Saturday, 29 March 2014


Buying a house is not difficult for NRIs any more as the NRI Housing Loan makes the property investment a lot more convenient.Any individual staying abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad are eligible for NRI Housing loan.Apart from that, government servants posted abroad on duty with the Indian missions or deputed abroad on assignments with foreign Governments or regional! International agencies are also entitled to these loans.

NRI Housing loan is offered by some of the premier financial institutions and banking in India such as ANZ Grind lays Bank, ICICI Bank, HDFC, HUDCO, CITIBANK, LIC etc. As an NRI, you can avail a maximum loan of Rs.1,00,00,000/- or 85% of the cost of the property including the cost of land, whichever is lower.The rate of interest will vary from 11.25% to 14.25% per annum depending on the financial institution. At the time of making application for the loan a processing fee is payable which will vary between 1% to 2% of the loan amount applied for depending on the institution.

The amount of loan to be borrowed will depend upon a person's repaying capacity.To arrive at the repaying capacity banks do take into consideration factors such as income, age,qualifications,work experience,number of dependants, spouse's income,assets,liabilities, stability and continuity of occupation, alternate employment prospects when the concerned person returns to India and savings history.

While applying for home loans in India the following documents are to be submitted along with the application:

1.   Employment/Residency related documents
·  Employment contract
·  Latest salary slip.
·  Latest work permit.
·   Identity card issued by the present employer.
·   Visa stamp on the passport.
·   Continuous Discharge Certificate (if applicable).
·   Overseas Bank Account Statement for the last few months.

2.   Property Related Documents
·   Receipts for payments made for purchase of the dwelling unit.
· Copy of approved drawings for the proposed construction/ purchase/ extension.
· A detailed cost estimate from Architect/Engineer for property to be purchased/ constructed / extended Allotment letter.

Once the loan is sanctioned, the period of repayment of the loan is determined which normally falls in the range of three to ten years.Loan can be repaid through Equated Monthly Installments(EMIs) comprising principal and interest.EMI payments can be made through post dated cheques from your Non-Resident(External) Account/Non-Resident (Ordinary) Account in India.

For more details,

Friday, 28 March 2014


Nowadays, a home mortgage is a clever plan to get your very own house. Even people who can afford to buy a property through their own cash tend to adopt to get loans from banks upon home mortgage.Home mortgage is considered to be the most important stage in property ownership.Some of the business oriented people are engaged in property mortgage for business expansion purposes.

In home mortgage, you will not have to spend a big sum from your pocket instantly. All you will have to do is to apply for loan, complete the formalities of the bank and get the loan from the bank on the basis of your economic stability.You must be present at the time the bank/lender comes to talk to you or contacts you.In submitting paper work, a completed accurate information may cause an immediate approval of your application.The Bank/lenders may do an interview, be truthful to them in giving all the financial information they need and even the personal information as well.A broker/agent may help you in gathering the entire required documents.After you have completely settled the amount due to your bank or financial institution,you will become the absolute owner of the house.

Here are some of the requirements you need to comply for getting home loan: 

Application Form:
The first step is to obtain a loan application form from the bank.The application form requires to be filled up completely and to be submitted to the bank along with your photo.

Permanent Address :
You have to give the address where you are residing.Include your alternative addresses if there are any, and if necessary,give your parents address too. The Bank or the lenders need these addresses for the transactions in case you are not reachable.

Social security and account numbers:
Submit a copy of your social security card.Your account numbers in other bank must not have blacklist history.For this reason, you must submit a statement of account wherein the status of your current account appears including your previous accounts for the past 2 years.

Annual Income Form:
This will help the Banks or lenders to determine your financial stability for purposes of quantifying the loan amount to be sanctioned.

Recent Legal Forms:
These forms includes Tax returns copy for the past 2 years, and legal documents whereby proof of termination of the past financial history,like foreclosure, bankruptcy and sales.

Sale agreement:
This contract should be signed by the Seller and the Buyer.This is a very important document which you may use in further transactions.

These documents are to be made available to the banks for sanction of housing loan. Banks and lenders seek for a qualified and trusted loan.All types of loans require these documents to record the relevant information in an orderly manner.You can apply on-line for home loan upon the mortgage of your property.There are several banks and lending institutions which offer various types of loans upon mortgage of your property even on internet since applications can be submitted even through internet.This method is beneficial and handy for borrowers who are busy.

