Be aware of risks in buying property through bank auction

Dubai - You should ensure that the property is fully vacant and in possession of the bank.

Question: I am proposing to buy a property in Coimbatore which is being auctioned by a public sector bank as the property was mortgaged to the bank when it gave a loan to the present owner. I am tempted to participate in the auction which the bank is going to have. What are the safeguards which I should take before bidding in the auction process?
Answer: Generally persons buy property in an auction as they feel that it may be available at a discount. However, there are certain risks involved which you have to carefully evaluate. The most important point to be noted is that the bank or institution which is auctioning the property only has symbolic possession of the same. This means that they have the relevant documents and papers. However, though the banks are required by law to take physical possession of the property, they do not do so. In such an event, the person who buys the property in an auction would find it difficult to make any person occupying such property vacate it. Therefore, you should ensure that the property is fully vacant and in possession of the bank and that no person is occupying the property in any capacity whatsoever.
The bank while auctioning the property may state that to the best of its knowledge no encumbrances exist in respect of the property. However, you should not rely on this statement because it is possible that third party claims may have been created which the bank may not be aware of. Hence, in order to determine whether there are any third party claims, a public notice needs to be given by the bank in atleast two newspapers before auctioning the property. Finally, the condition of the property should be checked by you before you put in the bid. You should also obtain an estimate from an architect regarding the costs to be incurred for any repair work which may be necessary.
Q: My daughter is likely to get married shortly. I will be going to India to purchase jewellery. I have been told that the purchase of jewellery can be quite risky as the jewellery may not be of the right quality. Do you recommend any safeguards?
A: While buying gold jewellery you should check the Hallmark to ensure that the purity of the gold is what is stated by the jeweller. Hallmark is a certificate of purity given by Assaying & Hallmarking Centres (AHC) which are accredited by the Bureau of Indian Standards (BIS). In order to ensure that there is no fake hallmarking, it is advisable to buy from a jeweller registered with BIS; currently there are around 30,000 jewellers in India who are registered with BIS. Further, you must ask the jeweller to show his BIS licence and ensure that the address of the shop from where you buy is the same as what is mentioned in the licence.
A proper bill should be obtained. The law requires that the jeweller should mention the Hallmarking charges separately in the bill. AHC charges a fee of Rs35 per piece which is tested by it. Further, the bill should separately give description of each article of jewellery, net weight of the precious metal and the purity in carat. To be absolutely sure, you can get your jewellery tested by any of the BIS recognised AHCs. They undertake testing of jewellery on priority for a fee. After testing, the AHC will issue a report giving identifications as marked on the jewellery. If the AHC report shows that the jewellery is of lesser purity than what is stated in the bill by the jeweller, you can approach the jeweller from whom you purchased the items to compensate you for the lower purity or to take back his jewellery and refund to you the full sale price.
Q: I have recently got married. My husband who has some income in India wants to take out a maternity oriented health plan. I want to know whether these plans are available with Indian insurance companies.
A: Many reputed Indian companies in the health insurance business have specialised health plans. These are different from standard plans where a new born child is excluded from coverage for the first ninety days from the date of birth. Therefore, complications arising immediately after birth would not be covered by the insurance policy. Hence, your husband should insure only with a well known company by subscribing to a maternity oriented plan. Such insurance will cover the cost of child birth (both normal and Cesarean), pre-natal expenses and post-natal expenses.
While evaluating the health plans of various insurance companies, your husband should consider the waiting period stipulated in the insurance policy for maternity related claims. Generally, the waiting period is around three years, though some plans may offer a waiting period of less than one year. Of course, such plans would be more expensive compared to standard mediclaim policies. Premium paid by your husband would be deductible from his taxable income to the extent of Rs50,000 every year. This benefit is available even to non-resident individuals who are liable to pay tax in India, but to claim the benefit the tax return will have to be filed and premium receipt details will have to be furnished.
- H. P. Ranina is a practicing lawyer, specialising in tax and exchange management laws of India.