing any right, title or interest, to or immovable property except in so far as it entitles the holder to the security afforded by a registered instrument whereby the Company has mortgaged, conveyed or otherwise transferred the whole or part of its immovable property or any interest therein to trustees upon trust for the benefit of the holders of such debentures; or
  • any endorsement upon or transfer of any debenture issued by any such Company; or
  • any document not itself creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest; or
  • any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding; or
  • any grant of immovable property by the Government; or
  • any instrument of partition made by a Revenue Officer; or
  • any order granting a loan or instrument of collateral security granted under the Land Improvement Act, 1871, or the Land Improvement Loans Act, 1883; or
  • any order granting a loan under the Agriculturists Loans Act, 1884, or instrument for securing the repayment of a loan made under that Act; or

(xa) any order made under the Charitable Endowments Act, 1890 (6 of 1890) vesting any property in a Treasurer of Charitable Endowments or divesting any such Treasurer of any property; or

  • any endorsement on a mortgage-deed acknowledging the payment of the whole or any part of the mortgage money, and any other receipt for payment of money due under a mortgage when the receipt does not purport to extinguish the mortgage; or
  • any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue

Explanation – A document purporting or operating to effect a contract for the sale of immovable property shall not be deemed to require or ever to have required registration by reason only of the fact that such document contains a recital of the payment of any earnest money or of the whole or any part of the purchase money.

(2) Authorities to adopt a son, executed after the first day of January 1872, and not conferred by a will, shall also be registered.

 

Five categories of documents are compulsorily required to be registered which are described in Section 17(I)(a), (b), (c), (d) and (e). One important aspect to be remembered is that the instrument of gift of immovable property irrespective of the value, even if it is less than Rs.100/-, such gift requires to be registered under the said Section. Another aspect which is to be borne in mind that all the documents described therein are non-testamentary instrument,

i.e. instrument or document executed and be effective during the lifetime of a person. Testamentary documents like Will, Codicil are not required to be registered even if under the Will the immovable properties given whose value may be more than lakhs of rupees. Clauses (b) and (c) cover large number of documents because any interest which is created, declared, assigned, limit extinguished whether in the present or future or any right, title or interest – whether vested or contingent – in case of immovable property of the value of Rs.100/- and above needs to be registered. You would have noticed that there is no reference of registration of document of any movable property. Whereas Section 17(2) gives exceptions of documents which need not be registered even if they fall within Section 17(1)(a) to (e). Some of the important exceptions are in grant of immovable property by government. It must be noted that Agreement for Sale does not required to be registered under the Registration

Act as it does not create, declare, assign, limit or extinguish any right, title or interest of any immovable property which merely creates a right to obtain conveyance which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest. In view of Section 17(2)(v), an Agreement for Sale does not require to be registered under the said Registration Act. One thing should be borne in mind that Section 17 prescribes law as to documents which are required to be compulsorily registered. Any document which does not fall within Section 17(1) can be registered, but it is optional. Another thing which should be borne in mind is that only any document or instrument can be registered.

If there is no writing with signature, then the same cannot be registered.

The Law as to effect of document which is required to be compulsorily registered and not registered is governed by Section 49 of the said Act. The said Section reads as under :- “49. Effect of nonregistration of documents required to be registered. No document required by section 17 (or by any provision of the Transfer of Property Act, 1882) to be registered shall –

  • affect any immovable property comprised therein, or
  • confer any power to adopt, or
  • be received as evidence of any transaction affecting such property or conferring such power, unless it has been

Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877, or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882, or as evidence of any collateral transaction not required to be effected by registered instrument.”

We are vitally concerned with first part, i.e. if any document required to be registered under Section 17 of the said Act or any provisions of Transfer of property Act, then it cannot affect any immovable property comprising therein. In other words, conveyance, deed of gift if it is not registered then the property transfer is invalid. Therefore such document if required to be compulsorily registered and even if it is executed but not registered it will not affect the immovable property or the rights therein. The transferee or purchaser will not get any rights in the said property.

Transfer of Property Act provides that certain documents need to be registered. If such documents are not registered, then under Section 49 they will not affect any immovable property comprised in the said document.