For more details,

Thursday, 27 March 2014


Public in general frequently use encumbrance certificates in property transactions as the sole evidence to ascertain free and marketable title of the vendor. They are under the impression that the encumbrance certificate would disclose all the charges created on a property. But, it is not so.There may be several types of encumbrances, which will not be reflected in the encumbrance certificate. The application for encumbrance certificate is to be submitted at the jurisdictional Sub-Registrar's office under whose jurisdiction the property falls. The prescribed application form for obtaining an encumbrance certificate is Form No.22.

In order to get a proper and valid certificate, it is very important that the applicant should clearly mention in the application the period for which the encumbrance certificate is required, detailed description of the property, its measurements, boundaries, and the person who is applying. The encumbrance year commences from April 1st of a calendar and closes on March 31st of the next calendar year. Any fraction of the encumbrance year attracts fee for the full year.The fee prescribed is for single property and per individual application form.

Form No.15 or 16
The encumbrance certificate is issued either in Form No. 15 or 16. If the property does not have any encumbrance during the particular period for which encumbrance certificate is sought, then encumbrance certificate in Form No.16 will be issued i.e., Certificate of Nil Encumbrance will be issued. If the property has any encumbrance registered during the particular period for which encumbrance certificate is sought, then encumbrance certificate in Form No.15 will be issued. The certificate in Form No.15 discloses the documents registered in respect of the property, the parties to the deed, nature of encumbrance, amounts secured or transacted in the said deed, registered number of the document, book no., volume no., and date.

The encumbrance certificate issued always will be in the language in which indexes are prepared in particular Registrar or Sub-Registrar's Office. If the indexes are not in English and the applicant wants certificate to be prepared in English, then the request of the applicant will be complied with to the extent possible. In Karnataka, now computerized encumbrance certificates are issued.

There is a provision for inspection of the records of the property maintained in the office of the Sub-registrar by the applicant himself/herself. In case the applicant prefers not to exercise this authority and merely submits application for issue of encumbrance certificate for a particular period, the department would be issuing the encumbrance certificate with due diligence and care. However, there is a rider clause in the computerized encumbrance certificate to state that the department shall not take responsibility for mistakes, if any, in the encumbrance certificate.

Though an encumbrance certificates discloses all registered encumbrances on a particular property during a specified period, it has certain limitations. The Encumbrances disclosed in the certificate are for the period for which certificate is issued and encumbrance created during the period prior this period or during the later period is not reflected in the certificate. The encumbrance certificate is issued in respect of the property as detailed in the application form and not as per the registered documents of the property. Thus, if the description of the property described in the application does not match with the details of the property as shown in the registered documents, then details of such documents are not reflected in the encumbrance certificate.

 The encumbrance certificate discloses the encumbrances created by documents which are registered in a particular office. In other words, it is the extract of the property register maintained in the Sub- Registrar's office and the document which is not registered and where under any charge is created does not get reflected in the encumbrance certificate. Further, there are certain documents for which registration is not compulsory but registration is optional. These documents include testamentary documents, document creating lease for a period of not exceeding one year, any decree or order of a court, or award. Since these transactions are not compulsorily register able, they do not find any mention in encumbrance certificate.

Agricultural Land
Agricultural lands are generally inherited. The change of ownership is recorded in revenue records, mutation register of village panchayath.Such changes of ownership are not registered. As such encumbrance certificates do not reflect the true ownership of the agricultural land. R.T.C,Mutation extracts give complete details of change of ownership, details of possession, conversion of agricultural land to non-agricultural purposes.Therefore, it is better to insist and rely on RTC and mutation extracts in case of agricultural lands in addition to the encumbrance certificate.

It is always advisable to obtain encumbrance certificates for a minimum period of 43 years and to verify whether the encumbrance certificate is issued for the complete period of your requirement and whether it contains the boundaries and the measurements of the property, signature of registering authority and the office stamp apart from disclosing the names and the signature of the persons who have searched and verified the records of the property. It is also advisable for the prospective purchaser of property to inspect the property personally and to verify and confirm that the original title documents are available with the vendor. In addition to this, some additional safeguards like paper notification, searching in jurisdictional courts for any pending cases may also be undertaken to protect the interests of the purchaser.

