This article has been written by Ms. Kashvi Rajvansh, a first-year student of LC1, Faculty of law, Delhi University, Delhi.
ABSTRACT:
In this article we will understand what a company is under the companies act, what are real estate transaction, how are they governed, what is a contract and what are the legal aspects in corporate real estate transactions.
INTRODUCTION:
The Companies Act, 2013 is what governs the formation as well as functioning of each company thus established. The contracts in India on the other hand are governed by the Indian Contract Act, 1872. The provisions of Companies act also include various other companies such as banking companies, insurance companies, companies dealing in electrics as well as any other corporate body. The real estate corporate transactions, when performed by a company would cone under the pursuit of corporate body as mentioned under the companies act. Additionally, the term transaction in real estate transactions is what would require the fulfilment of clauses and conditions under the Indian Contract Act, 1857.
BODY:
The provisions of the companies act applies to any company that has either been formed by that act or any previous existing act. To understand the details of it better, let us first understand the basics of how a contract is set forth. The basic ingredients of a contract include offer and acceptance. There have been case laws explaining the difference between invitation to offer as well as offer in general. The process of a contract is that an offer is made which is then accepted by the other party. In this acceptance there is a consideration to form a legal obligation. When the acceptance is made, it turns into a promise and when the elements of consideration as well as enforceable by law is there, it turns into a contract.
To understand the legal concepts of a corporate real estate transaction, let us first understand what real estate transactions are and how they are governed. In India all real estate transactions are governed under Real Estate Regulation and Development Act, 2016. According to this Act, real estate project means any kind of building or apartment or a plot of land on which building is constructed. It also includes common areas, development works, also plots. It additionally includes parts of plots that are used for selling or for building apartments or conversion of existing building into apartments. The act also discusses how regulations means any regulations which are established under that law.
What is a corporate body in reference to real estate?
A corporate body in such a case means any corporate body that has been established under the rules of companies act and has its model set up on real estate. They have a number of members that can also be called brokers who are involved with the company. The landlords set up a deal with brokers to be able to get tenancy in cases of renting out or selling a house. In cases of plots or entire apartments, such contracts are made with builders or with individual other contractors who then fulfil the conditions of the contract.
What is a real estate transaction?
A real estate transaction is one where the selling, purchasing, renting or sub-letting of building, apartments or plots are done. Such transactions are often done by companies or corporate bodies as described above and are made with individuals or other companies.
What are the legal aspects involved in real estate transactions?
Now that we have discussed the pre-requisites, the legal aspects that govern a corporate real estate transaction included fulfilling the terms of the following:
- Fulfilling the criteria under companies Act:- The companies act lays down provisions for formation of a company. In Addition to that, Schedule VI of the act talks about real estate transactions. It states how in the said act, industrial projects include real estate development, which includes industrial parks or special economic zones.
- Fulfilling the criteria of Contract Act:- Every transaction in India is a process of buying and selling. In such a case the contract act plays the most essential role as the intention to sell creates an intention to buy which results into a legal obligation as far as real estate or immovable properties are concerned. In such a case all clauses which are deemed valuable to form a contract are to be fulfilled for the transaction to have successfully taken place.
- Fulfilling criteria of real estate development act:– Every real estate from buildings to plot most foremost fulfil the criteria of real estate development act. Every real estate must be registered with the said act.
- Fulfilling criteria of transfer of property act:- “To transfer property” is the act of carrying out a “transfer of property,” which is defined as an act by which a living person conveys property, now or in the future, to one or more other living persons, or to himself, [or it himself], and one or more other living persons. The term “living person” in this section refers to a business, association, or body of people, whether or not they are incorporated. However, nothing in this section will alter the current laws governing the transfer of property to or by companies, associations, or bodies of people.
- Fulfilling criteria under the Indian stamp act:- According to this act, real estate papers in the case of a transaction have to be stamped and legally advocated by the government of India. In doing so, the government shall levy taxes which would be paid by the corporate body that is performing or getting such real estate transaction verified.
