The Constitution of India authorises both the central and the state legislatures to enact laws regarding the transfer of property (except agricultural land, which lies in the exclusive domain of the respective states). The state government maintains the land records showing the name of the person responsible for paying taxes, usually the owner of the land. However, at times the land may be transferred without the records being updated, and so they may not always correctly reflect the ownership of land. Further, the time lag between initial registration and subsequent amendments may give rise to fraudulent transactions. The Supreme Court has also held, on several occasions, that entries in revenue records have only a fiscal purpose and no ownership can be conferred on the basis of such entries. It is also pertinent to note that the registration of documents in relation to immovable property does not itself guarantee title to land. The lack of a coherent system in India has therefore resulted in uncertainty in ascertaining the rightful owner of land.
In Australia, there is a system called the Torrens system, based around a central registry, whereby all transfers of land are recorded in the register, which is maintained by the government. Most importantly, the owner of the land is established by virtue of his name being recorded in the government’s register. The Torrens system has done away with the need for a chain of title (ie tracing title through a series of documents). Each parcel of land is given a separate folio in the register and is identified by reference to a registered plan. The folio records the dimensions of the land and its boundaries, the names of the registered proprietors and any legal interests that affect title to the land. There is also provision for compensation if incorrect entries in the register lead to losses. Similar systems have also been adopted in countries like England, Ireland, New Zealand, Canada, Malaysia, Kenya and certain states of America.
In India, there have been some moves by the central government towards guaranteeing title to land, namely the Computerization of Land Records (CLR) and the Strengthening of Revenue Administration and Updating of Land Records (SRA & ULR) schemes. The CLR scheme was started in 1988 with the objective of computerising management of land records in the country and has been successfully implemented in states like Delhi, Haryana, Karnataka, Madhya Pradesh and Maharashtra. The SRA & ULR scheme was started at the same time to systematically maintain land records in sync with ownership changes and the implementation of rural development programmes for effective enforcement of land reforms. Recently the cabinet has approved the National Land Records Modernization Programme (NLRMP), while also merging the CLR and SRA & ULR schemes to computerise the land records and registration process and update survey and settlement records. The Union Urban Development Ministry has also suggested that state governments should implement a system of title insurance, similar to those prevalent in western countries. Such a system would insure the title of the land against any defects in the system.
Certain states in India are considering formulating and implementing a law to guarantee land titles. The Rajasthan government is set to introduce the Rajasthan Urban Land (Certification of Title) Act. Once this Act comes into being, provisions will be made whereby the relevant authority would guarantee land titles when a property changes hand. Further, in the event of a dispute where a buyer gets cheated by the seller, provisions to provide full compensation to the buyer will also be incorporated. Initially, only provisional titles would be given but after a two-year tenure, permanent titles would be issued. On the same lines, the Delhi government is in the process of drafting the Delhi Urban Property Registration and Titling Bill to provide greater transparency and accountability in property transactions.
More states should enact laws to guarantee land titles. Once implemented, the requirement of verification of past title transactions would take a back seat and title certificates would become conclusive proof of ownership. This would also result in a revival of interest among foreign investors entering the real estate market in India, as there is currently a risk associated with real property, due to inconclusive land titles. Further, the implementation of the system of title insurance in India should lead to renewed confidence among buyers. Such steps towards land reforms in India would help to reduce litigation caused by inconclusive land titles.
The views expressed in this article are those of the authors and are not intended to represent the views of the firm.
By Mrinal Kumar, principal associate and Shruti Garg, associate, Amarchand Mangaldas.
E-mail: mrinal.kumar@amarchand.com;shruti.garg@amarchand.com.
