Equitable Mortgage Registration -Tamil Nadu Amendment

The Tamil Nadu government made an amendment to Registration Act whereby it included memorandum of deposit of title deeds in the list of documents under section 17 of the Act.

Let us see some points, what is Title deed, what is deposit, what is sec.17, what is its effect?

Title deeds of a property is known as document or a set of documents which confers right of ownership over a property on a person.

When a person borrows money from another, who asks some sort of security for the loan, so the borrower deposits the title deeds of some property to the financier and thus creates the equitable mortgage over the property.

Various types of mortgages are available; Simple mortgage, mortgage with possession, conditional mortgage, etc are the main types; among these equitable mortgage is one which is created by just depositing/ handing over the title deeds and which did not require any separate document and registration of the same.

Whereas the simple mortgage and other types of mortgage require separate mortgage deed and its registration.

If any letter, document, memorandum or document is executed evidencing the deposit of title deeds, it did not require registration but optionally can be registered.

Registration Act lists out the documents in sec.17, which are compulsorily registered and in sec.18, which are optionally regisetrable.

As the equity mortgage did not require any separate document or its registration, its existence could not be available in any public records viz., encumbrance certificate, patta or chitta and could not be found also without any special prudence.

If any person lacking proper scrutiny or without any legal advice buys any property which is under equitable mortgage, later he may have to face the liability and redeem the property from the mortgage for the loan borrowed by ht previous owner.

In order to avoid such situation, the buyer has to insist the seller to produce all the title deeds and documents in original, before finalising the terms and entering into agreement.

One may think and ask, how a person can sell a property without the original deeds, when it is equitably mortgaged? Here is a circumstance narrated, one firm mortgaged the larger extent of lands in order to develop the same into a residential layout and has deposited the title deed to the financing firm.

It is the normal practice in vogue that a real estate firm shall not give the original deeds or even show them in original to the purchasers. The legal advisor of the buyer shall scrutiny the Xerox of all title deeds and found it in order and may certify that the real estate firm or the seller has the marketable title over the property and entitled to sell the same. Actually, the property is encumbered by the said equitable mortgage, which is not registered and cant be found in EC or by the lawyer in his scrutiny.

If a seller with wrong intention, after sale of all the plots in the residential layout, do not wish to repay the said loan amount, the bank [financing firm] shall initiate the process to seize the mortgaged property. Now, all the buyers or owners of the plots have to face this dispute and hence to lose the plots.

The same situation may exist in the case of apartments developments. The property developer shall produce the Xeroxes of title deeds only to the purchaser.

Moreover, the banks are empowered to sell the property by invoking the provisions of SARFAESI Act without assistance of Court of Law.

The only remedy to the innocent buyers is to give the property to the financing bank and get the money back from the seller, but which is a tough task if the seller has already acted with pre-planned wrong intention. All these headaches are due to the unregistered equitable mortgage.

Now the scene is changed, the TN government has passed an amendment whereby the memorandum of deposit of title deeds or any other document/s evidencing the creation of equitable mortgage is made as to be a compulsorily registered one, which will result that no bank or financiers can claim any right or lien or charge over any property through an unregistered mortgage deed or equitable mortgage deed.

Hence, the purchasers of plot or flat are relieved from the invisible demon of equitable mortgage. As such, this is a welcome move  by the government, however, it is not out of place to mention that the stamp duty and registration fee have to be revised for the registration of such memorandum, because these expenditures are borne by the borrower which adds the liability of the borrower.

Guide to Government Contracts/Tenders (In Tamil)

Guide to Government Tenders (In Tamil)

This guide helps to know about Government Contracts, How to participate in Tender, How to get contracts, How to Successfully completes a contract.
Those who want to do the profession of Contract with Government, be it central government or state government, or governmental organisations, shall know the procedure of participating in the tender.

This book shall guide them to become a Government Contractors - How to know about tenders - terminologies - How to prepare Estimates - participate in tenders - How to perform contracts - legal terms - impacts 
Please click the download below and download the guide  

Guide to Government Contracts Download (45 KB)

CIBIL and Housing Loan

CIBIL Score

A.Sri Vijayan

You might have heard someone lamenting that he had applied for loan for purchasing a car/ house; but the bank has rejected the same due to adverse credit score by CIBIL.

What is CIBIL?

Credit Information Bureau India Limited is a huge data base of credit information about borrowers (individual and establishments) and institutional lenders.

It is an association of lenders whose members are organized institutional lenders viz., Banks, Credit institutions, Financial organisations who lend money to others, simply we refer to as Financiers.

What does it do?

CIBIL collects information from its members about the credit they advanced and the borrowers. Then CIBIL combines the information and prepare a report about each borrower. This report is called Credit Information Report CIR.

What does CIR contain?

The CIR contains information about the borrower, all credits availed by him from various financiers, repayment performance, overdue, requests made by borrower with financiers for loan, its status, disputes, suits, etc.

Finally, the CIR rates the performance of the borrower based on the repayment history and gives a numerical score which ranges from 300 to 900.

Why is important?

All the banks, while processing the loan application, get the CIR from CIBIL, compare and analyse the score. The score is the performance indicator of loan applicant. Higher the score, higher the assurance of repayment; hence, the loan can be sanctioned without hazzleness.

All the banks believe that the CIR is precise and depend on it. If the score is less or any adverse reflections are found in the CIR, bank shall not grant loan.

Thus the CIR and CIBIL score become important for banks and the borrowers to keep it high,

How is the score calculated?

Credit repayment performance of a borrower is rated based on the existing repayment regularity, amount of previous loan, utilization, unsecured or secured, inquiries made by various lenders.

Regularity in repayment of existing or previous loan has a vital role in ranking the score. The delayed payments or bounced payments on loans shall reduce the score. Regular or pre-closure shall fetch more score.

Existing or pre-loan means and include loan for housing, vehicle, credit card, house hold article and personal loan.

How to score high?

If one have more secured loan (Housing, vehicle), it will normally fetch higher score. On the other hand, more unsecured loans (credit card, house hold, personal) will ordinarily reduce the score. However, the regular repayment on unsecured loan shall improve the score.

Disputes in repayment of any loan, indiscipline utilization or higher utilization or credit using credit card shall decrease the score.

One shall apply for loans to many financiers means that the borrower does not have clear and specific idea about loan requirement, amount, its purpose hence there would be a reflection of many approaches by the borrower to financiers; this shall drastically reduce the score.

Generally speaking, one shall have clear and specific idea about his need, shall not approach financiers without any need and shall repay the loan regularly.

How to get hazzle free loan?

One can apply online on the site www.cibil.com or send the application by post attaching the copies of proof for identity and residence and paying the requisite fee, the CIBIL shall send the CIR.

As already told, credit score ranges from 300 to 900. A decent score means more than 650, a high score means >800, an excellent score means >850.

Decent score shall get the loan, high score shall fetch loans with lesser formalities and excellent score shall bring higher amount of loan, lesser interest rate, lesser formalities.