Formation of Co-operative Housing Society

By a) Formation Adv. of Vinod Co-operative Housing Sampat Society Practically every developer has to form a Co-operative Housing Society at one point of time or another. With the limited amount of options available with regard to management of the affairs of the building i.e. (a) Condominium (b) Private Limited Company and (c) Co-operative Society, (excluding the unrealistic rental housing), it will not be an exaggeration to state that in atleast 90% cases particularly in Mumbai the Promoters and/or the Builders have formed a Co-operative Housing Society. The basic requirements for Registration of Co-operative Housing Society normally is not known to the flat purchasers. It is here that apart from the statutory obligations cast upon the builder, the builder as a friend, philosopher and guide of promoters helps in forming a Co-operative Housing Society. There are basically four (a) (b) (c) (d) Housing types of Co-operative Housing Societies Plot Owners Tenant Board connected with the housing. Societies Societies Societies Societies.

Open Flat

In Open Plot Societies, members purchase or take one lease a plot of land and themselves construct the building. Due to bureaucratic formalities and lack of specialised knowledge, a few societies are formed under the head of open Plot Societies. When a builder constructs flats and sells them to Flat Owners, the Society when formed is called Flat Owners Society. When Landlord forms a Society of tenants, it is called Tenants Society. When a Society is formed by Allottees of flats and building is constructed by the Housing Board Authorities, i.e. Mumbai Housing and Development Board, then the Society so formed is of the type of Housing Board Society. The procedure that should be followed for formation of societies of the above said types is different for different types of Societies. Members who wish to form Co-operative Housing Societies are generally ignorant of the procedural aspects and as a result of the same they have to run from place to place and get entangled in bureaucratic delays.

The procedure for Registration of a society begins with electing a Chief Promoter in a meeting of the Promoter. The builder under the Flat Owners type of co-operative society has the first right to act as the chief promoter. The developer/flat purchasers should call for a meeting of the Promoters by issuing the notice under Agenda of the meeting given at least 14 days notice to the Promoters. In this meeting, a Chief Promoter is elected who can exercise such powers and carry out such functions as are mentioned in the minutes of the Promoters of the proposed Co-operative Society. After electing the Chief Promoter, the proposed name of the society has to be decided by the Promoters.

Normally, the name reservation proposal should be accompanied with the signature of atleast 10 Promoters who have attended the meeting. It is a common belief that the Society should consist of atleast 10 members. If the number is less than 10 then special permission from Governmetn has to be taken. In such cases, the garages/car parking may be allotted to other relatives of the promoter to reach number of 10. It would be of interest to note that the model byelaws define flat as a Flat means a separate set and self-contained set of premises used or

intended to be used or intended to be used for residence, or office or show-room, or shop, or godown and includes a garage, or dispensary, or consulting room, or clinic, or flour mill, the premises forming part of a building and includes an apartment. On allotment of name and permission to open a bank account by the Registrar, the Chief Promoter has to collect Share Capital, Entrance Fees from promoters and deposit the same in the branch of the bank permitted by the Registrar. It should be noted that the amount cannot be withdrawn from the Bank till the Society is Registered or its Registration is refused, except with prior written permission of the Registrar. The Chief Promoter should submitRegistration Proposal to the Registering Authority within a period of 3 months from the date of issue of Letter of Reservation in the name of the proposed Society. The documents that are normally to be submitted to the Registering Authorities A. are as under :-

1. Application for registration of for Registrationas 2. Information per about Rule

Society in Form A along with Statement 4(1) society of in Maharashtra Statement B Co-operative (vide Govt.

Enclosure to application Rules, dated 1961.

Societies Circular

proposed

2-5-1980).

3. Information about promoter members of the proposed society in Statement C (vide Govt. Circular dt. 2-51980). 4. 5. 6. 7. 8. 9. A R.B.I. / Title true Treasury Challan for payment Certificate of the A Statement of Accounts Model as per Form D. Bye-laws. Bank Balance Certificate. of Registration Fee from approved an Building of Rs. 500/-. Advocate Plan.

Clearance copy

10. Letter of Authority Granting permission to commence construction work/Completion Certificate (if applicable). 11. Affidavit on Rs. 20/- Stamp Paper from atleast 10 promoter members to the effect that they are residing in the area of operation of the Society (Proposed), made before a Competent Authority.

12. Affidavit from the Chief Promoter on Stamp Paper of Rs. 20/- executed before the Competent Authority in form Y. 13. Certified True Copy of agreement made on Stamp paper and registered between the builder, promoter and purchasers of flat.

14. Where the promoter members are firms/ companies, a letter of authority from such firms/companies authorising the promoter to sign on behalf of firm/company.

15. In case of such proposed societies, names of 60% of the flat holders of the total number of flats constructed or proposed to be constructed as per the plan approved, must be included in Statement A to be attached to theRegistration Proposal. It is the duty of the Registrar to register the society and on registration of the society it becomes a separate legal entity. Thereafter, the management of the affairs of the society is carried out by the managing committee which is elected by the general body meeting of the society. It may be of interest to note that in a co-operative society the principle is one member one vote. In a co-operative society the right to be exercised in the general body meeting is a personal right. This is one of the reasons why even a person holding a power of attorney cannot attend the general body meeting of the society. THE quantum of the capital being introduced by the member is not of much importance. Preference should be given for formation of a private limited company if one member propose to acquire b) majority of the Stamp flats in the building. duty

Present rates of stamp duty for residential premises in the city of Mumbai are RS. 38,750/- on Rs. 10,00,000/-. Thereafter it is @ 8% for the additional value. The rate of stamp duty for shops/Galas/office Premises and Garage even if used for car parking is 10% in Mumbai Stamp duty has to be paid on the agreement Value or the market value of the property whichever is higher. Stamp duty has to be paid every time the flat is being sold. Stamp duty has to be paid even if it is a transfer within family. If the authorities are demanding more stamp duty than the agreement value then a representation should be made to the authorities emphasising the below mentioned points (as may be applicable)

(a) Possession of the premises will be acquired at a later date. (10% reduction in the market value is normally given by the town planners if possession is not given to the purchaser at the time of execution of the agreement) (b) The duty has to paid on built up are and not super built up area.

