The Growing Importance of Property Due Diligence in Lending

When financial institutions lend against land or property, the asset itself becomes the security for the loan. Any defect in the collateral can significantly affect the lender’s ability to recover its dues in the event of a default.

Some of the most common risks faced by lenders include:

• Defective or incomplete title chains
• Undisclosed mortgages or encumbrances
• Pending litigation involving the property
• Illegal constructions and planning violations
• Incorrect land classifications
• Forged or manipulated documents
• Boundary and survey discrepancies
• Invalid powers of attorney and succession disputes

A comprehensive due diligence process helps lenders identify these issues before disbursing loans.

Collateral and Title Verification and Matters

Collateral verification goes beyond merely collecting property documents from borrowers. It involves an in-depth examination of the asset’s legal, regulatory and physical status.

So, before approving a loan against real estate, lenders must ensure that the property has a clear and marketable title and is free from legal or financial complications.

This involves :

• verifying ownership records,
• checking for encumbrances and existing charges,
• reviewing the chain of title,
• examining registration and revenue records,
• identifying litigation or succession issues, and
• confirming survey boundaries and access rights.

A thorough verification process helps financial institutions avoid lending against disputed, defective, or legally unenforceable assets.

Regulatory and Zoning Due Diligence Cannot Be Ignored

Even when a property’s title is clear, regulatory violations can create major risks for lenders.

Due diligence should therefore include:

• Land use verification
• CMDA and DTCP compliance checks
• Building approval verification
• Layout approval review
• Planning permissions
• Development restrictions
• Floor Space Index (FSI) compliance

Properties that violate planning regulations often face difficulties in financing, redevelopment, and enforcement proceedings.

Continuous Monitoring of Collateral is Equally Important

The legal status of a property can change after loan disbursement. New encumbrances, litigation or government actions may arise during the loan tenure.

Therefore, lenders increasingly require:

• Periodic property reviews
• Monitoring of government records
• Tracking new litigations
• Identification of fresh encumbrances
• Portfolio-level risk assessment

Continuous monitoring helps institutions proactively manage their exposure and identify emerging risks.

Recovery Support During Enforcement Proceedings

When borrowers default, lenders must ensure that the collateral remains legally enforceable.

Property due diligence can support:

• Verification before initiating enforcement proceedings
• Documentation review
• Identification of legal impediments
• Assessment of title issues
• Due diligence during SARFAESI proceedings
• Decision-making during recovery actions

Early identification of risks can significantly improve recovery outcomes.

Corporate By Verified RealEstate: Turns Property Data into Lending Intelligence

Real estate-backed lending involves risks that often go beyond the documents submitted by borrowers. Hidden encumbrances, title defects, regulatory violations and ownership disputes can significantly impact the value and enforceability of a lender’s collateral.

To address these challenges, Verified Real Estate offers specialised solutions for the BFSI sector, including Banks and NBFCs, combining technology, data intelligence and legal expertise to deliver comprehensive property due diligence and collateral risk management services for financial institutions.

The platform helps lenders by:

• Verifying ownership and title records.
• Examining Encumbrance Certificates, Patta and revenue records.
• Reviewing planning and building approvals.
• Analysing historical transaction data and litigation indicators.
• Identifying regulatory and zoning risks.
• Generating structured, evidence-based due diligence reports.

The ecosystem is backed by:

• 30-point verification framework
• 40 million+ land parcels analysed
• 9+ live government portals integrated
• 50 years of transaction history reviewed
• 35+ specialised diligence tools
• 15+ years of Tamil Nadu real estate expertise

The outcome for banks and NBFCs:

• Better underwriting and credit decisions.
• Early identification of legal and title risks.
• Stronger collateral risk management.
• Continuous portfolio monitoring.
• Improved recovery and enforcement strategies.

By transforming fragmented property information into actionable intelligence, Verified Real Estate enables banks and NBFCs to lend with greater confidence while reducing the risks associated with real estate-backed financing.

