Article

PROCEDURE OF TRANSFER OF IMMOVABLE PROPERTY

ransfer of property is an act of conveying property from one person to another, in present or future. According to section 8 of the Transfer of Property Act 1882 (The Act), by transferring property, transferor transfers all rights in a property. There are various modes of transferring ownership of property: permanently by 1) relinquishment 2) sale 3) gift; and temporarily by way of 4) mortgage 5) lease and, 6) leave and license agreement.

 

Under Sec 54, the sale is a transfer of ownership by a deed (sale deed/transfer deed) for a price, paid or promised or part paid and part promised. The sale deed is compulsorily required to be stamped (stamp duty) and registered (before a Sub-Registrar) and is for consideration. Sale of property may result in long term, or short term capital gains tax liability, depending upon the period of holding of the property. This tax is payable by the seller of the property, and there are provisions under the Income Tax Act 1961 to save long term capital gains tax. Also, the tax implications are different when you have an under construction property and when you receive the possession of it. Also, the purchaser of a property is required to withhold 1% tax and deposit it with an authorized bank.

 

Sec 105 of the Act defines lease as a transfer of the right to enjoy a property, for a certain period, express or implied, in consideration of a price paid or promised, money or any other thing of value, to be rendered periodically or on such occasions. Section 17 of the Registration Act, 1908 mandates registration of the rental agreement, if the lease period is for more than 11 months. In all other cases, oral agreement accompanied with the delivery of possession is sufficient. The registration process involves payment of stamp duty and registration fees. The lease deed should clearly specify the purpose of the tenancy whether residential or commercial. The contract should also clearly mention the provision for premature termination of the lease. Under a lease agreement, the tenant has exclusive possession of the property. A tenant can sub-let the premises to a third party unless prohibited or restricted under the rental agreement.

 

Sec 58 of the Act defines Mortgage as the transfer of interest in the specific immovable property by way of a mortgage deed or deposition of title deeds for securing payment of a loan. The owner of the property creating a lien on an immovable property to the lender is the mortgagor. The lender is the mortgagee.

 

In a mortgage, the mortgagor may either deposit title deeds of immovable property to the lender or his agent with intent to create security or execute a mortgage deed. If there is a debt and if the debtor deposits title deeds with an intention that the title deeds shall be security for the debt, then by the mere fact of deposit of those title deeds, a mortgage comes into being. A mortgage by deposit of title deed does not require registration. Sometimes, a memorandum accompanies the deposit of title deeds to evidence the purpose of deposition of title deeds by way of an aide memoir. Though a mortgage by deposit of title deeds can be created by a mere deposit of title deeds without any written contract between the parties, in case the bargain or contract is reduced to writing, then it has to be registered.

 

Under section 122 of the Act, one can transfer immovable property through registered gift deed. The immoveable property is transferred voluntarily without any consideration. To make the transfer valid it is mandatory to register a gift deed with the sub-registrar as per section 17 of the Registration Act, 1908, and section 123 of the Transfer of Property Act. A donor does not have the right to revoke or cancel the registered deed at a later stage unless there is a specific clause mentioned in the deed. Section 126 of the Act provides for a situation wherein a donor can revoke a gift deed. For instance, if the property was gifted so that the recipient can reside in it, upon the death of the recipient, the property will get transferred back to the donor if she is alive, else to the heirs of the recipient. The Income-Tax Act 1961 specifies that capital gains arising out of a gifted property to blood relations are exempted from tax. However, income accrued from the gifted asset may be taxable.

 

Relinquishment is surrendering inherited or parental rights for another “legal heir”/ “another collateral” in the same property. In simple terms, relinquishment is a family arrangement where one legal heir surrenders his share in the property with or without monetary consideration for another legal heir. The relinquishment deed cannot be executed for another person who is not a legal heir. The relinquishment of property results in taxation of capital gains and on the basis of time horizon of holding the asset the gains are derived and taxes are calculated.

 

Registration of transfer of ownership of property

 

Once a property has been transferred by way of relinquishment, sale, or gift deed in the “name” of the recipient. It is also important to have the transfer recorded in the municipal records by way of mutation.

 

Stamp duty on transfer is payable as per applicable state laws. The stamp duty on gift deed may or may not be equal to the general stamp duty you pay on selling or relinquishing the property. It is different for different states in India.

 

Circle rate is the minimum price at which stamp duty is payable in case of transfer of immovable property. These rates are an indicator of likely prices of properties in various areas. Circle rates differ within cities in the same state, and among various localities of a city.

 

Where the actual price paid by a buyer is less than the circle rate, stamp duty is generally paid on the circle rate. However, a Sub-Registrar is required to allow registration of property even when the stamp duty paid is lower than the circle rate. However, it can impound the document and adjudicate proper stamp duty. The buyer can provide proof of the fact that the actual transaction is at the value stated in the deed, and that is the correct market value.