(c) If payments have been made in say 1995 and the agreement has been executed in 1998 then the market value (d) (e) of There the year 1995 has in to be the is taken market as per the if principles the in size of of Land the Acquisition shop is Act. big.

are The

reductions area

value

lacking

infrastructural

facilities.

(f) There is a defect in the title of the property and therefore, market value will also be reduced. (g) The officer should be told to inspect the premises and the only the market value should be fixed. Inspite of a fall in the property prices in the last few years the market value as mentioned in ready reckoner by government has increased by more than 50%. Earlier, for old buildings, land plus construction cost method of valuation was followed by many officers. On account of the different systems of valuations the stamp duty liability could differ substantially as can be seen from the following example.

As per land plus construction cost system of valuation for a commercial property in a building which is six years old situated at A-ward Sr. No. 4(a) (i.e. Madam Cama Road) the market value would be (land cost Rs. 4,200 + 50% Rs. 2,100/- for commercial and Rs. 250/- for construction) Rs. 6,550/-. However as per another system the same would work out for the same year to (Rs. 14,000/- less 20% depreciation) Rs. 11,200/-. For the same premises for the year 1998 the market value would be (Rs. 28,750/- less depreciation 5%) Rs. 27,312/-. Presently, land plus construction cost system of valuation has been stopped. Secondly the market value per sq.foot has been increased and thirdly the quantum of depreciation given for old buildings has been reduced thereby. At times, it is advisable to file an appeal. The benefit of filing an appeal as per the provisions of the Bombay Stamp Act 1958 is that as of date one can file an appeal without paying any amount as stamp duty. Only a sum of Rs. 300/- has to be paid as appeal fees. The recurring amnesty schemes being introduced by the government helps the duty payers in paying the amount at a later date. As of date the penalty irrespective of the period of default is just 2% per month till the time the appeal has been finalised. The prevailing market value for the year 1999 as is being planned for the city of Mumbai is almost same as in 1998. Marginal relief is given in some of the suburban areas. The recovery figures from stamp duty and registration for the last few years for the state of Maharashtra Year 1990-91 1990-92 1990-93 1990-94 are Amount as in under : Crores 293.93 363.56 478.12 613.08

1990-95 1990-96 1990-97 1990-98 c) Registration of

1,157.60 1,239.97 1,305.17 1,658.53 Documents

d) There is a proposal to simplify the Indian Stamp Act & the Indian Registration Act. With the introduction of computers in the stamp offices, the recovery notices are being received faster b the stamp duty payers. AS per section 17 of the Indian Registration Act 1908, if the value of immovable property exceeds RS. 100/- if subject to the exemptions if any right is proposed to be created or extinguished then the instrument has got to be compulsorily registered. The documents has to be registered. The documents has to be registered within a period of fours months from the date of its execution. The parties can go to the office of the Joint Sub-Registrar individually /collectively to register the document. If for certain reasons the parties cannot attend the office of the sub- Registrar within a period of the four months then in such cases the parties can execute a deed of confirmation and complete the registration formalities. The parties should carry their voter card/ passport along with the Alternately, they will have to ensure that two witnesses accompany the. Th registration fee is 1% of the market value of property or Rs. 20,000/- whichever is less. If the value of the document exceeds Rs. 5,00,000/and the possession has been parted then in such cases the Joint Sub-Registrar can insist for Income Tax Clearance Certificate of the Vendors. It may be emphasised that the courts have held that if the confirming Party has not received financial consideration then in such circumstances the income Tax Clearance Certificate of the Confirming Party cannot be insisted upon by the Joint Sub-registrar. The reasons for the parties not getting back their (a) (b) (c) (d) one of not not not the parties paying original the stamp the duty Income the to the on documents market Tax ULC office to value Clearance Clearance register the of are property Certificate and document.

submitting submitting not

going

Sub-Registrars

After completion of the abovesaid formalities the documents gets indexed. Earlier after indexing the documents used to go to Pune for microcilming. Now the documents are handed over much faster. As per the government guidelines, if all the formalities are completed then the documents should be returned to the parties as far as possible within a period of fifteen days. As far as possible the parties should insist for the certified true copy of the document. THE same is available on payment of a nominal fee after the document has been indexed. It may be of interest to note that the parties can register as many copies of the agreement as they desire with the Joint Sub-Registrar. The documents have to be registered with the Joint Sub-Registrar of Assurances in whose jurisdiction the property is situated. If there is a document for exchange of property then the document can be registered with any of the Joint Sub-Registrars who is entitled to register the document. Apart from the same, for a property situated anywhere in India the same can be registered at any of the four metro offices (i.e., Bombay, Delhi, Calcutta and Madras) of the Joint Sub-Registrar. If a Joint Sub-Registrar refuses to register the documents then the aggrieved party has a right to appeal against such a decision. If one of the parties has not remained present for registration then the aggrieved party can request the Joint Sub-Registrar to issue a summons to ensure that the party attends the Joint Sub-Registrars office.

A question that is regularly asked by the person purchasing the property is what is the time limit within which the authorities can recover stamp duty. If an individual had paid the adjudication fee and also paid stamp duty as

demanded by the stamp authorities, whether the same is binding upon the department? Well, as per the provisions of the stamp Act even if an individual had adjudicated the document and had also paid the stamp duty as demanded by the authorities then also as per section 53 A, the said matter could be reopened by the authorities within a period of six years. If one has lodged the document for registration without getting the same adjudicated then the authorities can reopen the same at any point of time. As per law as it stands today as per section 32A(5) of the Bombay Stamp act 1958, the time lag is eight years since the date of indexing. e) Stamp paper

As per the amendment of section 34 of the Bombay Stamp Act 1958, the stamp paper should be in the name of one of the parties executing the document.