It is advised that for tracing the clear and marketable title of the property, the purchasers should not mainly rely on the encumbrance certificate issued by the Registrar or Sub-Registrar's office, but has to examine all other relevant documents, such as title deeds, latest khata certificate, khata extract, and tax paid receipts.

For more details,

Wednesday, 26 March 2014


A single word can change the nature or understanding of the transaction and are several cases and matters which have been decided on the basis of the wordings employed in the document where the interpretation of words, phrases and terms by the courts have decided the fate of the parties.

You may have come across terms like "Indenture of Sale", "Indenture of Lease", etc. One may be wondering as to what is meant by indenture and how it is different from deed. Formerly, an indenture meant a document cut with serrated edges  which will fit with the counterpart of the document. In other words, the copies so cut had indented edges which made forgery difficult.Now, though the terminology is still used, this type of document is practically non-existent. At present, indentures can be taken to mean documents, usually in the nature of a contract, which are signed by both or all parties concerned.

Similarly, a power of Attorney can start with wordings like "Know All Men by these Presents". The term "presents" indicates the "Deed" itself. Further, one may come across terms like "one or more lots". Originally, the term "lot" or "lots" was used as indicating a parcel of land which was usually divided. "Lots" also meant contiguous parcels of lands. You may find this in usages like "parking lot", etc.

The term "real estate" itself has come to mean immovable property. It is used synonymous for lands, tenements, hereditaments and the rights relating to immovable property as distinguished against personal properties like goods and other properties which are basically not immovable properties.

The word "Tenements" signifies properties that can be held by a person which are of a permanent nature.It also means a house and other types of immovable properties. The word "Hereditaments" indicates any property which can be inherited and includes movable and personal property also.

The word "appurtenant" means pertaining to or belonging to and is used in such sense in deeds and documents.The word "Appurtenances" used in conveyances like Sale Deed, etc. means an interest or a right in a property incidental to the principal right which is more valuable and important. The word "Easement" in the Sale Deed can be stated to be the right or a privilege that a person has on the property of another. It also includes a right to enjoy a profit arising out of an immovable property. Usually, this is used in the context of indicating a right of way, pathways, a right of air, a right of tight passing through, etc.

The word "License" used in a deed indicates grant of a right or an authority to do something in the immovable property, which right or authority, but for the authorization, will be illegal or wrongful or unlawful. It is basically in the nature of permission. This does not create an interest in the immovable property, but creates a right or a privilege which is usually revocable.When acting under the right or privilege, the person exercising the right or privilege, known as "Licensee" enjoys immunity for the acts done.

The term "Metes and Bounds" appearing in deeds would indicate description or details of the boundary lines of the land, together with terminal points and angles. The term "Admeasurement" or "Admeasuring" is employed where the actual extent of the length and breadth of the property is given.

There are several other terms and words which may appear innocuous and apparently repetitive. It is possible that there is a sense of discomfort in not knowing exactly what the words or terms mean when you are to sign certain documents since the words and terms as understood could be totally different than intended in the document. Presumption of vague notions may land you in trouble. If you do not understand a particular usage, it is better to check up with your advocate or a person having knowledge of these terms and clear all doubts. 

For more details,

Tuesday, 25 March 2014


Generally, it is very difficult to construct a house without availing housing loan. There are numerous Housing finance Institutions (HFIs) viz. Banks and Housing Finance companies which provide housing loans ranging from few thousands to millions of rupees.Inspite of existence of various agencies that provide for housing loans, availing such loans may not be an easy task since there are lot of instances where such loan borrower  are rejected out rightly due to various reasons.

When an application for the house loan is rejected, it is quite natural for the applicant to get disappointed and at the same time wonders what went wrong for the rebuff.There may be a big communication problem at that juncture and the applicant may never get to know about the exact reason for the rejection of the application or he may get an evasive response.The Bank Official who deals with the Borrower will play a major role and enlighten the borrower about the procedure rather than keeping the applicant in the dark.

Types of Housing Finance/Loans
There are different types of Housing finance/loans available for the different categories which are listed below.
1. Purchase of land–Loan is given for purchase of site. Most of the Bankers do not entertain sanction of such loans since calculative risk is more in such loans.