 

State governments collect stamp duty and registration charges on the declared value or the circle rate, whichever is higher, on the property being transferred. These charges are usually defined as a percentage of the transaction value and differ across states. Besides stamp duty, typically 1% of the value of the property is charged as registration fee (to register the document). Stamp duty payable in case the purchaser is a woman is generally lower by about 1%-2% in most states. In Delhi, when purchasers are one or more women, its 4%, in case it’s only men or a corporate body, it’s 6% and in case it’s a man and woman it’s 5%. A further 1% is payable at registration charges.

 

For the seller of the property capital gains tax would be calculated on the value of the property as fixed by the Stamp Valuation Authority especially when such value is higher than the declared value of the property as appearing in the sale deed. In the situation of individuals and Hindu Undivided Families receiving properties from non-relatives, the circle value rate of the property would be treated as the amount on which income-tax is payable according to the Income-tax Act. In case a buyer get’s it for a lower price, the difference would be chargeable to tax as “Other Income”.


 

                          Arbitration

The Arbitration and Conciliation Act, 1996 came into force with effect from 22.8.1996. It consolidates and amends the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards.

It applies to the whole of India. It applies to the State of Jammu and Kashmir to the extent of the provisions relating to enforcement of foreign awards, which apply in full, other provisions apply insofar as they relate to international commercial arbitration or conciliation.

The Act is based on the conciliation rules adopted by the United Nations Commission on International Trade (UNCITRAL)

What is arbitration?

Arbitration is a process of dispute resolution in which a neutral third party (called the arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard. It is the means by which parties to a dispute get the same settled through the intervention of a third person, but without having recourse to court of law.

What is an arbitration agreement?

  1. Arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not.
  1. The parties make an agreement that instead of going to the court, they shall refer the dispute to arbitration.
  1. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Where an arbitration clause is included in a contract and the contract is avoided due to misrepresentation or fraud, the arbitration clause may still continue to be binding.
  1. Where, however, there was no contract at all between the parties or contract was void ab initio, the arbitration clause cannot be enforced.
  1. An arbitration agreement/clause must be in writing. Although no formal document is prescribed, however, it must be clear from the document that the parties had agreed to the settlement of dispute through arbitration.
  1. Where the arbitration agreement or clause is contained in a document, the parties must sign the document. Besides, the arbitration agreement may be established by-
  1. an exchange of letters, telex, telegram or other means of telecommunication; or
  1. an exchange of statement.

Appointment of an Arbitrator

Who May be Appointed

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. In case of an international commercial arbitration, where the parties belong to different nationalities, the Chief Justice of India may appoint an arbitrator of a nationality other than that of the parties.

Number of Arbitrators

The reference may be made either to a single arbitrator or a panel of odd number (i.e. 3, 5,7, etc.) of arbitrators. The parties are free to fix the number of arbitrators by agreement. If there is no agreement, the reference shall be made to a sole arbitrator.

Grounds for Challenging Appointment

The appointment of an arbitrator may be challenged if

  1. circumstances exist that give rise to justifiable doubts as to his independence or impartiality or
  2. he does not posses the qualifications agreed to by the parties.

Place of Arbitration

The parties are free to agree on the place of arbitration and failing an agreement to do so the place shall be determined by the arbitral tribunal having regard to the circumstances of the case and convenience of the parties.

Who May Refer to Arbitration?

An arbitration agreement is a contract and thus, any party to such an agreement must have the capacity to contract.

What Disputes May be Referred?

The parties to an arbitration agreement may refer to arbitration, a dispute which has arisen or which may arise between them, in respect of a defined legal relationship, whether contracted or not.

Thus, all matters of civil nature whether they relate to present or future disputes may form the subject matter of reference. The dispute, however, must be the consequence of legal relationship arising out of an obligation, the performance of which is a duty under the law and for its breach a remedy is provided.

Bar to Suit

When the parties have entered into an arbitration agreement, they cannot file a suit in a court of law in respect of any matter covered by the agreement; otherwise the very purpose of arbitration will be frustrated. The court will normally not intervene except where so provided by the Act.

What Disputes Cannot be Referred For Arbitration

The following disputes cannot be referred to arbitration:

  1. Insolvency proceedings.
  2. Lunacy proceedings.
  3. Proceedings for appointment of a guardian to a minor.
  4. Question of genuineness or otherwise of a will or matter relating to issue of a probate.
  5. Matters of criminal nature.
  6. Matters concerning Public Charitable Trusts.
  7. Disputes arising from and founded on an illegal contract

Interim Orders by Court
A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before its enforcement, apply to the court for any of the following matters-

  1. appointment of guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings;
  2. preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
  3. securing the amount in dispute in the arbitration;
  4. detention, preservation or inspection of any property or thing which is the subject matter of the dispute, or to authorize for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for obtaining full information or evidence;
  5. interim injunction or the appointment of a receiver; or
  6. such other interim measure of protection as may appear to the court to be just and convenient.

