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2011 (6) Supreme 737
SUPREME COURT OF INDIA
R. V. Raveendran, A. K. Patnaik and H. L. Gokhale, JJ.
Suraj Lamp & Industries Pvt. Ltd. — Petitioner
versus
State of Haryana & Anr. — Respondents
Special Leave Petition (C) No.13917 of 2009
Decided on : 11-10-2011
Power of Attorney-Scope of-A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property- The power of attorney is creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him - It is revocable or terminable at any time unless it is made irrevocable in a manner known to law- Even an irrevocable attorney does not have the effect of transferring title to the grantee- An attorney holder may however execute a deed of conveyance in exercise of the power granted under the power of attorney and convey title on behalf of the grantor (Para 13)
SA/GPA/WILL transactions –Validity of -Immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance- Transactions of the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property- The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property- They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act- Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records- This applies not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property-However held that observations regarding ‘SA/GPA/WILL transactions’ were not intended to apply to bonafide/genuine transactions (Paras 16 to 20)
The case primarily addresses the legality and validity of transactions involving Sale Agreements (SA), General Power of Attorney (GPA), and Wills concerning immovable property. It clarifies that such transactions do not constitute a transfer of interest or title in the property unless executed through a duly registered deed of conveyance. The court emphasizes that a transfer of immovable property by sale can only be effectuated through a registered sale deed, and transactions like GPA sales or SA/WILL transfers are not recognized as complete or valid transfers of property rights (!) (!) .
Furthermore, the court discusses the scope and limitations of powers of attorney, stating that they do not transfer ownership but merely authorize an agent to act on behalf of the principal, and even an irrevocable power of attorney does not transfer title (!) (!) . Similarly, a will is considered a posthumous disposition that only takes effect after the testator's death and does not transfer property inter vivos (!) (!) .
The judgment underscores that only a registered deed of conveyance can effectively transfer ownership or interest in immovable property, and any other form of transfer, including SA, GPA, or Wills, cannot be relied upon as conclusive or valid modes of transfer (!) . It also highlights the importance of registration, which provides order, security, and clarity in property transactions, and discourages under-valuation and black money generation (!) (!) .
In conclusion, the court reiterates that SA, GPA, and Wills are not substitutes for a registered sale deed and that such transactions do not convey title or create any interest in the property. The observations aim to curb illegal and non-transparent transfer practices and reinforce the legal requirement for proper registration to establish valid property rights (!) (!) (!) .
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JUDGMENT
R. V. Raveendran J. —
By an earlier order dated 15.5.2009 [reported in Suraj Lamp & Industries Pvt.Ltd. vs. State of Haryana & Anr. - 2009 (7) SCC 363], we had referred to the ill - effects of what is known as General Power of Attorney Sales (for short ‘GPA Sales’) or Sale Agreement/General Power of Attorney/Will transfers (for short ‘SA/GPA/WILL’ transfers). Both the descriptions 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. As noticed in the earlier order, 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.
2. The modus operandi in such SA/GPA/WILL transactions is for the vendor or person claiming to be the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof:
(a) An Agreement of sale by the vendor in favour of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future.
Or
An agreement of sale agreeing to sell the property, with a separate affidavit confirming receipt of full price and delivery of possession and undertaking to execute sale deed whenever required.
(b) An Irrevocable General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing him to manage, deal with and dispose of the property without reference to the vendor.
Or
A General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing the attorney holder to sell or transfer the property and a Special Power of Attorney to manage the property.
(c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).
These transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. These are 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.
Ill-Effects of SA/GPA/WILL transactions
3. The earlier order dated 15.5.2009, noted the ill-effects of such SA/GPA/WILL transactions (that is generation of black money, growth of land mafia and criminalization of civil disputes) as under:
“Recourse to `SA/GPA/WILL’ transactions is taken in regard to freehold properties, even when there is no bar or prohibition regarding transfer or conveyance of such property, by the following categories of persons:
(a) Vendors with imperfect title who cannot or do not want to execute registered deeds of conveyance.
(b) Purchasers who want to invest undisclosed wealth/income in immovable properties without any public record of the transactions. The process enables them to hold any number of properties without disclosing them as assets held.
(c) Purchasers who want to avoid the payment of stamp duty and registration charges either deliberately or on wrong advice. Persons who deal in real estate resort to these methods to avoid multiple stamp duties/registration fees so as to increase their profit margin.
Whatever be the intention, the consequences are disturbing and far reaching, adversely affecting the economy, civil society and law and order. Firstly, it enables large scale evasion of income tax, wealth tax, stamp duty and registration fees thereby denying the benefi
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