Maharashtra CHS Act

Society under Ramesh Chartered Accountant Posted on 20th May 2001 dues section in following 101 of S. circumstances M.C.S. cannot Act, be recovered 1960. Prabhu

Non-Members-Pending Formalities In case of the flat owners type of Society whether formed with the Co-operation of the Builder or Non Cooperation of the builder, we always find some members do not become the members of the Society. If the flat owners LEGAL does not become / the member, the NOT case u/s. ADMITTED 101 cannot AS be filed.

HEIR

NOMINEE

MEMBER

When a member expires keeping a huge of amount of Society dues and the legal heirs / nominees also do not pay the dues nor they become complete the necessary formalities to become the member, in such cases also recovery FUNDS suit MISAPPROPRIATED u/s BY 101 THE cannot be filed. BEARERS

MEMBERS/OFFICES

In many cases the office bearers of the Society commit misappropriation or fraud of the Society funds. Even after proving such fraud /misappropriation the recovery cannot be done u/s. 1010 of the M.C.S. Act, 1960. A criminal casewill have to be filed separately to recover such misappropriated funds of the Society.

4 DUE FROM BUILDER IN RSPECT OF UNSOLD FLAT/SHOP WHEN NOT BECOME THE MEMBER OF THE SOCIETY Many times it so happens that Builder also does not become the member in respect of the unsold flats/shops. It is more seen in case in case of formation of societies under Builders non co-operation category. In such cases also, if builder does not pay the maintenance of the Society, the recovery suit cannot be filed u/s. 1010 of the M.C.S. Act, 1960.

PENALTY/CHARGES NOT PROVIDED UNDER THE ACT, RULES AND BYE-LAWS OF THE SOCIETY When any recovery suit is to be filed under Section 101 of the M.C.S. Act, 1960, the Society should be aware of

the type of dues which can be recovered from the members. If any penalty or charges which are not provided in the Act, Rules or the Bye-law of the Society, the same cannot be recovered u/s 101 of the M.C.S. Act, 1960. Therefore, we have mentioned separately the charges which can be levied and the basis of levy of charges is also explained. Writing off or outstanding found irrecoverable

Subject to the model Bye-law no. 150, the Society may write off any loan and interest thereon, Societys charges due from the members, the expenses incurred on recovery thereof and the accumulated losses, which The are amounts certified mentioned in as model irrecoverable Bye-laws No. by 149 shall the not be Statutory written of Auditor. unless:

the meetings of the General Body of the society has given due sanction for writing off the amounts. The approval of the financing agency to the writing off of the amounts, if the Society, is indebted to it, is obtained. The approval of the registering Authority is obtained.

Provided that if the Society is affiliated to the District Central Co-op. Bank or any other financing agency is not necessary. Provided further that if the Society is classified as A or B at the last Audit no such permission of Bank or the financing agency or the Registering Authority is necessary, if there is sufficient balance in the bad debt fund, specially created for the purpose to cover the amount proposed to be written off.

Question Defaulter Q. When is the member

and

Answer

termed

as

defaulter

A. If on the due date of bill, the member does not make the payment, than he can be categorised as a defaulter.Societies in such circumstances can also charge interest. However it is important that there should be a demand upon the member. Election by Defaulter

Q. Can a defaulter contest the election ? Can a defaulter propose or second candidate for the election ? A. A defaulter cannot contest the election. However, a defaulter can propose or second candidate for the election. Prior claim of society

Q. Does the society have prior claim on the shares of a member if the member has become insolvent or is unable to pay his debts to the financiers/business associates ?

A. As per Section 47 of the Maharashtra Co-operative Societies Act, 1960, it is clearly specified that the society has prior claim on the amount recoverable from a member subject to prior claim of Government in respect of land revenue, or any money recoverable as land revenue as per the provisions of Section 60 and 61 of Code of Civil Procedure Code 1908. The language used in the section also includes the word notwithstanding anything in any other law for the time being in force. This implies that amongst all the claims except for Government claims the society would be getting the first charge on the shares of the defaulter, therefore in my humble opinion, the claim of the society will have to be discharged first before amounts are payable to the financiers / business associates. Rebate Q. Can the society give rebate to to members for prompt payment of members dues ?

A. Normally Societies charge interest from defaulting members. If rebate is being given for prompt payment then the defaulter is penalised twice for the same act (i.e. he looses the rebate facility and simultaneously has to pay interest on the defaulted amount). As per the principles of equity and natural justice a person should not be penalised twice for a particular act. We have not come across any case law on the above said subject. It may be mentioned that there are number of societies which are offering rebate for prompt payment as nothing is mentioned in the Bye-laws pertaining to granting rebate. However, we are of the opinion that Society must not grant rebate to members. Clarification from the office of the registrar with regards to granting of rebate will be of immense help to theSocieties. Recovery fees

