• Registered Agreement by paying cheque and cash

I have finalized a land with 21 Lakh, the seller says that pay Rs. 5 lakh in cash and rest 16 Lakh by loan or cheque as I wish. But he puts a condition that Rs. 5 lakh must be paid in cash and in black as you know happens in real estate. After payment of this black money and Rs. One lakh by cheque a registered Agreement will be made in presence of both parties lawyer. Rs. 16 lakh will be shown in registered Agreement and 1 lakh will be counted as pre payment. He and his lawyer argue that registered Agreement is binding to both parties. He also said that I can check his property with my lawyer. I am doubtful. What should I do? I want deal only after bank accepts my loan application and sanctions it.
Asked 2 years ago in Property Law
Religion: Hindu

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19 Answers

Hello,

 

This happens in usual course. Tell him that you will make the advance payment in white so that you keep the record of the payment.

however, if you think that the person is not right and he might cheat you then do not go for the same.

 

regards

Anilesh Tewari
Advocate, New Delhi
17870 Answers
344 Consultations

5.0 on 5.0

See basically a registered agreement is binding on both the parties and specific performance of agreement can be sought from the court. See get copy of documents from the seller apply for loan approval if loan is approved then only give the amount and enter into the sale agreement. 

Shubham Jhajharia
Advocate, Ahmedabad
25518 Answers
149 Consultations

5.0 on 5.0

Refuse to make any cash payment 

 

2) insist that all payments would be made by cheque only 

 

3) if you make cash payment of Rs 5 lakhs and deal is cancelled you would not get refund of cash paid by you 

Ajay Sethi
Advocate, Mumbai
84936 Answers
5617 Consultations

5.0 on 5.0

Bank will sanction the loan on the actual amount mentioned in your Registered Agreement 

However, cash part is always risky as it doesn't have any record 

But it is safe if you are getting a registered agreement bcoz you can anytime enforce your right (do get it registered before registrar) 

Or get an unregistered agreement and apply for loan and it will make your work easy. 

 

Amol Chitravanshi
Advocate, Delhi
279 Answers
1 Consultation

4.0 on 5.0

Tell him, cash 5 lacs will be paid at the time of registration of sale deed. Or no advance will be paid, complete payment at the time of registration.

To evade stamp duty, such practice is common  but to avoid any fraud and cheating, take receipt of every payment.   And ask hi to provide non encumbrance certificate and cross check by your lawyer.

Yogendra Singh Rajawat
Advocate, Jaipur
21452 Answers
31 Consultations

4.4 on 5.0

Dear Sir,

The following information may kindly be read:

Cash Payment in Property Deal – High Risk for a Buyer

Last year in Delhi and NCR alone, 1200+ fraud cases were filed by buyers who were trapped in cash payment in a property deal. The modus operandi of property deal is that a temporary or “Kachha” agreement as it is called in Hindi is signed between the seller and the buyer. This agreement contains FULL Value of a property deal. For example, if buyer and seller agreed to property deal of 50 lac. Out of 50 lac, it is agreed that 15 lac will be a cash payment, and 35 lac will be through cheque.

On the day of property registration or before that buyer will pay 15 lac in cash to the seller. Now the sale deed will be registered at 35 Lac, and this kachha agreement will be destroyed once the property deal is completed. In this entire transaction, there is NO MENTION of 15 lac cash payment.

Now you must be wondering where are the chances of fraud. In this case, after the property deal, seller produced the copy of kachha agreement in front of police and told that buyer is not paying balance 15 lac. Stumped…In some cases, seller blackmailed buyer and negotiated for an additional sum. Typically a seller tells the buyer that kachha agreement is legally invalid, but it is not true. Only the name is Kachcha or temporary agreement, but legally it is Pakka Agreement :). In this case, the buyer cannot claim that he has paid 15 lac in cash. Therefore, you can be trapped in this entire property deal.

Moreover, if God forbids something goes wrong after the payment of cash say the deal is cancelled, or something happens to the seller. In one of the case, the complainant paid cash on the day of registration. On the way to sub registrar office, the seller died in an accident. It is highly unlikely scenario but a possibility. Now the total cash component is gone for the buyer. If property deal is cancelled, then it is impossible to recover the cash component from the seller.