Conclusion

In an environment where property-related disputes and documentation issues remain prevalent, comprehensive due diligence is no longer optional for banks and NBFCs. Effective collateral verification, title assessment, regulatory checks and continuous monitoring can significantly reduce lending risks and improve recovery prospects. Institutions that adopt a robust property verification framework are better equipped to protect their portfolios and make informed credit decisions.

A Will is often seen as a strong document in property disputes. But can a Will be used to claim a property that was allegedly purchased in someone else’s name?

The Supreme Court’s decision in Manjula and Others v. D.A. Srinivas answers this question clearly. The case also raised serious issues under Sections 25, 27 and 30 of the Hindu Succession Act, especially on whether a person accused of murder can claim property through a Will. Those succession-law aspects have been discussed separately. In this article, we focus on the benami angle — whether a Will can validate or revive a property claim that is barred under the Benami law.

Case Name and Basic Details

The case was Manjula and Others v. D.A. Srinivas before the Supreme Court of India. The decision was delivered on 8 May 2026, with the neutral citation 2026 INSC 465. The judgment was delivered by a Bench of Justice J.B. Pardiwala and Justice R. Mahadevan.

The deceased person was K. Raghunath. His wife was Manjula, who became one of the appellants before the Supreme Court.

Simple Background of the Dispute

D.A. Srinivas filed a civil suit claiming that he was the owner of certain properties. His claim was based on a Will dated 20 April 2018, allegedly executed by K. Raghunath in his favour. Raghunath died on 4 May 2019. Srinivas wanted the court to declare him the owner of the properties based on that Will.

Manjula and her children opposed this claim. Their case was that Raghunath had earlier executed a registered Will dated 28 January 2016 in favour of his wife, Manjula. Based on that, they had already mutated the revenue records in their favour.

So, on the surface, this looked like a dispute between two competing Will-based claims.

But the real issue was much deeper.

Where the Benami Issue Comes In

Srinivas’s own pleadings created the legal problem for him.

He claimed that the properties were bought using his money, but they were purchased in the name of K. Raghunath. He also said this was done because he or his company could not directly purchase agricultural lands due to restrictions under the Karnataka Land Reforms Act.

In simple words, Srinivas was saying:

“I paid the money, but the property was kept in Raghunath’s name.”

That is exactly where the Benami Act becomes important.

A benami transaction generally involves a property being held in the name of one person, while another person claims to have paid for it or to be the real beneficial owner. The law does not allow such hidden ownership claims to be freely enforced, especially when the arrangement was created to bypass legal restrictions.

Why the Court Did Not Treat This as a Normal Will Case

The Supreme Court said courts should not be fooled by clever drafting.

Even though Srinivas presented the case as a Will-based ownership claim, the real foundation of the suit was that the properties were allegedly purchased in Raghunath’s name for Srinivas’s benefit. The Court said that the substance of the claim matters more than the label used in the plaint.

This is the heart of the judgment.

A person cannot first say, “The property was bought with my money but kept in another person’s name,” and later try to recover that property by saying, “That person made a Will in my favour.”

If the original arrangement itself is benami, the Will cannot be used as a shortcut to defeat the Benami law.

What the Supreme Court Said About Clever Drafting

The Supreme Court also discussed the role of courts under Order VII Rule 11 of the Code of Civil Procedure. This provision allows a court to reject a plaint at the initial stage if the suit is barred by law.

The Court said that while deciding such an application, courts should not mechanically read the plaint line by line in a narrow way. They must meaningfully examine the plaint and identify the real nature of the claim. If a legal bar is hidden behind careful wording, the court can still reject the case.

In this case, the Court found that the Will was being used to give legal shape to what was essentially a benami claim.

Why the Will Did Not Help Srinivas

A Will can transfer only a valid and legally transferable interest. It cannot legalise an illegal or prohibited ownership structure.

The Supreme Court’s message was direct:

Property purchased in a benami transaction cannot be claimed by the alleged real owner merely on the basis of a Will executed by the benamidar.

Here, Raghunath was the person in whose name the property stood. Srinivas claimed that he had funded the purchase. The Will allegedly executed by Raghunath was therefore treated as a mechanism used to recover property that, according to Srinivas’s own case, had been kept in another person’s name.