Q. What is the amount of Enquiry Fee and Court Fee that has to be paid by the Society when the Society proposes to recover the dues from defaulting member under Section 101 of the MCS Act ? A. If the defaulter does not respond to the request made by the Society then the Society obviously does not have any other alternative but to recover the dues from the defaulting member. The Enquiry Fees and the Court Fee Stamps have to be paid on the amount of claim as made out against the defaulting member. Increase the amount to berecovered from the defaulter is below Rs. 1,000/- then the Enquiry Fee that has to be paid by the Society is 5.5% ofthe claim and Court Fee Stamp have to be affixed of Rs. 15/-. Incase the amount to be recovered from the defaulter is between Rs. 1,01/- and Rs. 2,000/- then the Enquiry Fee that has to be paid by the Society is 4.5% of the Claimand Court Fee Stamp have to be affixed of Rs. 20/-. Incase the amount to be recovered from the defaulter is between Rs. 2,001/- and Rs. 5000/- then the Enquiry fee that has to be paid by the Society is 3.5% of the Claim and Court Fee Stamp have to be affixed of Rs. 20/-. Incase the amount to be recovered from the defaulter is Rs. 5,000/- and above then the Enquiry Fee that has to be paid by the Society is 3% of the Claim and Court Fee Stamp have to be affixed of Rs. 25/-. The maximum Enquiry Fee is Rs. 1,000/-. The Enquiry Fee is to be paid to the Reserve Bank of India by Government Challan Account 0425 Co-operation, 800 other receipts XVII Notice and Recovery Fees. Recovery of Dues with Recovery procedure

Q. Some members of our society do not pay their dues inspire of repeated requests. When the office bearers go to recover the dues from other members raise the plea that even if we are late by a few days to pay the dues you charge us interest. Please inform us in detail about the various steps to be taken to recover the dues including the amounts to be paid to the Government Authorities ? We have been given to understand that now it is not compulsory for housing societies to go to the Co-operative Court to recover the dues and the Asst.Registrar / Deputy Registrar can help us out in the above matter ?

A. IT would be advisable if the members of the Committee meet the defaulting members in person and try to discuss out the issue with the defaulters. The defaulters should be firmly told that the Committee has to keep the same policy for all the members and on account of them being in default other members of the society also complain to the office bearers particularly when members have to pay the interest. In case the defaulters do not wish to pay the dues then the office bearers should issue notice for recovery of dues. Inspite of the same if the defaulters do not pay the dues that a suit can be field before the Asst. Registrar / Deputy registrar u/s. 101 for recovery of dues. With the amendment of Section 101 the dues payable be members of a Co-operative Society can be recoveredfaster. Even the office bearers can do recovery under Section 101 themselves. It is not compulsory The to file a for suit in a Co-operative of Court is for Recovery as of under Dues. :-

procedure

recovery

dues

Issue Pass Issue Apply to the

notice resolution a the Asstt. to

for recover final Registrar

payment the dues notice / Deputy

of in

dues the to

to

the Committee the

defaulter. Meeting. defaulter. of dues.

Managing

Registrar

for

the

recovery

Pay the prescribed fee. The The Amount 1,000/1,001/2,001/5,001/to to & fee has rate (Rs.) to be paid of through fee Scale 5.5% 2,000/5,000/Above 4.5% 3.5% 3% a challan payable at is fee Rs. Rs. Rs. Rs. the Reserve as court Bank under of India. : fee 15/20/20/25/-

payable of

Maximum Fee Rs. 1,000/The above said fee has to be credited in Reserve Bank of India by Government Challan under the head of account. 0425 800 XVIII Notice & Recovery Fees Disconnection of Essential Services Other Co-operation Receipts

Q. Can the office-bearers of the society disconnect essential services like electricity, water supply, etc. of defaulters, who refuse to pay the securities dues inspite of repeated requests ?

A. Law cannot be taken in ones own hand. Essential services like electricity, water supply, etc. are necessary for the occupants. IT is our sincere advice that office-bearers, and / or manager should not disconnect the essential supplies irrespective of the the dispute with the defaulter. If the aggrieve party flies a criminal complaint then the person found guilty for disconnecting the essential service/s can be punished with imprisonment which can extent upto a period of three months and/or fine. If the member refuses to pay the dues then you can recover the dues by filing a suit against the member. The procedure for recovery of dues u/s. 101 is very simple and the office bearers can themselves recover the dues. We have observed that societies can get the recovery certificate without even appointing a lawyer.

Q. What is stamp duty? A. It is a tax collected by the government, which must be paid on time. If there is delay in payment, it attracts penalty. Q. Is stamp duty payable on the instrument or transaction? A. It is payable on instruments and not on transactions. Stamp duty should be charged on the basis of the contents of the instrument only. If any information essential for working out stamp duty is missing in the instrument, valuation officer can call for the same. However if information is already given like, area of flat, No. of floors, year of construction etc. he should not ask for a certificate to that effect from builder or society. Q. Why should stamp duty be paid?

A. A stamp duty paid instrument/document is considered a proper and legal instrument/document and as such gets evidentiary value and is admitted as evidence in courts. The instruments / documents not properly stamped are not admitted in evidence by the court. Q. What are the instruments on which stamp duty is to be paid? A. Instruments include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, cheque, promissory note, bill of exchange, bill of lading, letter of credit, policy of insurance, transfer of shares, debentures proxy and receipt. Q. Is stamp duty payable on transfer of a flat from husband to wife or children and vice?versa? A. Yes. Stamp duty will be same as applicable to conveyance. However 10% rebate could be expected during valuation, at the discretion of the valuation officer. Q. Is stamp duty payable on all instruments/documents relating to transfer of immovable property? A. Except transfer by will (or by nomination in a co?operative housing society) all transfer instruments/documents including agreements to sell, Conveyance Deed, Gift deed, Mortgage Deed, Exchange Deed, Deed of Partition, Power of Attorneys, Leave and Licence agreement, Agreement of tenancy, lease deeds, etc has to be properly stamped before registration. If you have purchased the flat, in a co?operative housing society, on or after 10?12?1985 you must pay the stamp duty on market value as per ready reckoner. Flat purchased on or before 09?12?1985 required stamp paper of Rs.5 only. However on flat purchased on or before 09?12?1985 will require stamp duty on market value at the time of conveyance of the property in favour of the society. The concept of payment of stamp duty on market value was introduced from 04?07?1980. Property purchased prior to 04?07?1980 will be charged on agreement value only. Q. What is the relevance of dates 10?12?1985 and 04?07?1980? A. Any flat purchased in a co?operative housing society on or after 10?12?1985 is required to pay stamp duty on market value at the time of signing the agreement itself. However prior to 10?12?1985 such transactions required a stamp paper of Rs.5 only at the time of signing the agreement, however stamp duty on market value has to be paid on all such transactions at the time of conveyance of the property in favour of the society. In case of the property not covered under co?operative housing society, they are required to pay stamp duty on market value from 04? 07?1980 onwards. This payment is required at the time of execution of the document. However prior to 04?07?1980 there was no market value concept hence agreement value was accepted for stamp duty payment. Q. What is the stamp duty payable in case of exchange of properties? A. In this case stamp duty is payable only on the value of that property, among the two properties exchanged, whose value is higher. Q. When is stamp duty payable? A. It is payable either before execution of the document/instrument or on the day of execution of document/instrument or on the next working day of executing such instrument/document. Execution of document/ instrument means putting signatures on the instrument by persons executing the instrument/s. Q. What is the penalty for the delayed payment.?

