FRDI BILL 2017 – A LOOK INTO THE SECURITY OF COMMON MAN`S DEPOSITS!! FRDI contemplating increase in deposit insurance cover from Rs.1 lakh to Rs.3.5 lakhs: Report


FRDI BILL 2017

A LOOK INTO THE SECURITY OF COMMON MAN`S DEPOSITS!!

Though the bill has been sent to the joint parliamentary committee, which is studying the bill and is expected to submit its report in the winter session, some media reports fuelled by social media messages are causing panic among investors and depositors. But rather than clarifying its position on the bill as soon as the first reports were out, the government waited for social media to go absolutely berserk before the Finance Minister came out with a pacifier.

Another fear among the public was that the money deposited or standing in the name of/to the credit of the public in the bank being converted into a fixed deposit or shares of the bank, in case of bailing out the bank. 
The worst part of the fear was that, if the bank goes bust or under loss, the bank can use the deposits of the public for its recovery or survival, and the public felt and thought that all their monies and deposits will be LOST.

Before addressing some of these fears, let us first look at what the existing rules mean for depositors and then deliberate on the changes that are expected if and when FRDI is implemented in its current form.

India has historically been a country where not only bank accounts but even mutual funds are considered safe places to park one’s money. No depositor has ever lost his or her money despite the Deposit Insurance Corporation providing a cover of only Rs 1 lakh for both the principal amount and interest earned. The cover was only Rs 1,500 in 1962, when the corporation was incorporated but was increased to Rs 1 lakh in May 1993.

However, the insurance company did not have much work to do as depositors of banks going under were taken care of by merging the failed banks with bigger banks.

Coming to FRDI, here is what section 52 – the section of the FRDI bill that deals with ‘bail-in’, has to say:

“…the Corporation may, in consultation with the appropriate regulator, if it is satisfied that it is necessary to bail-in a specified service provider to absorb the losses incurred, or reasonably expected to be incurred, by the specified service provider and to provide a measure of capital so as to enable it to carry on business for a reasonable period and maintain market confidence, take an action under this section by a bail-in instrument or a scheme to be made under section 48”.

Section 48 details the method and time of resolution and provides for all possible means to ensuring that the depositor’s money is safe. It calls for transferring the whole or part of the assets and liabilities of a specified service provider or creating a bridge service provider, or merger or amalgamation of the specified service provider, as well as the acquisition of the specified service provider, in whole or in part.

In other words, the bill talks of ensuring that the depositor is insured and protected by the relevant regulator in all possible ways, as is the case even now. Although FRDI details the processes for how the depositors’ money is protected, what is not spelled out yet is the cover provided on the loss of one’s deposit and interest.

Given the path the government has chosen in the case of smaller banks, where they are being asked to merge with bigger ones, the cover amount is not so much of an issue as the government allowing a bank to collapse. Still, the government should have made a reference to it in the bill to allay public fear.

In any case, depositors need not worry as subsection (7) of Section 52, which talks of the bail-in instrument or scheme, clearly states that this section shall not affect any liability owed by a specified service provider to depositors to the extent such deposits are covered by deposit insurance. It also talks of not affecting any liability that the specified service provider has by virtue of holding client assets.

Subsection (7)(e) of Section 52 talks of not affecting any liability any liability, so far as it is secured – thus covering all secured deposits. Subsection (7)(f) takes care of the liability owed to employees or workmen including pension liabilities of the specified service provider, except for liabilities designated as the performance-based incentive.

Depositors have little to worry about in India as even failed mutual funds, as was seen in the case of Unit Trust of India, have been bailed out by the government using taxpayer money. All the depositor has to ensure is that they are part of a bigger entity. After all, if the political damage is big enough, all depositors are bound to get paid, irrespective of the bank or financial entity involved.

 BUT, THE GOVERNMENT MUST COME OUT WITH A VERY STRONG CLAUSE TO PROTECT THE INTEREST OF THE DEPOSITERS IN CLEAR TERMS OTHER THAN WHAT HAS BEEN ALREADY DRAFTED.

FRDI contemplating increase in deposit insurance cover: Report

FROM RS.1,00,000/- TO RS.3,50,000/- Hope the Government will amend and incorporate this to safeguard the interest of the public and the depositors.

