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

Mr. Rohan Sharma and his father were in the final stages of selling their commercial plot located in the city of Alipur. They had entered into an agreement with a corporation, ‘Stellar Tech Solutions’, and had already received a token advance payment. The day for the registration of the sale deed was fast approaching. The buyer proposed to pay the remaining balance, a substantial sum of over ₹90 Lakhs, through a Demand Draft (DD) or a cheque on the day of registration itself. Mr. Sharma was apprehensive about this arrangement. He was concerned about the possibility of the payment instrument being dishonoured after they had already signed the sale deed and transferred the property title. He wanted to understand the safest procedure to ensure the funds were securely credited to their account before the ownership was legally transferred, thereby avoiding any potential legal complications.

Advice in such cases

When dealing with high-value property transactions, ensuring the security of the payment is paramount. Relying on instruments like cheques or even Demand Drafts without prior verification can expose the seller to significant financial risk and protracted legal battles. The primary goal should always be to confirm the receipt of cleared funds before or at the very moment of signing the registration documents.

• Prioritize Electronic Fund Transfers (RTGS/NEFT): The safest and most recommended method for high-value transactions is Real-Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT). RTGS transfers are settled individually and in real-time, making them ideal for large sums. Once the amount is credited to the seller’s account, it is final and irrevocable. The best practice is for both the buyer and seller to visit the buyer’s bank together, initiate the RTGS transfer, and proceed to the Sub-Registrar’s office for registration only after the seller receives a confirmation SMS and verifies the credit in their bank account.
• Verify Demand Drafts (DD): A Demand Draft is significantly safer than a cheque because the bank issues it only after receiving the funds from the purchaser’s account. However, the risk of forged or fraudulent DDs, though small, still exists. Before proceeding with registration, you can visit the issuing bank branch with the DD to verify its authenticity.
• Avoid Cheques if Possible: A personal or company cheque carries the highest risk. It can be dishonoured for various reasons, most commonly “insufficient funds.” While a bounced cheque is a criminal offense under the Negotiable Instruments Act, the legal process to recover the money is time-consuming and stressful. It is best to avoid this mode of payment for the final settlement amount.
• Structure the Sale Deed Carefully: The sale deed should explicitly mention the payment details, including the mode of payment, transaction reference number (for RTGS/NEFT), and DD numbers. It should clearly state that the full consideration has been received. Never sign a deed that states full payment has been received if it has not.
• 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

Understanding the legal framework is crucial for protecting your rights during a property sale.

• The Transfer of Property Act, 1882: Section 54 of this Act defines a ‘sale’ as the transfer of ownership in exchange for a price paid or promised. The term ‘price paid’ is key; you are not obligated to transfer ownership until the price is fully paid and secured.
• The Negotiable Instruments Act, 1881: Section 138 of this Act provides a legal remedy for the dishonour of a cheque for insufficiency of funds. It prescribes punishment of imprisonment, a fine, or both. However, this is a curative measure, not a preventive one.
• The Bharatiya Nyaya Sanhita, 2023 (BNS): If the buyer issues a cheque with the dishonest intention of not honouring it from the outset, it can amount to the criminal offense of cheating. Section 318 of the BNS, which deals with cheating and dishonestly inducing delivery of property, would be applicable.
• The Registration Act, 1908: This Act governs the process of registering property documents. The act of registration before the Sub-Registrar gives the sale deed its legal validity.

If you are the complainant

If you find yourself in a situation where the payment has failed after registration, you must act swiftly.

