The flat we are buying (Mumbai, Maharashtra) is co-owned by two brothers, one of whom is an NRI and lives in Dubai. The stamp duty and registration (3% total) for this deal was completed on March 22, 2021. The sale agreement is pending to date (July 7, 2021) because the NRI brother has failed to provide details for filing of TDS. Initially the brothers wanted us to not file NRI TDS since the NRI TDS is way higher (~20%) than non-NRI (1%) TDS but we refused to do so since it is illegal. After this, the brothers applied for a lower TDS certificate to avoid paying higher TDS upfront. They are expecting the reduced certificate to have ~3% TDS. They have said that if TDS is more than 3%, they will either cancel the deal or require us to pay the TDS. We have said that we will consider paying a fraction of that amount once the certificate is produced. However, the lower TDS certificate has been pending for 2+ months now and this deal has been stuck. Within ~15 days from today (on July 23, 2021), we will reach the 4 months mark after completion of stamp duty and registration beyond which I believe there is a penalty if the sale agreement is not signed. We informed the brother about this but they don’t care about the penalty and their reply was that “they are also losing money since the house has not been rented for the past 2 months and we must repay them for loss of a few months of rent if this deal doesn't go through". The brothers have taken a 7L deposit from us (paid via cheque) as a token amount for this deal. Since both parties are frustrated with this deal, we had mutually agreed to cancel this deal on 1st July with the brothers giving us a 1 month post dated cheque worth 7L. We wanted a 1 week post dated cheque but all lawyers recommended that we get any date cheque and try to settle this out of court. We sent the owners a cancellation MOU within 2 days which stated that the deal is being cancelled because of delay in producing TDS certificate for the sellers but they refused to sign on it saying that it should state that buyers are responsible for cancellation since sellers have to file for NRI TDS reduction certificate because of us, which again makes no sense. My guess is that they are thinking if buyers are cancelling the deal then they don’t have to return the token amount. I am convinced that they are not going to sign a cancellation MOU or return our token. I want to avoid going to court but soon there may not be a choice. I wanted to get advice on a few things: 1. What is the exact penalty if the sale agreement is not signed within 4 months of stamp duty and registration. In this case, who is liable to pay that ? 2. Should we wait for a few more days for the lower TDS certificate ? I don’t want to do this deal but looks like if I back out of the deal, I might have to go to court to get token back which can take years. 3. If we go to court, do we need proof why the deal is stuck (delay in buyers lower TDS certf)
Wait for few days for lower TDS certificate
2) if you go to court you have to prove why deal is stuck
3) since buyer refuses to refund your money you have no option but to take legal proceedings FD to recover your earnest money
4) maximum penalty is 10 times the registration charges.payable by purchaser
Hello,
Dear Sir,
1. If it is not done within four months, a grace period of another four months is allowed on payment of a penalty. A maximum penalty of 10 times the registration charges may be levied by the registrar. The liability to pay the stamp duty as well as the registration charges lies with the purchaser of the property.
2. It is best you wait for a few more days to lower the TDS certificate. You may try solving the method amicably through alternate dispute resolution
3. YES, IT IS VERY IMPORTANT TO RECORD SUCH A PROOF, as that will give you an upper hand.
4. It is unfair on their part to keep the token amount and they must return it
Thank you
God Bless
1. How could you pay the stamp duty without executing a document and not registered.
Well payment of stamp duty is a different subject to that of the registration of a document.
If a document has been executed, it is pertinent that the same should be registered within four months from the date of execution.
You say that you have not even entered into a sale agreement, then where is the question of paying the stamp duty and what is the purpose of paying the stamp duty.
Agreements being the soul and heart of businesses, need to be enforceable by law. They will be enforceable by law if they satisfy the provisions mentioned under the Indian Stamp Act, 1899 read with the Registration Act, 1908.
2. You do not have to wait for the said certificate, you can very well deduct the tax at source at the time of settlement of the sale consideration amount as per the applicable rate.
The seller being a NRI cannot ask you to wait or deduct a lower amount or put pressure on you to return the part of the amount, you can cancel the MOU and issue a notice to this effect with a demand to return the booking amount with interest from the date of payment.
