The Undervalued Sale Deed and the Possession Trap
Ramesh agreed to sell his Thane flat to Nisha for ₹1.5 crore. The agreement dated 5 January 2025 records earnest money of ₹5 lakh, with the sale deed to be executed by 30 April 2025. The flat has an outstanding home loan of ₹40 lakh. The society's no-objection certificate has not been obtained, and the occupancy certificate is missing. The draft sale deed prepared by Ramesh's assistant recites the consideration as ₹90 lakh, states that the full ₹1.5 crore has been received, and provides that possession will be handed over before registration. Nisha has paid only ₹5 lakh. Ramesh now demands the balance in cash before signing. Nisha's company secretary is asked to review the draft, complete the transaction, and protect her interests.
1. Identify the legal and professional problems in the draft sale deed, including the undervaluation and the false receipt.
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Undervaluation
- Stamp duty on a sale deed is payable on the consideration or the market value, whichever is higher. Reciting ₹90 lakh when the agreed price is ₹1.5 crore is a deliberate undervaluation. Under the Maharashtra Stamp Act, 1958, an under-stamped instrument can be impounded, and the deficit duty and penalty can be levied. Registration may be refused or delayed. The purchaser also faces the risk of proceedings and of a defective title document.
False receipt
- The draft says the full ₹1.5 crore has been received although only ₹5 lakh has been paid. That is a false recital. A company secretary who drafts or certifies such a statement is exposed to professional misconduct under the Company Secretaries Act, 1980 and the ICSI Code of Ethics. A false receipt can also be used to cheat the purchaser or a lender and may attract criminal law. The CS must refuse to include it.
Possession before registration
- Under section 54 of the Transfer of Property Act, 1882, title to immovable property passes only on a registered sale deed. Handing over possession before registration does not transfer ownership. At most, the purchaser may claim the protective doctrine of part performance under section 53A if the conditions are satisfied. Nisha should not pay the full consideration before registration.
Loan, society NOC and occupancy certificate
- The seller's home loan creates a charge. Without a no-dues certificate and discharge of the mortgage, Nisha may take a title subject to the bank's charge. The society's NOC and share transfer are necessary for a flat in a co-operative society. A missing occupancy certificate can affect lawful occupation and future transfer. The CS should flag all three before completion.
2. Set out the correct completion sequence and the documents Nisha should insist on before registration.
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Sequence
- Title search and encumbrance check for the flat and the society share certificate.
- Obtain the society's NOC and complete the society's transfer formalities.
- Obtain the bank's no-dues certificate, discharge deed and tripartite arrangement for repayment of the ₹40 lakh loan at closing.
- Verify the occupancy certificate and municipal approvals.
- Prepare a fresh sale deed with the correct consideration of ₹1.5 crore and a payment schedule, not a false full-payment receipt.
- Pay stamp duty and registration fees; present the deed for registration.
- Pay the balance by RTGS or bank draft at registration against a written receipt.
- Take possession only after registration; then apply for mutation and society record changes.
Documents to insist on
- Original title deed and the chain of prior title documents.
- Society share certificate, NOC and latest maintenance receipts.
- Bank no-dues certificate and mortgage discharge.
- Occupancy certificate and approved plans.
- Property tax and electricity/water receipts.
- Seller's PAN, Aadhaar and photographs; passport-size photographs for registration.
- Stamp duty challan and registration receipt.
Cash payment should be refused. The balance should move through banking channels at the time of registration, and the sale deed should record the actual amount received.
3. Draft the key clauses on payment, title, possession and default.
Read the worked answer
Consideration and payment The total consideration is ₹1,50,00,000. The earnest money of ₹5,00,000 already paid is adjusted. The balance of ₹1,45,00,000 shall be paid by the purchaser to the seller at the time of registration by RTGS or bank draft against a written receipt. No payment shall be made in cash. The seller shall simultaneously discharge the existing home loan and produce the bank's no-dues certificate.
Title and encumbrances The seller warrants that he has a clear, marketable and subsisting title to the flat, free from all encumbrances except the home loan disclosed in the agreement, which shall be discharged before or at registration. The seller shall indemnify the purchaser against all claims, charges, dues and demands arising before the date of the sale deed.
Possession Possession of the flat, along with the society share certificate and all keys, shall be handed over to the purchaser immediately after registration and receipt of the full balance consideration. The seller shall pay all society dues, property tax and utility charges up to the date of possession.
Default If the seller fails to execute or register the sale deed by 30 April 2025 or within such extended period as agreed, the purchaser may seek specific performance or rescind the agreement and recover the earnest money with interest at 12% per annum and damages. If the purchaser fails to pay the balance, the seller may forfeit a reasonable part of the earnest money and seek specific performance or damages. The defaulting party shall pay the innocent party's reasonable legal costs.
Registration and disputes The sale deed shall be registered before the Sub-Registrar, Thane. Stamp duty and registration charges shall be borne as agreed. Disputes shall be subject to the jurisdiction of the courts at Thane.