10 Common Legal Myths Busted

You are here: ET Home Personal Finance Savings Centre Analysis
By Sakina Babwani, ET Bureau | 26 Aug, 2013, 08.00AM IST Post a Comment

People have several misconceptions about legal provisions.
We shatter a few commonly held notions.
10 common legal myths busted
Did you check your friend's repayment history when you agreed to be a guarantor for his
home loan? You should have, because according to a Supreme Court ruling, the lender
can recover his dues from the guarantor if the borrower is unable to repay the loan. Your
friend's liabilities could become yours if he defaults. Yet, very few people know this or
check it when they blindly sign up as guarantors for loans taken by friends and relatives.
There are several such misconceptions that are harboured by the smartest of us. In our
cover story this week, we have picked 10 such misconstrued notions about the legal
position on financial matters and clear the air on what is correct under the law. This is
important because if you believe in something that is not legally tenable, it could have an
adverse impact on your finances. Of course, ignorance about the law should never be an
excuse for making a mistake.
1) I need to submit the originals in court
Certified photocopies are perfectly fine and acceptable.
Don't submit the original documents when you file a plea in court because you could easily lose them. As per the Civil Procedure Code,
1908, when you file a petition in court, it needs to be accompanied with affidavits and certified copies of the original documents that you
want to present as evidence. "It would be a mistake to submit the originals along with the complaint as you run the risk of losing them.
Besides, they are not required as per the procedure," says Aakanksha J oshi, senior associate, Economic Law Practices. However, you
will be required to present the originals at the time of hearing. At that time, too, you can present photocopies if it is not possible to
produce the originals. However, these photocopies will have to be certified and attested by a gazetted officer to ensure the stamp of
authenticity.
In fact, you should not give the original documents to anyone, including your lawyer, in some instances. Make sure he is efficient in
handling the paperwork if you are entrusting key documents to him. As an alternative, you could hand over the certified copy for his
reference and retain the original. Take the orginal to court only at the time of hearing.
10 common legal myths busted - The Economic Times http://economictimes.indiatimes.com/personal-finance/savings-centre/anal...
1 of 9 26/Aug/2013 2:39 PM
As a safety measure, always keep two sets of certified photocopies, in case you misplace the original. A good idea is to scan the
documents and store them on your computer or on the cloud. You can use online services like Google Docs (Docs. google.com) and
Windows Live Sky-Drive (Explore.live.com/skydrive) to store your documents.
2 of 9 26/Aug/2013 2:39 PM
2) I can fil e a case anyti me I want
The civil cases not filed within a deadline are time-barred.
While everyone is entitled to their day in court, you cannot knock on the doors whenever you want. The civil cases come under the ambit
of the Limitation Act, 1963, which has laid down a time frame within which one must file the case. This can range from three months to
three years, depending on the case that is filed. If you don't file the case within the given deadline, it becomes 'time-barred' and the court
does not admit the plea. Defence lawyers often ask the courts to dismiss cases that have been filed after the deadline.
The Limitation Act, however, lists out circumstances under which the court can accept your case beyond the time limit. If the person filing
the case is not in a position to file the case himself (if he is a minor or mentally challenged) and does not have anyone to represent him,
the time period could be extended. For example, if a case has to be filed within one year, but the plaintiff is 16 years old and does not
have a guardian, the limitation period would begin from the time he completes 18 years.
If the case is dismissed on a mere technicality, it can be painful, especially in suits related to recovery of money. So, ask your lawyer
about the time period within which the case must be filed. If you miss the deadline due to your lawyer's oversight or any other glitch, you
will have no recourse in court.
3) I can gi ft ancestral property as I li ke
It is owned by the entire family, not an individual.
While you are entitled to tax benefits if you set up a Hindu Undivided Family (HUF), there is a restriction on the transfer of property. You
cannot gift ancestral property that is jointly held by the HUF unless you are a sole surviving member, according to a recent ruling by the
Bombay High Court. The ruling came in a case filed by the sons of one Mallappa Isapure, who had two wives. He divided the ancestral
property between the sons of his two wives.
However, the second wife, Chandrabai, claimed that a portion of the property that was in possession of the sons of the first wife was, in
fact, gifted to her by her husband. The sons of the first wife said that the property could not be gifted as it was a joint family property.
While the appellate court dismissed the plea, the trial court upheld it, and was later also maintained by the high court, which stated that
ancestral property could not be gifted. The property was duly partitioned and the respondents were asked to pay the cost.
In HUFs, the property is jointly held by the family. Therefore, no individual member has an absolute right over it. Hence, he cannot gift it
to a third person, unless he is the sole surviving member of the HUF. "This ruling has significance for HUFs, while the other religions do
not recognise the concept of joint property," says Suresh Surana, founder, RSM Astute Consulting.
4) Letter of authori ty i s enough for delegation
It works for routine tasks, not for complex deals.
While you may be astute at taking care of your financial matters, there are times when you must delegate authority to someone else. The
two commonly used documents to do so are the letter of authority and the power of attorney.
A letter of authority is a simple document, which works for routine, everyday tasks like collecting a cheque book from the bank branch or
submitting documents on your behalf. However, this is not a registered document and will not be accepted for more complex
transactions such as the sale of property or any other asset.
3 of 9 26/Aug/2013 2:39 PM
For such deals, you need a power of attorney to delegate authority since the transaction is bigger. A power of attorney is a more detailed
document and lays down the manner in which the transaction is to be conducted.
4 of 9 26/Aug/2013 2:39 PM
5) Out-of-court settlement can' t be chal lenged
You can go to court in case of fraud or coercion by the other party.
Out-of-court settlements help avoid the hassles of filing a court case. They are seen as a quick, cost-efficient and amicable way of
settling disputes as opposing parties can work out a deal that is mutually acceptable to both. But what if you sign the deal based on
certain assumptions only to discover later that some facts were deliberately hidden from you? Thankfully, an out-of-court settlement is
not the end of the road.
"You can always approach the court in the case of fraud or coercion," says Neerav Mainkar, founder of law firm, M Neerav & Associates.
The court will review the circumstances under which the agreement was signed, and revoke it if fraud or coercion is proved.
In the case of arbitration, too, you can appeal against the award on the grounds that the arbitration agreement was invalid or you were