3. You can cancel the MOU by issuing a legal notice and demand the refund of the booking amount within a time stipulated in the demand notice, if he fails to comply with the demand, you may cite that as a reason in the money recovery suit proposed to file.
The sellers appear to be at fault
Even if a higher TDS is deducted it's not that that money is lost
The seller can always claim a refund from the IT department
The seller's argument that they have lost rent for 2 months is also preposterous
They are already sitting with your 7 lacs deposit and earning interest on it and they have not taken any prompt steps to get the certificate for reduced TDS
You will have to file a suit for avoidance of contract and for refund of your 7 lacs with damages and compensation
I presume what has been registered is an agreement to sell and what is pending is a sale deed and not a sale agreement. There is a world of difference between the two
If the agreement to sell is registered and if a cancellation deed is not registered then the brothers will not be able to resell their property
Also when the brothers cannot pursue refund of the TDS from IT, its highly unlikely that they will also file any suit for specific performance against the buyer
As there is a deadlock there is no way out but to file a suit.
May be on receiving the court summons with the suit papers the brothers would come in line and settle the matter with you amicably
If a suit is filed and when there is an agreement for sale which is registered and not cancelled, then the brothers are essentially locking up their property in dispute, which would be quite foolish as no purchaser will then put their hands in such a property
So the way out is to incur some expenses and file a suit to avoid the contract as above and see how it pans out
Begin with a legal notice
Small correction - we have paid the registration and stamp duty (on 22nd March) since the government had reduced the fees for the same but the execution has not been completed. Currently we only have the MOU for sale stating the terms and conditions for the sale deed on a 100 Rs E-stamp paper but this document is not notarized / registered. This MOU also has the receipt stating that we have paid 7L with the cheque details. I wanted to know what evidence(s) is acceptable in court to prove that the delay is caused due to the failure to produce lower TDS certificate. Can we record audio calls or gather whatsapp conversations ? The sellers are cunning in that they never reply to emails and rarely reply to whatsapp texts but we can try recording audio conversations. Not to mention, they refuse to sign any kind of documents at this point.
the MOU without notary is valid
all whatsapp conversations, email correspondences, verbal/oral communications can be used as evidence
audio recordings is also proof
Terms of MOU are binding upon parties
2) on basis of MOU you can file suit for specific performance todirect seller to execute registered sale deed in your favour
3) you can issue legal notice to seller that deal is stuck because of failure to obtain lower TDS certificate
You have to issue a legal notice to the seller stating that since he has delayed production of the required document, i.e., the Lower TDS certificate, the deal of execution of sale could not be done by the seller, hence you,may communicate your decision to cancel the MOU towards the proposal to buy this property and demand refund of the amount received by them towards booking amount with interest.
This legal notice will serve you the purpose of evidence for recovery of your booking amount for which the MOU stands as a receipt which is legally valid and acceptable by court to permit you to file the money recovery suit.
Dear sir,
1. You can file legal notice to the seller regarding the default in production of the Lower TDS Certificate.
2. Also you can issue for specific performance of the contract according to the MOU
3.yes all the conversations on WhatsApp and calls can be utilized as evidence
Thank You
- You should issue a legal notice to the seller and ask for refund of double amount paid by you as the agreement date is already passed due to their fault of TDS reasons.
- Further, if no response then file a suit for specific performance before the court for getting direction to execute the sale agreement in your favor of to get the refund of the amount with interest.
- Further, a MOU is a statement of understanding between two or more parties which when made has no enforceability in the eyes of law , as such an agreement has no intention to create a legal bond between such persons.
- But , when an MOU has been made as per section 10 of the Indian contract Act, then it is a valid agreement.
- Further , no stamp duty is required on MOU, but if the MOU for an agreement to purchase immovable property worth more than Rs. 100/- , then it is mandatory to be registered and stamped .
- Further, if the MOU contains its expiration , then it lost its value , otherwise , the limitation period to challenge an MOU is 3 years from the ate of its execution .