Penalty for Cash Payment in Property Deal

The biggest misconception of any buyer or seller is that how the income tax department will come to know about the cash payment. Please remove this misunderstanding from your end. Once this misconception is cleared, let’s discuss the penalty on Cash Payment that can be levied by income tax department. A Penalty of 100% can be levied on Cash Payment. A penalty will be applicable on Seller. An action can be taken against buyer also. Therefore, in the example mentioned above, if the seller receives 15 lac as a cash payment, a penalty of equivalent amount i.e. 15 lac can be imposed on Seller.

As a buyer, you have to decide whether you would like to take a risk in property deal as i highlighted. Also, note that all the cash transactions are being monitored. Any unusual cash transactions from a bank account will immediately put you under the scrutiny of income tax department. I am not creating fear but requesting all the readers not to encourage illegal practices. Be a good citizen of India and make all payments through legal channel. Any cash transaction of more than 20,000 should be done responsibly and carefully. Also, remember that by doing this you will be helping govt of India in curbing BLACK MONEY.

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Netravathi Kalaskar
Advocate, Bengaluru
4952 Answers
27 Consultations

4.8 on 5.0

The property should be purchased with white money only else youbcan geg into trouble if he refuses to acknowledge that you paid him money in black....you have no legal recourse available as you cannot claim anything as you yourself are in the wrong.

Therefore if you are interested and have the money then tell them that you shall pay them the black money after the agreement.

Regards 

Rahul Mishra
Advocate, Lucknow
13220 Answers
48 Consultations

5.0 on 5.0

First of all you contact a property lawyer and ask him to do the title search.Once you get the report from him and if everything is ok related to the title ownership,then you approach the bank and make an application for the loan.

They will make the investigation about the property and will let you know how much you can get the amount as a loan.Based on that you can take a decision.you can make a deal only after bank accepts your loan application.

Generally seller won't do the registration of the sale deed until and unless he receives the full payment.

so no need to worry about the deal at this stage.First of all do all the ground work and based on the outcome you can take a further decision.

Seshukumar Kuchibhotla
Advocate, Hyderabad
57 Answers

5.0 on 5.0

Hello Sir,

A very Good Morning,

Please be advised as follows:

Title in an immovable property can only be transferred by a sale deed. In the absence of a duly stamped and registered sale deed, no right, title or interest in an immoveable property, accrue to the buyer of the property.

You need to differentiate between an Sale Agreement and Sale Deed.

Sale deed can only transfer the Right and title of the property on you when its gets registered and becomes a conveyance untill then the title of the property vests with the seller only.

As per the Indian Registration Act, 1908, any agreement for transfer of any interest in an immovable property of value more than one rupee, is required to be registered.  So, if you have purchased any property under any agreement for sale, without it being followed by a proper sale deed, you do not get any right or interest in the property purported to be transferred under the agreement of sale.

Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law. Therefore, the immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.”

What the sales agreement creates, is a right for the purchaser to purchase the property in question on satisfaction of certain conditions. Likewise, the seller also gets the right to receive the consideration from the buyer on complying with his part of the terms and conditions.

In case of failure of the seller to sell or hand over possession of the property to the buyer, the buyer gets a right of specific performance, under the provisions of the Specific Relief Act, 1963. A similar right is available to the seller under the agreement, for seeking specific performance from the buyer.

 

Remedy you can Go For:

  1. Firstly, you should verify from the records in the website of UP Bhoomi Lekh that whether the seller who is selling you the property really owns it or not on the basis of records in order to prevent any fraud in future.

Since you have to take a loan from the bank for that you can come into an agreement on a court notarized document after paying the required stamp duty so that that is a sufficient enough proof for you to get a loan sanctioned on your name from the bank.

Try and convince the seller:

You can show the seller the sanction letter from the bank and pay your portion of the cost fully. The sale agreement is then is which acknowledges the part payment already received (1 Lakh in your case) and mentions that the balance amount will be paid to the seller within a pre-set time limit (usually 30 days) and contains a clause that the agreement would be null and void in case of a failure of payment within the stipulated time and allows the seller to retain fully/partly the amount that has already been paid as a penalty in such a case.

Based on such a registered agreement the bank will disburse the balance loan amount in the name of the seller. If this option is acceptable to the seller you should exercise some caution. Firstly you should submit photocopies of all the documents that you will be giving them after the agreement is signed and registered. Ensure you get at least an email from the bank acknowledging the documents submitted by you and providing the complete list of documents that will be needed to make the disbursement.

Go through the list and make sure that you will be in a position to provide those documents. Frequently in such cases the lender may raise last minute requests in terms of documents that it had not apprised you about earlier. Remember delays in disbursements will cost you dearly in terms of loosing the property as well as penalties.

