Legal Misconceptions in Financial Matters

Whenever it comes to anything related to law, we consider ourselves to be laymen and follow whatever is popularly believed. Starting from being a guarantor for a friend’s home loan to filing a civil case in court, we follow rules that don’t even exist. Here are some of the popular myths broken and, financial matters explained that are actually followed under the law, reports Sakina Babwani of The Economic Times.

Court needs original documents

Yes it does! But only during the hearing. One should not submit the original documents while filing a plea as there is a good chance of losing the documents. As per the Civil Procedure Code, 1908, a complaint should be accompanied by affidavits and photocopies of the original documents. The photocopies should be certified and duly attested by a gazetted officer to ensure its authenticity. The originals are however required during the hearing of the case only.

Originals should never be submitted to anyone under any circumstance. A safe way is to keep scanned copies of the original document in computer or on the cloud via Google Docs, Windows Live Sky-Drive.

2. There is no deadline to file a case

The court is not waiting to hear your case alone. One could not go and file a case at any time of the year and expect it to be accepted by the court. Under the Limitation Act, 1963, a case has to be filed within a time frame of three months to three years, depending on the nature of the case. There are few exceptions to this law, such as if the person wanting to file a complaint has not completed 18 years of age or is mentally challenged. In case of the minor, the time limit will start from the time he completes 18 years. And for the differently-able person, there should be someone to represent him.  Once the time lapses, the case is considered to be time-barred.

3. To Gift an inherited property

Inherited or ancestral property belongs to the entire family and not to an individual. A person cannot gift an ancestral property unless he is the sole survivor of the family. Tax benefits could be claimed if the property falls under Hindu Undivided Family (HUF), which means that the property is jointly owned by the family.  There is a recent ruling by Bombay High Court that dictates that an individual do not possess the right to gift inherited property without the entire family’s consent unless he is the sole surviving member of the HUF.

4. Power of Attorney and Letter of Authority serves the same purpose

While Letter of Authority can be useful for carrying out daily tasks like collecting or submitting document on one’s behalf, it is not an authenticated document. On the other hand, Power of Attorney is used for bigger and riskier transactions like sell of property or any other asset. The manner in which the task has to be carried out is mentioned in power of Attorney. But in case of letter of authority, the manner may or may not be specified. Hence they are not the same.

5. Out-of-court settlement is the end result

Most of us believe that a case that has been settled outside the walls of the court cannot be challenged. But in case of fraud or coercion, one can file a complaint in court against such settlement. People go for out-of-court settlement as they are usually fast and can be solved by mutual understanding. However, if one of the parties discover that the deal is unfair, he can approach the court for justice. Same goes for arbitration and one can challenge the award on the grounds of invalid arbitration agreement or improper notice of the appointment of arbitrators.

6. Guarantor need not repay the loan

The Supreme Court has announced that the responsibility of the guarantor is same as that of the borrower in case the borrower is not able to repay the loan.  Before becoming a guarantor for an acquaintance, one should check the borrower’s repayment history because the lender has the rights to recover his dues from the guarantor if the debtor fails to repay the amount taken. Nowadays, banks check the guarantor’s repayment history to issue a fresh loan to the later. Hence, one should not act as a guarantor for long term loans or if there is any doubt of the borrower’s capacity to repay.

7. Heirs enjoy a right over shares

As per a Bombay High Court ruling, the shares in a demat account will be passed to the nominee and not to the descendant of the concerned person. According to Section 109A of the Companies Act, even if the shareholder mentions the inheritor in the will, the right to shares goes to the nominee after the death of the original shareholder.

8. Insurer doesn’t need to be informed about a second hand car purchase

If the insurer is not informed about a second hand car purchase, then the idea of claiming for damage in the car from the insurance company is not legitimate. As soon as a person buys a used car, the insurance should be transferred to the buyer’s name along with the vehicle’s registration certificate and road tax receipt. According to Irda Regulations, the insurance company is not liable to repay a claim if it is not informed about transfer of vehicle within 14 days of purchase.

9. An appellant can’t be an advocate for his own case in consumer court

Most people hesitate to move a consumer court due to the need of a lawyer to represent the case. However, the Supreme Court has suggested that non-lawyers can appear before the quasi-judicial bodies like consumer court as representatives on a regular basis. This is an encouraging initiative by the court since most of the time appellants are unable to hire lawyers since the little sum of compensation provided in consumer disputes is not enough to pay a lawyer’s charge.

10. Online will is more than enough to transfer property

Technology allows one to buy and sell property on the click of a button. It has also come up with the novel idea of creating online will with the help of which one could transfer property to the heirs. Various websites like UK-based Q-Will and US-based Legacywriter. Com provides a step-by-step guidance and offers various templates to choose from to make a will. However, the Indian law does not accept online will or digital signature and hence the online will needs to be printed out, signed by the maker of the will in the presence of two witnesses who must then attest the will.




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