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Force Majeure: Evolution of Jurisprudence in India Post COVID-19

The extraordinary outbreak of the Covid19 pandemic has had staggering effects on the economy, health and commerce of about 110 nations across the globe. Even after almost a year, the situation is far from normal. In addition to the massive pressure on the health and medical segments, several other unprecedented factors played crucial part in the whole system, economy, commerce, or business. Given the present situation of disruption of supply chaindisruption of assured manpower, uncertainty of future planning, inadequacy of security as well as the forced restraints in free commercial activities, numerous commercial contracts have either been interrupted, delayed or cancelled. The present situation has thrown light on several important questions with respect to the jurisprudence of the force majeure clause in various commercial contracts or frustration of contracts 

 

Force Majeure Typically in Law

 

The term force majeure which seems to have been borrowed from the Code Napoleon had received interpretation in several decisions of the English Courts in earlier years. In Matsoukis v. Priestman and Co.[i] . Justice Bailhache opined that force majeure would include strikes and break-down of machinery but not bad weather, or football matches, or a funeral. In Lebeeaupin v. Crispin[ii] Justice McCardie had observed: “A force majeure clause should be construed in each case with a close attention to the words which precede or follow it, and with due regard to the nature and general terms of the contract. The effect of the clause may vary with each instrument.”

In the Indian context, the Supreme Court has considered, interpreted and decided the events of force majeure in various judicial precedents, inter-alia from Satyabrata Ghosh vs Mugneeram Bangur[iii] to Energy watchdog vs CERC[iv] The Court has maintained a strict yet flexible approach towards the concept of force majeure and frustration of contracts. In the case of Alopi Prashad and Sons vs. UOI[v] the Supreme court had observed that commercial hardship shall not be a just and reasonable ground to support frustration of contract and excuse performance.

As we find in the commercial world, contracting parties have generally been incorporating the force majeure clause in their contracts since ages, to absolve themselves of any liability arising out of events beyond their reasonable control. However, in this discussion we would focus the force majeure arising out of Covid-19 pandemic.

 

COVID 19 and Application of Force Majeure

 

There was a difference of opinions and questions were raised over the fact that some contracts though having a force majeure clause, do not stress on the word ‘pandemic’, ‘epidemic’, ‘disease’ etc. , while majority of the contracting parties rely on the general phrase ‘any other unforeseeable event, not under the control of either of the parties.’

 
Executive Interpretation:
 

Alike the private sector, the Government contracts and the Public Sector transactions also started suffering on account of the pandemic and declaration of lockdown throughout the country. To address the situation fairly, the Ministry of Home Affairs came out with Notification No. F. 18/4/2020 PPD dated 19-02-2020 with respect to Manual for Procurement of Goods, 2017 declaring that the interruptions in supply chain due to Covid 19 from China or any other country shall be covered under the ambit of force majeure, and that force majeure shall be invoked whenever considered appropriate following the due process of law.

While the power of the Ministry to bring certain events within the ambit of force majeure under clause 9.7.7 of the Manual for Procurement of Goods, 2017 by a simple notification, may be a different issue, but as it appears, by this notification the Corona Pandemic was brought within the meaning of force majeure as defined in the Manual for Procurement of Goods, 2017 and tacitly, this event certainly becomes applicable in respect of all government and/or public sector contracts irrespective of application of the Manual for Procurement of Goods, 2017.  It may be noted that this Memorandum of 19th February 2020 was issued prior to Covid-19 affecting operations in India, recognizing the difficulty faced by the contracting parties regarding import of materials from other countries which were impacted by the pandemic.

Similarly, on account of various representations and submissions made by various Renewable Energy (RE) Developers and RE Associations, and considering the prevailing situation, the Ministry of New and Renewable Energy vide Office Memorandum No. 283/18/2020-GRID SOLAR dated March 20, 2020 declared Covid-19 as a force majeure event. The Ministry vide the said order granted time extensions in scheduled commissioning date of RE projects, in light of disruption of supply chain due to the pandemic.

The Ministry of Roads Transport and Highways also in its Circular dated 18.05.2020 inter-alia classified the pandemic as a force majeure event. In addition, the Ministry of Home Affairs by its Order no. 40-3/2020(D) dated 24 March 2020 expressed that the country was threatened with the spread of Covid 19 virus and therefore has considered to take effective measures to prevent its spread across the country and therefore in exercise of powers under section 10(2)(I) of the Disasters Management Act 2005 issued various guidelines for immediate implementation. Subsequently, by Office Memorandum dated 13 May 2020 the Ministry of Finance, Department of Expenditure referred to its earlier memorandum dated 19 February 2020 and also referred to the Manual of Procurement and recognized inter-alia that in view of the prevailing restrictions, it may not be possible for the parties to the contract to fulfill contractual obligations. Therefore, after fulfilling due procedure and wherever applicable, parties to the contract could invoke force majeure clause for all construction / works contracts, goods and services contracts, and PPP contracts with Government Agencies up to a certain period and subject to certain conditions. Therefore, officially the Government of India recognized Covid-19 Pandemic as an event of force majeure applicable in relation to contracts with Government Agencies, in effect resulting inclusion of Public Sector Undertakings also.

While the specific acceptance of force majeure in relation to Government sector contracts may not have any binding effect on the contracts outside the scope of the explicit instances or in relation to purely private contracts between two private parties, they probably offered an explanatory value to bring Covid 19 and the forced restraints imposed on account of lockdowns, within the ambit of force majeure.  

 
Judicial Interpretation:
 

In the Indian judicial scenario the court would rely on the terms of force majeure clause in the contracts or on principles of frustration under section 56 of the Contract Act. This means, unless there is compelling evidence for non-performance of contract the courts do not favor parties resorting to frustration or termination of contract. On account of the enormous devastative effects the Pandemic created on the commercial and economic environment in the country, different Courts had to come forward and grant relief to different contracting parties who were severely affected by the Pandemic.

The Delhi High Court considered the matter in June 2020 in the case of MEP Infrastructure Developers Ltd vs. South Delhi Municipal Corporation and Ors[vi]. The court essentially relied on the Ministry of Roads Transport and Highways (MORTH) circular and observed that:

27(i) The respondent Corporation itself referred to Circular dated 19.02.2020 which notified that the COVID-19 pandemic was a force majeure occurrence. In effect, the force majeure clause under the agreement immediately becomes applicable and the notice for the same would not be necessary. That being the position, a strict timeline under the agreement would be put in abeyance as the ground realities had substantially altered and performance of the contract would not be feasible till restoration of the pre-force majeure conditions.” 

The court also expounded on the continuous nature of the force majeure event and held that the subsequent lockdown relaxations given by the central government and the state government shall not amount to abatement of the force majeure event, at least in respect to major contracts such as road construction projects. The court also identified the distinct effects of the lockdown, independent of the effects of the pandemic and its implications on various contracts which many be affected by the force majeure conditions.  

In the case of Standard Retail vs G.S Global Corp Pvt. Ltd[vii] steel importers had approached the Bombay High Court seeking restraint on encashment of letters of credit provided to Korean exporters in view of the COVID-19 pandemic and the lockdown declared by the Central/State Government citing that the contracts between the parties were unenforceable on account of frustration, impossibility, and impracticability. The Bombay High court by its order dated 8 April 2020 rejected the plea inter-alia on the grounds: 

  1. The Letters of Credit are an independent transaction with the Bank and the Bank is not concerned with underlying disputes between the buyers and the sellers.
  2. The Force Majeure clause in the present contracts is applicable only to one respondent and cannot come to the aid of the Petitioners.
  3. The contract terms are on Cost and Freight basis (CFR) and the respondent had complied with its obligations and performed its part of the contracts and the goods had already been shipped from South Korea. The fact that the Petitioners would not be able to perform its obligations so far as its own purchasers are concerned and/or it would suffer damages, is not a factor which can be considered and held against the Respondent.

The court also observed that:  

“The Notifications/Advisories relied upon by the respondent suggested that the distribution of steel has been declared as an essential service. There are no restrictions on its movement and all ports and port related activities including the movement of vehicles and manpower, operations of Container Freight Station and warehouses and offices of Custom Houses Agents have also been declared as essential services. The Notification of the Director General of Shipping, Mumbai, states that there would be no container detention charges on import and export shipments during the lockdown period.

In any event, the lockdown would be for a limited period and the lockdown cannot come to the rescue of the Petitioners so as to resile from its contractual obligations with the Respondent No. 1 of making payments”.

Therefore, even if the event is a force majeure, contracts may not be avoided if the event does not affect performance of the entire contract or affect every aspects of any contract. The event has to be specific to the failure.

In the Halliburton case[viii] , decided on May 29, 2020, the Delhi High court was of an unequivocal opinion that:

“62. The question as to whether COVID-19 would justify non-performance or breach of a contract has to be examined on the facts and circumstances of each case. Every breach or non-performance cannot be justified or excused merely on the invocation of COVID-19 as a Force Majeure condition. The Court would have to assess the conduct of the parties prior to the outbreak, the deadlines that were imposed in the contract, the steps that were to be taken, the various compliances that were required to be made and only then assess as to whether, genuinely, a party was prevented or is able to justify its non- performance due to the epidemic/pandemic”.

