Friday, February 3, 2012

A contract is always open to registration according to the Indian Contracts Act - Economic Times

A contract is always open to registration according to the Indian Contracts Act - Economic Times:

Debasish Roy, ET Bureau Nov 13, 2011, 08.41am IST

The first thing that a real estate agent in India tells you is that registration for sale of land and apartments has been shut down and that you have no option but to buy through the illegal, mindless and back door route of getting a general power of attorney to a plot of land, an apartment or commercial establishment .

For one thing, this is incorrect. The law of the land allows you more than one way of registering a transaction. The Indian Contracts Act allows you to enter into a written contract with the buyer if you want to sell your land and then register the contract along with proof of execution of the said contract in a magistrate's court of law.

The Transfer of Property Act allows you to leverage the power of section 53A where it is stated that if one party (the buyer or the seller ) fulfills his part of the transaction or a part of the complete transaction then the other party is to be legally compelled to fulfill his part of the transaction too.

One can read both these relevant acts and frame a water-tight contract where both parties are bound by the law. Following this execution of the contract, a certified copy of the same can be attached to a letter to the registrar of land records / land transactions and due information can be furnished in that letter with a stamped receipt to the letter.

This letter will serve as legal notice to the government that a valid transaction has taken place as per the law and if necessary the government may kindly issue a notice for payment of stamp duty on the said transaction. The apex court has already clearly stated that a transaction through the power of attorney route for sale and purchase of real estate is not valid. As a result, all banks have refused to honour any such transactions for loan applications following the judgment .

This has deterred informed parties from avoiding transactions through the power of attorney route but not deterred unscrupulous real estate agents from still selling apartments through agreements on an Rs 10 stamp paper or a power of attorney on another stamp paper.

Ignorant citizens of this country have no idea what to do but ignorance of the law is no excuse (Latin: ignorantia legis non excusat) Therefore, the government agencies will mutely stand spectator when the common and helpless citizen is robbed of home and hearth after a legally invalid transaction on a non-residential plot of land.

The excuse our government agencies hide behind is the British model of government : viz. the government cannot be responsible for every stupidity that a citizen commits. The government works in the best of intentions but it is not responsible for acts committed by citizens . Well, it is time we buried this British stiff upper lip where it belongs and resort to a more benevolent system of governance.

The government should spend money on campaigns on the lines of the Soviet Union's propaganda machine where books and booklets with pictures are circulated informing common people about the fallacy of entering into invalid transactions.

People are not aware of the law. Instead of creating an insular system where a common person has to hire a lawyer for thousands of rupees to point out a single sentence in a bare act, the government should be educating people about the basic tenets of the law governing land related transactions.

Currently, Reasonable Homes Private Limited, a section 25 company is working on a model contract between a buyer, leasor and a seller, lessee of land, apartments or commercial space. Upon completion and vetting by legal luminaries, this model agreement will be downloadable from the company's website. Says managing director, Arunn Panchal, "we aim to create more and more confidence for the buyer in real estate transactions and more and more transparency in this industry."

People are also not aware that applications for conversion of land from agricultural to residential is met with a favourable response if it happens to be by a section 25 company or a cooperative society as it being done for the public good. This is another area where real estate sharks deter authentic buyers. They always give the impression that such land can never be converted. Land sharks thrive on our ignorance. We should avoid this vice by all means.

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