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The under-valuation extortion racket

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Written By murali772 - 12 July, 2010

Bangalore governance Corruption Real Estate property

My flat, part of a multi-storied complex of 124 flats, located in Koramangala, was registered on 16/02/05. From about a year after registration, many of us owners started receiving notices from the 'under-valuation cell' of the Dept of Revenue, GoK, alleging under-valuation in the assessment of stamp duty payable. Even as our Association, headed by me in the capacity of the President, was trying to figure out as to how to handle the matter collectively, many lawyer-brokers started approaching us with packaged deals to 'sort out' the issue, a typical offer quoted being for totally Rs 21,000/- per owner. Of this, Rs 7,000/- was to be made out to the government by DD, and the remaining Rs 14,000/- was to be paid to the lawyer-broker in cash, of which Rs 7,000/- was supposed to be for the government officials involved. The association took the stand that if the demand had any merit, the members will pay the entire amount by DD, but to the government only, and perhaps some nominal costs to the lawyer.  

The lawyer-brokers and the government officials were obviously not agreeable to this, and official reminders started coming, causing some panic amongst the members.

At this stage, I contacted the Coalition Against Corruption (CaC - http://pac-cac.kiirti.org/), a help-desk set up by the Public Affairs Centre (PAC), Bangalore. The CaC put me in touch with Mr A Ravindra, IAS (retd), who was then a Director of the Centre, who, in turn, put me on to Mr Arvind Rishbud, IAS, the then Secretary, Revenue Department, GoK. Mr Rishbud went into the merits of the case, and asked us to ignore the notices, while simultaneously taking action against some of the official involved. We had heard that a certain Mr Mehboob Khan had been suspended.

Meanwhile, in two other complexes, completed around the same time, the associations decided to go by the 'settlement' route, and collectively paid up close to Rs 80 lakhs, two-third in cash of course. When some owners very righteously refused to pay the lawyer her (a lady) fee in cash, she offered them the option of paying by cheque but after adding some 33% to cover the taxes leviable.

The PAC decided to celebrate this 'victory', and felicitated me (and another gentleman for some other similar deed) at a public function, with the founder-director, Dr Samuel Paul, himself handing me a memento of a Sheaffer's pen, which I proudly carry with me all the time. Reading about this in the press, a flat owner in one of the complexes which had followed the 'settlement' route, but who had refused to toe the association line, called me to congratulate, as also to tell the story of what went on there. Apparently, he as well as a few others, got away scot free. Or, at least that was the position there at that stage.   

The matter was forgotten thereafter upto about a year later, when our members again started receiving notices, all very similarly worded and all pre-dated, in a kind of a 6-month periodic exercise, with some 10 to 20 of them being targeted at random each time. Strangely, I wasn't amongst the recepients of the notices, though in the earlier rounds, I had also been included.

After ignoring the notices for some time, with anxiety again growing amongst the recepients, I got to convince one of them to volunteer to lodge an official complaint with the Inspector General of Registration & Commissioner of Stamps & Chief Controlling Revenue Authority in Karnataka (Shimsha Bhavan, No 720, 46th cross, 8th block Jayanagar, Bangalore-560 082), giving the full background of the case, trying it as a test case. Even as we were waiting for a response, another member received what was supposed to be a final ex-parte order, with a demand to pay up Rs 59,850/-, possibly hoping to cower us into submission with that. I got him also to lodge a complaint with the IG. That was on 12th May. It is two months since then, and there has been total silence from the department and the IG. Now, I am now keeping open the option of going on the offensive and asking for action taken reports on the complaints lodged, under RTI.


The legal position
We could go about things in this fashion because we were fairly sure of our grounds. Now, the 'guideline market value' for 'Mosaic/ Ceramic/ Vitrified flooring applicable for our specific area, during the period (w.e.f. 02/08/04), was at Rs 880/- per sft, as per Notification no CVC/ RGN: 3/ 2003-04, Bangalore, dt 21/07/04 (issued under the Karnataka Stamp Act, 1957), and we had paid the duty according to that.

With rising stamp duty levies becoming a major deterrent to their marketing efforts, developers came up with the concept of conveyancing just the undivided share of land, and then entering into an agreement for construction, on which other taxes are leviable, but not stamp duty (and registration charges). When this procedure took root, and the government revenues dipped, they came up with the 'guideline value' basis for determining the stamp duty amount payable on fully constructed apartments, even where the conveyancing was only of the undivided share of land.

The guideline values are determined by an expert panel, constituted by the government, with powers to review them periodically. In fact, for our very area, it was revised to Rs 1180/- (wef 14/10/05) from the earlier Rs 880/- (which was wef 02/08/04), a jump of over 34% in just over a year. Very clearly, therefore, there already exists a fair and just methodology for determining the stamp duty leviable. The purpose obviously was also to prevent arbitrariness in the assessment by the revenue authorities.