Further, while discussing the scope of the force majeure clause in contracts it was observed by the court that:

“Para 63. It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying non- performance. There has to be a ‘real reason’ and a ‘real justification’ which the Court would consider in order to invoke a Force Majeure clause”.

The Madras High Court in the case of Tuticorin Stevedores’ Association vs The Government of India[ix], dated 14 September 2020, observed that the question as to whether on account of the pandemic outbreak of Covid-19, the parties can invoke the principle of force majeure need not detain us. The calamitous impact and disruption caused by Covid-19 on the economic front has been recognized by the Government itself.

In Confederation for Concessionaire Welfare & Ors. vs Airports Authority of India & Anr[x] the Hon’ble Delhi High Court observed on 17 February 2021 inter-alia that the court has perused the clauses relating to Force Majeure. There can be no doubt that the pandemic is a force majeure event. Since the Petitioners wish to terminate/exit from their respective agreements, while directing completion of pleadings and while the issues are under examination by this Court, there is a need to reduce the risk to both parties as simply postponing the exit by the Petitioners would also make it impossible for the AAI to re-allot the spaces to willing concessionaires and the outstanding against the Petitioners would continue to mount. Accordingly, as an interim measure the Hon’ble Court directed certain processes to be followed.

In another case of Ramanand vs. Dr. Girish Soni RC.[xi], an application came under consideration of the Delhi High Court which raised various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same. By order dated 21-5-2020 the Delhi High court while determining whether lease agreements are covered under the ambit of section 32 and section 56 of the Act and even though it was held that suspension of rent on the grounds of force majeure is not permissible under the circumstances, the court allowed relaxation in the schedule of payment of the outstanding rent owing to the lockdown.

The Hon’ble Supreme Court in the case of Parvasi Legal Cell and Ors. Vs Union of India and Ors., observed that the pandemic was an ‘unusual’ situation, that had impacted the economy globally. This case revolved around the liability of the airlines to compensate passengers who faced cancellation of flights due to government-imposed lockdowns and restrictions on inter-state and international travels. The court relied on the office memorandum issued by the Ministry of Civil Aviation dated 16th April 2020 to dispose of the petition.

In the case of Transcon Iconia Pvt. Ltd v ICICI Bank[xii], the Bombay High Court while determining whether moratorium period would be excluded for NPA classification observed inter alia as under:

‘38… the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the 90-day NPA declaration period. As currently advised, therefore, the period of 1st March 2020 until 31st May 2020 during which there is a lockdown will stand excluded from the 90-day NPA declaration computation until — and this is the condition — the lockdown is lifted’.

Yet, in another judgment passed in R. Narayan v. State of Tamil Nadu & Ors.[xiii] the Madras High Court directed the Municipal Corporation to waive the license fee for running a shop at a bus stand, and observed that:

“…this Court would be justified in treating the “lock down” as a force majeure event which will relieve the licensee from performing his obligation to the corresponding extent.” The Court also observed that … “The respondents (The Government of Tamil Nadu & Ors.) themselves have chosen to treat the lock down restrictions as a force majeure event. But they have relieved the licensees from the obligation to pay the fees only for two months. The reason for granting waiver for the months of April and May would equally hold good for the entire “total lockdown” period.”

Therefore, as it appears, most of the High Courts relied on the government orders that classified pandemic as force majeure, although the relief granted in each case has been subjected to restraint based on the accompanying facts and circumstances. The common observation however remained that the Covid-19 pandemic is a force majeure event.

 

Key Takeaways

 

Hence, it can be summarized that, commercial hardship shall not be a just and reasonable ground to support frustration of contract and excuse performance. The Courts have no general inclination to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events. Parties are at an obligation to complete their part of the contract against all odds, within a reasonable and practical limit. However, where the contract itself either impliedly or expressly contains a term according to which performance would stand discharged under certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Act. If, however, frustration is to take place de hors the contract, it will be governed by Section 56.

The following preliminary conditions are emerging to be sine quo non to invoke covid-19 as a valid defense for non-performance:

  1. The contract is rendered impossible to perform: To establish pandemic as a force majeure occurrence de hors the contract the parties must demonstrate how the pandemic has disturbed the fundamental basis on which the obligations and agreements of the parties rested [Naihati Jute Mills Ltd. Vs Khayaliram Jagannath[xiv]]. This principle was also adequately elaborated upon by the Bombay High Court in Standard Retail vs G.S Global Corp Pvt. Ltd. A mere invocation of the force majeure clause in light of the pandemic does not absolve the parties from discharging their contractual obligations. A prima facie case has to be built justifying the reason for inability and seeking such an exemption.
  1. Prior conduct of the parties: While pleading the defense of force majeure, it is highly pertinent for the concerned party to ensure that, prior to the outbreak of the pandemic, the party was discharging its functions in a bona fide manner within the stipulated conditions of the contract. Additionally, as enumerated in the Halliburton case by the Delhi High Court, the concerned party should have demonstrated a bona fide attempt at undertaking all reasonable measures to execute its obligations in light of the situation and was genuinely prevented to act upon the same due to the collateral effects of the pandemic.
  1. Collection of documents capable of corroborating the claim of force majeure: It is crucial for the party invoking the force majeure clause to corroborate their claims with valid documents applicable to the specific instance, given the unusual and unprecedented situation. In the present scenario, these documents can include the abovementioned government circulars and guidelines, local medical reports, news reports, announcements etc. It needs to be kept in mind that generic documents howsoever crucial they may be, might not be enough in any specific case. While citing such documents, the affected party also has a duty to carry out a due diligence to ensure such exemptions and relaxations are strictly applicable to their case as observed in Standard Retail vs G.S Global Corp Pvt. Ltd.

 

No Straitjacket Formula                     

 

As can be summarized, different Courts in India have upheld the defense of frustration of contract and the defense of force majeure sparingly in every case. Even though the Covid 19 pandemic and its consequent lockdown can be generally covered under the ambit of force majeure, but there can’t be any straitjacket formula and its invocation strictly and solely shall depend upon the facts of each case, previous conduct of the parties and the prevailing circumstances in the specific scenario. If there are alternate modes of performing contractual obligations, the liable party shall not have the luxury to hide behind the comfort of doctrine of frustration or the doctrine of force majeure and absolve themselves of their duties. Accordingly, it would need a very careful examination of the whole situation before any ground is taken for avoidance of obligations under a concluded contract.

References:

[i] (1915) 1 K.B. 681

[ii] (1920) 2 K.B. 714

[iii] [1954 SCR 310]

[iv] [(2017)14 SCC 18].

[v] [1960 (2) SCR 793]

[vi] W.P.(C) 2241/2020

[vii] Commercial Arbitration Petition (l) no. 404 of 2020

[viii] Halliburton Offshore Services Inc. v. Vedanta Ltd. O.M.P (I) (COMM.) No. 88/2020 & I.As. 3696-3697/2020

[ix] WP(MD)No.6818 of 2020 and WMP(MD)No.6217 of 2020

[x] W.P.(C) 2204/2021 & CM APPL.6421-22/202

[xi] REV447/2017

[xii] 2020 SCC OnLine Bom 626

[xiii] Case No.19596 of 2020 and W.M.P.(MD)Nos.16318 & 16320 of 2020

[xiv] AIR 1968 SC 552

Image Credits: Photo by Medienstürmer on Unsplash

The Courts have no general inclination to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events. Parties are at an obligation to complete their part of the contract against all odds, within a reasonable and practical limit.

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Restoring value through tenancy reforms

The phenomenon of urbanisation, accompanied by the aspirations of the masses looking to make an ascend out of and above their life circumstances, dawns with transformation of landscapes. The harbours of the coast often become a passageway to opportunities. Settling the chaos of the opportunities in the city of Mumbai post the Second World War led to unique tenancy model in the city which sheltered its migrant population that would not otherwise be able to afford a shelter to call its own and ever since, rent control laws continue to bear the blame for much of an unlocked value of premises in the city despite the initial righteous intention of tenancy reforms.

Righteous Intention v. Regressive Implementation

The Maharashtra Rent Control Act, 1999 stands as a successor of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, which was enacted as social welfare, as well as regulative legislation with a bonafide intention of protecting tenants from exploitation by and tyranny of landowners and from the spurt in rentals. The aforesaid situation did not change much with the enactment of the Maharashtra Rent Control Act, 1999 as the provisions of this substituted legislation were nothing but old wine in a new bottle. It carried forward the pros and cons of the erstwhile Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 without rationale a and, as a result, rented premises in Mumbai city continue to fetch lower rental returns than prevalent market value or become a subject matter of long-lasting litigation/s. This situation has adversely impacted the rental market in the city of Mumbai and people are caught between the adverse demand and low yielding supply of the premises to be meant for rentals.

Against this background, yet another tenancy reform, the Model Tenancy Act, 2021 as approved by the Union Cabinet in the first week of June 2021 (“the Model Act”) is now being viewed as a great catalyst towards boosting the rental market as it may stimulate the market by promising secured higher rental returns to the landowners (which includes premises’ owner) and as an affirmative driving force addressing most of the concerns of its predecessors.