2.Constructed houses or Flats–Loan is sanctioned for the purpose of purchase of a house which is already constructed and available as readymade. The same can be availed for the purchase of flats too.

3. Construction Loan –As the name itself suggests, loan can be availed for construction of a building on the entire property.

4. Composite Loan–This means that loan can be availed both for buying a site and constructing a house.

5. Take over Loan–This means taking loan from one bank to another Bank, in order to clear the dues of the other bank.

For each of the above said loans, margin money will differ and also certain restrictions will be imposed by the Banks before the loan is sanctioned. For instance,when a person avails the composite loan,he should construct the house within the stipulated period, which may vary from 12 to 24 months as per the terms agreed.There have been many cases where the applicant and a builder enter into an agreement for availing housing loan, which is required for the builder to commence the project and subsequently vanishes with the unutilized loan amount once the huge chunk of principal amount is received by the builder, leaving the applicant in the lurch and making him to face the consequences. It is advisable for the applicant to take necessary precaution before applying for the loan and utilizing it properly.However, this kind of problem can be avoided if the applicant approaches reputed and established Builders.

Regular Income of the applicant  
The first and foremost criteria of the Banks before sanctioning or even entertaining the loan application is about the steady monthly income of the applicant. If the applicant is a salaried man, either serving in a Government organization or private company, the first hurdle is cleared. Then the Banks will enquire about other aspects such as IT returns being filed by the applicant for the past two or three years, Bank Statements for the last 6-12 months and other relevant documents to ascertain financial status and banking transactions.Further,Bank financial statements will reveal outstanding loans and repayment details,bounced cheque details, regular credit of income, any subsisting encumbrance and if such statements are satisfactory to the Bank, then it is the first round of victory for the applicant.

Margin Money
Usually, Banks provide the loan to an extent of 85% of the total estimated amount of the plot or property or flats.The remaining 15% has to be arranged by the applicant and the loan will be sanctioned by the bank only after giving satisfactory evidence regarding his capability of mobilizing that 15% of the balance amount.

Credit Rating
Loan will be sanctioned on the basis of the present salary and only 50% of the salary amount will be considered for the loan repayment purpose by the Bankers.For instance, if the applicant is getting Rs. 10,000 PM take home salary, loan will be sanctioned taking into consideration his salary status, 50% of the salary will be taken for repayment of the proposed loan and the remaining Rs.5,000/-will be considered as the amount for his expenses. Even if a person is getting Rs.25,000PM as gross but Rs.10,000 as take home salary, he may get the loan amount considering his take home salary and not his gross. Apart from this, other factors like the applicant’s antecedents are also thoroughly checked before sanctioning of the loan, wherein the  Bank will look into the total number of dependents of the applicant to ascertain his repayment capacity.If the dependents are more, the loan amount sanctioned will be obviously less.

Each Bank has its own prescribed criteria pertaining to monthly income of the applicants based on which the loan is sanctioned.There is also a necessity of a Guarantor’s signature in some cases.Applicants who do not have a fixed income are not entertained by a majority of Banks.

Age Factor
Generally availing loan jointly by all the co-owners will increase the borrowing capacity. Further, the age of all the co-owners should neither be less than the lower limit nor exceed the upper limit.However, age limit will vary from one Bank to another.It may also affect the tenure of the house loan as well as EMI’s. Some of the Banks may stick to 70 years as the upper age limit for the co-applicant. If the applicant is 35 years and the co-applicant is 60 years, then the loan will be sanctioned for a maximum period of 10 years.In other cases, the applicant’s retirement age is also taken into account. If the applicant is 54 years old and would be retiring by 60, then the maximum loan tenure would 6 years only.

Property age
It is a known fact that the age of the property is vital in case of a resale. In many cases, loans are sanctioned on resale properties if such properties are aged less then 50 years.If the applicant intents to buy properties situated in the areas which are black listed by the Banks for various reasons,then such application will be rejected, irrespective of applicant’s financial status.The said property should be within the geographical limits as defined by Banks for the sanctioning of the loan.Some of the multi-national banks have their own set of rules and normally do not entertain the loan applications of TV and other artists, police, journalists, politicians, advocates and others.