The Court did not allow that.

Employer–Employee Relationship Did Not Save the Claim

Another important point was the relationship between Srinivas and Raghunath.

Srinivas tried to rely on the nature of their relationship to escape the Benami Act. But the Supreme Court made it clear that an ordinary employer–employee or commercial relationship does not automatically become a fiduciary relationship.

This matters because the Benami law contains certain exceptions for property held in a fiduciary capacity. But every business, employment, or trust-like arrangement cannot be casually called fiduciary. The Court rejected that attempt in this case.

The Murder Accused Angle of this Case

The case also had a serious criminal-law and succession-law layer.

Srinivas was stated to be an accused in connection with the murder of Raghunath, the very person through whom he claimed the property. The Supreme Court discussed the principle that a person who murders or abets the murder of another cannot inherit the victim’s property. This issue relates to Section 25 of the Hindu Succession Act.

However, that is not the main focus of this article. The key point here is the benami issue:

Even before the succession disqualification issue, Srinivas’s property claim faced a serious legal bar because it was rooted in an alleged benami arrangement.

What Happened in the Courts?

The trial court rejected Srinivas’s plaint under Order VII Rule 11 CPC, holding that the suit was barred by law.

The Karnataka High Court reversed the trial court’s decision and allowed the suit to continue.

The Supreme Court disagreed with the High Court. It restored the rejection of the plaint and held that the claim could not proceed because it was essentially an attempt to enforce a benami transaction.

The Supreme Court also directed the Central Government to appoint an Administrator and take over the suit properties within eight weeks for confiscation under the Benami law.

Why This Judgment Matters for Property Buyers

• A property bought in another person’s name is not always illegal, but it must fall within a lawful exception.
• Buyers should be careful if one person paid the money but another person is shown as the owner in the documents.
• Always verify whether the registered owner is the real and lawful owner of the property.
• A Will, agreement, or family explanation cannot automatically fix a benami transaction or defective title.
• Before buying, check the title history, payment trail, ownership records, and possible benami risk.

Verified.RealEstate Perspective

At Verified.RealEstate, property verification is not just about checking whether a Will, sale deed, patta, or encumbrance certificate exists. The real question is whether all documents together show a clean and lawful ownership history.

A property may look valid on paper, but hidden risks can arise from benami arrangements, suspicious funding, family disputes, competing Wills, pending litigation, revenue record mismatches, or claims by persons who say they funded the purchase.

Tools and services like LandLens by Verified.RealEstate, Verify My Land, Encumbrance Certificate checks, Patta verification, and legal due diligence can help buyers identify such risks before entering into a transaction.

Final Takeaway

The Manjula case is not only about succession law or murder-related disqualification. It is also a strong Supreme Court warning on benami property claims.

The core message is simple:

A Will can transfer valid property rights. It cannot legalise a benami transaction.

If a property claim is rooted in the idea that one person paid the money while another person held the title, courts will examine the real substance of the transaction. Clever drafting, emotional claims, or a later Will cannot be used to bypass the Benami law.

For years, thousands of property transactions across India were executed without a registered sale deed. Instead, buyers relied on:

• General Power of Attorney (GPA)
• Agreement to Sell
• Will

These “GPA sales” were common in Delhi, Haryana, and even influenced practices elsewhere. They helped parties reduce stamp duty, avoid registration costs, and transfer possession quickly — but legally, ownership remained questionable.

Then came a ruling that changed everything.

The Case That Redefined Ownership

In the late 1990s and early 2000s, large numbers of properties in Delhi and nearby regions were being transferred through GPA + Agreement to Sell + Will, instead of a registered sale deed.

Suraj Lamp & Industries Pvt. Ltd. purchased property in Haryana through this GPA route from earlier holders who themselves had acquired it in the same manner. When disputes arose regarding the validity of such transfers and registration authorities began refusing to treat GPA transactions as proper conveyances, the legality of these “GPA sales” was challenged.

The matter eventually reached the Supreme Court as Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana.