RERA to apply to ongoing projects – Bombay High Court !


 ‘some (builders) will go to jail’ – housing minister Mr.Puri.

With the Bombay High Court upholding the constitutional validity of Real Estate (Regulation and Development) Act (RERA) and stating that “ongoing projects” too would come under its ambit, the issue has been settled once and for all, minister of housing and urban affairs Hardeep Singh Puri said on Thursday.

With the Bombay High Court upholding the constitutional validity of Real Estate (Regulation and Development) Act (RERA) and stating that “ongoing projects” too would come under its ambit, the issue has been settled once and for all, minister of housing and urban affairs Hardeep Singh Puri said on Thursday. State governments will now have no scope to loosen the regulation by either keeping ongoing projects out of RERA or defining them in their own convenient ways, he added. Speaking at the Express Group’s Idea Exchange programme, Puri said that though the central legislation always included ongoing projects under the ambit of RERA, some state governments did deviate from it, which would not be possible now. However, he clarified that even before the court’s order came, he was in touch with various state governments on the issue and had written them letters to include ongoing projects within RERA. “They (states which have diluted the law) will have to comply. I have already taken it up with them,” he said.

Puri also said that builders also need to be given a chance, which is why the court has said that in cases where delays occur in delivering flats due to exceptional and compelling circumstances (to be decided on a case-to-case basis), penal action should not be taken. Puri said that Rera is broadly moving on the right path and that’s why the builders had approached the high court. However, he accepted that there are teething problems which would get sorted out. “Its been only six months since the law came into effect,” he said. “You will get to clean up the real estate sector. Is it (Rera) biting on the ground? Is it having any effect? My answer is absolute, unambiguously yes, because if it weren’t then those guys (builders) wouldn’t have run to challenge it in the court… There are teething problems but I expect that a major push will come through affordable housing in all these projects and the clean-up will involve a lot of these guys. Some of them will go to jail. I have absolutely no doubt about that,” Puri said.

Uttar Pradesh and Haryana had kept ongoing projects outside the purview of Rera. For instance, in Haryana only fresh projects were to be covered under Rera and all projects under construction or which had applied for construction were kept out. In Uttar Pradesh, ongoing projects that had applied for completion certificates were kept out along with the ones that have been granted part-completion certificates.

BUYING SITES OR PLOTS FROM HOUSING CO-OPERATIVE SOCIETIES ? CHECK


Planning to buy a plot or site in a housing co-operative society?

Planning to buy a plot or site from a reseller, who bought or allotted site or plot by the housing co-operative society?

Please conduct a thorough and diligent scrutiny and examination of all the title documents, approvals and the BACKGROUND of the seller.

A Co-Operative society is permitted by the Government for a specific purpose for a particular or specific group in a specific or particular area for a specfic purpose like credit co-operative society or house building society.

Every person cannot become a member of multiple societies with similar purposes.

 

There is a By-Law which is applicable to every society, which dictates the terms, conditions, and eligibility of the members and it has to be approved by the Joint Director of Co-Operative societies of that particular state.

The allotment of the sites or plots is governed by the by-laws and the prevailing laws of the state.

A person, which includes his family, cannot buy more than a site or multiple sites from housing society, khb, bda or under ashraya scheme.  The entire family can buy only one site either from BDA, KHB, Housing Society or if the family or the head of the family already have a property, then such persons cannot buy a property from these entities.

HENCE, CHECK, BEFORE BUYING.

RERA COMPLIANCE – SMALL AND MEDIUM CLASS BUILDERS MAY DISAPPEAR


With the onset of RERA rules and regulations, it has become very difficult for the small and medium scale developers who were present in the real estate sector, to raise funds and capital for their ongoing as well as new projects and almost 75% of the new projects have been shelved or dropped.

There is severe fund/cash crunch in the market, where even the leading builders are finding it difficult to manage their funds, whereas, the others are unable to even complete the ongoing projects.

The Banks may also demand RERA approval for all new projects for home loans and the violators or illegal structures (new ones) may not be able to get home finance.  But, There are few financial institutions, which are more willing to lend money to illegal or unauthorized structures even without RERA approval.

