An amendment with teeth

Changes in the Registration Act, 1908, are geared to protect banks/public at large and prevent frauds in relation to immovable property

The Registration Act 1908 in its application to the State of Maharashtra has been amended effective from April 1, 2013, with the primary objective of safeguarding the interests of banks and public at large and preventing the fraudulent practices of builders.

Prior to these amendments, an agreement relating to mortgage by deposit of title deeds was not in public domain. As a result, on a few occasions, builders would avail loans from multiple banks on the same property and would also sell off the mortgaged property.

One step that the amendments to the Act have made to protect the interests of both, the citizens at large, and the banks that lend to builders, is the mandatory provision of online application, called “E-registration Module” for online filing of agreements.

The amendments have incorporated the following list of compulsorily registered documents under Section 17 of the Act:

• “Agreement relating to deposit of title deeds, where such deposit has been  made by way of security for repayment of a loan or existing or further debt;
• “Sale certificate issued by any competent office or authority under any recovery Act;
• "Irrevocable power of attorney relating to transfer of immovable property in any way executed on or after the commencement of the Registration (Maharashtra Amendment) Act, 2010”

Suitable modifications have been incorporated in the Act providing for presentation of agreement relating to deposit of title deeds by electronic means including the regulation procedure for presentation of such agreement, appearance for admission, endorsements and such other process.

New sections 89A, 89B, 89C and 89D have introduced to the Act. These require copies of court decrees, attachment orders, notice of intimation of mortgage by deposit of title deeds, punishment for failure to file notice of intimation of mortgage by deposit of title deeds and provision for compensation in case of subsequent transferees.                                                                          

Effects

In case of mortgage by deposit of title deeds, if:

• An agreement is signed between the borrower (builder) and the lender (bank), it must be compulsorily registered within four months from the date of its signing;
• No agreement is signed, the borrower has to file a notice of intimation giving details of the mortgaged property, details of borrower, lender, amount received under mortgage, rate of interest, list of documents deposited to the registering officer (having jurisdiction over the immovable property) within 30 days of mortgaging the property.   

If the borrower fails to file the notice within 30 days and subsequently enters into any transaction in relation to the mortgaged property, such transaction will be void and the third party will be entitled to refund of the amount paid, plus 12% interest from the date of payment as compensation. The amount recoverable by the lender will be a charge on the mortgaged property.  

Further failure to file the notice with the registering officer within the prescribed time will render the borrower liable for fine and imprisonment for a minimum of one year, extending to three years.

The State is thus taking all steps to protect the interest of all parties and prevent frauds in relation to immovable property.

-- The author is a partner of J Sagar & Associates, Advocates & Solicitors. Views are personal. (ashoogupta@jsalaw.com)