A court has jurisdiction to pass interim orders even before arbitral proceedings commence and before an arbitrator is appointed.

Setting aside an Award
An application for setting aside an arbitral award may be made before the court, by a party within three months of receipt of the award by him. The court may set aside an award on the following grounds:

  1. a party was under some incapacity;
  2. the arbitration agreement is not valid under the law;
  3. the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
  4. the award deals with a dispute not contemplated by or beyond the scope of the submission to arbitration;
  5. the composition of the arbitral tribunal or the arbitral proceedings was not in accordance with the agreement or with the law;
  6. the subject-matter of the dispute is not capable of settlement by arbitration under the law; or
  7. the arbitral award is in conflict with the public policy of India.

Appeal
An appeal shall lie before the court, against the following orders-

  1. granting or refusing to grant any interim measure
  2. setting aside or refusing to set aside an arbitral award and
  3. granting or refusing to grant an interim measure of protection.

No second appeal shall lie against the appellate order of the court, except, however, that an appeal may be made to the Supreme Court.

Enforcement of Foreign Awards
Foreign award
 – has been defined to mean an award on differences between persons arising out of legal relationships, whether contractual or not and considered as commercial under the law in force in India, and made in pursuance of an agreement in writing for arbitration to be governed either by the New York Convention or by the Geneva Convention, in the territory of a notified foreign state.

  • Where a commercial dispute covered by an arbitration agreement to which either of the conventions applies, arises before a judicial authority in India, it shall at the request of a party be referred to arbitration.
  • Any foreign award, which is enforceable under this part, shall be binding and may be relied upon by the parties by way of defence, set off or otherwise in any legal proceedings in India.
  • The party applying for the enforcement of a foreign award shall, produce the original award or a duly authenticated copy thereof, the original arbitration agreement or a certified copy thereof, and evidence to prove that the award is a foreign award.
  • An appeal shall lie against the order of court refusing to refer the parties to arbitration or refusing to enforce a foreign award.

SC: A JOINT ACCOUNT HOLDER CANNOT BE PROSECUTED, UNLESS HE HAS SIGNED THE CHEQUE

The operative part of the judgement read as under :

The normal rule is, no one is to be held criminally liable for an act of another. This normal rule is, however, subject to exception on account of specific provision being made in statutes extending liability to others. For example, Section 141 of the N.I. Act is an instance of specific provision that in case an offence under Section 138 is committed by a company, the criminal liability for dishonour of a cheque will extend to the officers of the company.

The conditions have to be strictly complied with. The persons who had nothing to do with the matter, need not be roped in. A company being a juristic person, all its deeds and functions are the result of acts of others. Therefore, the officers of the company, who are responsible for the acts done in the name of the company, are sought to be made personally liable for the acts which result in criminal action being taken against the company. In other words, it makes every person who, at the time the offence was committed, was in-charge of, and was responsible to the company for the conduct of business of the company, as well as the company, liable for the offence. The liability under Section 141 of the N.I. Act is sought to be fastened vicariously on a person connected with the company, the principal accused being the company itself.

It was never the case of respondent No. 1 in the complaint filed before learned Magistrate that the appellant wife is being prosecuted as an association of individuals. Since, this expression has not been defined, the same has to be interpreted ejusdem generic having regard to the purpose of the principle of vicarious liability incorporated in Section 141. The terms “complaint”, “person” “association of persons” “company” and “directions” have been explained by this Court in Raghu Lakshminarayanan v. Fine Tubes.

The materials culled out from the statutory notice, reply, copy of the complaint, order, issuance of process etc., clearly show that only the drawer of the cheque being responsible for the same.

Under Section 138 of the Act, it is only the drawer of the cheque who can be prosecuted. In the case on hand, admittedly, the appellant is not a drawer of the cheque and she has not signed the same. A copy of the cheque was brought to our notice, though it contains name of the appellant and her husband, the fact remains that her husband alone put his signature. In addition to the same, a bare reading of the complaint as also the affidavit of examination-in-chief of the complainant and a bare look at the cheque would show that the appellant has not signed the cheque.

A joint account holder cannot be prosecuted unless the cheque has been signed by each and every person who is a joint holder. The said principle is an exception to Section 141 of the N.I. Act. The culpability attached to dishonour of a cheque can, in no case “except in case of Section 141 of the N.I. Act” be extended to those on whose behalf the cheque is issued. This Court reiterates that it is only the drawer of the cheque who can be made an accused in any proceeding under Section 138 of the Act.

Reference : Supreme Court. Mrs. Aparna A. Shah v. M/s Sheth Developers Pvt. Ltd. & Anr., criminal appeal no. 813 of 2013 (from the Judgement and Order dated 24.9.2010 of the High Court of Judicature at Bombay in Criminal Writ Petition No. 1823 of 2010).

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