Registered Sale Agreement may not transfer the title on to you but is always binding on the parties.

According to the Transfer of Property Act, an agreement for sale, whether with possession or without possession, is not a conveyance. Section 54 of the Transfer of Property Act enacts that the sale of an immovable property can be made, only by a registered instrument and an agreement for sale does not create any interest or charge on its subject matter.

 

Harshit Singh Jadoun
Advocate, Noida
68 Answers
2 Consultations

5.0 on 5.0

Litigation is long drawn and expensive proposition 

 

2) suit for specific performance would take years to be disposed of 

Ajay Sethi
Advocate, Mumbai
84936 Answers
5617 Consultations

5.0 on 5.0

Ask them to take the advance payment of 6 lakh by cheque and not cash. 

Rest of the payment you can make at the time of registration in cash and cheque  

Anilesh Tewari
Advocate, New Delhi
17870 Answers
344 Consultations

5.0 on 5.0

I dont think that what has been told is a feasible option. Why worry about court cases and disputes when all you want is a property.

 

Rahul Mishra
Advocate, Lucknow
13220 Answers
48 Consultations

5.0 on 5.0

Cajoling you. Than he will say in court that you failed to pay 5 lacs so court should not entertain your petition, And they themselves are raising doubts about possibility of court interference, Conduct questionable.

Yogendra Singh Rajawat
Advocate, Jaipur
21452 Answers
31 Consultations

4.4 on 5.0

So you can pay 5 lakh cash at time of registration of sale agreement if before that you pay then you have no proof of payment and then seller can also turn around so to safeguard both the amount can be paid at the time agreement is registered. 

Shubham Jhajharia
Advocate, Ahmedabad
25518 Answers
149 Consultations

5.0 on 5.0

Hello Sir,

1. Firstly Please let me know that whether the sale agreement has already been formed and signed by both the parties?

2. If not I suggest you to firstly pay the seller 5 Lakh money on record (or any amount agreeable between both the parties) and state the same in the sales agreement and then give him 5 lakh unrecorded (or any money as per your capacity)  money which you will not state in the sales agreement. However, in order to be on a safer side and secure your 5 lakh (or any money given) that you would be giving him unrecordedly, mention a condition in the sales agreement that if your seller fails to get the registry done within a stipulated time period then he would be liable to give you back double the amount given by you i.e 5 lakh. This would secure your 5 lakh rupees that you have given unrecorded. 

3. To put it simply, in the sales agreement you explicitly mention that if there is any failure on the part of the seller to get the registry  done he  will have to pay double the amount that you have given him on record.

Sir if still you have any query or doubt with respect to the solution or the agreement you can get in touch with me to allow me to explain you in a bit detailed manner. 

Thank you for your time and Consideration.

Harshit Singh Jadoun
Advocate, Noida
68 Answers
2 Consultations

5.0 on 5.0

Dear client 

You should Go and check the property and also take the photocopy of the registry and give it to bank to check the loan eligibility on the property and your documents. So that you don't land into financial crisis in case bank rejects loan after agreement. 

And yes the agreement of 16 lac will be binding on both the parties and you should try to get the registered agreement from seller. 

Mohit Kapoor
Advocate, Rohtak
10688 Answers
7 Consultations

5.0 on 5.0

That is a very tricky position as you will not have possession.  If the sale agreement is registered then you will definitely go to court but lawyer fees and duration of the court case will be additional burden. 

Prashant Nayak
Advocate, Mumbai
24931 Answers
58 Consultations

4.4 on 5.0

Don't make any cash payments, it is illegal if you know that the reason you are paying cash is to avoid Tax. Incase if you are cancelled the said deal then you cannot claim refund from seller. 

Mohammed Mujeeb
Advocate, Hyderabad
19012 Answers
31 Consultations

4.5 on 5.0

If you are agree to pay five lacs in black and entering in sale agreement by paying rupees 1 lakh through cheque and getting the property changed as per your satisfaction you can go with deal and there is nothing wrong and the sale agreement will be valid and enforceable by both the parties the only thing is that in this agreement that your property value will be registered for 16 lacs only as the payment of 5 lacs will not be shown in any record and the stamp duty for the registration will also be payable only and rupees 16 lacs or the circle rate of the land which ever is more.

In case of any dispute if you want to reverse the sale deed in that case you can claim only 16 lacs not the amount you paid in cash

Vimlesh Prasad Mishra
Advocate, Lucknow
6829 Answers
23 Consultations

4.9 on 5.0

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