Another major blow is that the Income Tax department is scrutinizing  all the major bank deposits between Rs.2.5 laks to Rs.1 crore.  This scrutiny has further affected the cash flow requirements of the small and medium class builders.

Only, the BIG FISHES may survive at this juncture.

 

DOCUMENTS AND TAXES – GENERAL LIST FOR THE PURCHASE OF PROPERTIES


Transactions in immovable property are carried out by parties in properties containing the following elements:

GENERAL REQUIREMENTS

(All approvals, NOC, Licenses, Documents, Provisions, Rules, Regulations, Laws, Taxes, Charges, Fees, and Regulations are not applicable to all the properties.  Specific Requirements or eligibility or statutory documents for specific properties.)

Generic list

OWNERSHIP

Original owner.

Intermediary owners.

Promoter.

Developer.

Contractor.

Investor.

Marketing agency.

Prospective buyer.

Lending institutions.

Association of Owners.

Agreement Holder.

GPA Holder.

NATURE OF PROPERTIES

The following are the nature of properties:

Land.

Houses.

Flats/apartments.

Infrastructure.

Special amenities and facilities.

Sites.

Industrial Sheds and Lands.

Commercial Complexes.

RIGHTS

The following are the nature of rights:

Ownership.

Possession.

Leasehold rights.

Rights under a mortgage.

Easement.

License.

Lien.

SUCCESSION

There are two types of inheritance and succession:

Intestate succession i.e. by operation of personal laws.

Testamentary succession i.e. through wills.

TITLE

Three-tier legal scrutiny of titles is essential:

In the hands of the present owner.

In the hands of the prospective buyer for his benefits.

For the benefit of the lending institutions.

Issuing public notice in leading English and vernacular newspapers, inviting objections or claims, is recommended in all cases.

CHARGES AND OTHER LEVIES

1). Betterment Charges or Improvement Charges.

2). Lake Development Charges.

3). Solid Waste Charges (Municipal Area)

4). BWSSB charges or cell or penalty on buildings without OC.

TAXES

Properties attract the following taxation:

1) Gift Tax, Wealth Tax or any prevailing or applicable taxes.

2) GST (on the transfer of goods in contracts).

3) Income tax on income and capital gains.

4) Tax exemptions and deductions under special schemes for housing, economic zones etc.

5). Municipal Taxes or Property Taxes.

TAXES AND DUTIES AT THE TIME OF REGISTRATION

1). Stamp Duty.

2). Registration Fee.

MODES OF CONVEYANCE OR TRANSFER

The following are various modes by means of which any person can acquire any type of right, title, and interest in an immovable property:

  1. Direct purchase/transfer.
  2. Gift/settlement.
  3. Will/probate/succession certificate.
  4. Intestate succession and inheritance.
  5. Partition, release, family settlement, reunion.
  6. Family Arrangement.
  7. Partition among co-owners.
  8. Property as a capital contribution in a firm.
  9. Distribution of assets in a firm on reconstitution and on the dissolution of a firm.
  10. Private trust.
  11. Amalgamation, merger, de-merger and liquidation of companies.
  12. Rights and interests held through shares in companies, cooperative society etc.
  13. Adverse possession.
  14. Awards in arbitration proceedings.
  15. Orders and decrees of courts of law and other statutory authorities including Lok Adalats.
  16. By operation of various provisions of personal laws relating to Hindus, Mohammedans, Christians, Sikhs, Parsis, Jews etc.
  17. By operation of law under laws relating to other persons and legal entities including cooperative societies, other societies including mutual benefit societies and other Association of Persons.
  18. BDA sites.
  19. Land acquisition.

20.By grants were given or orders passed by Governments and statutory authorities.

  1. By a Conciliation, Order passed under section 19(v) (i) and (ii) read with Section 21 of the Legal Services Authority Act, 1977. Such an order can be passed by a High Court Judge and other competent authorities by which rights and interests between contending parties can be settled and established.

TRACING OF TITLES

The tracing of titles should begin with the tracing of the earliest documents available pertaining to the property which, probably, will pertain to the documents obtained by the first owner.