A. If stamp duty is not paid on time, it attracts the penalty at the rate of 2% per month on the deficit amount of the stamp duty. However maximum penalty can be only 2 times of the deficit amount of the stamp duty. (This amendment has come into force from 0 1 ?05?200 1) Documents lodged with sub?registrar/superintendent of stamps prior to any amnesty scheme will attract lump sum penalty of Rs.250 or Rs.300 only, as the case may be. Q. What is the rate of stamp duty? A. Stamp duty on ownership residential flats in a co?operative housing society attracts concessional rates depending upon its value. On first 10 lakhs, it is Rs.38,750/? and above that it is 8% of the amount above Rs.10. Lakhs. On non?residential properties either in a co?operative society or not, it is at a flat rate of 10% of the value. However non?residential property for the use of nursing home or bank have some relief in it's valuation. Garrage which is a part of the resident flat is valued at 25% of the rate applicable to flat in that zone. On Leave and Licence agreement for one year stamp duty is Re.2,000/? and for 3 years it is Rs. 10,000/?. For more then three years it will be charged as per lease agreement. Leave and Licence agreement can be for any length of period and not necessarily for 11 months, which is a misconception. If there is any deposit, refundable or not, additional stamp duty will be charged at the rate of 1 % of the deposit amount, irrespective of the period of the agreement. In case of transfer of tenancy, stamp duty is charged at the rate of Rs.200 per Sq.Mtr for Residential premises and Rs.2,000 per Sq.Mtr. in case of non?residential premises, irrespective of the location of the property. Q. Some agents claim to get the valuation reduced to save substantial amount of stamp duty. Is it correct? A. Many people are under the impression that some consultants and agents can help them in reducing the stamp duty. We would like to warn them that this can be done only by furnishing misleading information like wrong C.T.S. No. & zone, less area of flat, longer age of building and building having lift as not having lift. This would prove to be very detrimental and harmful when, in future, they receive notice from the department for under valuation due to concealment of facts. Even a registered document can be reopened anytime within 10 years from the date of registration. Please note that writing misleading information in the agreement is offence under Stamp Act, which is Punishable with fine and imprisonment. Q. Who is liable to pay stamp duty? A. In the absence of any agreement to the contrary the purchaser/transferee has to pay stamp duty or in case of exchange of properties both parties have to bear stamp duty equally. Q. In whose name are the stamp papers required to be purchased? A. From 01105/1994 stamp papers are to be purchased in the name of one of the parties to the instrument/document. If the stamp paper is not in the name of the parties and it is used for preparing the agreement it will be treated as if no stamp paper is used. However it will not make the agreement invalid and can be enforced in law if proper stamp duty is paid subsequently. Prior to 01/0511994 stamp paper could be purchased in any name and was valid for any period of time. However from 01105/1994 stamp paper has a life of six months only and after that it is treated. as ordinary paper as if it has no stamp. Q. Is stamp duty paid on the consideration amount stated in the document or on the market value of property as determined by stamp duty authorities?

A. Stamp duty is payable on the market value of property. Market value of any property is determined by the stamp duty Authorities on the basis of ready reckoner issued by the government every year on 1 st of January. However where value is decided by government or semi? government bodies like LIC, CIDC0, BMC MHADA, Income Tax Department etc. then that value is accepted as market value for the purpose of stamp duty. Q. What needs to be done to know the amount of stamp duty payable on an instrument before executing the instrument? A. One can work out the stamp duty amount with the help of ready reckoner easily available. Alternatively one of the parties to the instrument should get the instrument adjudicated with the stamp duty authorities. Adjudication means determination, by collector of stamps, of proper stamp duty amount, which will become payable if the instrument is executed. For adjudication one of the parties to the instrument can apply to the collector of stamps by furnishing a true copy or an abstract of the instrument on which stamp duty is to be determined along with the details of the property pertaining which the stamp duty is to be determined along with payment of the adjudication fees of Rs. 100. In case of a signed document, adjudication must be done within one month otherwise two per cent interest per month will be levied as penalty. An adjudicated unsigned document is valid up to 31st December of that year for the purpose of the valuation Q. What is the market value of a property? A. Market value in relation to any property which is the subject matter of the instrument means the price which such property would have fetched if sold in open market on the date of execution of such instrument or document or the consideration stated in the instrument whichever is higher. However, for payment of stamp duty, market value is the value as worked out as per ready reckoner. Q. What if after adjudication one does not pay stamp duty? A. If the agreement is signed before adjudication, one has to pay stamp duty with interest and penalty as applicable. However in case of an unsigned agreement, one may ignore the adjudication order and close the matter if he so desires. Q. Where can a person pay stamp duty? A. Stamp duty could be paid legally without adjudication, on the basis of the Ready Reckoner, at the following offices. An amount up to Rs.25,000 is accepted in cash and an amount above that is to be paid by bank draft or pay order drawn in favour of the "Superintendent of Stamps, Mumbai" payable at Mumbai. An amount above Rs.25,000 can also be paid in cash at Reserve Bank of India, through an duly authorised challan. A duly authorised challan can be obtained from General Stamp Office at Fort. General Stamp Office, Town Hall Building, Ground Floor, Near Horniman Circle, Fort, Mumbai 400001. Office of The Sub Registrar and Administrative officer Old Custom House, Ground Floor, Near Horniman Circle, Fort, Mumbai 400 023. General Stamp Office, Extended Sales Counter, MMRDA Building, l st Floor, Near Sales Tax office, Bandra Kurla Complex, Bandra East, Mumbai ?400 051. Office of The Sub Registrar, Now Administrative building, Near Ration Office, Ramkrishna Chemburkar Marg, Chembur, Mumbai 400 071. Also there are various authorised stamp vendors from whom stamp paper of the required amount can be purchased and agreement made on them, which is another way of paying stamp duty. Stamp vendors sell stamp papers of face value up to Rs. 10,000 and one can purchase as many stamp papers as one wants from them. Q. What are the office hours of stamp offices?