Legal Aspects
All said and done, paramount importance should be given to the legal aspects. The title of the property should be clear in all aspects right from the origin, flow and the present status.If the title is not clear, the application will not be entertained and it may be rejected.The Banks will not sanction the loan even if the opinion is clear but the supporting original documents are missing since it may conclude that the property is either mortgaged elsewhere or having some other problems.The actual market value and the percentage of deviation of the property will also be taken into consideration before the sanction of the loan.

Thus, there are not many hassles to get a loan from the Banks of your choice provided all the pre-requisites are fulfilled by the applicant. Some years ago, a person would have ventured to construct a house after 45-50 years duly saving the required amount to construct a house. But now due to the accessibility and availability of easy loans from Banks, youngsters between the age group of 25-35 are either constructing new houses or buying an apartment which is indeed a good sign.

Though the switch-over to a liberalized lending regime has brought in competition and efficiencies in the housing finance market, factors like the ability to cater to the larger segments of the population, including those in rural areas is still a challenge.These segments are outside/below the income tax bracket and the fiscal benefits are no concessions for them.The Bankers expect higher equity from the applicant’s side for sanctioning the loan. 

For more details,

Monday, 24 March 2014


Identifying a suitable property is the first step taken towards the purchase of a property.After completing the same,documentation is the next and very important aspect.The agreement to sell is governed by the provisions of the India Contract Act (1872) and the Transfer of Property Act (1882).

Mode of stamp duty
Previously,documents were prepared on the stamp paper issued by the Government Department.After the‘Telgi Scam’,usage of the stamp papers were prohibited in Karnataka.Now,a white paper or Rs 2 document sheet which is issued by the department of Registration is preferred.Regarding stamp duty, it has to be made either by way of Pay a pay order /Demand Draft or Banker’s Cheque in favour of the concerned Sub-Registrar.The Registration charges, either by way of a DD or cash, has to be submitted to the concerned Sub-Registrar.The details of the stamp duty and registration charges will be entered by the Sub-Registrar on the reverse side of the sale deed.

The beginning
The documents consist of several distinct parts.The name and description of the documents is the first, in the documents.This gives a general indication about the nature of the document.However,contents are the most important factor to decide the nature of the document.The date and place of the execution of the document is the beginning of the document.The date of the documents may differ from the date of registration.The documents can be presented for registration within four months from the date of execution. However, the date and place of execution is important for the purpose of determining the limitation and jurisdiction.

The name of the parties to the contract, their age, father’s name,in case of a married woman her husband’s name, and place of their residence should be mentioned. All the owners, as one of the parties to the contract,should take abundant care at the time of executing such documents.The party to the contract may act for himself/itself or on his/their behalf, may be represented by other capacity.In such case,the party should clearly mention on what capacity he/they are being represented,which is also one of the very important aspects in the documents.

All the relevant facts in a logical and chronological order should be narrated. The rights and obligations of the parties must be stated.The intention of the party should also be clearly mentioned in the document.

The ‘Preamble’
The Preamble reveals the history of the property, nature of the transaction and the intention of the party.The previous history of the property can be established, by an advocate, from the Preamble.

Operative portion
The operative portion of the document states the nature of transaction, as to whether it is an absolute transfer or an agreement to transfer the right, title and interest, the consideration paid,mode of payment of such consideration and balance payable,if any.The duration of the completion of transaction should be mentioned clearly.The covenants of the vendor,pertaining to clear and marketable titles, is an important aspect for the transfer.

Default clause
In case of a default in the payment or non-performance of the other party, remedy to be taken, has to be clarified in the document itself.

In case of delayed payment,what is the percentage of interest payable or damages payable to the other party or the modes to terminate the agreement in case of breach, should be stated clearly.

In case of non-performance,specific performance clause should also be included in the document. The arbitration clause is advisable to be incorporated in the agreement.

Possession is the most important ingredient of the transaction.The time of delivery of possession should be clearly and specifically mentioned.It may be noted that the seller need not give the possession of the property to the purchaser on the execution of the agreement or on part payment.Possession has to be given on completion of the sale process and receipt of the full consideration amount after execution of the conveyance deed. The agreement should also refer to the mode of possession of the property and whether it is vacant or not.When the property is let out,the seller has to arrange for a rental agreement between the existing tenant and the purchaser of the property.