 

COMMENTS

not sure where things stand today

murali772 - 14 October, 2018 - 14:00

Over a month back, after a visit to District Courts in connection with a personal matter, I took the opportunity to meet Mr Trilok Chandra, IAS, IGSR (in Kandaya Bhavan, next door), to check on the current status, vis-a-vis the undervaluation issue, in the context of the recent steep hike in 'guidance values' across the city, even as the market is indicating something different. I had taken a print of my letter, addressed to the CM (check my post of 16/08/13), and after reading it, Mr Trilok Chandra told me that it should not be a problem any more if the registration is done at the updated "guidance value" - meaning it's not an issue, any longer.
 
On checking with 'Janaagraha', however, I was told that the problem may not have been fixed yet, though they have not been tracking the matter closely of recent.
 
Whatever, this should be a matter of interest for Bangalore Apartments Federation (BAF). 
 

how not to clean up the system

murali772 - 30 January, 2014 - 16:20

In a move to check undervaluation of properties, the Inspector-General of Registration and Commissioner of Stamps (IGRCS) had proposed to chalk out digital maps using Geographical Information Systems (GIS) to provide information on guidance value of properties and host them online. But IAS officer P Manivannan, who held additional charge as IGRCS and proposed the move, was abruptly relieved of the responsibility. He was with the department for just two weeks.

Sources in the know said that staffers in sub-registrar offices lobbied for the bureaucrat's transfer, and confirmed that Manivannan's proposal is certain to die a quiet death.

- - - A senior stamps and registration department officer said: "The staff at sub-registrar offices were upset with the idea and even met revenue minister V Sreenivas Prasad on this issue. Officers who've tried to bring in reforms in our department have always met with a similar fate.''

At present, guidance value of properties is not easily available to the public and they have to get it from the local sub-registrar's office.

"GIS-based guidance value will become an excellent planning tool to identify priorities for buyers and sellers of property. There is no scope for undervaluing or overvaluing property when this information is open, transparent and available to all,'' said Yogesh M Deepak, a realtor.

Describing Manivannan's transfer as routine, minister said: "Undervaluation of immovable properties during registration, especially in Bangalore, has been the order of the day for 15 years. The government is trying to streamline work at sub-registrar offices and check revenue leakage. There is no question of succumbing to any pressure and compromising."

- - - CHEATING THE SYSTEM - While registering a building on MG Road, buyer describes the address as 'near Church Street'. Guidance value for MG Road properties is Rs 14,500, while it's Rs 13,500 on Church Street.

For the full report in the ToI, click here.

One had thought that the minister was generally clean. Perhaps we know better now.

The other part of this racket is played by the "undervaluation cell", which will send you a notice in about a year down the line from your registering, and thereafter send a lawyer to work out a deal making out for payment of one third the "negotiated" amount to the government, and an equal amount each in cash to the lawyer and the concerned official.

All of it is detailed in this blog, right from the very beginning, ending with my petition to the CM, Mr Siddaramaiah, on the 16th Aug, '13 (check the post above), after he had settled in his chair. So, when Mr Manivannan was given charge of the department, one had thought that the CM was responding to the petition. Apparently, other forces have intervened in the meanwhile. Rumour has it that the forces were directed straight from Delhi. And, it happened simultaneously as RaGa was talking to Arnab Goswami about his commitment to "clean up the system"

Stamp Duty

pathykv - 12 July, 2010 - 13:25

Dear Mr. Muralidhar,

I hope you are aware of

ipaidabribe.com

K.V.Pathy

commendable job

silkboard - 12 July, 2010 - 18:30

Murali, thank you so much for sharing full details of your case. Reminds me that our first meeting happened after a friend told me about this incident and gave me your name.

This and Srivathsa's khata story - nice examples that sharing our own good and bad experiences is one way to derive benefits from information sharing website like ours.

Welcome "Sulabha Nondani"/ PRDE scheme

murali772 - 25 April, 2018 - 07:51

With the Sulabha Nondani (easy and anywhere registration) process, the stamps and registration department has rolled out Pre Registration Data Entry (PRDE), which is almost a DIY project for property registration.
 
The aim is to eliminate the cuts and commissions and to reduce the interface time with the sub-registrar and staff. You may need to visit the sub registrar’s office for less than 15 minutes. And the process should be done sans a lawyer, a middleman and see the end to the ubiquitous ‘percentage’ culture.
 
For the full text (emphasis added by me) of the report in the Bangalore Mirror, click here. 
 
Excellent initiative by Sri K V Thrilok Chandra, inspector general of registration and commissioner of stamps. The important thing now is for the Civil Society to pursue with the new government to implement the "Sulabha Nondani"/ PRDE scheme immediately it takes up office, and not allow itself to fall prey to the machinations of the "mafia confederation" (working largely within) and shunt out Sri Thrilok Chandra elsewhere (like they did to Mr P Manivannan earlier - check my post of 30th Jan, '14, scrolling above). 
 
Simultaneously, the matter of closure of the scamster "Under Valuation Cell" (check my post of 16th Aug, '13, scrolling above) also needs to be pursued, for the real big relief for property buyers.  
 

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