In October 2011 (final judgment reported in 2012), the Supreme Court examined whether property ownership could legally pass through GPA, Agreement to Sell, and Will without a registered sale deed.

What the Court decided:

• GPA sales do not convey ownership.
• Agreement to Sell does not create title.
• Immovable property can be legally transferred only through a registered sale deed.

The Court also clarified that genuine powers of attorney for management purposes remain valid — but they cannot substitute a sale deed.

This decision effectively ended the widespread practice of using GPA transactions as a shortcut method to transfer ownership.

Possession does not equal ownership.
Documentation does not equal title.
Registration equals ownership.

That principle reshaped the entire real estate ecosystem.

🔴 The Real Impact: How Suraj Lamp Changed Property Transactions

The importance of this judgment is not in its wording — but in how it transformed real estate practice across India.

1️⃣ The Collapse of GPA Sales

After the ruling:

• GPA-based “sales” lost legal credibility.
• Buyers became hesitant to purchase GPA properties.
• Informal property markets weakened.

An entire parallel system of property transfers effectively shut down.

2️⃣ Stamp Duty Compliance Increased

Earlier, many transactions were structured to avoid full stamp duty.

Post-judgment:

• States saw improved revenue collection.
• Under-reporting became riskier.
• Developers structured transactions formally.

Property transfers became documentation-heavy and compliance-driven.

3️⃣ Bank Lending Became Stricter

Today, banks rarely approve loans if:

• The title chain includes GPA transfers without regularisation.

Housing finance institutions insist on:

• Clear registered sale deed
• Proper title continuity
• Clean encumbrance history

This shift directly stems from Suraj Lamp.

4️⃣ Litigation Strategy Changed Nationwide

In property disputes today, courts ask one basic question:

Is there a registered sale deed?

If not, the Suraj Lamp ruling is immediately cited.

It now influences:

• Specific performance suits
• Cancellation of sale deeds
• Ownership declaration cases
• Patta and mutation disputes
• Title verification matters

Even High Courts across India rely on this precedent while deciding ownership issues.

5️⃣ Due Diligence Standards Became Tougher

Post-Suraj Lamp, serious buyers and legal advisors:

• Verify document chain carefully
• Avoid GPA breaks in title history
• Insist on proper registration before closing deals

For property investors, this means title verification is no longer optional — it is essential.

Platforms like Verified.RealEstate now emphasise verifying:

• Registered sale deeds
• Encumbrance Certificates
• Chain documents
• Stamp duty compliance

Because informal documentation is no longer defensible in court.

6️⃣ Why Suraj Lamp Is Still Mentioned in Most Cases

The reason is simple.

The judgment settled a foundational principle:

Ownership of immovable property in India transfers only through a registered sale deed.

Any dispute involving:

• Unregistered transfers
• Oral sales
• Agreement-to-sell claims
• GPA ownership claims
• Possession-based arguments

Will inevitably refer back to Suraj Lamp.

It is not just a case.
It is a baseline rule.

🧾 Practical Takeaways for Property Buyers

• Never treat GPA as proof of ownership.
• Ensure a properly executed and registered sale deed exists.
• Verify stamp duty payment.
• Check mutation and revenue records reflect the registered deed.
• Avoid properties with unclear title chains.

In modern real estate transactions, compliance is protection.

Across Tamil Nadu, many land disputes today originate from 1960s resurvey and settlement operations. During that period:

• Survey numbers were revised
• Subdivisions were created
• Pattas were updated
• Land classifications were altered
• Village and district jurisdictions changed

As a result, landowners now face:

• Survey number mismatches
• Patta inconsistencies
• Temple or government ownership claims
• Classification changes (wet/dry/poramboke/natham)
• Breaks in title chain before 1970

To solve this properly, you must go beyond modern revenue extracts and trace back to pre-Independence village records, especially the Old Settlement Register (OSR) and the Inam Fair Register (IFR).

Understanding the Root Records: OSR and IFR

Old Settlement Register (OSR)

The Old Settlement Register was created during British-era revenue settlement under the Ryotwari system.