Location and description should contain the total measurement, the municipal number, street, road, with complete and proper boundaries and properties surrounding the property agreed to be sold.It should also include the area, floors, type of constructions and materials used among others.The details should be exhaustive so as to identify the property clearly as Section 21 and 22 of the Indian Registration Act makes it mandatory to disclose the details.

At the end, the document should contain and undertaking that the executants is signing the documents before the witnesses.The witness who sign in the document, may or may not know the contents of the agreement. Whereas, in the case of consenting witnesses, who have a certain interest in the property, would know the contents of the documents. The non-testamentary document should be drafted by an Advocate or licensed documents writer and they should sign on the same.

Preservation of the original document is the most important aspect as it is an evidence of ascertaining the ownership of a particular person and incase of his death, for their legal heirs.If the original document is misplaced or unavailable, it would seriously affect the title of the property.It may be presumed that the property documents are pledged with some financial institutions by way of deposit of title deeds. It is advisable to laminate the documents and preserve them in safe custody.

For more details,

Saturday, 22 March 2014


Power of Attorney is one of the documents which is being executed most extensively pertaining to the transactions involving transfer of properties, irrespective of modes of conveyance.The main reason being inability of the person, either the transferee or the transferor to be present at different place at the same time. In order to complete such transactions, in his/her absence, General Power of Attorney is executed, authorizing another person to do acts or certain acts on his/her behalf.Such an instrument empowering a specified person to perform such act in his absence is termed as General Power of Attorney, as envisaged in the Power of Attorney Act 1882.

The instrument of Power of Attorney is based on the concept of Law of Agency, wherein the Principal,i.e.,the person who executes Power of Attorney, authorizes his Agent, i.e., the person in whose favor such Power of Attorney is executed, to do all such necessary acts specified in the Power of Attorney on his behalf and further ratifies such acts of the Agent and the said concept has been recognized under the statute thereby giving legal sanctity.

Competency of the Parties:
The following are the mandatory requirements before executing Power of Attorney:

Majors: It is necessary that both the Principal and the Agent must have attained the age of majority because contract entered between two parties, wherein, either of the one is a minor, is not recognized under Law. Hence, it is very important that both the parties should be above 18 years of age.

Sound Mind: It is also important that both the Principal and the Agent must be of the sound mind since the contract with the person of unsound mind does not bind the parties to such a contract.

Types of Power of Attorney:
There are two types of Power of Attorney. They are:
·     General Power of Attorney: General Power of Attorney gives wide power to the agent to do various acts on behalf of the Principal, without any specifications.

·     Special Power of Attorney: Special Power of Attorney is executed in those cases wherein the agent is empowered to do such acts specified in such Power of Attorney. In this kind of Power of Attorney, the power given to the agent will be revoked as soon as that particular act for which the power of attorney is executed, is performed and once such an act is completed, Power of Attorney does not subsist.

Sub-delegation of power:
The general principal is that an agent can neither sub-delegate his powers to a Sub-agent nor can appoint another power of attorney. The said principle is well expressed in Latin maxim “Delegate non protest delegate”, which means a person who is delegated with certain powers cannot delegate such powers to a third person. But, section 190 of the Indian Contract Act provides certain exceptions, wherein the agent can appoint sub-agent. However, such sub-delegation must be done in connivance with the Principal, who has to ratify all the acts done by the agent on his behalf. The following are the circumstances under which Sub-delegation is permitted:
·      The nature, custom of the trade is such that it requires the appointment of sub-agents.
·         The recitals in such power of attorney authorize the agent to sub-delegate his powers to another agent.

Registration and Notarization:
Under Section 17 of the Registration Act, if any transaction involves transfer, assignment or creation of right, title and interest over the immovable property and the value of such property is Rs.100 or more, then registration of such documents is mandatory.

As regards execution of Power of Attorney, if the principle assigns right, title and interest over the immovable property in favor of the agent and authorizes the agent to execute any document on his behalf, in such case registration of the power of attorney is preferable.However, if the agent is delegated with the powers which does not involve any kind of assignment or transfer of interest over the immovable property, then power of attorney notarized before Notary Public or even before the Magistrate,is considered to be authenticate documents.