- Fulfilling the criteria of the registration act:- According to this act, after the registration of a real estate, if one gets involved in its selling or purchasing of such real estate, then the documents created for this valid contract must also get registered under the registration act. This happens on certain amount of the property. The evaluation price of the property then further requires a stamp.
A few cases in this light are:
SUNIL GOEL & OTHER PETITIONERS VS. THE STATE AND ORS. S
In the following case, the issue was that the Government of Delhi wanted to acquire the land in question for public purpose, namely, Rohini residential scheme. The court had initially referred to section 6(1) of land acquisition act, and had stayed the order. A civil suit was then filed. The Constitutional bench later realised that issuance of the notification was done way after the stipulated time of one year. The bench thus proceeded and the counsel appearing on behalf of the petitioners cited the case of Padmasundara Rao vs. State of Tamil Nadu. The supreme court also noticed that a similar stand was taken in the case of Oxford English school vs. State of Tamil Nadu. The judgement of the case was decided in the favour of the petitioners.
M/S M3M INDIA PVT. LTD. & ANR vs DR DINESH SHARMA & ANR :
The case involved the question of whether the proceedings under Consumer Protection Act can run concurrent to proceedings under Real estate regulation act. The NCLT had already decided the ratio of such a case under Ajay Nagpal v. Today Homes and Infrastructure Private Limited. The Supreme Court however had decided a similar case under Pioneer Urban Land and Infrastructure Limited and Another v. Union of India and Others where it held that allotees of flats can claim reliefs under Consumer protection Act, Real estate regulation act as well as insolvency and bankruptcy code.
GETAMBER ANAND & ANR. vs ANIL KUMAR SAHA:
The case revolves around the shares and the monetary value. The background of the case is that Anand, Saha and Ashwani Talwar had founded the ATS group together in the year 1998. They all held shares in the company. According to the Memorandum of Understanding of the company as signed by the parties, the parties had to make their best effort and pay a sum of 150 crores to the exiting party. The findings and judgements of the Arbitral Tribunal was looked into. The court realised that the petitioners under the clauses of The Memorandum of understanding had not fulfilled their obligations. The transfer of additional shares of the ATS was under the control of the petitioners and yet they could not find someone who they could transfer the shares to. It also stated how under clause 4 of the MoU, it wasn’t mentioned that the burden of such transfer of shares would be contingent upon the respondent. The MoU also mentioned under clause 6, how, if despite their best efforts, the shares are not transferred then to compensate for the 150 crores, the respondent would be entitled to sell the shares. The court thus found that the petitioner had breached the MoU.
CONCLUSION:
In this article we have observed how one has remedy for all rights granted to us by the government. Each matter of a real estate comes under the clauses of the real estate regulation and development act. In case of a transaction made in such matters, every such matter has rights under various other established acts such as the Companies act, in case when a company is performing such real estate transactions. Other acts include getting remedies under the Indian contract act, the transfer of property act and as additionally observed by the case laws, the consumer protection act and also the insolvency and bankruptcy code.
References:
The companies act, 2013
The Transfer of property act, 1882
The real estate (regulation and development) act, 2016
The Indian contract act, 1872
The Indian stamp act, 1899
Blogs and articles referred:-
Real Estate Transactions in India: Legal Procedures and Due Diligence written by admin of docsplanner. The link for the same is
Due diligence for real estate M&A transactions in India written by AZB & Partners on lexology website. The link for the article is
Understanding the legal aspect of a real estate contract written by your legal coach on their website. The link for the article is
Cases referred:-
SUNIL GOEL & OTHER PETITIONERS VS. THE STATE AND ORS. S, 2014 civil appeal no. 3513/2007
https://www.casemine.com/judgement/in/56e66a69607dba6b53436363
M/S M3M INDIA PVT. LTD. & ANR vs DR DINESH SHARMA & ANR , 2019 SCC 343
https://indiankanoon.org/doc/138563482/
GETAMBER ANAND & ANR. vs ANIL KUMAR SAHA, 2018 DEL84
https://indiankanoon.org/doc/133555622/