Rationalising the Expectation

While the disputes arising out of decades-old tenancies continue to keep their memories alive in the Small Causes Courts and further in the appellate courts, the prevailing skepticism that premises owners have lately clung to as a result of the pandemic over letting out their premises, shows the unreliability of the current rent control laws and eviction proceedings under the Maharashtra Rent Control Act, 1999. However, the enactment of the Model Act too depends on the adaptation of the provisions by the States to suit their indigenous tenancy models.

The State of Maharashtra has already cleared its stand in favour of protecting the interest of the tenants enjoying protection under the prevailing rent control regime.[i] Further, the prospective applicability of the Model Act is an important consideration while assessing the extent of the change to be expected out of the Model Act. Hence, it is required that the thrust of the reforms be maximised where it can be currently realised from the very stage of entering into a rental agreement, while the process of working out the reforms into the indigenous tenancy models continues to be unravelled by the State government.

One of the reforms that is hoped for is an overhauled dispute resolution process for rent and tenancy related matters. The Model Act seeks to nail the long lasting tenancy litigation by proposing a three-tier adjudicatory system being the Rent Authorities, Rent Courts and Rent Tribunals vested with exclusive jurisdiction to try and adjudicate disputes falling under the scope of the Model Act which does not extend to “question of ownership or title”.[ii] The essential condition to be met to seek relief through the Rent Authorities or the Rent Courts and Rent Tribunals is to have a rental agreement that is duly identified with a unique identification number by the Rent Authority set-up for a district under the Model Act.[iii]

An overview of the role to be played by the authorities/courts to be constituted under the Model Act is as tabulated below:

 

Matters related to the eviction of tenants are to be adjudicated upon by the Rent Courts, which may try and dispose off the matter based on the terms and conditions stipulated in the agreement entered between the disputing parties or on the basis of an application/documents made/placed before it.

Eviction of a tenant may be sought on the following grounds under the Model Act:

  • Non-payment of arrears of rent and other related charges for a period of two consecutive months despite being served a notice by the landowner as stipulated under the Model Act.
  • Abandonment of the premises (part or whole) by the tenant without the consent of the landowner.
  • Misuse of the premises includes the use of additional space by the tenant, causing damage to the premises, or carrying out activities that cause a public nuisance or are illegal.
  • Carrying out repair and alterations to the tenanted premises.[i]
  • Bonafide requirement by the legal heirs of a deceased landowner during the subsistence of the tenancy agreement.[ii]

It is noteworthy that the Model Act also provides for the interest of landowners who have let out vacant land as a part of the tenanted premises, to enable the landowners to undertake construction on the vacant land by causing severance of the vacant part of the land from the tenanted premises. In order to give effect to such severance of vacant land, the landowner may make an application before the Rent Court, if the landowner is unable to obtain possession of the vacant land from the tenant. The Rent Court may, on being satisfied with the willingness of the landowner to commence construction on the vacant land without causing undue hardship to the tenant, direct severance of vacant land or make other such orders that it may deem fit.[iii]

Restoring Value

The Model Act once again comes in as a tenancy reform with noble intent at a time when restoring the value of constructed properties that are vacant as a fallout of the current circumstances is vital for the recovery of the real estate market. While the applicability of the Model Act to the premises that have been trapped under old rental agreements and arrangements is subject to its enactment by the State, the assurance, that continues to gleam through is the balance that can be brought about by having a watertight rental agreement as per the Model Act. The Model Act accords primacy to the rental agreement executed between the landowner and tenant and strives to ensure its absolute enforcement.

Execution of new rental agreements pertaining to residential and commercial premises as per the provisions of the Model Act, as may be notified by the State government, will be the first step for landowners who seek better returns on their premises along with a more balanced set of landowner-tenant obligations. The challenge here remains to convince existing tenants to agree to the shift.

Taking a lesson from the quandary arising out of the existing rent control legislation, it is important that the implementation of the Model Act should be directed towards giving full effect to the balanced set of rights and obligations of tenants and landowners as currently envisaged therein. The pitfall to be avoided is the misuse of the autonomy given to the landowners and tenants while putting the provisions of the Model Act, that place reliance on the rental agreement to steer the course of the tenancy, into practice. It is only when the fine balance of responsibilities created under the Model Act are replicated in rental agreements, that the potential positive socio-economic impact of the Model Act will be of aid to the collective advancement towards the goal of ‘Housing for All’.

References

[i] Naresh Kamath, Maharashtra to Partially Adopt Central Model Tenancy Act, HINDUSTAN TIMES (June 3, 2021),
https://www.hindustantimes.com/cities/mumbai-news/maharashtra-to-partially-adopt-central-model-tenancyact-101622743211971.html.

[ii] The Model Tenancy Act, 2021, §40.

[iii] The Model Tenancy Act, 2021, §4(4)(a).

[iv] The Model Tenancy Act, 2021, §10.

[v]The Model Tenancy Act, 2021, §20(3).

[vi] The Model Tenancy Act, 2021, §32.

[vii ] The Model Tenancy Act, 2021, §35(7).

[viii] The Model Tenancy Act, 2021, §35(8)

[ix] The Model Tenancy Act, 2021, §38(3)

[x] The Model Tenancy Act, 2021, §37.

[xi]The Model Tenancy Act, 2021, §35(2).

[xii]The Model Tenancy Act, 2021, §21.

[xiii]The Model Tenancy Act, 2021, §22(2).

[xiv]The Model Tenancy Act, 2021, §27.

 

Image Credits: Photo by Sasun Bughdaryan on Unsplash 

 It is only when the fine balance of responsibilities created under the Model Act are replicated in rental agreements, that the potential positive socio-economic impact of the Model Act will be of aid to the collective advancement towards the goal of ‘Housing for All’.

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Income Tax Returns for AY 2020-21: Ready Referencer

With the extended time limit for filing of Income Tax Return (for AY 2020-21), u/s. 139(1), without late fees, for Non-Audit cases and for Non-Corporate assessees of 31st December 2020 fast approaching, given below is a quick guide for ready reference of some key changes that have been made in the respective Income tax return forms for this year.

Further, the conditions and features for eligibility of forms that are applicable for filing the correct income tax returns are also specified as follows:

Key Procedural Changes:

  • ITR 1 to ITR 4 can be filed using PAN or Aadhar by Individuals.
  • The submitted ITR forms display the ITR-V with a watermark ‘Not Verified’ until the same is verified either electronically by EVC or by sending the same via post after manual signing.
  • The unverified form ITR-V will not contain any income, deduction and tax details. The unverified form will only contain basic information, E-filing Acknowledgement Number and Verification part.
  • The unverified acknowledgement is titled as ‘INDIAN INCOME TAX RETURN VERIFICATION FORM’ & final ITR-V is titled as ‘INDIAN INCOME TAX RETURN ACKNOWLEDGEMENT’.
  • Return filed in response to notice u/s. 139(9), 142(1), 148, 153A, and 153C must have DIN.
  • There is a separate disclosure for Bank accounts in case of Non-Residents who are claiming income tax refund and not having a bank account in India.

COVID related Changes:

  • The Government had extended the time limit for claiming tax deduction u/CH VIA to 31st July 2020, and the details of the same need to be reported in Schedule DI (details of Investment).
  • The time limit for investing the proceeds or capital gains in other eligible assets, so as to claim exemptions u/s 54/ 54B/ 54F/ 54EC, had been extended to 30th September 2020.
  • Penal interest u/s. 234A @ 1% p.m., where the payments were due between 20-03-20 to 29-06-20 and such amounts were paid on or before 30-06-20, had been reduced to 75%, vide ordinance dated 31-03-20.
  • Period of forceful stay in India, beginning from quarantine date or 22-03-20 in any other case up to 31-03-20, is to be excluded, for the purpose of determining residential status in India.[1]

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Consequences of Late filing of Return of Income:

  • Late Fees u/s. 234F of INR. 5,000 up to 31.12.20 and INR. 10,000 up to 31.03.21. In case of total income up to 5 Lacs, the penalty is INR. 1,000.
  • Penal Interest u/s. 234A @ 1% per month
  • Reduced to 75%. vide Ordinance dated 31.03.20, where the payments were due between 20.03.20 to 29.06.20, and such amounts were paid on or before 30.06.20.
  • Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.
  • In case of a belated return, loss under any head of Income (except unabsorbed depreciation) cannot be carried forwarded.
  • Deduction claims u/s. 10A, 10B, 80-IA, 80-IB, etc would not be allowed.

Vide CBDT Notification dt 24.06.2020, no interest u/s 234A if Self-Assessment tax liability is less than 1 Lac and the same has been paid before the original due date.

  1. Section 5A: Apportionment of income between spouses governed by the Portuguese Civil Code.
  2.  115BBDA: Tax on dividend from companies exceeding Rs. 10 Lakhs; 115BBE: Tax on unexplained credits, investment, money, etc. u/s. 68 or 69 or 69A or 69B or 69C or 69D.
  3. Inserted in sec 139(1) by Act No. 23 of 2019, w.e.f. 1-4-2020:

Provided also that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year:

  • has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
  • has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
  • fulfils such other conditions as may be prescribed,

Shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.

4. Section 57: Deduction against income chargeable under the head “Income from other sources”.

5. Schedule DI: Investment eligible for deduction against income (Ch VIA deductions) to be bifurcated between paid in F.Y.19-20 and during the period 01-04-20 to 31-07-20.