Thus for example, if a person executes Power of Attorney, authorizing the Power of Attorney Holder to execute sale deed on his behalf before the proper registering officer, then it is advisable to get such power of attorney registered. On the other hand, if Power of Attorney is executed, authorizing the power of attorney holder to prosecute or defend the suit, then GPA can be notarized before Notary Public. However, the Court shall presume that a power of attorney executed before and authenticated by Notary public or any Court, Judge, Magistrate, Indian Consul or Vice-consul or Representative of the Central Government was so executed and authenticated. If the Power of Attorney is not signed and sealed as required under law, it is nothing more than a waste paper.

In either of the case, each page of the document, whether registered or notarized, has to bear official stamp of the Sub-Registrar office or Notary Public and must disclose the registration number, Book number and signature of the Sub-Registrar or Notary. If the same is notarized, then, apart from the above, appropriate Notary Stamp has to be affixed.

Outside India: Section 85 of the Indian Evidence Act applies equally to documents authenticated by Notaries Public of other countries. However, the same has to be done by the designated Officers. So any power of attorney executed outside India shall be authenticated by notary of such country or Indian Consul/Embassy.

Stamp Duty:Power of attorney, executed and notarized in any country in favor of Power of Attorney Holder, residing in India, has to be duly stamped within four months from the date of receipt of the same and the stamp duty in such case has to be at the District Registrar’s office. However, if the same is executed in India, the same has to be executed on the document sheet, duly stamped. Stamp duty in either of the case will be Rs.100- if the same is executed in favor of one to five of them and if power of attorney is given to more than five persons, then the actual stamp duty payable is Rs.200/-.

Cancellation of G.P.A:Power of Attorney can be cancelled by either of the parties to the said contract. However, the same has to be done by giving proper notice to the other, clearly mentioning the intention of the person to revoke the said Power of Attorney and notice to that effect has to be given to the public. However, the Principal cannot cancel the agency after the agent exercises his powers partially. If the power of attorney is given only for the specific purpose and that purpose is fulfilled or if either of them dies or becomes unsound, then such an instrument automatically gets cancelled. Nevertheless, proper notice is a must.

If the agent himself has any interest in the property which is the subject matter of the agency, then the same cannot be cancelled unless the agent agrees.

Representation of Owner:In Bangalore, there are many instances wherein it is seen that the Power of Attorney Holder, in his individual capacity, representing himself as the owner instead of the actual owner will convey immovable property, which act does not confer any kind of right over the purchasers since the document itself is void and not binding on the parties. So it is very important to verify as to whether the conveyance has been made by the GPA Holder, duly representing his Principal/Owner.

In the recent times, with the growing boom of real estate in Bangalore, the instrument of General Power of Attorney is playing a major role, not only in regard to sale or purchase of the property, but also in all other related fields. However, abundant caution has to be taken at the time of executing Power of Attorney and also cancellation of the same because the same can also be used as a weapon involving acts of fraud or conspiracy to misguide and cheat public.

For more details,

Friday, 21 March 2014


Works Contract is most questioned and frequently litigated issue in the Court of Law, and also between the purchaser of the flat and promoter.The decision of the Hon’ble Supreme Court in Gannon Dunkerleys case stating that the expression “Sale of goods as used in Seventh Schedule of Constitution has the same meaning as in Sale of Goods Act made the law commission in its sixty first report to recommend to amend the Constitution of India - Accordingly 46th amendment was passed in 1982.This empowered the states to legislate laws to levy tax on transfer of property.The goods involved in execution of works contract may be in the form of goods or in any other form. Article 269 of the Constitution provides for levy of tax on sale or purchase of goods other than news paper. In case of interstate trade and commerce, the tax is to be levied by Government of India, but assigned to the states in which tax is leviable.

Article 286 of the Indian Constitution works as restraint on the authority of the same.

Work contract
One has to distinguish the difference between contract of sale of goods and contract of work.The difference is very thin. It is terms of the contract and nature of the obligation to be discharged, which distinguishes works contract from contract for sale.

In case of sale of goods, goods are delivered as they are to the purchaser, whereas in case of works contract, the goods are delivered in a modified form. This may be well explained in the purchase of readymade house, which is sale of goods and contract to construct a house, which is a works contract. In purchase of readymade house, the house is delivered as it is, whereas in case of contract for construction, the house is constructed using various materials and delivered to the purchaser.This is well explained in case HAL Vs State of Karnataka (1984) 55 STC 314.

