Registration Act and the Banker —I

The Indian Registration Act, 1908 came into effect on the first day of January, 1909 extending to the whole of India, except the state of Jammu and Kashmir.

The Registration Act basically aims at giving certainty to the execution of documents and prevents the operation of fraudulent and secret transactions that are likely to result in a defective title. The Act specifies:

•  The documents that are to be registered;
• How to register;
• Where to register; and 
• The effects of registration/non-registration.

By and large, the Act prescribes compulsory registration of documents relating to the transactions of immovable property.

Bankers in their role of disintermediation give different types of loans to different kinds of clientele, and all against different kinds of securities. In this connection, they handle innumerable title deeds pertaining to various properties either in the form of equitable or simple mortgages. Perhaps, no other Act has got such an influence on decision-making authorities in the bank as much as the Registration Act, for it has got a greater say in deciding acceptance of properties as securities for the monies lent, as also in creating effective charges on the said properties – to ensure that the monies lent are returned.

Implications of Registration

Registration of a document admits its execution and gives notice to the world that such a document has been executed. Such compulsory registration further ensures that reliable and complete history of all transactions affecting the title to the property is made available to the citizens at notified offices. Secondly, the registration of a document indirectly establishes the fact of its compliance with various statutory requirements such as:

·      Provisions under Stamp Act (unless the document is properly stamped, the registering authority is not supposed to accept it for registration);

·         The Urban Land Ceiling Act (unless the document is accompanied by necessary exemptions granted by the competent authority, the Registrar is not supposed to register the documents);

·         Zonal requirements;

·         Tax liabilities, etc. (properties valued over a certain cut-off limit cannot be registered, unless no objection certificate is obtained from the Income Tax authorities).

Usually, every person desirous of entering into a transaction relating to an immovable property takes a look at the registration record to examine the change of title to the property, to know the prior transactions and also the existing transaction affecting the title to the property. Even if one does not do such a search, but notices a transaction at a later date, the law imputes that he had knowledge of the transaction. Incidentally, explanation for Section 3 of the Transfer of Property Act, 1882 (T.P. Act) provides that, where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property shall be deemed to have notice of such instrument as per the date of registration, provided that the instrument has been registered and its registration completed in the manner prescribed in the Registration Act.

Box 1: Lending Banks – Search Period A lending banker usually does a search in the records of the Registrar for a period of 30 years in order to trace all the transactions relating to the property under reference and to establish the validity of the title being claimed by the applicant for loan.

The Registration Act basically deals with documents but not with the transactions thereunder. It is, however, a different matter that transactions relating to immovable property would arise under the document and thus the transactions and documents are inseparable. There are also certain transactions that are taking place and completed without documents, say for example:

·         Equitable mortgage created by mere deposit of title deeds; and

·         Partition of HUF properties orally with no documents.

Box 2: Immovable Property and its Lease Immovable property – as per Section 2 (6) of the Transfer of Property Act – includes lands, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass. A lease of immovable property is a transfer of a right to enjoy such property made for a certain time, expressed or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms.

In all such cases, where there are no documents, the question of registration does not arise. But the Registration Act states that where a document is employed to effectuate any of the transactions specified in Section 17, such document must be registered although the transaction is not required to be put in writing.