• Preserve All Documents: Keep meticulous records of the Agreement to Sell, any receipts for advance payment, the original dishonoured cheque/DD, and the bank’s return memo.
• Send a Legal Notice: In the case of a bounced cheque, you must send a formal demand notice to the buyer through a lawyer within 30 days of receiving the cheque return memo from the bank.
• Initiate Legal Proceedings: If the buyer fails to make the payment within 15 days of receiving the notice, you can file a criminal complaint under Section 138 of the Negotiable Instruments Act. Simultaneously, you can file a civil suit for the recovery of the amount and, in some cases, for the cancellation of the sale deed.
• File a Police Complaint: You can also file an FIR with the police for cheating under Section 318 of the BNS, arguing that the buyer had a fraudulent intent from the beginning.
• 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 payment fraud in a property deal, your immediate actions are critical.

• Secure Primary Evidence: Your first step is to obtain the original dishonoured instrument (cheque or DD) and the official ‘cheque return memo’ from your bank. This memo is vital as it states the specific reason for the dishonour.
• Withhold Possession: If you have not yet handed over physical possession of the property, do not do so. If possession has already been given, the matter becomes more complex, and immediate legal intervention is necessary.
• Communicate in Writing: Immediately send a formal communication to the buyer, preferably through your lawyer, informing them of the payment failure and demanding immediate payment.
• 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

Dealing with law enforcement in such matters can be challenging. The police may initially perceive the issue as a civil dispute, especially if it’s a simple case of a bounced cheque, and might direct you to the court system under the Negotiable Instruments Act. To get an FIR registered for cheating under the BNS, your complaint must clearly articulate the element of fraud and dishonest intent from the very beginning of the transaction. A well-drafted complaint by a lawyer, highlighting how you were deceived into transferring valuable property, is crucial. Once an FIR is lodged, the police will conduct an investigation, which involves recording statements and collecting evidence from banks and the Sub-Registrar’s office. This process can often be slow and requires persistent follow-up.

FAQs people normally have

• Can I refuse to sign the sale deed if the buyer only offers a cheque at the time of registration?
  Yes, absolutely. As the seller, you have the right to insist on a secure payment method. You can refuse to sign the documents until you have confirmed that the entire sale amount has been credited to your bank account.
• Is a Demand Draft (DD) completely risk-free?
  While a DD is much safer than a cheque, it is not 100% risk-free. There have been cases of sophisticated forgeries. For high-value transactions, it is prudent to verify the DD’s authenticity with the issuing bank branch before concluding the registration.
• What is the undisputed safest and fastest payment method for property sales?
  RTGS (Real-Time Gross Settlement) is the gold standard. It is managed by the RBI, the transfer is almost instantaneous for high-value amounts, and it is final and irrevocable.
• What if the buyer insists on paying by cheque and including this fact in the sale deed?
  This is a significant red flag. While you can mention in the sale deed that the consideration is paid via a cheque (with its details) and that the title will pass only upon its successful realisation, this creates legal complexities. If the cheque bounces, you will have to file a suit for cancellation of the deed and recovery, which can be a long legal process. It is far better to insist on cleared funds beforehand.

What evidence is required?

To build a strong legal case in the event of payment failure, you will need to gather the following evidence:

• The original signed Agreement to Sell.
• The original dishonoured cheque or Demand Draft.
• The official bank return memo specifying the reason for dishonour.
• A copy of the legal notice sent to the buyer demanding payment.
• Proof of delivery of the notice, such as postal receipts or courier tracking reports.
• Any written communication with the buyer, including emails, letters, or text messages regarding the transaction and payment.
• A copy of the registered Sale Deed, if the registration was completed.
• Your bank account statements showing the non-receipt of funds.

How long will the investigation take?

The timeline for legal proceedings can vary significantly. A case filed under Section 138 of the Negotiable Instruments Act is tried as a summary proceeding, which is designed to be faster. However, due to the high volume of cases in Indian courts, it can still take anywhere from one to three years to reach a conclusion. A police investigation into a cheating complaint under the BNS can take several months before they file a final report or chargesheet in court. The subsequent criminal trial can then extend for several years. This underscores the importance of taking preventive measures to secure payment rather than relying on the legal system for a cure.

Advocate Sudhir Rao, Supreme Court of India