If you are stuck in such a situation, here is what to do.

Mr. Alok Sharma is in the process of selling his self-acquired independent house located in Jaipur, which is valued at approximately 7 crores. This is a monumental transaction for his family, as he is retired and this sum constitutes a significant portion of his life savings. His brother, Mr. Rajesh Sharma, is assisting him to ensure the process is handled with utmost care. They have found a prospective buyer, Mr. Vikram Singh, who claims to be a successful professional having worked with a major tech firm, “Global Tech Innovations,” in Singapore and is now affiliated with a prestigious business school in Jaipur. Mr. Singh has stated that he has the necessary funds readily available in his bank account and will not require a home loan. He has offered to pay an initial token amount of 40 lakhs to sign an “Agreement to Sell” and has requested the property documents for verification. The deal also includes a proposed cash payment of 60 lakhs, with the rest to be paid through banking channels. The Sharmas are concerned about how to verify Mr. Singh’s financial capacity, especially since no bank is involved in vetting him. The buyer has also expressed a desire to pay an interim amount of 2.5 crores to enable the Sharmas to purchase new apartments, with the condition that the house be vacated by the time of final registration. This situation raises several critical questions about securing the payment and ensuring a smooth, risk-free transaction.

Advice in such cases

When dealing with a high-value property sale, especially with a buyer who is not taking a loan, exercising extreme caution and conducting thorough due diligence is paramount.

• Draft a Watertight Agreement to Sell (ATS): This is the most critical document. The ATS should be drafted by a competent property lawyer. It must clearly detail every aspect of the transaction, including the total sale consideration, the payment schedule with specific dates, the amount received as earnest money, and the consequences of default by either party.
• Payment Terms and Schedule: Clearly define the payment milestones. A typical structure involves:
  • Earnest Money/Token Amount (usually 5-10%) on signing the ATS.
  • One or more interim payments.
  • The final balance payment on or before the date of execution of the Sale Deed.
• Forfeiture Clause: The ATS must have a clear clause stating that if the buyer defaults or fails to make the payment within the stipulated time, the seller has the right to terminate the agreement and forfeit the earnest money paid.
• Secure Payment Methods: Insist that all payments, apart from the initial token amount, be made through secure and verifiable banking channels like Demand Drafts (DD) or RTGS. These provide a clear financial trail and are as good as cash once cleared. Avoid large cash transactions as they carry legal risks under the Income Tax Act.
• Verification of Funds: It is perfectly reasonable and prudent to request the buyer to provide proof of funds. You can politely ask for a recent bank statement or a ‘Balance Confirmation Letter’ from their bank. To avoid fake documents, you can suggest a joint visit to the buyer’s bank branch for verification. This is a common practice in high-value deals.
• Possession of Property: Do not hand over physical possession of the property until you have received the entire sale consideration in your bank account and the Sale Deed has been registered. Handing over possession prematurely is extremely risky.
• TDS Compliance: Ensure that the buyer deducts the applicable Tax Deducted at Source (TDS) under Section 194-IA of the Income Tax Act on the sale consideration and provides you with the TDS certificate (Form 16B).
• Use of an Escrow Account: For added security, consider using an escrow account managed by a neutral third party (like a bank or a lawyer). The buyer deposits the sale amount into this account, and the funds are released to you only upon the successful registration of the property in the buyer’s name.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

The legal framework governing such transactions in India is robust. Key statutes include:

• The Transfer of Property Act, 1882:
  • Section 54: Defines ‘Sale’ as a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. It mandates that the sale of immovable property of value one hundred rupees and upwards can be made only by a registered instrument.
  • Section 55: Outlines the rights and liabilities of the buyer and seller. It obligates the seller to disclose material defects and the buyer to pay the purchase money at the proper time and place.
• The Indian Contract Act, 1872: This Act governs the Agreement to Sell, making it a legally binding contract. Any breach can be remedied under this Act.
• The Registration Act, 1908: This Act mandates the compulsory registration of the Sale Deed for immovable property to ensure a valid title transfer.
• The Income Tax Act, 1961: Governs the tax implications, including capital gains tax for the seller and TDS obligations for the buyer. The Act also has restrictions on cash transactions.

If you are the complainant

If you are the seller (complainant) and the buyer defaults on the agreement, you have the following recourses:

• Send a Legal Notice: The first step is to have your lawyer send a formal legal notice to the buyer, outlining the breach of the Agreement to Sell and calling upon them to fulfill their obligations or face legal action.
• Forfeit the Earnest Money: As per the forfeiture clause in your ATS, you can legally forfeit the earnest money paid by the buyer.
• File a Civil Suit: You can file a suit for ‘specific performance’ in a civil court, asking the court to direct the buyer to go through with the sale as per the agreement. Alternatively, you can file a suit for damages, seeking compensation for the losses incurred due to the breach of contract.
• Criminal Complaint: If there is evidence of cheating from the very beginning (for instance, if the buyer provided forged documents or a cheque that bounced), you can file a criminal complaint under Section 318 of the Bharatiya Nyaya Sanhita (BNS) for cheating.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

As a victim of a fraudulent property deal or a breach of contract, your primary goal is to mitigate your losses and seek justice. The steps are similar to those for a complainant.

• Gather All Documentation: Collect all related documents, including the ATS, payment receipts, bank statements, and all communication with the buyer (emails, messages).
• Do Not Hand Over Original Documents: Never give the original property title deeds to the buyer before receiving the full payment. Provide only photocopies for due diligence.
• Seek Legal Recourse Immediately: Time is of the essence. Delays can weaken your case.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

The police generally view property transaction disputes as civil in nature. If you approach them with a complaint about a buyer backing out, they are likely to advise you to approach the civil court to enforce the contract. However, police intervention becomes necessary and they will register a First Information Report (FIR) if there is a clear element of a cognizable criminal offense, such as:

• Cheating (Section 318 BNS): If it can be proven that the buyer had a dishonest intention to deceive you from the very beginning.
• Forgery (Section 335 BNS): If the buyer has used forged documents, such as a fake ID or a forged bank statement.
• Criminal Breach of Trust (Section 316 BNS): This may apply in specific circumstances where property or funds were entrusted to the buyer under certain conditions which they then violated dishonestly.

In most cases of simple contract breaches, the legal battle is fought in civil courts.

FAQs people normally have

What evidence is required?

To build a strong case, whether civil or criminal, you will need concrete evidence. Key pieces of evidence include:

• The Executed Agreement to Sell (ATS): This is the primary document that establishes the terms of the contract.
• Proof of Payments: Bank statements showing the credit of the token amount, copies of Demand Drafts, or RTGS transaction details.
• Communication Records: Emails, text messages, or letters exchanged with the buyer that discuss the terms of the sale, payment, or reasons for default.
• Legal Notice: A copy of the legal notice sent to the buyer and the postal receipt as proof of dispatch.
• Identity Documents: Copies of the buyer’s and seller’s identity and address proofs exchanged during the deal.
• Witnesses: Any individuals, such as property brokers or family members, who were present during the negotiations or signing of the agreement can act as witnesses.

How long will the investigation take?

The timeline for resolving such disputes varies significantly.

• Criminal Investigation: If an FIR is registered, the police are required to complete their investigation and file a chargesheet under the Bharatiya Nagarik Suraksha Sanhita (BNSS). This process can take several months, depending on the complexity of the case and the workload of the police. The subsequent court trial can take several years.
• Civil Suit: A civil suit for specific performance or damages is known to be a lengthy process in India. It can take anywhere from a few years to over a decade to get a final resolution from the courts, including appeals.

Advocate Sudhir Rao, Supreme Court of India