A. Stamp offices work from Monday to Saturday, except the second and fourth Saturday and public holidays, between 10 a.m. to 4.30 p.m. Q. How does one get a refund of stamp duty? A. Refund should be claimed within six months from the date of purchase of Stamp. Refund is granted on spoiled paper, blank document or document executed but afterwards found to be unfit due to some mistake. An application ,should be made to Collector of Stamps, Mumbai. Q. Where to get market value rates from year 1985 to 2001 for stamp duty valuation? A. The publisher of this ready reckoner, The Architects Publishing Corporation of India, have published these rates and they may be contacted for further details. One should refer ready reckoner of the year in which property is purchased so as to arrive at proper market value for payment of stamp duty on old agreements. Even they have also published market value as on 01 ?04?1981 in Mumbai, for capital gains tax purpose. REGISTRATION Q. Within how much time one should register a document? A. The document should be registered within four months from the date of the execution. If the document could not be registered within four months, then it can be registered within an additional period of four months after making an application, with reason for the delay, to the sub?registrar and paying penalty as imposed by the sub?registrar. Penalty can be legally upto 10 times of registration fees, which is very high. However registrars are lenient on this account and may impose a nominal penalty. Q. What should Do done if more than eight months have passed and one wants to register an instrument? A. If more than eight months have passed since execution of documents and if it is to be registered then one should prepare a deed of confirmation and the said document should be attached as an annexure to the deed of confirmation. One should register the deed of confirmation to which the original agreement has been annexed. Q. What other documents are required at the time of registration of documents? A. (1) No Objection Certificate (Form 37?1) from the appropriate authority if apparent consideration of transfer of immovable property exceeds Rs.75 lakh for Mumbai city under chapter XXC of Income Tax Act, 1961. (2) No Objection Certificate under Urban Land Ceiling Act if the area of land transferred exceeds 500 Sq.Mts in Mumbai city. Note : Income tax clearance certificate under Section 230A of Income Tax Act, 1961, if the value of the property is more than Rs. five lakhs is now not required from 01 ?06?2001. (3) Property Card of land on which the property being registered is situated. This requirement is irrespective of whether land is sold or building is being sold or any part of the building is being sold and also irrespective of whether the seller of property is recorded as owner on property card or not. In other word even flat owners are expected to produce this paper at the time of registration. (4) Photographs of Buyer and seller of the property is also required at the time of registration. Q. Where can one get copy of the Property Card?

A. For copy of property card following off ices may be contacted. For Mumbai City District. For Mumbai Suburban The Superintendent The Superintendent of Lands & Mumbai City Survey & Land Records, Mumbai Suburban 1st Floor, Old Custom House, Fort, 10th Floor, New Administrative Shahid Bhagat Singh Marg, Housing Board Colony, Near Chetna Mumbai 400 023. Mumbai 400 Tel: 266 1231 Tel: 642 9874 Q. What are the other requirements before registration? A. A document/instrument should be correctly stamped as per the Ready Reckoner so as to confirm that proper stamp duty has been paid, otherwise the sub?registrars do not register the document. In view of recent ruling by the Hon. Mumbai High Court Sub?registrars are now accepting the documents and keep it pending for its market value clearance. For registration of printed and typed documents relating to property in Mumbai city, one should go to Old Custom House, Fort, along with the original document and one photocopy. For Registration for property in Mumbai Suburb i.e. Borivli and Andheri Taluka is done at MHADA Building, Bandra East and Family Cout Building, Bandra Kurla Complex, Bandra. East and for Kurla Taluka registration is done at Administrative Building, Chembur. For registration at Bandra or the Chembur offices one photocopy with the original are required. The agreement must be typed on 90 GSM Paper on one side only. Photocopies should be taken on only one side of paper and paper should be of 90 GSM quality and there should be a butter paper in between two sheets of the photocopy. One should go with two witnesses or with a valid passport, for registration. It is proposed to register document with the help of computer and the original document will be returned after scanning on the same day. Hence photocopy will not be required in future. Q. Is registration compulsory for all types of transfer of immovable properties? A. Except in case of transfer of share of co?operative housing society and Housing Limited Company where registration is optional, virtually in all cases of transfer of immovable property like family arrangement, agreement to sell, conveyance, gift deed, lease deed (above one year), Leave & Licence agreement, tenancy agreement, declaration deed, mortgage deed, exchange deed etc has to be registered compulsorily under Indian Registration Act 1908 otherwise the proper legal title will not pass on to the purchaser/Transferee i.e. title will be defective if registration of document is not done. However in view of amendments with effect from 01?01?2002 in the Indian Registration Act, 1908., many legal practitioners are of the opinion that even the document of co?operative housing society should also be registered. Q. In what languages should the document be written so that it can be registered in Mumbai? A. It should be normally in English, Hindi, Marathi and Gujrati only. Q. What are the office hours of Registration Offices? A. The office of the Registrar works from Monday to Saturday, except the second and fourth Saturday and public holidays, between 10 a.m. to 4 p.m. However registration work is not done on all Saturdays due to administrative reasons. Q. Where in Mumbai one can register documents relating to property? District Records, District, Building, College, 051.