6.High-value Transaction: Annual Cash deposit exceeding Rs. 1 crore or Foreign travel expenditure exceeding Rs. 2 Lakhs, Annual electricity expenditure exceeding Rs. 1 Lakh.
7.Schedule 112A: From the sale of equity share in a company or unit of equity- oriented fund or unit of a business trust on which STT is paid under Section 112A.

8. 115AD(1)(iii) proviso: for Non-Residents – from the sale of equity share in a company or unit of equity-oriented fund or unit of a business trust on which STT is paid under Section 112A.
9. Section 40(ba): any payment of interest, salary, bonus, commission or remuneration paid to a member in case of Association of Person (AOP) or Body of Individual (BOI).

10. Section 90 & 90A: Foreign tax credit in cases where there is a bilateral agreement; Section 91: Foreign tax credit in cases of no agreement between the countries.

[1] Circular No 11 of 2020 dated 08th May 2020.

References

Image Credits: Photo by Markus Winkler from Pexels

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2021 Budget Impact on the Real Estate Sector

The Real Estate Sector has received an undeniable boost with the recommendations of the Union Budget of 2021. Projects like ‘Housing for All’ and ‘Pradhan Mantri Awas Yojana’ (PMAY) have always received emphasis under the Modi regime. Through the changes proposed to be implemented by the Union Budget of 2021, it is clear that measures like the granting of tax holidays for affordable housing and tax exemptions in the interest of migrant workers with regard to rental housing projects point towards the priority that the housing and Real Estate Sector enjoy in the current Union Government’s policy and execution scheme.  

Considering the unavoidable and unforeseeable fiscal deficit that struck the economy with the onset of the pandemic in 2020; the Finance Ministry had to tread judiciously with limited room for any big announcements under the Union Budget of 2021.  

 

The main standpoint with regard to the Real Estate sector that was observed was the policy of the government to promote and facilitate ‘Housing for All’ which entailed prioritizing and increasing access to and affordability of housing.  

The Budget of 2021 allotted Rs. 54,581 crores to the Ministry of Housing and Urban Affairs. 

  
Here is what the Real Estate gained in the Union Budget of 2021 

 

Increase in safe harbour limit for primary sale of residential units 

  • The safe harbour limit for the primary sale of residential units has been increased from 10% to 20% in order to increase the incentivisation of Real Estate developers and home buyers. 

Incentivising Affordable Housing 

  • In an instance of taking up a loan to purchase a house; the government had already allowed, in its 2019 Budget; a deduction of interest rate that amounted to a monetary sum of around Rs. 1.5 lakh to increase affordability and purchasing power. 
  •  This deduction in interest rates for housing loans is proposed to be extended further for another year- till March 31, 2022 in the current Budget policy. This would mean that the deduction of Rs. 1.5 lakh will continue to be available for loans that are taken up in order to purchase houses at affordable rates till March 31, 2022.  
  • To further advance the procurement and supply of affordable housing, the current Budget also proposed a year-long tax holiday for affordable housing projects till March 31, 2022.  
  • With an unprecedented rise in the number of migrants all across the country due to the pandemic; Nirmala Sitharaman has also advanced the action of allowing for a tax exemption for notified “Affordable Rental Housing Projects” in order to facilitate and encourage the supply of Affordable Renting Housing to these migrant workers.  

REITs 

  • Further, the Budget has also encouraged debt financing of InVITs and REITs by Foreign Portfolio Investors by according relevant amendments to legislations. These amendments would facilitate ease of financing to InVITs and REITs, consequently promoting greater funds for the real estate and infrastructure sectors.  
  • The Finance Ministry also went a step further and suggested the provision of advance tax liability to arise only after the payment or declaration of dividend. This move is aimed to eliminate the uncertainty that arose with an estimation of dividend income by shareholders for paying tax in advance. Further, the Finance Ministry has also proposed that tax on dividend income may be deducted at the more beneficial treaty rate, for Foreign Portfolio Investors.   

Infrastructure Development 

  • The Budget has also allotted revenue towards the development of infrastructure around the country. 702 kms of conventional metro is already operational, added to another 1,016 kms of metros and RRTS that is under construction in 27 cities across the country. 
  • Metro rail systems and access will now be provided at affordable and decreased prices, to increase access through the development of two new technologies- ‘MetroNeo’ and ‘MetroLite’ in Tier-2 cities and certain areas of Tier-1 cities. This is expected to increase efficiency and safety. 

Construction workers 
 

  • With an increase in the importance accorded towards the unorganised labour sector, the Finance Ministry has further proposed to initiate and introduce a portal to collect information on construction-workers, buildings and gigs, particularly for migrant labourers. This will promote insurance, housing, health and food policies for these migrant workers. 

 

Analysis  

 

A close analysis of the afore-mentioned changes proposed by the Union Budget undeniably brings out the Government’s intention to assist, promote and facilitate development and growth in the real estate sector.  The focus laid by the Government on Affordable Housing and its policies will undeniably cause growth in this sector. Additionally, the infrastructure initiatives in the Budget are also extremely beneficial and will provide a huge boost to the sector, allowing its growth and subsequent development.  

However, the current Budget policies revolving around the real estate sector have failed to accord with the additional demand levels that were anticipated by the stakeholders of the industry in order to sustain the growing demand for housing. To facilitate growth, efficient execution and time-bound implementation are crucial. Persistent focus and attention according to the policy of ‘Minimum Government, Maximum Governance’ would promote the ease of doing business. The proposed level of expenditure on infrastructure by the Government on metro lines, roads, warehousing, ports, etc. is a move that is expected to give a boost to the economic GDP and hence, is commendable.  

Conclusion 

 

While the various measures proposed to be implemented in the real estate sector through the current Budget will positively impact an economy that is still grappling with the hit delivered by the COVID 19 pandemic, these changes and proposals also act as a mark of the industry’s transition from mere existence to actual growth. 

References 

1 Budget Speech | Union Budget. (indiabudget.gov.in) 

2 Budget 2021: Analysis. (freepressjournal.in) 

 

Photo by Fabian Blank on Unsplash

close analysis of the aforementioned changes proposed by the Union Budget undeniably brings out the Government’s intention to assist, promote and facilitate development and growth in the real estate sector.  The focus laid by the Government on Affordable Housing and its policies will undeniably cause growth in this sector. Additionally, the infrastructure initiatives in the Budget are also extremely beneficial and will provide a huge boost to the sector, allowing its growth and subsequent development.  

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Karnataka Land Reforms (Amendment) Act, 2020 to Promote Industrial Development?

Land plays a crucial role in defining the degree of Industrial Development in any state and Karnataka is no exception. Land acquisition process is one of the essential factors that contribute to industrial development and related investments.  The State Governments in India have been endeavouring and enacting a plethora of reforms easing the land acquisition process with an intention to attract major investments and in particular industrial development.

There has been a long-pending demand for land reforms in Karnataka from industry patrons. Industrialists have been raising concerns on issues/difficulties attached to the land acquisition process in the state. It has been a major cause for losing huge investment opportunities in Karnataka to other neighbouring states like Tamil Nadu, Andhra Pradesh, Telangana, and Maharashtra. It became a dire necessity for Karnataka Government to work on some land reforms so that the difficulties attached with the land acquisition process by the industrialists can be addressed and the State Government could compete with the neighbouring states in attracting industrial investments.

In appreciation of the current scenario and with a bonafide intention of easing land acquisition process in the state, the Karnataka Government has enacted the Karnataka Land Reforms (Amendment) Act, 2020 on 24th April 2020 (“Amended Act”).

The said amendment addresses certain issues embodied under Section 109 of the Karnataka Land Reforms Act, 1961 (“Act”), viz., deemed conversion with respect to the projects approved by the State High-Level Clearance Committee/ State Level Single Window Clearance Committee and alienation of the permitted land under Section 109 of the Act upon expiry of seven years from the date of the said permission. Accordingly, the following amendments have been effectuated to Section 109 of the Act under the Amended Act:

Section 109 (1) (i) of Act shall be substituted and amended as under: 

(i) industrial development, the extent of which shall not exceed forty units.

Explanation: ‘industrial development’ includes mining of minor minerals, whether specified or non-specified and stone crushing activity under the Karnataka Regulation of Stone Crushers Act, 2011 (Karnataka Act 8 of 2012).

Provided that in respect of Industrial Development, land to such extent approved by the Government with the approval of the State High-Level Clearance Committee/ State Level Single Window Clearance Committee under the Karnataka Industrial (Facilitation) Act, 2002 (Karnataka Act 45 of 2003) shall be deemed to have exempted by the Government from the provision of Sections 63, 79A, 79B and 80.”

Section 109 (2) the proviso shall be substituted and amended as under: 

 “Provided that, any company or organization after obtaining permission under sub section (1), purchases the land and if the company or organization after utilizing the land for not less than seven years for the purpose of purchase, does not continue to use the land due to various reasons, which are beyond its control, after seven years so permitted under rules from the date of such purchase, may on an application be permitted, by the Government, for sale of the land for the same purpose”.

Through the Amended Act, the Karnataka Government has boosted the investment channel for industrial development directing industrialists to approach Karnataka Udyog Mitra (KUM) under Karnataka Industrial (Facilitation) Act, 2002 for their respective projects so that they can avail the benefits of the deemed conversion.

