Sale of property through power of attorney not valid: Supreme Court
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 the 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 a 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 was
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.
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