TN Registration department to flag properties of insolvent persons to curb illegal transfer and sales

CHENNAI: The Registration department has directed sub-registrars to immediately flag properties belonging to persons declared insolvent in encumbrance certificates (ECs) and refuse registration of documents covered by statutory prohibitions to curb fraudulent property transfers.

The directive seeks to close gaps that could allow properties be sold or transferred even after a court has declared their owners insolvent, potentially jeopardising creditors' efforts to recover the assets.

IG of Registration GK Arun Sundar Thayalan said in a circular that the move followed concerns raised by the Official Assignee of the Madras High Court that delays in updating registration records could facilitate unauthorised transfers and cause avoidable hardship.

Under the Presidency Towns Insolvency Act, 1909, the property of a person adjudged insolvent vests in the Official Assignee. Failure to reflect the court's decision in registration records could complicate recovery of those assets.

The department has reiterated instructions issued in April 2018, directing sub-registrars to record the adjudication in their memo volumes, assign an "L" number and index it under the relevant provisions of the Registration Act, 1908. The details must be entered in the EC immediately upon receipt of the relevant communication.

The EC must also be sent free of cost to the Official Assignee or Official Receiver, as applicable, within three days of the entry.

The circular directs officials to strictly enforce Section 22-B of the Registration Act, which provides for refusal of registration in specified cases involving properties prohibited from registration by law or attached by a competent authority. It states that insolvency adjudication falls within the grounds for refusal under this provision.

District registrar P Suresh Babu has been designated as the nodal officer to monitor compliance at the headquarters level. District registrars have also been instructed to ensure that sub-registrars under their jurisdiction follow the directions.