Though the Amended Act endeavours to address issues related to the land acquisition process being faced by industrialists for causing industrial development in Karnataka, ambiguity remains as to what extent the Amended Act shall be able to achieve ease of land acquisition process for tangible industrial development in the state.

Consequently, except for the industrial project/s approved by the State High-Level Clearance Committee/ State Level Single Window Clearance Committee under the Karnataka Industrial (Facilitation) Act, 2002, issues relating to the land acquisition process for industrial development under Section 109 of the Act have not been specifically addressed and therefore the Amendment Act does not provide real reprieve/benefit to the industrialists aiming to invest in Karnataka. The Karnataka Government could have really eased the situation by enacting bold reforms than providing highly conservative and restrictive reforms and could have adopted the best practices from the neighbouring states to achieve an optimal result.

We hope that, in days to come, the State Government would address the pragmatic issues relating to ease of land acquisition process in Karnataka for industrial development and would be successful in attracting huge industrial investment for the benefit of the State.

 

Image Credits: Photo by samer daboul from Pexels

Though the Amended Act endeavours to address issues related to the land acquisition process being faced by industrialists for causing industrial development in Karnataka, ambiguity remains as to what extent the Amended Act shall be able to achieve ease of land acquisition process for tangible industrial development in the state.

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Concept Note on Force Majeure Event in light of the COVID -19 Pandemic

The term ‘Force majeure’ literally translates from French as ‘superior force’. It’s a common clause in legal contracts that allows either party to limit their liability in the face of some unforeseeable, extraordinary event. In English, the term is often used in line with its literal French meaning, but it has other uses as well, including one that has roots in a principle of French law. It is related to the concept of an act of God, an event for which no party can be held accountable.

The novel Corona Virus (COVID-19) pandemic prevalent across the globe has created considerable havoc and India is not an exception. COVID-19 is highly contagious in nature and it is transmitting from human to human like wildfire impacting millions of lives adversely.

Considering the gravity of this adverse situation and to bring it under control, the Central Government has imposed a nation-wide Lock-Down, wherein the mobility of all (Citizens, Resident Indians, Non-Resident Indians, Foreigners, immigrants, and so on) are restricted. Under this scenario, the questions before all landlords and tenants are whether this untoward and unprecedented situation would qualify as an irresistible force and fall under the category of a Force Majeure event? If so, what remedies do the landlords and tenants have in such an event?

There are a plethora of instances where epidemic/pandemic situations have been adjudged as Force Majeure events such as the Ebola epidemic in West Africa where it was declared a Force Majeure event for the purpose of continuing business operations and performing obligations of the concluded terms of contracts. Similarly, Courts in China interpreted the outbreak of Severe Acute Respiratory Syndrome (SARS) as a Force Majeure event where contracts could not be performed owing to the epidemic. Compared to them, the Covid-19 pandemic is much adverse in its impact as well as severity and has resulted in a global crisis. Hence, COVID-19 would most likely be listed as a Force Majeure event in India on demonstrating that the performance of a contract had become impossible during the existence of the pandemic and the consequent lockdown.

Contracts that have a Force Majeure clause that mentions an epidemic/pandemic situation would be governed by the terms therein i.e. the parties may seek amnesty under the Force Majeure clause. Similarly, in the event, a contract has the requisite Force Majeure clause embodied in it but explicitly excludes a situation like COVID -19 shall be dealt in accordance with the contract i.e. the Parties shall be disentitled from invoking COVID -19 as a Force Majeure event and seeking any reprieve out of it. However, in the event a contract does not contain a Force Majeure provision, the affected party may nevertheless be able to rely on the prevailing law. In this regard, it is crucial that we shall refer to Section 56 of the Indian Contract Act, 1872 and Section 108 (B) (e) of the Transfer of Property Act, 188.

The relevant portions of the aforesaid provisions are reproduced hereunder for ready reference: 

Section 56 of the Indian Contract Act 1872:

“56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void. —An agreement to do an act impossible in itself is void.” Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.1 —A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.2″ Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. —Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.”

This section incorporates the Doctrine of Frustration which deals with those cases where the performance of a contract has been frustrated i.e. the performance of obligations has become impossible due to any unavoidable reason or condition. The doctrine will apply where an unforeseen event either renders a contract impossible to perform or makes the outcome of the performance radically different from what was envisaged by the parties at the time the contract was formed. Although the frustration principle is subject to a very high threshold, it may be possible to envisage a range of factual circumstances in which COVID-19 and the ensuing governmental response measures could be construed as a frustrating event.

However, Section 56 does not ideate a situation wherein a Lessee is restrained to use a Demised Premise temporarily due to the occurrence of a Force Majeure event. The treatment of such a lease agreement (temporary frustration of the contract) will depend on the Court’s interpretation. It is therefore upon the Court/s to adopt a liberal interpretation of Section 56 to include the situation of temporary shutdown due to the current pandemic. Moreover, it would be to the benefit of the majority of the Courts in India to liberally interpret the Force Majeure clause as well as liberally apply Section 56.

One needs to understand that the COVID 19 situation being universal in nature, has made both the Lessor and the Lessee victims of the situation and led to cascading adverse impacts affecting both parties in the performance of their respective agreed obligations. Like the Lessee, the Lessor has the right to invoke Section 56 of the Contract for non-performance on his part due to frustration of the contract in the absence of a contract stating otherwise.

Besides the doctrine of frustration, one may also invoke Section 108 (B) (e) of the TP Act to a limited extent to cover COVID -19 situation as explained below.

Section 108 (B) (e) of the Transfer of Property Act, 1881:

“108. Rights and liabilities of lessor and lessee.—In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:—

(B) Rights and Liabilities of the Lessee

(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;”

Upon careful reading and strict interpretation of the foregoing provision, one will notice that Section 108 provides “other irresistible force” as one of the events qualifying as a Force Majeure event. If the Demised Premises becomes unfit to occupy (any material part of the Demised Premises be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let) due to the said event, the Lessee at his option can terminate the Lease Agreement without being liable to pay any damages/penalties.

Therefore, for application of the foregoing provision, a liberal interpretation of ‘other irresistible force’ would be required to cover the COVID-19 situation. Moreover, the application of the provision would depend on the demonstration of the effect the pandemic has on the property i.e. only if a situation arises consequently to the pandemic and the lockdown which destroys the Demised Property or renders it unfit for the purpose it was let, the provision would apply. Further, whether a situation where the Lessee is restrained to use the Demised Premises temporarily due to the pandemic and the treatment of such a lease agreement would entirely depend on the Court’s interpretation.

One needs to appreciate the fact that a contract concluded based on mutual agreements shall supersede the application of Section 108 of the TP Act. Accordingly, any contracts having the requisite Force Majeure clause embodied in them shall be dealt with in terms of the said contract. If the Contract provides for Force Majeure clause but does not specifically provide for COVID -19 situation, one has to rely on a liberal interpretation of the Force Majeure clause and examine whether one can conclude that the COVID-19 situation is implied in the Force Majeure clause provided in the contract. However, the impact of the Force Majeure event cannot be generalized and shall vary depending on the nature of the transaction and its impact on the same. The High Court of Bombay in its decision dated 8 April 2020, in the matter of Standard Retail Private Ltd Vs GS Corp & Others, dealt with the COVID-19 claim and held that Force Majeure cannot be invoked by the purchaser in making payments when the seller has performed its part of the contract.

One needs to bear in mind that the COVID -19 situation is absolutely unprecedented and unenforceable. We all need to accept the hard reality that the World is not the same as it was in December 2019. We are living in an arbitrarily changed scenario and we need to adapt accordingly to this new world order.

 

Image Credits: Anastasiia Chepinska on Unsplash

For the application of the foregoing provision, a liberal interpretation of ‘other irresistible force’ would be required to cover the COVID-19 situation. Moreover, the application of the provision would depend on the demonstration of the effect the pandemic has on the property i.e. only if a situation arises consequent to the pandemic and the lockdown which destroys the Demised Property or renders it unfit for the purpose it was let, the provision would apply

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Revenue Records Do Not Create or Extinguish the Title

With land or property related litigation accounting for two-thirds of all civil cases pending in the Indian courts, evidence to establish legal title has taken a centre stage. Conflicting laws, administrative incompetence, and a lack of awareness among the population is clogging the judicial pipeline. Courts have therefore been conferred with multiple opportunities to analyse the legal implications of the various documents involved in property transaction and an unwavering opinion on the lack of standing of ‘Revenue Records’ in an ownership claim has emerged.

Mutation Entry in the Revenue Records does not Create or Extinguish Title Over Land/ Property

In practice, often, in a dispute over title of a land/property, it is seen that the parties assert their title by placing reliance upon their name being reflected in the revenue records. On this point, recently, the Supreme Court, with characteristic clarity in Prahlad Pradhan & others Vs. Sonu Kumhar & others which was decided on October 16, 2019,[i] reiterated that the mutation entry in the revenue records does not create or extinguish title over the land, nor such entry has any presumptive value on the title of such land.

