The recent arrest of the owner of a commercial complex in Gurugram for allegedly selling the same property to as many as 25 buyers, has raised serious concerns about due diligence and safeguards for property investors. In this case, the developer allegedly sold a single floor of a building to multiple individuals, even though a deal for the same floor had been finalised with the first buyer in 2021.
The incident underscores the need for investors/buyers to carry out thorough checks before investing in both under-construction and ready-to-move properties.
Gurugram 32nd Avenue case
Dhruv Dutt Sharma, CEO of the firm behind the 32nd Avenue commercial project, was arrested by Gurugram Police in connection with a ₹500-crore cheating case. The allegations relate to investors, not homebuyers. According to police, Sharma allegedly lured investors with promises of fixed returns for 30 years on investments in commercial properties. While returns were paid in the first year, payments reportedly stopped thereafter, a report published in the Hindustan Times newspaper said.
Investigators said investors were sold units ranging from 64 sq ft to 3,000 sq ft across three commercial projects, including 32nd Avenue on a 3.95-acre plot along the Delhi-Jaipur Expressway in Sector 15, Gurugram. However, several investors later found that the actual area allotted to them was smaller than what was stated in their conveyance deeds.
Checks that investors should undertake before investing in a commercial property
Before investing in a commercial property, investors/buyers should verify the chain of ownership for the last 20-30 years, especially for older properties, through a trusted and competent person, including legal experts.
Basic verification checks
Kunal Arora, Partner at Lakshmikumaran & Sridharan Attorneys, told HT Real Estate that obtaining independent legal due diligence is one of the first and most important steps for anyone purchasing a standalone property.
Beyond engaging a legal advisor, buyers should carry out basic checks themselves. This includes verifying the original title documents, not just the most recent one. Where there is a chain of ownership, all original documents in the chain must be available to the current owner.
“Physically inspecting these documents is crucial, as it reduces the risk of competing ownership claims; if multiple parties claim rights, not all can possess the originals. The authenticity of documents must also be verified to guard against forgery, including cross-checking records with the sub-registrar’s office,” he explained.
Buyers should also ensure that no equitable mortgage or charge exists on the property. If a loan has been taken against it, the lender typically retains the original title documents, which serves as a red flag. Finally, particularly in commercial property transactions, it is essential to confirm that physical possession of the property rests with the person claiming to be the owner, he said.
Buyers should also verify records with relevant government authorities. For instance, checking property tax records with the municipal corporation can help confirm the identity of the current owner, as ownership details are typically updated or mutated in municipal records after a transfer. This serves as an additional layer of verification, he said.
To ensure authenticity and prevent forgery, one of the final steps in the due diligence process should be to cross-check copies of all relied-upon documents against records maintained at the sub-registrar’s office. This helps confirm that the documents are genuine and that there are no discrepancies in the official records, he said.
Verify RERA filings and inventory data
Beyond simply checking whether the project is RERA-registered, buyers must review the Quarterly Progress Reports (QPRs) filed by the developer on the state RERA website, explains Manmeet Kaur, Partner at Karanjawala & Co.
Check the CERSAI database
Buyers should check reports from the Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI). This central database records equitable mortgages created by banks, she said.
Issue public notice and encumbrance certificate (EC)
It is advisable that the buyer issue a Public Notice in two local newspapers (one English and one vernacular), inviting claims against the property 15 days prior to the transaction. Simultaneously, obtain an Encumbrance Certificate (EC) from the Sub-Registrar’s office in order to ensure that the property in question is free of all encumbrances, she said.
Who is the rightful owner if the property has been found to have been sold to multiple buyers?
If a builder sells the same property to multiple buyers, ownership typically rests with the buyer whose name is first legally registered in the property records. Registration, not merely an agreement to sell, establishes legal ownership.
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“Legally, ownership is determined by the priority of rights under Section 48 of the Transfer of Property Act, 1882. If a developer/seller executes a Sale Deed for the same unit with two different buyers, or with multiple buyers, the ownership rests with the buyer whose deed was executed and registered earlier,” explains Kaur.
However, it is imperative to mention that a mere Agreement to Sell (even if signed first) does not confer title; it only gives a right to enforce the sale. A registered ‘Sale Deed’ (Conveyance Deed), on the other hand, is superior to an unregistered Agreement to Sell. Thus, the first person to get a Registered Sale Deed is typically the rightful owner, she says.
In essence, the person whose name is registered on the most recent valid title document is considered the rightful owner. However, this determination can only be made after carefully examining the entire chain of title to ensure that every prior transfer was lawful and properly recorded. The individual who last acquired the property through a valid transaction and in whose name no subsequent transfer has been executed is the current legal owner, said Arora.
Actual physical possession of the property and custody of the original title documents are strong indicators of ownership. While these practical checks provide added comfort, from a legal standpoint, ownership vests in the person holding the latest valid title in their name, provided it has not been transferred further, he added.
What legal options/forums do subsequent buyers have?
The following are the legal options and forums available to investors.
In addition to RERA and refunds, subsequent buyers should consider filing Criminal Proceedings against the seller since selling the same unit twice amounts to fraud and dishonest inducement. In that case, buyers can get an FIR registered with the concerned police station for cheating, criminal breach of trust, etc. This often puts immediate pressure on the developer, advises Kaur.
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NCDRC (consumer court): If the buyer is purchasing the property for personal use and not as an investor, they can approach the consumer court for deficiency in service, she says.
Insolvency (NCLT): If multiple buyers have been impacted, they can group together to initiate insolvency proceedings against the developer under the IBC (Insolvency and Bankruptcy Code), says Kaur.
The role of the sub-registrar’s office
It is important to clarify that the sub-registrar’s role is primarily ministerial, collecting stamp duty, and not investigative. Under the Registration Act, the sub-registrar verifies the identity of the parties, not the title of the property, Kaur points out.
Can banks lend to multiple buyers for the same unit?
When a bank sanctions a mortgage, it is legally required to register the charge with CERSAI within 30 days. If banks are lending to multiple buyers for the same unit despite the charge being recorded in the CERSAI database, it points to a systematic lack of due diligence or complicity, adds Kaur.