First owner: The earliest original documents, records, the order of a court or government or a statutory authority by which the rights to an immovable property is vested with the first owner.

Intermediary parties: The subsequent documents, records or orders of the type mentioned above, duly recording in a chronological unbroken sequence of legal acts, events, identifying and tracing the title in the hands of the various intermediate owners till the last owner i.e., the transferor.

Current owner: The documents of title with the current owner i.e., transferor, including the document by means of which he has acquired title and other documents like the Khatha, Encumbrance Certificate, and tax paid receipts up-to-date.

An investigation of these records must be made before a certification of these records by an advocate. The investigation is the verification of the actual existence of these records in the books/registers of the various departments mentioned above. Certification, on the other hand, is done only on the basis of records produced before an advocate on an apparent examination of the same by him.

CHARGES AND ENCUMBRANCE OF THE PROPERTY

Encumbrance Certificate

Various kinds of transactions and matters mentioned below will not be entered in Book-I maintained by Sub-Registrars and hence will not appear in an encumbrance certificate furnished either in Form 15 or in Form 16 by the Sub-Registrar exercising relevant jurisdiction. Hence, other modes of evidence and documentation are required to confirm the title. The following are the transactions and matters not included in the encumbrance certificate:

  1. Oral tenancy.
  2. Litigation in courts (Lis Pendens).
  3. Tax liabilities
  4. Unregistered mortgage by deposit of title deeds.
  5. Prior unregistered agreement
  6. 6.Oral Partition/Family Arrangement.
  1. Oral gift under Mohammedan Law.
  2. Unregistered will.
  3. Rights and interests held through partnership firms, Association of Persons, societies including cooperative societies, companies etc.
  4. Unregistered agreements, MOUs, the general power of attorney etc.
  5. Rights of third parties not directly recorded in documents.
  6. Orders and decrees of courts, statutory and tax authorities.
  7. Rights through possession, part performance, the equitable title under Section 53-A of the Transfer of Property Act, 1882.
  8. Physical Possession of the property and grounds or claims of possession.

SAFEGUARDS

Many safeguards must be taken to ensure the vesting of a clear, absolute and marketable title in the hands of the purchaser or any person acquiring any interest in the property in question in any manner whatsoever. Some of the safeguards are mentioned below:

  1. Obtain court permission for sale of minor’s share.
  2. Make all major co-parceners parties in case of Hindu Undivided Family.
  3. Ensure compliance with legal formalities by companies, other persons, and legal entities.
  4. Examine Government records, documents, and papers.
  5. Verify original documents of title and lodge the same with a common custodian in Escrow.
  6. Issue public notice through newspapers.
  7. Verify marketability of title.
  8. Make all other interested parties as parties in the transaction.
  9. Obtain confirmations and affirmations through affidavits.
  10. Obtain possession in part performance.
  11. Appropriate court action for injunctions, specific performance etc.,
  12. Resolve disputes through arbitration or through the family arrangement.
  13. Avail the benefit of other legal remedies and reliefs as provided under different transactions, different laws apply.
  14. Obtain the general power of attorney to derive powers and authority to carry out all acts in general and certain specified acts, deeds and things in relation to the immovable properties and the rights, interests, and title relating thereto.
  15. Register agreements and get attestation by Notary Public on documents.
  16. Obtain Encumbrance Certificates, tax paid receipts and certified copies of other papers and records held by statutory authorities.
  17. Verify if there are any restrictions relating to land granted including restrictions in respect of land of Scheduled Castes and Scheduled Tribes.
  18. Protect the rights or possession under section 145 of the Criminal Procedure Code from statutory authorities.
  19. Obtain Succession Certificate from the Jurisdictional Court, in case of intestate succession.
  20. Obtain Family Tree from the jurisdictional revenue authority appointed by the State Governments with powers delegated to issue the same.

* * *

Vital documents for acquiring BMP, BDA property

The following are the documents of title with respect to properties located within the jurisdiction of the Bangalore Mahanagara Palike which are to be obtained from the present owners and verified before purchase/acquisition by lease, mortgage:

Primary documents

1) Parent Deed by means of which the present owner/owners acquired title to the property.