In reaching the above conclusion, the Supreme Court relied upon the following judgments:

  • In In Smt. Bhimabai Mahadeo Kambekar (D)Th. LR Vs. Arthur Import and Export Company which was decided on January 31, 2019[ii] as well as in Sawarni (Smt.) Vs. Inder Kaur[iii], the Supreme Court had held that the mutation of a property in the revenue record does not create or extinguish title nor does it have any presumptive value on the title. It only enables the person in whose favour mutation is ordered, to pay the land revenue in question.
  • In Balwant Singh & Anr. Vs. Daulat Singh (dead) by L.Rs. & Ors.[iv], similar observations were made by the Supreme Court, where it was held that a party is not divested of his title in the suit property as a result of mutation entry.
  • In Narasamma & Ors. Vs. State of Karnataka & Ors.[v], the Supreme Court reiterated the above position by observing that it is true that the entries in the revenue records cannot create any title in respect of the land in dispute.

Importance of Mutation Entries

In view of the findings of the Supreme Court in the present case, and as per the law already laid down by the Supreme Court, it is an inevitable conclusion that mutation entries in respect of any land on the revenue records do not create or extinguish title. What is then the need for mutation entries?

Mutation entries are maintained for fiscal purposes, to ensure that the land revenue is paid by the person whose name is recorded thereon. Although they are not a direct evidence of legal title, they nevertheless could be used for corroboration. Further, apart from assisting authorities in fixing taxpayer’s liabilities, they are of significance while resale of a property. Also, non-filing would attract penalties. Furthermore, the procedure, cost, and documents required while applying for mutation differ from state to state. States now provide for e-mutation services to ease the process.

Mutation entries are generally challenged on the ground that they were made surreptitiously or fraudulently or a sale deed relating to a particular transaction was fraudulently made and therefore void.

Difference Between ‘Revenue Records’ and ‘Title Documents’

Primarily, lands get transferred/conveyed from one person to another through a registered sale deed (a record of the property transaction between the buyer and seller). Other documents used to establish ownership include the record of rights (document with details of the property), property tax receipts, and survey documents. Hence, there appears two terminologies i.e., (1) revenue records of the land and (2) title documents which describes the owner of the property or land. To understand better “Revenue Record” is a generic expression that includes documents such as the Index of Lands, Record of Rights, Tenancy and Crops, Mutation Register, Disputed Cases Register, etc. It also includes geological information regarding the shape, size, soil type of the land, and economic information related to irrigation and crops. Whereas, a title deed/document talks about the rightful ownership of a person over a land. Apart from the ownership, title deed also speaks of the rights, obligations, and mortgage obligations of the owner.

Land Title is a document that determines the ownership of land or immovable property.  Having a clear land title protects the rights of the titleholder against other claims made by anyone else to the property.  In India, land ownership is determined through various records such as title documents that are registered and survey records issued by the Government. 

Currently, land can be transferred from one party to another through sale, gift, inheritance, mortgage, and tenancy. The Transfer of Property Act, 1882 provides that the right, title, or interest in immovable property (or land) can be transferred only by a registered instrument.  The Registration Act, 1908, is the primary law that regulates the registration of land-related documents.  Therefore, currently, all sale deeds/title documents relating to land or immovable property transfer are registered under the Registration Act, 1908. 

 

 

Reference 

[i]     2019 SCC Online SC 1416

[ii]   (2019) 3 SCC 191

[iii]  (1996) 6 SCC 223

[iv]  (1997) 7 SCC 137

[v]   (2009) 5 SCC 591

 

Sharon McCutcheon on Unsplash

“Revenue Record” is a generic expression that includes documents such as the Index of Lands, Record of Rights, Tenancy and Crops, Mutation Register, Disputed Cases Register, etc. It also includes geological information regarding the shape, size, soil type of the land, and economic information related to irrigation and crops. Whereas, a title deed/document talks about the rightful ownership of a person over a land. Apart from the ownership, the title deed also speaks of the rights, obligations, and mortgage obligations of the owner.

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Land Acquisition in India – A Tough Balancing Act

Sovereigns across the globe have relied upon the doctrine of eminent domain to acquire land for public use. Consent of those who own the land takes a backseat when the greater good is at stake. Guided by this utilitarian principle and to usher a sense of equality among the economically weaker citizens of this nation, ‘right to property’ was removed as a fundamental right through the 44th amendment. However, democracy demands people-pleasing and power mongers have to give in once in a while for a euphoric sense of justice to prevail. Consequently, the doctrine of eminent domain was balanced through the introduction of the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlements Act, 2013 (RFCTLARR Act). The act empowered central and state governments to acquire lands for the development of public good with ‘consent’.

However, acquisition of land comes under Schedule VII i.e. the concurrent list which means both state and central governments can devise laws under it. This provided scope for abuse by states which enacted similar laws on land acquisition suiting their specific requirements. While doing this, the states remained undeterred by ‘Article 21’ that ensures the right to personal liberty and dignity, thus clearly defying the ‘basic structure’ of the constitution. Further, land acquisition under the said state laws was in blatant violation of the requirement that central laws enacted on subjects under the concurrent list must take precedence over the state laws. Federalism in this regard didn’t favour the distressed population. This misuse of power has caused negative externalities to the marginalized populations and the role of the capitalist class and private players in connection to the political establishment has been visible. This paper seeks to examine the impact of the state legislation which has resulted in exploitative conditions and varying judgments by high courts across the country.

The 2013 Act and 2014 Amendment Ordinance

The reasons for the introduction of the RFCTLARR Act in 2013 included lack of standing for the people displaced, lack of participation in the acquisition decision, inadequate compensation, insufficient coverage of families affected by the acquisition, procedural delays, and inequities as well as non-use of the land acquired. To some extent, the new law acted as a huge relief for marginalized landowners but it did not go down well with the state governments or industry participants who started protesting against the cumbersome process and the acquisition cost that, according to them, would hinder developmental activities.

To plug the vehement protests, an ordinance was promulgated that substantially altered the provisions of the RFCTLARR Act by exempting five categories of projects from the consent and social impact assessment provisions i.e. defense, rural infrastructure, affordable housing, industrial corridors, and infrastructure projects including Public-Private Partnership (PPP).[i] However, the ordinance lapsed after a few re-promulgation and law to replace the ordinance has not and most likely would not see the light of the day due to the sensitive nature of the subject and intense contestations by the stakeholders. A Joint Parliamentary Committee (JPC) is now shouldering the responsibility of bringing about the amendments.

Dilution of Key Provisions by States

In the meanwhile, several states have already brought about changes through Rules under Section 109 of the Act or have enacted their own state-level land acquisition legislations. At least six state governments have enacted their own land acquisition laws by seeking Presidential consent using Article 254 (2) of the constitution. These new state laws directly adopt the amendments proposed by the 2014 land ordinance and exclude acquisitions for certain purposes from the purview of the central law. State-level rules are diluting the applicability of progressive clauses like prior consent, public hearings, or Social Impact Assessment (SIA).

In Jharkhand, the state rules reduce the quorum of the gram sabha consent to one-third from half as required in the central rule. In Odisha and Jharkhand, unused acquired lands are repatriated into land banks rather than returning it to the original owners as required by the central law. The Tamil Nadu law allows unused land to be taken for any other purpose, provided the District Collector certifies the same. State Rules are reducing the amount of compensation to be paid against acquisitions. In states like Haryana, Chhattisgarh, and Tripura the multiplying factor for rural land is fixed at 1.00 as against 2.00 as specified in the central law.[ii]

Judicial Developments

While the states have been busy bypassing the law, courts have had to deal with a bombardment of litigation requiring interpretation of key provisions of the RFCTLARR Act as well as determining the constitutional validity of the state enactments. Key pronouncements have been made with regards to Section 24(2) of the RFCTLARR Act which states that after initiating land acquisition for a project under the 1894 law if the physical possession has not been taken by the developer or the compensation not paid to the landowners for more than five years, the acquisition process would lapse. In such cases, the government would have to initiate fresh acquisition under the Act.

A three-judge bench of the apex court had held in Pune Municipal Corporation v Harakchand Misirimal Solanki that mere deposit of compensation in government treasury cannot be regarded as a payment made to the landowner and acquisition proceedings under the 1894 Act will lapse in such cases. The decision was overruled by another three-judge bench in Indore Development Authority vs Shailendra holding that deposit of the award in treasury should be regarded as payment to the landowner who is refusing to accept compensation. Following the contradictory stand, a bench has been constituted by the CJI to end the controversy and all compensation matters in land acquisition cases pending in high courts have stayed till the issue is settled.

In another stark turn of events, the Madras High Court declared as “illegal” the amendment made by the Tamil Nadu government to the Centre’s Land Acquisition Act, exempting three state legislations from its purview. The court said, “In order to revive these acts, the State must re-enact these statutes, in accordance with Article 254(2) of the Constitution of India and obtain the assent of the President. Merely, by inserting Section 105-A and the 5th Schedule, in the new Act, these impugned enactments do not get revived. Since this had admittedly not been done, the Acts remain repugnant, and Article 254(1) renders them inoperative.”

Alternative to Acquisition

As far as the issue of developmental activities being hindered because of difficulty in land acquisition is concerned, the centre should look at encouraging land leasing and land pooling as is already being practiced in Haryana and UP. In such arrangements, the landowner lends the land to the government for a steadily increasing rent, or through an annuity-based system or through land development by a government agency, it said. Under pooling, the group of landowners gives their land to a government agency for developing the land with infrastructure and amenities and later they get a part of it back in return.

