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There are several documents which are not compulsorily register able under Section 17 of the Registration Act.. Some of them require high stamp duty under the Karnataka Stamp Act and some of them do not. Even the ones which require high stamp duty, if they are under stamped, can be rectified later by paying a penal amount 10 times the original amount. Non payment of stamp duty does not make the document void or otherwise invalid. The consequences of under stamping as per the stamp act are 1. to make the document inadmissible for evidence before any authority capable of receiving evidence of before any public authority. 2. The document can also be impounded for enforcing the payment of full stamp value. An under stamped instrument can be admitted as evidence in court if penal stamp duty 10 times the value of the original amount is paid.
The following are the list of documents that do not require registration:Power of attorney that is given except power to sell property
Agreement of sale given by a land owner to a developer
Lease deed for less than one year
Memorandum of oral partition
recording a past transaction.
Power of Attorney:Registration: In many cases, a general or specific power of attorney need not be registered. The question of registration arises only if a power is given for the sale of immovable properties. The Indian Registration Act does not make a power of attorney compulsorily registerable. However, the Supreme court has recently ruled that a power of attorney given to sell immovable properties should be registered. It should be done at the office of the sub registrar within whose jurisdiction the person giving the power resides. If the person resides abroad, the power should be attested by the Indian consulate in that country. Such power of attorney should be used within 3 months from the date of its execution.
Stamp duty: The Karnataka Stamp Act prescribes the stamp duty to be paid on different types of power of attorneys. A power given to a close relative needs only Rs. 100/- stamp paper, even if it is to sell property. A power given to a person who is a non relative will attract a stamp duty of 2% of the market value of the property, which can be adjusted in the stamp duty payable on the sale deed. A power of attorney given to a developer will attract stamp duty at the rate of 4% on the market value of the property which is subject to a maximum of Rs 4 lakhs. This amount is not adjusted at the time of executing subsequent sale deeds
Consequences of under stampingThe power of attorney: Can a sub registrar refuse to register a sale deed if the power of attorney produced by the person executing the sale deed is not properly stamped? Yes, the sub registrar can refuse to accept such a document for registration, provided he immediately gives the reason to be recorded in writing.
Revocation of power of attorney: It is now settled law that an irrevocable power of attorney given for consideration cannot be revoked.
Development agreement and Agreement to sell between landowner and developer:
A development agreement is not required to be registered. This includes all construction contracts given to a developer. However it attracts a stamp duty of 4% of the market value of the property, subject to a maximum of Rs. 4 lakhs. If the developer properly stamps the agreement, then the power of attorney which is executed by the land owner in favored the developer is exempted from stamp duty and requires only Rs. 100/-.The Stamp Act says that agreements of sale or M.O.U. given to a developer for construction, development, sale or transfer (in any manner whatsoever) of any immovable property in Karnataka attracts a stamp duty of 4% of the market value of the property subject to a maximum of Rs. 4 lakhs. Agreements of sale between the developer and the land owner should be made out as a simple agreement of sale accompanied with a separate contract to build between two parties which require only Rs. 200/- stamp paper. Possession should be taken separately and at a later date by the developer from the land owner.
An agreement to sell coupledwith possession in the agreement itself will attract the same duty as a conveyance. The duty payable is adjusted later in the stamp duty towards the sale deed.
Registration: A development agreement and an agreement of sale need not be registered under the Registration Act. It is hardly surprising therefore that there are hardly any development agreement or agreements of sale that are properly stamped. As already stated, an under stamped document is not an invalid document. But want of registration cannot be cured, so documents that require compulsory registration should always be registered.
Lease agreements and lease deed for less than one year:An agreement to lease without possession and a lease deed for less than one year need not be registered. However, if a lease for more than one year is drafted as a leave and licence deed or if the lease is found to commence from the date of agreement itself and if possession is found to be handed over, then the agreement to lease operates as a lease deed and should be registered if the period of lease is over 1 year.
The new rent control acthas practically removed all statutory protection of tenants, but thehigh cost of stamp duty of a lease agreement or lease deed of less thanone year continues to deter full stamping of such documents.
Stamp dutyon agreement to lease and lease deed: Leases for more than one year attracta stamp duty of 5% on the average annual rent and 14.5% on the deposit. This duty can be reduced by showing some of the amounts in a separate amenitiesagreement which need not be registered. Agreements to lease and lease deedsfor less than one year also require the same stamp duty as above but asthey do not require registration, they never get properly stamped.
Partitiondeed: A memorandum oral partition recording a past transaction need notbe registered. A partition deed effecting partition in the deed itself required registration but the stamp duty is nominal and amounts to Rs. 200 to Rs.1000 per share, depending on its location and nature of land. It is better to register a partition deed an it gives notice of the partition to everyone and the title is better protected.
In conclusion always register a document which is compulsorily register able or for which stamp duty is not high. Documents for which stamp duty is high and which do not require registration do not become invalid for want of proper stamp duty alone. But the rights of both parties should be protected in case of default, so consult a lawyer. Always give possession separately and never in the documents itself.
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