Friday, September 15, 2017

SC: Sale of property through power of attorney not valid

SC: Sale of property through power of attorney not valid

Immovable property can be legally and lawfully transferred/conveyed only by Registered Deed of Conveyance, and that transactions in the nature of "GPA Sales" or "SA/GPA/Will Transfers", do not convey title and do not amount to transfer nor can they recognized as a valid mode of transfer of immovable property, and further that the Courts will not treat such like transactions as concluded transfers as conveyances as they neither convey title nor create any interest in an immovable property and that they cannot be recognized as piece of title, except to the limited extent of Section 53 (A) of Transfer of Property Act.

Also read FULL Judgment at:



2012 (1) SCC 656 :  183 (2011) DLT 1, SC

Also read the related stories

No property sale on power of attorney: Supreme Court

The court rules that transfer through general power of attorney cannot give ownesrship title to the buyer.

Gyanant Singh

New Delhi, October 13, 2011 | UPDATED 12:11 IST

Property sales through the common practice of general power of attorney (GPA) will not give ownership title to the buyer.

In a landmark judgment that is expected to send a large number of property owners into a tizzy, the Supreme Court held that the GPA method of immovable property sales is not a valid form of transfer of property.

A three-judge bench presided over by Justice R. V. Raveendran said that property can be lawfully transferred only through registered sale deeds.

"A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property," the bench said, after interpreting various provisions of the law concerning property sales. However, the bench said the judgment will not affect "genuine transactions" under the GPA.

The judgment delivered on Wednesday would have an impact on both freehold and leasehold properties and affect the mode of transfer of property in Delhi and the National Capital Region (NCR) where GPA sales are very common. Even though it can cause some hardship to those who have already purchased property through the GPA, the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.

Navin Raheja, chairman and managing director of Raheja Developers said, "The court's decision will help to curb the circulation of black money to some extent in the real estate sector where titles are manipulated. Besides, many property transactions where prices are rounded off will be affected. However, overall there won't be any significant impact on normal property sales."

The apex court said there can be no mutation of property in municipal and revenue records on the basis of such documents. The bench, however, clarified that its order should not be a ground for disturbing mutations already effected by the Delhi Development Authority (DDA) or any other authority.

But, there is little relief for thousands of people who hold property without mutation as GPA sales can only be treated as existing sale agreements. An application of the order with prospective effect would have protected their interest. The court, though, stressed that it had merely reiterated the well- settled legal position that such transactions cannot be treated as completed transfers.

The court could not make the order applicable with prospective effect as it had not laid down any new law. However, it said that those who had already bought property through GPA before its judgment could use the documents to apply for regularisation of allotments and leases by development authorities.

"Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under section 53A of TP (Transfer of Property) Act," the court said.

In order to ensure that GPA continues to serve its purpose, the court said its judgment will not affect the validity of sale agreements and powers of attorney executed in genuine transactions. "For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance."

The court further said that a person can enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings. In that connection he can execute an agreement of sale and grant a power of attorney that will allow the developer to further sell the property to prospective purchasers.

While hearing a matter on the subject, the court had decided to clarify the law on the issue as such transfers had not only led to evasion of stamp duty and registration charges but had also provided scope for investing black money in real estate. Besides, such transfers were giving nightmares to bona fide purchasers as the same property could be sold to several people in the absence of verification or certification of title. A proper verification of ownership was possible only if all property were transferred through registered sale deeds.

Noting that such transactions were now not just limited to Delhi but had spread to neighbouring areas, the court had sought the views of the Centre and the states of Delhi, Haryana, Punjab and Uttar Pradesh. There was a near unanimity that such transactions should be discouraged as it caused loss of revenue and increased litigation due to defective titles.

Going into the legality of such transfers, the court said any contract of sale which was not a registered sale deed would fall short of the requirements of the relevant provisions of the Transfer of Property Act and could not confer any title.

The court said a transfer of property by way of sale could only be by a sale deed. "In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred," the bench said.


Also read the related stories

Sale of property through power of attorney not valid: Supreme Court

J. Venkatesan 

NEW DELHI: OCTOBER 13, 2011 00:00 IST

Such transactions are made to avoid certain conditions and payments

Judgment will not be applicable to “genuine transactions"

Reduce stamp duty to encourage registration of sale deeds

The Supreme Court has deprecated the practice of sale of immovable properties through sale agreement/general power of attorney/will transfer, and said such sale of property is not valid.

A three-judge Bench of Justices R.V. Raveendran, A.K. Patnaik and H.L. Gokhale said such transactions “are not transfers or sales and such transactions cannot be treated as completed transfers or conveyances.” To avoid such transactions, the Bench asked the States to reduce the stamp duty to encourage registration of sale deeds.

Writing the judgment, Justice Raveendran said: “A SA/GPA/Will does not convey any title nor create any interest in an immovable property. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title.”

The Bench said: “The descriptions of SA/GPA/Will are misnomers as there cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. These kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money [black money] and to avoid payment of unearned increases due to development authorities on transfer.”

Deed of conveyance

The Bench pointed out that these were transactions where a purchaser “pays the full price, but instead of getting a deed of conveyance gets a SA/GPA/Will as a mode of transfer, either at the instance of the vendor or at his own instance.”

The Bench said a transfer of immovable property by way of sale could only be by a deed of conveyance (sale deed). In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property could be transferred.

The Bench noted that though certain measures to amend the Registration Act had some effect to plug the loss of revenue by way of evasion of stamp duty, the ill-effects continued. Further, such transaction which was only prevalent in Delhi and the surrounding areas had started spreading to other States also.

“Those with ulterior motives, either to indulge in black money transactions or land mafia, continue to favour such transactions,” the Bench said and added “reducing stamp duty on conveyance to realistic levels will encourage the public to disclose the maximum sale value and have the sale deeds registered.”

Long-run benefits

The Bench said: “Though the reduction of the stamp duty may result in an immediate reduction in the revenue by way of stamp duty, in the long run it will be advantageous for two reasons: parties will be encouraged to execute registered deeds of conveyance/sale deeds without any undervaluation instead of entering into SA/GPA/Will transactions and more and more sale transactions will be done by way of duly registered sale deeds, disclosing the entire sale consideration thereby reducing the generation of black money to a large extent.”

The Bench, however, made it clear that if the documents relating to SA/GPA/Will transactions had been accepted and acted upon by the Delhi Development Authority or other developmental authorities or by the municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision.

The Bench also said that this judgment would not affect the validity of sale agreements and powers of attorney executed in genuine transactions viz., a person giving GPA to his spouse, son, daughter, brother, sister or a relative to manage his affairs to execute a deed of conveyance.

The Bench placed on record its appreciation of the former Solicitor-General, Gopal Subramaniam, for rendering assistance as amicus curiae in this case.


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