Real Estate

In India, Governments do not register property

G’nY Online: In whatever walk of life we may be, registration and stamp duty is the part and parcel of most activities. We accept it unquestioningly. Yet, there has been a serious amount of research to put it in place.

An indeed interesting evening with Vinod Agrawal, IAS and the Principal Secretary in the looking after Registration & Stamps in the Department of Revenue in Telangana revealed a mine of information. He surprised us with his immense knowledge in the field of crucial legalities and explained it with charming clarity. A brief interaction is presented below.

How did registration come into being?

The first law about registration was made in 1793 by the East India Company. Since they were not authorized to make laws or acts, they made regulations, which was named Regulation No. 36 of 1793. Before such a regulation was put in place, it was common to write and consequently deny documents of sale, alluding to coercion, extortion and the like. The buyers had no legal or statutory support.

The purpose of this Regulation was to award public sanctity to document signed by the two private parties. It would be presented before a public authority, which would ascertain the identity of the executant; examine whether he is capable of entering  into a contract, whether he is a lunatic, or of an unsound mind, or a minor, or under any duress.

(Vinod Agrawal, IAS and the Principal Secretary, Registration & Stamps in the Department of Revenue in Telangana.)

Thereafter, he would faithfully copy this document into a register so that in case of necessity in future the contents of the documents could accurately be ascertained. The term ‘registration’ came into being because there was a register in which the documents were copied, and the person who copied it came to be known as the registrar. Thus, a private transaction received a public authentication, i.e. a public certificate. This is the genesis of ‘registration’.
 
Can one technically register the sale of say Taj Mahal?
 
Interestingly, yes, though some states have made laws prohibiting registration of documents pertaining to lands owned by Governments. We currently follow the  Registration Act of 1908. Most people feel that the act of Registration means not only certification of transfer, but also the bonafide status of property. That is not true.

The registration only certifies the execution of a document. Therefore, the ‘registration of the property’ is incorrect. In India, what is actually registered is the document. This system is called the ‘Deed Registration System’, as in, there is a deed, which is registered, and this may or may not pertain to your property or it may contain infirmities or illegalities or lies.

During registration the government imposes a stamp duty of a certain value. Earlier, physical stamps were used, or a document was processed on a stamped paper. Today one can pay the stamp duty to a Bank and a proof may be attached to the document. But, this process of taxation creates a misconception amongst the parties, as they feel that the process has awarded sanctity to the title of the sold property.

In reality we follow a procedure of ‘caveat emptor’, i.e ‘let the buyer beware’. Therefore, the person who is buying the property, has to do his own investigation and come to his own conclusion whether the seller has adequate title over the subject property. The registrar’s job is only to register.

In fact he is barred by law from looking into the title of the seller. Legally speaking if a sale deed covering a property owned by the Registrar himself is presented before him by someone else claiming it to be his, the Registrar can’t refuse to register it, other requirements being in order. It follows that the act of registration by itself does not transfer the title.

Land records are poor in the India. Rural land records at best provide some presumption about title, but are open to litigation. For urban lands there are hardly any records. Therefore, there is no way in the Indian system where one can conclusively declare himself an owner of a property.

Is there any way in the present system we could integrate land records with registration so that fraudulent sales could be avoided?

There is a method, which we are trying to put in place. In case of rural properties, the Revenue Department keeps a record – the record of rights (ROR) or khasra. It can be ordained that when a party comes to register a property his name should be necessarily present in the latest RoR.

Through this, fraudulent transactions will be considerably reduced. Secondly, to ensure that the RoR is updated regularly on a near real time basis the registration itself could trigger the process of change in this RoR – commonly understood as the mutation process.

Many states have manual method, while many have started computerised formats. For example, in Andhra Pradesh, when registering a property, the registrar checks a computerized RoR to determine the title. If the name is found, registration is undertaken. Thereafter computer sends the information to the Tehsildar to initiate the mutation so as to update the RoR. But, this can’t be done where there is no RoR, as in case of urban properties or where the RoR is not up-to-date.
 
Is there a process that you can register titles and not deeds?

Sir Robert Torrens, a British citizen, who later became the Governor of New South Wales in Australia, invented the Torrens system. It was first introduced in New South Wales and is running successfully in many countries besides Australia like New Zealand, France, England, Canada, Kenya, Uganda, Thailand, Singapore, and Malaysia etc. In this system, the Government determines the titles over the properties and records them in a public register, which becomes the conclusive proof of one’s title.

Entries in this register are unassailable and title flows from this entry. Land ownership is transferred through registration of title instead of using deeds. Most of the Governments guarantee the entries in the register meaning that anybody undergoing a loss on the basis of an incorrect entry is compensated. This Guaranteed Title System (GTS) operates on three principles called the Curtain, Mirror and Insurance principles.

In GTS since all titles flow from or accrue by the register there is no uncertainty about the title. There is no necessity for a buyer to make any investigation beyond the register thereby making the transaction fast and secure. Banks and other lenders can speedily lend against the property.

Studies have shown that this system opens up the land markets and multiplies property based banking thereby contributing to the economic growth. A study by Makenzie in 2001 says that a system of secured titles together with good land ceiling laws could contribute an additional 1.3 per cent growth to India’s GDP.

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