Achieving a balance

While RFCTLARR has completed six years, it has brought in radical awareness among the advocates of fair acquisition. This has led to increasing land litigations and a gradual rise in the intervention by courts. The progress of RFCTLARR is instrumental in shaping economic revival considering India’s fluctuating growth rates in recent years. There are more than 13,000 cases of land acquisition pending in courts. This raises concerns about the efficacy of the Act and the recent amendments. A conducive relation between fair compensation and economic development is essential in achieving a balance to boost not only economic growth but to aid the overall development of the nation.

References: 

[i] Section 10A of the LARR Ordinance, 2014

[ii] https://cprindia.org/sites/default/files/working_papers/MAPPING%20DILUTIONS%20-%20Exec%20Summary.pdf

 

Image Credits: Nandhu Kumar on Unsplash

While RFCTLARR has completed six years, it has brought in radical awareness among the advocates of fair acquisition. This has led to increasing land litigations and a gradual rise in the intervention by courts. The progress of RFCTLARR is instrumental in shaping economic revival considering India’s fluctuating growth rates in recent years. There are more than 13,000 cases of land acquisition pending in courts. This raises concerns about the efficacy of the Act and the recent amendments.

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Housing Apartheid In Urban Areas: A Constitutional Challenge

“Excellent brand new 2bhk fully furnished flat, cross ventilation, natural light, cosmopolitan society, no Muslims; with car-parking, on immediate sale, 5th floor. If interested, pls call___” read the controversial 99acres.com advertisement for a flat in Dadar (East), Mumbai.[1] This generated a furore and resulted in the removal of the advertisement from the website and a statement from them claiming that they were opposed to any kind of discriminatory practice.[2]

 

 

Jayanagar is one of the largest residential areas in Bangalore. The population is mostly dominated by upper-class Hindus and is extremely notorious in its treatment towards Muslims and sometimes to Christians too, with respect to letting outhouses.[3] They mask their prejudice mostly in the garb of not letting houses out to non-vegetarians (which is problematic on its own). The tolerance level is higher for Hindu non-vegetarians (preferably non-SC/ST), then Christians, then SC/STs and then Muslims.

These incidents and many more in addition to them provide a propitious opportunity to discuss housing apartheid, which is not peculiar to a particular area or city. The examples stated above display instances of housing apartheid in most cosmopolitan cities in the country. They illustrate discrimination and prejudice, either overtly or covertly, and, in my opinion, are in direct violation of Article 15 of the Constitution of India[4].

The concept of housing apartheid is elucidated herein by first discussing the infamous Supreme Court case, Zoroastrian Co-operative Housing Society Limited v. District Registrar Co-operative Societies (Urban),[5] which allowed for setting up of segregated housing societies, and then proceed to evaluate the constitutional provisions in the context of right to housing, for Muslims in particular, and finally query into the feasibility of regulating the private sphere in this context.

 

The case

 

In the Zoroastrian Co-operative Housing Society Limited case,[6] members of the Parsee community established a housing society and limited membership to the co-operation, through a bye-law, only to persons belonging to that community. The Respondent applied to the society, seeking permission to demolish the building and use the space for construction of a commercial building. Permission was not granted as the bye-laws of the society did not allow for the use of the property for commercial purposes. Subsequently, when he applied for permission to construct residential flats to be sold to Parsees, he was permitted to go ahead. When he entered into negotiations with a builders’ association for sale of property, he violated the restriction placed upon him with respect to not allowing membership of non-Parsees in the co-operative society. The matter reached the High Court of Gujarat when the society challenged such a violation. The High Court rejected the claim of the society and held that restricting membership would amount to a violation of the right to property and Article 300A. Subsequently, the society went on appeal to the Supreme Court of India, wherein the claim was upheld and the court held that the bye-law was not in contravention with Section 4 of the Gujarat Co-operative Societies Act which laid down that any bye-law which contravenes public policy would not be recognised. The court’s understanding of this provision was that public policy has to be located within the confines of the Act and not look for constitutional principles or provisions unless explicitly provided by the Act.  This judgement also held that a co-operative society does not come under the fold of a ‘state’ under Article 13 of the Constitution of India[7] and accordingly, a fundamental rights challenge cannot be held valid as they are attracted only when a state action contravenes these rights.

This is an extremely verticalist interpretation of the Constitution[8] and potentially bad in law. By taking this approach, the court has completely disregarded the obligation of non-state actors in not violating fundamental rights. For example, Article 17 of the Constitution[9] would be rendered a toothless provision if it is not enforceable against non-state actors. Another example that is closer to the topic in discussion is the case of Vishaka v. State of Rajasthan,[10] wherein, the Supreme Court issued guidelines and norms to be followed in order to prevent instances of sexual harassment against women at workplaces. Observance of these guidelines would not have been effective if state actors were the only bodies expected to do so. Horizontal application of fundamental rights, i.e., a rights challenge enforceable against both state and non-state actors, was etched out clearly in this case.

 

Right to housing

 

The Supreme Court has endorsed a segregationist view by allowing community based housing, despite religion being an explicitly mentioned ground for non-discrimination.[11] The Indian society has undergone the trauma of partition, and in this framework, it is important and would be a highly mature approach if consideration is given to what it means for a minority community to practice, profess and propagate their religion, without having the fear of being discriminated against, and the degree to which the right to dignity may enable an individual or a group of persons to enjoy the right to freedom of religion without the expectation and fear of either implicit or visible manifestations of hate and incitement to religious hatred.

The ease with which the Supreme Court allowed for such a discriminatory practice based on a specified ground to pass gives a huge leeway for other discriminatory practices based on non-specified grounds to be carried out, such as refusing housing on grounds such as HIV status, sexual orientation, disability, language etc.[12]

 

What can be done about it?

 

The Justice Sachar Committee Report (Report on Social, Economic and Educational Status of the Muslim Community of India), 2006 was submitted by the expert level group set by the Ministry of Minority Affairs.[13] It was recommended by this report that an Equal Opportunities Commission (EOC) be set up to keep a check on discrimination against minorities. The Madhava Menon Committee was set up in order to examine and analyse the structure and functioning of the EOC. This committee proposed the draft EOC Bill in 2008.[14] The Union Cabinet on 20 February 2014 gave its nod to the setting up of this Commission.[15]

While this Commission seeks to make a paradigm shift in the way equality is understood in the traditional sense, it is also onerous on the Commission to not exclude the housing sector from its immediate scope. Several critics have opined that such an Act would pervade into the private sphere of the landlord with respect to the choices that he/she would want to make about who to let out the house to. However, with the horizontal application of fundamental rights, such a problem would not arise as a violation of Article 15 would be enforceable against a private party too.

In arguendo, if such an application of fundamental rights were not allowed then, such a restriction on the choice of the landlord should be considered as a reasonable restriction as a direct co-relation can be made to increasing ghettoization of certain communities due to the practice of housing apartheid.[16]

 

Conclusion

 

The Zoroastrian Co-operative Housing Society Limited case narrowed down the scope of constitutional interpretation. However, with the coming of the EOC, the right to housing has to be construed as a constitutional guarantee and only when this is done can the principle of minority protection, which is one of the foremost responsibilities of the Constitution, be said to have been achieved to an extent.

 

References:

[1] Saurabh Gupta, Mumbai: No Muslims, said online ad for a flat, NDTV, 8 November 2013, available at: http://www.ndtv.com/article/cities/mumbai-no-muslims-said-online-ad-for-a-flat-443130 (Last visited on 18 March 2014).

[2] Mumbai property broker posts online ad, says no to Muslims, IBN Live, 7 November 2013, available at: http://ibnlive.in.com/news/mumbai-property-broker-posts-online-ad-says-no-to-muslims/432717-3-237.html (Last visited on 18 March 2014).

[3] Zainab Bawa, The Shame of a Name, Kafila, 20 March 2009, available at: http://kafila.org/2009/03/20/the-shame-of-a-name/ (Last visited on 18 March 2014).

[4] Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth

(1) The State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them

(2) No citizen shall, on grounds only of religion, race, caste, sex, place of birth or any of them, be subject to any disability, liability, restriction or condition with regard to

(a) access to shops, public restaurants, hotels and palaces of public entertainment; or

(b) the use of wells, tanks, bathing ghats, roads and places of public resort maintained wholly or partly out of State funds or dedicated to the use of the general public

(3) Nothing in this article shall prevent the State from making any special provision for women and children

(4) Nothing in this article or in clause ( 2 ) of Article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes

[5] AIR 2005 SC 2306.

[6] Ibid.

[7] Laws inconsistent with or in derogation of the fundamental rights:

(1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void

(2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void

(3) In this article, unless the context otherwise requires law includes any Ordinance, order, bye law, rule, regulation, notification, custom or usages having in the territory of India the force of law; laws in force includes laws passed or made by Legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law or any part thereof may not be then in operation either at all or in particular areas

(4) Nothing in this article shall apply to any amendment of this Constitution made under Article 368 Right of Equality

[8] Ashish Chugh, Fundamental Rights: Vertical or Horizontal?, (2005) 7 SCC (J) 9.

[9] Abolition of Untouchability: Untouchability is abolished and its practice in any form is forbidden. The enforcement of any disability arising out of Untouchability shall be an offence punishable in accordance with law

[10] AIR 1997 SC 3011.