Section 4 of the Maharashtra Ownership Flats (Regulation and Promotion of Construction, Sale, Management & Transfer) Act, 1963 provide that Agreement for sale of flat need to be registered. Therefore, registration of the said document is necessary but the same is not required to be registered under the Registration Act or the Transfer of Property Act. Therefore, the provisions of Section 49 of the Indian Registration Act will not apply to such an Agreement for Sale even if it is not registered.

Such documents are required to be registered with the Sub Registrar of Assurances appointed under the Indian Registration Act within whose jurisdiction the said immovable property is situated. However, in case of Mumbai, Kolkata, Chennai and Delhi, the documents of any parts of India can be registered with the Sub Registrar of the said Cities.

The fees prescribed to be paid for registration of document is 1 per cent of the consideration and the maximum registration payable for any instrument is Rs.20,000/- in the State of Maharashtra.

Lease: Rights and Duties of Leasee and Lessor

By Dr Sanjay Chaturvedi, LLB, PhD

Section 105 of Transfer of Property Act defines lease, lessor, lessee, premium and rent. “105. A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transfer or by the transferee, who accepts the transfer on such terms.

The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”

In a case of lease, there is no transfer of property but only transfer of right to enjoy the said property. The ownership of the property continue with the Lessor.

Lessee has only right to enjoy, use and occupy the property. However, the lease for particular time which may be expressed or implied or in perpetuating. In case of lease, consideration could be price paid or promise to be paid of money, share of crop, service or any other thing or value to be rendered periodically or on specific occasion by the transferor to the transferee. In case of sale, the consideration has to be always in terms of money, but in case of lease it could be in terms of money, it could be in terms of sale of crops or service or any other thing of value. This is how Lease defers from Sale. It must be also borne in mind that in ordinary language what we call this as “tenancy” is a also lease and is covered by the said Act except in case where there are specific provisions under he Rent Control Act.

Section 106 provides for duration of certain leases in absence of certain contract or local usage. The said Section reads as under :- “106. In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice expiring with the end of a year of the tenancy; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice expiring with the end of a month of the tenancy.

Every notice under this section must be in writing signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property”.

This Section provides how lease can be determined or come to an end if there is no written contract or local usage to that effect.

Section 107 covers how leases can be made. Section 107 reads as under :

“107. A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee.

Provided that the State Government may, from time to time, by notification in the official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class or such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.”

Any lease of immovable property from year to year or from any term exceeding one year or reserving yearly rent can be made only by registered instrument. There cannot be such lease by unregistered document or by oral contract. Other leases can be either by registered instrument or by oral agreement accompanied by delivery of possession. Such leases are required to be executed both by the lessor and the lessee.

Section 108 of the said Act covers rights and liabilities of the Lessor and the Lessee which reads as under :

“108. In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased :-

A.  – Rights and Liabilities of the Lessor

  • The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
  • The lessor is bound, on the lessee’s request to put him in possession of the property;
  • The lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contract binding on the lessee, he may hold the property during the time limited by the lease without

The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person to whom that interest is for the whole or any part thereof from time to time vested.

B.    – Rights and Liabilities of the Lessee.

  • If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
  • If by fire, tempest or flood, or violence of an army or of a mob or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;
  • If the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;
  • If the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;
  • The lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased out but not afterwards all things which he has attached to the earth; provided he leaves the property in the state in which he received it;
  • When a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;
  • The lessee may transfer absolutely or by way of mortgage or sublease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;

Nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, former or lessee;

 

  • the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lease is, and the lessor is not aware, and which materially increases the value of such interest;
  • the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;
  • the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;
  • if lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;
  • the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use or permit another to use the property for a purpose other than that for which it was leased, or fell or sell timber, pull down or damage buildings belonging to the lessor or work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injuries thereto;
  • he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;
  • on the determination of the lease, the lessee is bound to put the lessor into possession of the

This provision is of great importance as it covers rights and obligation of the lessor and lessee among themselves. However, this is so provided there is no contract contrary or usages which are contrary to the same.