A. In Mumbai agreements are registered at the following four offices. For property situated from Colaba to Mahim/Sion. Office of Mumbai City?1 Old Custom Fort, Mumbai 400 001 the (Fort) House, Ground Sub?registrar & Mumbai Floor, Near of City?2 Horniman Assurance, (Worli), Circle

For property situated between Bandra and Dahisar. Office of the Sub?registrar of Assurance, Andheri Taluka?1 (Bandra) & Borivli Taluka?1 (Malad), MHADA Building, Ground Floor, Kala Nagar, Bandra East, Mumbai 400 051. Office of the Sub?registrar of Assurance, Andheri Taluka?2 (Andheri), Borivli Taluka?2 (Kandivli) & Borivli Taluka?3 (Borivli). Family Court Building, Ground Floor, Back side, Near MMRDA Building, Opp. Sales Tax Office, Bandra Kurla Complex, Bandra East, Mumbai 400 051. For property situated between Sion and Mulund. Office of the Sub?registrar of Assurance, Kurla Taluka?1 (Kurla) & Kurla Taluka?2 (Vikhroli) Administrative Building, Chemburkar Marg, Near Rationing office, Chembur, Mumbai 400 071. Registration fees is to be paid at Sub?registrar's office at the time of registration only or as per the challan prepared by the Sub? registrar which is to be deposited along with cash in the specified bank. Q. After how long is the document given for registration returned? A. Documents lodged for registration prior to October 1 1995 are sent to Pune, after it is indexed, for microfilming and then only it is returned to the party which may take a few years. All the documents lodged for registration on and from October 1 1995 are returned to the party within a few days of indexing the same because only the photocopy is sent to Pune for Microfilming. However if proposed computerisation takes place documents will be returned on the same day. Q. Why does it take so long for documents to return to the owner? A. The above mentioned procedure is one of the reasons but the major reasons due to which the document remains pending at the office of sub?registrar and not being indexed and not returned to the owner, are as follows: (a) Stamp duty is not paid according to "MARKET VALUE". (b) Income Tax Clearance certificate U/s 230 is not attached where required. (c) N.O.C. of Appropriate Authority in Form 37?1 is not attached where required. (d) N.O.C. under Urban Land Ceiling Act is not attached where required. (e) Certain parties to the agreement has not admitted execution in front of Sub?registrar. The above deficiencies were always pointed out at the time of registration by way of remark (such as MV, 230A, 37?1, NOC, ADM) on the registration receipt itself but due to ignorance, owners have never cared to clear them and hence documents have, over the years, got accumulated in the office of the Sub?registrar. With effect from 17/08/2000 Sub?registrars where accepting documents which do not have any of the deficiencies mentioned under point (a) to (d). However deficiency relating to non?admission is tolerated and document is accepted and kept pending. However in view of order dated 12?10?2001 by Hon. High Court of Judicature at Mumbai, the sub?registrars will now accept the documents presented to them even if it is not stamped as per Market

Value on the basis of Ready Reckoner. But such document will be kept pending till the Market value Dispute is not settled. Note : Income tax clearance certificate under Section 230A of Income Tax Act, 1961, is now not required from 01 ?06?2001 even for documents accepted for registration before 01 ?06?2001 as requirement for such certificate was on the day of registration and a document is considered to be registered on the day it is Indexed and if it is not indexed uptill now no Income Tax Clearance certificate is required even for old cases. Q. What is the Registration fee? A. Registration Fee is a fee for the service provided by the sub? registrar's office, of recording and storing the document for years together and in proper condition. If one does not pay registration fees, he will not be able to register the document and will be deprived of these services but there is as such no penalty for non payment as is the case in stamp duty. So whenever a person goes for registration he is charged the same registration fees as is chargeable on his document on the date of registration and no interest etc. is charged. Registration fees is one percent of the Market Value or Rs.20,000/? whichever is less in case of documents pertaining to sale or conveyance. This is applicable from 01 ?04?1997 upto date. However for documents lodged with sub?registrar during 01?09?1995 to 31?03?1997 maximum fees was Rs.10,000/? and for documents lodged with sub-registrar during 01?01?1984 to 31?08?1995 this fees was maximum Rs.5,000/? and also documents lodged with sub?registrar prior to 01 ? 01 ?1984 fees was maximum Rs.250/?. Therefore if a document is lodged on above respective periods the registration fees will be maximum upto what is indicated for that period even if it is was kept pending at sub?registrars office and is indexed now. Registration fees in case of Leave & Licence agreement is Fixed at Rs.1,000/? only. INCOME TAX. Q. What was Income Tax Clearance Certificate.? A. It was a certificate Under section 230A of Income Tax Act to be obtained by Seller/ Transferor of Immovable Property if value of that Immovable Property exceeded Rs. Five Lakhs. However with effect from 01?06?2001 this certificate is no more required. Q. What is No Objection Certificate.? A. It is a certificate to be obtained Jointly by Seller & Buyer (i.e. Transferor & Transferee) of Immovable Property, if apparent consideration for transfer of immovable property located in the area of Greater Mumbai exceeds Rs.75,00,000/?. Q. Where can one obtain No Objection Certificate.? A. It is to be obtained from "APPROPRIATE AUTHORITY" constituted U/s 269UB of Income Tax Act, 1961 and such Appropriate Authority for Greater Mumbai is "Appropriate Authority, Mumbai", (Income Tax Department), 3rd Floor, A Wing, Mittal Court, Nariman Point, Mumbai 400021. Q. Why No Objection Certificate has to be obtained? A. Such requirement of obtaining No Objection Certificate arises from Chapter XX?C (i.e. Sections 269U to 269UO) of Income Tax Act, 1961, where by the Central Government has right to Purchase Immovable Properties in certain cases of transfer where it feels transaction involves Black Money with intention to evade tax and property is undervalued by 15 percent or more of estimated market value. It specifies that where any Immovable Property is to be transferred by way of sale, exchange or lease of 12 years & above and apparent consideration exceeds 75 lakhs then no transfer shall be effected unless application is made with "Appropriate Authority" in form 37?1 in duplicate along with transfer/sale deed or Memorandum of understanding & Appropriate Authority has granted it's No Objection certificate to such persons (read Buyer/s & Sellers/s). This is Done Basically to curb black money transactions.