not given sufficient notice of the appointment of arbitrators and, hence, could not represent yourself. Apart from this, if a matter is not
envisaged to be settled by arbitration as per the arbitration clause, you can appeal for it to be set aside under Section 34 of the
Arbitration and Conciliation Act.
6) I' m not supposed to repay the loan i f I' m a guarantor
If the borrower defaults, the lender can ask the guarantor to repay the loan.
When a friend or relative asks you to stand guarantee for his loan, don't treat it as a simple formality. The Supreme Court has ruled that
the responsibilities and liabilities of a guarantor are no different from that of the borrower. In this particular case in the apex court, Ganga
Kishun had acted as guarantor for a loan taken by his friend, Ganga Prasad, who died before the loan was fully repaid. When the bank
tried to recover the loan by selling Kishun's land, he challenged the move in court. However, after a lengthy legal battle, which reached
the Supreme Court, it was held that the bank had the right to recover the dues from the guarantor if the borrower had failed to pay.
Apart from repaying a loan that someone else has taken, the proceedings can negatively impact your loan eligibility. If the borrower
defaults, the banks would turn to you for its dues. If you are unable to pay, your credit score will be impacted. Worse, banks consider the
loans for which you are acting as guarantor to assess your repayment capacity before issuing you a fresh loan. Hence, ideally you
should act as guarantor for loans with shorter tenures so that your responsibility ends sooner. If you are not confident about the debtor's
capacity to repay, avoid becoming a guarantor.
5 of 9 26/Aug/2013 2:39 PM
7) My hei r will i nherit my shares
The shares in a demat account will go to nominee.
A will does not always ensure that the beneficiaries will get their dues, especially if the person has made nominations. When it comes to
shares in a demat account, it is the nominee in the account who inherits them, not the person named in the will, as per a Bombay High
Court ruling. The case dates back to 2008, when Harsha Kokate filed a petition in the court, seeking permission to sell her deceased
husband's shares, for which her nephew was the nominee.
Her husband, Nitin Kokate, who died in J uly 2007, had made his nephew the nominee in J uly 2006 for the shares held in his demat
account. The court held that the wife had no right over the shares as the provisions of the Companies Act mandated that the nominee of
the demat account inherit the securities.
This is a significant ruling, wherein the provisions of the Companies Act override the legality of a will. As per Section 109A of the
Companies Act, the nominee legally inherits the shares after the death of the original shareholder, even if the latter has named someone
else in the will. Experts suggest that you name the nominee in the will as well so as to avoid confusion.
8) I don' t need to inform the i nsurer when I buy a used vehicl e
Claims for damage or theft will not be honoured if the insurance is not in the buyer's name.
Buying a used vehicle? While you take utmost care to check its condition, it is also important to get the paperwork right. Besides the
vehicle's registration certificate and road tax receipt, you also need to get the insurance transferred in your name. If you don't do so, the
insurance company is not liable to reimburse a claim, according to a ruling by the National Consumer Disputes Redressal Commission.
Ashok Kumar purchased a used car in 2006. The car was insured by the New India Assurance, but Kumar did not inform the company
6 of 9 26/Aug/2013 2:39 PM
about the transfer of ownership and registration. When the car was stolen in 2007, Kumar filed a claim, which was rejected on the
ground that the policy was not in his name. The Delhi District Commission and the State Commission ruled in favour of Kumar.
However, the National Commission ruled in favour of the insurance company, stating that according to Irda regulations, it is mandatory to
inform the insurance company about the transfer of vehicle within 14 days of purchase, failing which the company is not liable to
reimburse a claim.
The silver lining is that third-party claims will be admissible under Section 157 of the Motor Vehicles Act, which states that the certificate
of insurance 'shall be deemed to have been transferred in favour of the person to whom the motor vehicle is transferred'.
7 of 9 26/Aug/2013 2:39 PM
Home | News | Markets | Personal Finance | Mutual Funds | Infotech | J obs | Opinion | Features | Videos | My Portfolio | Budget 2013
SIGN UP FOR FREE WEALTH MAILER.
Regular source of Personal Finance Knowledge.
Enter your e-mail... SUBSCRIBE
9) I can't move a consumer court wi thout a l awyer
Even non-advocates can argue a case in these quasi-judicial bodies.
The costs and hassles involved in hiring a lawyer keeps many consumers from moving the court against companies. However, the
Supreme Court has ruled that one doesn't need an advocate to move a consumer court. In 2000, hearing a complaint against two tour
operators, the south Mumbai District Consumer Forum upheld the respondents' demand that only lawyers should be allowed to
represent the consumers. This order was challenged in the Bombay High Court, which quashed it, saying that litigants before consumer
forums 'cannot be compelled to engage advocates' as these were quasi-judicial bodies.
However, the Bar Council of India appealed against the 2002 judgement, which had granted permission to authorised agents to
represent customers in consumer courts. The Supreme Court upheld the high court judgement and suggested a mechanism wherein
non-lawyers could be accredited to appear before the consumer forums as representatives on a regular basis.
"This is a welcome move as it will simplify procedures and promote easy access for members of the public to consumer forums," says
J oshi of Economic Law Practices.
The ruling takes into account the fact that the tiny sums granted as compensation in consumer disputes do not make it economically
viable for appellants to engage a lawyer. The court also held that the decision was consistent with the Advocates Act, as agents don't
practice.
10) An online will i s suffici ent to pass on property to hei rs
Indian law does not recognise online wills. It must be signed and attested.
Several Web portals and companies now allow you to make an online will. J ust register on the website and you will be given
step-by-step guidance. All you need to do is answer the questions and the software automatically drafts the will for you. An online will
would cost around Rs 10,000. Many foreign websites, such as the UK-based Q-Will and US-based Legacywriter. com, also offer various
templates from which you can choose the one that fulfills your requirements, while other firms offer onesize-fits-all solutions.
Once you fill in the details of the assets and beneficiaries, the service provider will e-mail a draft of your will. However, your task does not
end here. You have to get a physical copy of the will as India does not recognise the concept of an online will or digital signature. So,
you need to take out a print of the online will and sign it in the presence of two witnesses.
The will must be attested by these two witnesses, without which the document would be deemed invalid. Though not mandatory, you
can get the will registered as well. The Indian law is very clear on this. Online portals merely help you draft the will; signing it and getting
it attested is your responsibility.
8 of 9 26/Aug/2013 2:39 PM
Other Ti mes Group news
sites
Times of India |
| Mumbai Mirror
Times Now | Indiatimes
|