Section 111 provides how leases are to be determined. The said Section reads as under :-

“111. A lease of immovable property determines –

  • By afflux of the time limited
  • Where such time is limited conditionally on the happening of some event – by the happening of such
  • Where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to the happening of any event – by the happening of such
  • In case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same
  • By express surrender; that is to say, in case the lessee yields up his interest under the lease, to the lessor by mutual agreement between
  • By implied
  • By forfeiture; that is to say, – (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated as insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease.
  • On the expiration of a notice to determine the lease or to quit or of intention to quit, the property leased, duly given by one party to the

Editorial : Housing Is Not a Fundamental Right in India Now

By Dr Sanjay Chaturvedi, LLB, PhD

India established its constitution on 26th January 1950 and there were many Right and Privileges given to Indian citizens. Among them was “Right to Own a Property”. This right was taken a back by the government in 44th Constitutional amendment in 1978. It means we the Indian do not have Right to own a property. If the government wants it for Defense, Archeological purposes or for exploration of minerals or for infrastructure projects, they just have to give a notice and vacate. We do not have right to say NO to their order. Transacting above Rs.75 Lakh in Mumbai, Rs.50 Lakh in Delhi and likewise, we have to take NOC from Income Tax department. This is not a NOC. It is an offer to Income Tax Department, if they may please purchase it and if they refuse then only the seller is entitled to sell it.

The Farmers of Indian Constitution gave a Fundamental Right to own a property under Article 31 of the constitution of India.

Article 31 provided that “no person shall be deprived of his property save by authority of law.” It also provided that compensation would be paid to a person whose property has been taken for public purposes. The Right was restored by Article 300A which states:

Article 300A : Persons not to be deprived of property save by authority of law. No person shall be deprived of his property save by authority of law.
Which means, any Indian Citizen do not have a Fundamental Right to own a property now which was conferred by the Original Constitution of India. The Right under Article 300 A is a Constitutional Right and not Fundamental Right.
The difference in the two right is that in Fundamental Right, you can sell, dispose of your property any which way you want and for whatever consideration. But in Constitutional Right, you have to obey the Taxation, limits for transactions and pay Stamp Duty as per the Government derived indicative Recknor Rates. You cannot say to government to acquire your property/ land for public utility purposes like railways, dams defense etc.
Fundamental Right to own a property have gone and we need to live with only constitutional Right. The provision indicated
that a person can be deprived of his property only through an Act passed by the Parliament/State Legislature and not by executive order or fiat. The word „Law‟ in Art. 300A means an Act of Parliament or a State Legislature, a rule or a statutory order, having the force of law, that is positive or State-made law.
The fundamental „right to property‟ had been modified by the Parliament by several other Constitution Amendments. Art. 31-A, inserted by the Constitution First Amendment Act, 1951 with retrospective effect, saved laws providing for acquisition of estates of the nature referred to in various clauses thereof, declaring that such laws shall not be deemed void on the ground that they are inconsistent with, or take away or abridge any of the rights conferred by Art. 14 or 19 of the Constitution.
Hon’ble Supreme Court opined in State of Maharashtra v. Shandrabhai, AIR 1983 SC 803 that the fundamental „right to property‟ has been abolished because of its incompatibility with the goals of justice, social, economic and political and equality of status and of „opportunity‟ and with the establishment of a social democratic republic, as contemplated by the Constitution. Whereas Hon’ble Court have observed in Jilu Bhai Nam Bhai Khachar v. State of Gujarat, AIR 1995 SC 142. that the right to property‟ under Art. 300A is not a basic feature or structure of the Constitution. It is only a Constitutional right.
Paying compensation and what should be the value under the compulsory acquisition of various Land Acquisition Acts and recent amendments to the Land Acquisition Act shall be discussed in another article by me. But the question is, shall India again regain the Fundamental Right conferred by the Farmers of Indian Constitution?

FEMA: Repatriation outside India, including credit to NRE or FCNR account by NRIs

Photo Courtesy Raunak Grp For Illustration Purpose

By Dr Sanjay Chaturvedi, LLB, PhD

Repatriation outside India, including credit to NRE or FCNR account, of sale proceeds of any immovable property situated in India, requires prior permission of the Reserve Bank except in circumstances stated in paragraph below.

In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India, who is a citizen of India, or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied :-

  1. the immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules /Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act,1999;
  2. the sale takes place after three years from the date of acquisition of such immovable property or from the date of payment of final instalment of consideration for its acquisition, whichever is later;
  • the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in foreign currency non-resident account or (b) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in non-resident external account for acquisition of the property; and
  1. in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

All requests for acquisition of agricultural land/plantation property/ farm house by any person resident outside India or foreign nationals may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.

The NRIs/ PIOs can freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely repatriable outside India subject to TDS.

1 2