For example say their is agreement between Mr. A and Mr. B where Mr. A will sell an Immovable Property to Mr. B on 10/04/1998 then firstly both Mr. A & Mr. B should enter into an agreement in writing to sell the immovable property at least 4 months prior to the date on which transfer is intended to be effected in other words they should mention 10/08/1998 or later date as the intended date on which transfer will take place so as to give at least 4 months gap between date of agreement to sell and intended date of transfer as per Section 269UC(1) & 269UC(2) of Income Tax Act 1961, secondly both Mr. A & Mr. B should jointly file form 37?1 with Appropriate Authority before expiry of 15 days from the date of agreement to sell i.e. on or before 25/04/1998 as per Section 269UC(3) of Income Tax Act,1961 for obtaining No Objection Certificate. Appropriate Authority is allowed time of 3 complete calendar months from end of the month in which form No. 37?1 has been received by the Authority to pass an order of purchase of property or granting an No Objection Certificate. If Appropriate Authority passes the order of purchasing the property then property gets vested in the government. And if Appropriate Authority fails to pass an order within three months time then No Objection Certificate is deemed to have been granted. Order for purchase can be passed only (a) If Appropriate Authority has concrete reasons to believe ?that their is significant under valuation of property i.e. under valuation is to the extent of 15 percent or more of market value as determined by the Appropriate Authority. (b) If such under valuation is done to evade taxes. In normal course it is assumed that under valuation is primarily done to evade tax unless it is proved by the seller and/or buyer that such assumption is not true and consideration mentioned is actual as per prevailing circumstances. (c) After following Law of Natural Justice by giving proper and true opportunity to Buyer/seller of being heard in the matter. (d) For the amount equal to the amount of apparent consideration mentioned in the agreement. Hence it does not include amount of any stamp duty if paid by either purchaser or seller and as such it will not be paid by the appropriate authority. If any stamp duty amount has been paid then it will be loss to buyer or seller if appropriate Authority decides to purchase the property. The above provision is not applicable when Buyer & Seller are relatives and they recite the relation and consideration of natural love and affection for less or nil value charged for the immovable property in the transfer agreement. In this case there is no need for No Objection Certificate from Appropriate Authority. Q. What is Income Tax on Capital gains from sale of Property? A. If Immovable Property is sold within 3 years from the date of purchase any gain therefrom is treated as short term Capital gains and treated as normal income but if Immovable property is sold after 3 years from the date of purchase any gain therefrom is treated as Long term capital gains and tax is charged on such amount. But if the capital gain is invested within 2 years in purchase of residential house as per section 54 then the capital gain is exempt. Q. What is the tax Benefit on purchase of immovable property through Housing Finance? A. Interest paid upto Rs.1,50,000/? is allowed as deduction from the house property income under 2nd Proviso of section 24 of the Income Tax Act. Further Under Section 88 amount of interest or capital paid upto Rs.20,000/(excluding expenditure allowed under section 24 above) is allowed for purpose of the rebate on income tax. CO-OPERATIVE SOCIETY Q. Is society bound to check the payment of stamp duty before transfer of the flats? A. Society is not bound to check and ascertain if the stamp duty is paid as per market value on the agreement of the incoming members. However it is desirable that all incoming members should pay stamp duty as per true market value of their flats. It will help the society to expedite conveyance

process with builders in future. Society can refuse the transfer, if stamp duty is not paid as per market value. Q. What is restriction on sale of flat? A. A Member can not transfer his interest in the capital/property of the said society unless he has held the same for one year. Q. Can H.U.F. become member of Co?operative Housing Society? A. Under section 22 of the Maharashtra Co?operative Society Act, an H.U.F. is not included in the list of persons eligible to become members of the Co?operative Housing Society. As such H.U.F. cannot be admitted as member. Q. Can a member give his flat on Leave & Licence to outsiders? A. A member can give his flat on leave & licence only after obtaining permission from the society. In such case society can charge non? occupancy charge which will not be more than 10% of the maintenance charge of the flat. Q. What is the transfer fee which a society can charge? A. Society cannot charge more than Rs.25,000/? transfer fee from incoming/outgoing member. Q. Why builders do not convey the property in favour of society? A. It is observed that after the builder hands over the possession of respective flat purchasers, he is expected to convey the property in favour of the society. But in most of the case it is not done because of the following reasons. i) Stamp duty must be cleared of all the members or defaulter must pay stamp duty with penalty at the time of conveyance. ii) Under land ceiling Act. NOC must be produced. iii) Income Tax NOC certificate from competent authority must be produced Since owner is not interested in producing above certificates and members avoid to contribute their share of stamp duty, builders have good excuse and conveyance is not done in favour of the society.