[11] Under Article 15 of the Constitution of India.

[12] Tarunabh Khaitan, Reading Swaraj into Article 15: A New Deal for all the Minorities, 2 NUJS L. Rev. 419 (2009).

[13] Justice Sachar Committee Report on the Social, Economic and Educational Status of the Muslim Community of India, available at: http://www.minorityaffairs.gov.in/sites/upload_files/moma/files/pdfs/sachar_comm.pdf (Last visited on 18 March 2014).

[14] Madhav Menon Committee Report on Equal Opportunity Commission: What, Why and How?, available at:  http://usindiapolicy.org/documents/inclusion/EOC-Report-MMA.pdf (Last visited on 18 March 2014).

[15] Govt clears Panel to check Discrimination against Minority, The Indian Express, 20 February 2014, available at: communitieshttp://indianexpress.com/article/india/india-others/govt-clears-panel-to-check-discrimination-against-minority-communities/ (Last visited on 18 March 2014).

[16] Rafiq Dossani, The Future of Indian Muslims, Stanford Journal of Muslim Affairs, available at: http://iis-db.stanford.edu/pubs/23275/2011Spring_Avicenna_DossaniRafiq.pdf (Last visited on 18 March 2014).

 

 

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The Zoroastrian Co-operative Housing Society Limited case narrowed down the scope of constitutional interpretation. However, with the coming of the EOC, the right to housing has to be construed as a constitutional guarantee and only when this is done can the principle of minority protection, which is one of the foremost responsibilities of the Constitution, be said to have been achieved to an extent.

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Squatter’s Right – Now A Shield and A Sword

Squatter’s Right i.e. Adverse Possession has often faced criticism for rewarding wrong-doers and assigning rights to usurpers. However, this age-old practice, based on the belief that “ownership” must belong to the person who made the best or highest use of the land, has stood the test of time. Since the concept has not been clearly defined in the statute, its development depends heavily on the equity and justice meted out by the courts under Article 27, 64 and 65 of the Limitations Act, 1963. In that direction, the Supreme Court has further solidified the position of the individuals nurturing the spirit of the land i.e. the possessors. The Court has now afforded them a sword i.e. the right to sue for protection of the property acquired through adverse possession.

In a landmark judgment, Ravinder Kaur Grewal v Manjit Kaur[i], the Supreme Court has held that any person who has perfected title by way of adverse possession, can file a suit for restoration of possession in case of dispossession. This means a person who has acquired right over a property as it was in his possession for 12 years can file a suit to reclaim it in case of forced dispossession by the original owner or any other party. The court observed that once the right, title or interest is acquired it can be used as a sword by the plaintiff as well as a shield by the defendant within the ken of Article 65 of the Limitations Act, 1963.

Resultantly, the decision of Gurudwara Sahab v. Gram Panchayat Village Sirthala[ii] and 

decisions relying on it in State of Uttarakhand   v.   Mandir   Shri   Laxman   Sidh   Maharaj[iii] and Dharampal (Dead) through LRs v. Punjab Wakf Board[iv] were declared incorrect and therefore overruled. Consequently, the idea that the plea of adverse possession can be raised only by way of defence does not hold water anymore.

 

 

Question of Law

 

Whether a person claiming the title by virtue of adverse possession can maintain a suit under Article 65 of Limitation Act, 1963 for declaration of title and for a permanent injunction seeking the protection of his possession thereby restraining the defendant from interfering in the possession or for restoration of possession in case of illegal dispossession by a defendant whose title has been extinguished by virtue of the plaintiff remaining in the adverse possession or in case of dispossession by some other person ? Whether Article 65 of the Act only enables a person to set up a plea of adverse possession as a shield as a defendant and such a plea cannot be used as a sword by a plaintiff to protect the possession of immovable property or to recover it in case of dispossession? Whether he is remediless in such a case? In case a person has perfected his title, based on adverse possession and property is sold by the owner after the extinguishment of his title, what is the remedy of a person to avoid sale and interference in possession or for its restoration in case of dispossession?

 

Observations and Verdict

 

The Court held that a person in possession cannot be ousted by another person except by due procedure of law and once 12 years’ period of adverse possession is over, even owner’s right to eject him is lost and the possessory owner acquires right, title and interest possessed by the outgoing person/owner as the case may be against whom he has prescribed. Moreover, in case of dispossession by another person by taking law in his hand a possessory suit can be maintained under Article 64, even before the ripening of title by way of adverse possession. By perfection of title on extinguishment of the owner’s title, a person cannot be remediless. In case he has been dispossessed by the original owner after having lost the right by adverse possession, he can be evicted by the possessor by taking the plea of adverse possession.

 

In Gurudwara Sahab v. Gram Panchayat Village Sirthala (supra), the Apex Court had opined that no declaration of title could be sought by a plaintiff on the basis of adverse possession in as much as adverse possession can be used as a shield by a defendant and not as a sword by a plaintiff. However, the court clarified that the present issue was not extensively contested in that case and only a passing observation had been made which was palpably incorrect.

 

Further, in Bhim Singh & Ors.[v] where a suit for declaration and injunction claiming ownership had been filed based on adverse possession, the Punjab & Haryana High Court had held, relying on the language of the IIIrd column of Article 65, that the plea of adverse possession was a defence available only to a defendant. The Apex Court has now clarified that the conclusion of the High Court based on the inferential process was not permissible as the language of Article 65 nowhere barred the perfection of title by way of adverse possession whether a person was suing or being sued.

 

In Article 65, a suit “for possession of immovable property or any interest therein based on title” has been used. “Title” could be perfected by adverse possession, as has been held in a catena of decisions. Further, there was a conferral of right by adverse possession.

Similarly, in case of infringement of any other rights, a plaintiff who has perfected the title by adverse possession, can sue to question alienation and attempt of dispossession. 

 

Adverse Possession of Public Property:

 

Considering the law of adverse possession as has developed vis-à-vis property dedicated to public use, Courts have been loath to confer the right by adverse possession. There are instances when such properties were encroached upon and then a plea of adverse possession was raised. Hence, for properties dedicated to public cause, it is made clear in the statute of limitation that no rights can accrue by adverse possession. 

 


Elements of Adverse Possession Reiterated in the Decision:

 

  • Adverse possession necessitates all the three classic requirements to co­exist at the same time, namely, nec ­vie. adequate in continuity, nec ­clam i.e., adequate in publicity and nec­ precario i.e. adverse to a competitor, in denial of title and his knowledge.
  • Visible, notorious and peaceful so that if the owner does not take care to know notorious facts, knowledge is attributed to him on the basis that – but for due diligence he would have known it.
  • Adverse possession cannot be decreed on a title which is not pleaded.
  • Animus possidendi under hostile colour of title is required[vi]
  • Trespasser’s long possession is not synonym with adverse possession. The owner can take possession from a trespasser at any point in time.
  • Adverse possession is heritable and there can be tacking of adverse possession by two or more persons as the right is transmissible one. However, a trespasser cannot tack adverse possession of earlier trespasser.[vii]
  • Possession is the root of title and is right like the property. Possession confers enforceable right under Section 6 of the Specific Relief Act. What can be prescribable against is limited to the rights of the holder.

 

The Way Forward

Although the concept of adverse possession has been lambasted time and again[viii] for being archaic and misused, efforts to eliminate it have not seen the light of day. To consider whether the time had come to repeal it, a questionnaire cum consultation paper[ix] had been issued by the Law Commission in 2012 but no recommendations have been made to date. With this latest decision, the right of possession has been reinforced and neglect of property has been reprimanded. Although, in line with the principle behind the law, this may open floodgates for litigations demanding rights of adverse possession that was not an option earlier. With the changing times, it is important that the concept is revisited by lawmakers and at least the time needed to gain the right through possession be increased to a minimum of 20 years. This would rest the opposition to some extent as it would impose an increased commitment to the property at issue and grant more time to the original owner to make a claim.

References:

[i] C.A No. 7764 of 2014, 07-08-2019 SC

[ii] (2014) 1 SCC 669

[iii] (2017) 9 SCC 579

[iv] (2018) 11 SCC 449

[v] AIR 2006 P H 195, (2006) 144 PLR 159

[vi][vi] Bhimrao Dnyanoba Patil Vs State of Maharashtra, 2003 (1) Bom. L.R. 322; 2003(1) All MR 565; 2003 (2) LJSoft 131

[vii] Gurbinder Singh & another Vs. Lal Singh & another (AIR 1965 SC 1553)

[viii] Hemaji Waghaji v. Bhikhabhai Khengarbhai Harijan & Ors., (2009) 16 SCC 517 And State of Haryana v. Mukesh Kumar, (2011) 10 SCC 404

[ix] http://lawcommissionofindia.nic.in/reports/Adverse%20Possession.pdf

 

 

Image Credits: Photo by Bonnie Kittle on Unsplash

Although the concept of adverse possession has been lambasted time and again for being archaic and misused, efforts to eliminate it have not seen the light of day. To consider whether the time had come to repeal it, a questionnaire cum consultation paper had been issued by the Law Commission in 2012 but no recommendations have been made to date. With this latest decision, the right of possession has been reinforced and neglect of property has been reprimanded.

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