In another case HAL Vs State of Orissa,Hon’ble Supreme Court has observed that in contract of works there is a person performing or rendering service on property, where as in case of sale of property there is individual existence of the property as a whole, which is being delivered to the purchaser.

Types of Contracts
There is no well established formula by which contract for sale and contract of work can be distinguished.Any contract which contains not only the work but also requires goods to be used may be of the following three types;

q  Contract may be for works to be done for remuneration and also for supply of goods in execution of work.This is a composite contract.

q  It may be contract of working which use of materials is incidental to the execution of the work. This is contract for work and labour not involving sale of goods.

q  It may be contract for supply of goods where some work is required as incidental to sale.  This is purely a contract of work.

Agreements, where in land and buildings are conveyed to the prospective purchaser and proper stamp duty is paid on such conveyance are transfer of immovable property and are not liable to tax under sale tax laws.

Agreement with Builder
However we shall examine cases, where developer executes General Power of Attorney in favour of builders for valuable consideration such contracts may be any of the following types;

q  Power of attorney for valuable consideration.
q For valuable consideration in part and partly by way of constructed property.

Hon’ble Supreme Court in Raheja Development Corporation Vs State of Karnataka (Appeal [Civil]) 2766 of 2000 5/5/2000 observed that “the definition of works  contract under Karnataka Sales tax is very wide and not restricted to works contract, it also includes “any agreement for carrying out either for cash or for deferred payment or for any valuable consideration, the building and construction of any movable or immovable property.

Land being immovable property is not liable for payment of sales tax.But when any construction takes on land through an independent contractor on behalf of the builder, contractor executing the work is liable to pay works contract tax.

Dual Role of Developer
We may also visualise a situation where a builder himself acts as contractor.In such situation the sales tax department considers the builder in dual capacity as contractor and as owner/builder.The department is subjecting the builder to sales tax.The relevant case is Mittal investments corporation Vs. State of Karnataka which was decided by Hon’ble high Court of Karnataka.  It was held as follows;

q  If the building was first constructed and thereafter agreed to be sold, then it was a sale of immovable property for which no sales tax is attracted.

q  According to the agreement, some advance has been taken at the time of executing agreement and the balance amount to be paid in 15 instalments

q  It has not been established that at the time of agreement, whether construction has started by the builder.

q  The purchaser has to purchase the land from the purchaser and not from the builder.

q  It is not clear whether plans were approved, before the execution of agreement.

It was held that there is transfer of property in goods and liable for tax.On review petition it was held, the builder would not be liable to pay sales tax under section 5B in respect of buildings which have been completed before entering into an agreement and also in respect of agreements which have been entered after the construction of the building was started.However, this was overruled by Hon’ble Supreme Court in case of K. Raheja Development Corporation Vs. State of Karnataka

The question whether a particular contract is for sale of goods or contract for work or labour is very difficult to determine.The distinctions and terms specified by various courts are not exhaustive.They mainly dwell on one or two points which have come in the cases, which are rigid and can be made applicable to all cases. The deciding factor would be the contents of contract, the circumstances of the transaction of the prevailing custom of the trade.The levy of the works contract tax is on the materials used in execution of particular contract, the property which is ultimately transferred.

Karnataka Sales Tax Act
The provisions relating to works contract under Karnataka Sales Tax Act were inserted with effect from 01.08.1985 but were given effect from 1986.Section 2(29)(b) of KVAT Act deal with the Works Contract, which refers to the property in goods involved in execution of works contract for cash or deferred payment. Section 2(37) defines“Works Contract” as works contract includes any agreement for carrying out for cash,deferred payment or other valuable consideration, the building,construction, manufacture, processing, fabrication, erection, installation, fitting out,improvement modification, repair, or commissioning of any movable or immovable property.

The contractor has to include the sales tax in the quotation itself, so that he can collect it from the principle and pay same to the Department, if not he has to pay the sales tax on his own profit.The developer has to include this clause in the agreement to sell and collect the tax from the purchaser of flat and remit the same to the Commercial Tax Department.

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