Li ving and entertai nment
Timescity | iDiva | Bollywood
Zoom| Healthmeup | Luxpresso
Technology | Guylife | Online
Songs
Networki ng
itimes | Dating & Chat | Email
MensXP.com
Hot on the Web
Breast Feeding | Online Shopping
Movie ReviewVideos | Miss India
Used Cars in Chandigarh | Bike
Price India
Servi ces
Book print ads | Online shopping | Free SMS | Website
design | CRM | Tenders
Matrimonial | Ringtones | Astrology | J obs | Property | Buy car | Bikes in
India
Used Cars | Online Deals | Restaurants in Delhi | Movie ShowTimings in
Mumbai
Remit to India | Buy Mobiles | Listen Songs
About us / Advertise with us / Terms of Use and Grievance Redressal Policy / Privacy Policy / Feedback / Sitemap/ Code of Ethics Copyright 2013 Times Internet Limited. All rights reserved.
Live Market News Portfolio Mobile Live TV Newsletter Commodities Speed QnA Blogs Alerts
9 of 9 26/Aug/2013 2:39 PM

10 Common Legal Myths Busted

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

10 Common Legal Myths Busted

Uploaded by

Copyright:

Available Formats

You are here: ET Home Personal Finance Savings Centre Analysis

By Sakina Babwani, ET Bureau | 26 Aug, 2013, 08.00AM IST Post a Comment

You might also like