2) Building sanction plan issued by the Chief Executive Engineer, BBMP, BDA, BMRDA or local planning authority, in case of a building constructed on the property.

Secondary documents

1) Khatha Certificate issued by the BBMP, BDA, GP in the name of the present owner/owners.

2) Khatha Extract issued by the BBMP, BDA, and GP.

3) Tax paid receipts issued by the BBMP/BDA/GP evidencing payment of taxes in respect of the property.

4) P.T. Sheet and Chalta issued by the City Survey Department containing the sketch of the property in question and its measurements.

5) Encumbrance Certificate (preferably in Form 15) issued by the Sub-Registrar exercising relevant jurisdiction over the property for a period of not less than 30 years.

6) Copy of the plan sanction issued by the BBMP/BDA/Local Planning Authority/BMRDA for the construction of a house or residential or commercial multi-storeyed building.

7) Copy of the Commencement Certificate of the BBMP/BDA/BMRDA issuing permission to commence construction of a multi-storeyed building.

8) Copy of the occupancy certificate issued by the Palike certifying that the building constructed on the schedule property is in accordance with the sanctioned plan.

9) Copy of the receipt evidencing payment of compounding fees to the BBMP or Revenue Authorities or Municipal Corporation or Town Municipal Council for regularising the deviation, if any, made from the building sanction plan.

10) Copy of the No Objection Certificate from the Fire and Emergency Services, HAL, AAI, KSPCB, BESCOM or other electricity suppliers, Water Supply (rural) or BWSSB, Coastal Area Authority(if applicable) Department.

11) Copy of the clearance to operate lifts in the building issued by the Chief Executive Engineer, BBMP, and Electrical Inspectorate.

12) Copy of the NOC/CFE/CFO/Clearance Certificate issued by the Pollution Control Board.

13) Copy of the Endorsement issued by the Director, Fire Services Department, by means of letter addressed by him to the BBMP/BMRDA/BDA or LPA stating that he has no objection to the  issuing an occupancy certificate in respect of building constructed on the property.

14) No Objection Certificate from the Airport Authority of India.

The documents mentioned in (6), (7), (8), (9), (10), (11), (12), (13) and (14) usually arise in the case of multi-storeyed buildings and large layouts.

BDA jurisdiction

The following are the documents of title with respect to properties allotted and/or sold by the Bangalore Development Authority to the present owner/owners which need to be obtained by every prospective purchaser:

PRIMARY DOCUMENTS

Allotment letter issued by the Bangalore Development Authority in favour of the present owner in respect of the property.

Possession letter issued by the Bangalore Development Authority in favour of the present owner in respect of the property, recording handing over of possession of the property to the present owner.

Absolute Sale Deed executed and registered in favour of the present owner by the Bangalore Development Authority in respect of the property after the expiry of 10 years from the date of allotment.

Building sanction plan issued by the Bangalore Development Authority where a building has been constructed on the property.

Secondary documents

Khatha Certificate issued by the Bangalore Development Authority in the name of the present owner/owners.

Tax paid receipts issued by the Bangalore Development Authority evidencing payment of taxes in respect of the property up-to-date.

Encumbrance Certificate (preferably in Form 15) issued by the Sub-Registrar exercising relevant jurisdiction from the date of allotment up-to-date.

APPROVALS/LICENSES/PERMISSION/CONSENTS/ORDERS/NOC

1). DC Conversion Order for the change of land use.

2). Change of Land Use from BDA, MUDA/BMRDA or Any other LPA.

3). Developmentpment Plan from BDA/BMRDA/LPA.

4). Sanctioned Building Plan from Municipal Corporations or TMC or GP as applicable.

5). NOC from BESCOM ( in case of Bangalore), BWSSB ( in case of Bangalore) AAI, HAL, GSI, Fire and Emergency Services, LDA, CFE and CFO from KSPCB.

6). In case of Coastal Areas, appropriate orders from Local Bodies.

7). NOC from KIADB, KHB, LAO, NH and BDA.

8). NOC Under Sec 79A and 79B, 7 and 7A and PTCL Acts. (specifically for agricultural lands)

9). RERA APPROVAL.