It contains:

• Original survey numbers
• Land extent
• Land classification
• Pattadar name at settlement time
• Revenue assessment
• Official remarks

OSR is effectively the ancestor of today’s A-Register.
If ownership history breaks before 1960, OSR becomes essential.

Inam Fair Register (IFR)

“Inam” refers to land granted tax-free or at concessional rates to:

• Temples
• Mutts
• Service holders
• Individuals

The Inam Fair Register documents:

• Nature of grant
• Name of inamdar
• Extent and boundaries
• Confirmation or resumption status
• Conditions attached

If someone claims land is temple land or government land, IFR verification is mandatory.

Where Should the Search Be Done?

Many people search randomly online. That does not work.

Tracing pre-Independence land records requires visiting specific offices in the correct order.

1️⃣ First Layer: Current Revenue Records

📍 Where to Search

• Village Administrative Officer (VAO)
• Taluk Office (Revenue Section)
• Taluk Survey Department

📄 Collect:

• Patta
• A-Register Extract
• Chitta
• Adangal
• FMB (Field Measurement Book)
• Mutation history

This establishes the present identity of the land.

2️⃣ Second Layer: 1960s Resurvey & Settlement Records

📍 Where to Search

• Taluk Survey Office
• District Survey & Settlement Office
• Collectorate Record Room

📄 Ask for:

• Old-to-new survey number linkage
• Resurvey proceedings
• UDR (Updating Registry) records
• Subdivision history

Most 1960s confusion can be resolved at this level.

3️⃣ Third Layer: Pre-Independence Records (OSR & IFR)

📍 Primary Location:

Tamil Nadu Archives and Historical Research, Egmore, Chennai

This is where you search for:

• Old Settlement Register (OSR)
• Inam Fair Register (IFR)
• Initial Survey Registers
• Estate / Inam investigation files

Important:
Search using historic district names.

Example:
Areas now in Dindigul district were historically under “Madura District” before 1985. If you search only using modern district names, you may miss records.

4️⃣ District Record Centres (Alternative Route)

Some older records (30+ years old) are transferred to:

• District Record Centres
• Collectorate old record rooms

In some cases, district-level access may be faster than Egmore.

5️⃣ Parallel Search: Sub-Registrar Office

📍 Where to Search

• Jurisdictional Sub-Registrar Office (SRO)

📄 Collect:

• Parent documents
• Pre-1960 sale deeds
• Partition deeds
• Inam abolition or estate conversion documents

Revenue history must match registration history.
If they contradict, the dispute begins.

The Correct Order of Investigation

1. VAO / Taluk Office (current records)
2. Taluk Survey Office (1960s linkage)
3. Sub-Registrar Office (document chain)
4. Tamil Nadu Archives (OSR & IFR)
5. District Record Centre (if required)

Skipping steps leads to incomplete tracing.

Why Historic District Names Matter

Pre-Independence records may use:

• Madura instead of Madurai
• Composite districts that were later bifurcated
• Old taluk structures

Before visiting Archives, verify historic jurisdiction using old gazetteers or archival indexes.

Searching with only modern spellings can result in “record not found,” even when records exist.

Common Situations That Require OSR + IFR

• Survey number mismatch after resurvey
• Patta cancellation disputes
• Temple land claims
• Poramboke classification disputes
• Estate / Inam abolition confusion
• Title break before 1970

If your document chain does not smoothly move backward beyond the 1960s, OSR and IFR investigation becomes necessary.

Verified.RealEstate Can Help

For complex cases involving:

• Survey mismatch
• Patta inconsistency
• Historic district change
• Inam-related disputes
• Classification errors

Verified.RealEstate structures your document chain and identifies exactly where the break occurred — whether at the mutation level, survey linkage level, or settlement root.

Because land tracing requires technical mapping — not assumptions.

Final Takeaway

Modern patta is only the latest layer of history.

To resolve land ownership confusion caused by 1960s settlement:

• Start with current revenue records
• Trace survey linkage
• Verify registered document chain
• Investigate OSR
• Confirm IFR (if applicable)
• Use historic district names during archival search

Only then can ownership be legally and historically defended.