2011 (10) TMI 8 - SC - Indian Laws

Invalidity of GPA, SA, and Will for Property Transfers

Suraj Lamp & Industries Pvt. Ltd. Versus State of Haryana & Another

The judgment clarifies that transactions involving General Power of Attorney (GPA), Sale Agreement (SA), and Will (WILL) do not constitute valid property ... Sale of property through general power of attorney - GPA Sale - transfer of title - section 53A of transfer of property Act - Held that:- 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. - They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act.Regularization of earlier GPA - Held that:- Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said ‘SA/GPA/WILL transactions’ may also be used to obtain specific performance or to defend possession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to ‘SA/GPA/WILL transactions’ has been accepted acted upon by DDA 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. Issues Involved:1. Legality and validity of General Power of Attorney Sales (GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (SA/GPA/WILL transfers).2. Ill-effects of SA/GPA/WILL transactions.3. Relevant legal provisions under the Transfer of Property Act, Indian Stamp Act, and Registration Act.4. Scope and effect of Agreement of Sale, Power of Attorney, and Will.5. Measures to curb SA/GPA/WILL transactions and their implications.Detailed Analysis:1. Legality and Validity of GPA Sales or SA/GPA/WILL Transfers:The judgment clarifies that transactions involving the execution of a General Power of Attorney (GPA), Sale Agreement (SA), and Will (WILL) do not constitute a valid transfer of property. These transactions are often misused to avoid prohibitions, stamp duty, registration charges, and taxes. The court emphasizes that a sale or transfer of immovable property can only be legally effected through a registered deed of conveyance. Therefore, SA/GPA/WILL transactions do not convey any title or interest in immovable property and are not recognized as valid modes of transfer.2. Ill-Effects of SA/GPA/WILL Transactions:The judgment highlights several adverse consequences of SA/GPA/WILL transactions:- Generation of black money.- Growth of land mafia and criminalization of civil disputes.- Evasion of income tax, wealth tax, stamp duty, and registration fees.- Encouragement of corruption and circulation of black money.- Difficulty in title verification and certification, leading to increased litigation and disputes.3. Relevant Legal Provisions:The judgment refers to specific sections of the Transfer of Property Act, Indian Stamp Act, and Registration Act to underscore the legal requirements for valid property transfers:- Section 5 of the Transfer of Property Act defines 'transfer of property.'- Section 54 of the Transfer of Property Act specifies that a sale of immovable property can only be made by a registered instrument.- Section 53A of the Transfer of Property Act provides limited protection under the doctrine of part performance.- Section 27 of the Indian Stamp Act mandates the disclosure of all facts affecting the chargeability of stamp duty.- Section 17 of the Registration Act requires compulsory registration of documents that create or transfer any interest in immovable property.4. Scope and Effect of Agreement of Sale, Power of Attorney, and Will:The judgment elaborates on the limited scope and effect of each of these instruments:- Agreement of Sale: Does not create any interest in or charge on the property. It is merely a contract to transfer property in the future.- Power of Attorney: Authorizes the grantee to act on behalf of the grantor but does not transfer any right, title, or interest in the property. It is revocable and does not convey ownership.- Will: A testamentary document that takes effect only after the testator's death and is revocable during the testator's lifetime. It does not constitute a transfer inter vivos.5. Measures to Curb SA/GPA/WILL Transactions and Their Implications:The court acknowledges the steps taken by various states to discourage SA/GPA/WILL transactions, such as amending the Registration Act and Stamp Act to require registration and appropriate stamp duty for agreements of sale and powers of attorney. The court also notes the positive step taken by the State of Haryana to reduce stamp duty on deeds of conveyance, which encourages the execution of registered sale deeds and reduces the generation of black money.Conclusion:The court reiterates that immovable property can only be legally transferred through a registered deed of conveyance. SA/GPA/WILL transactions do not convey title, create any interest, or amount to a valid transfer of immovable property. The court calls for an end to the practice of SA/GPA/WILL transactions and emphasizes the need for parties to obtain registered deeds of conveyance to complete their title. The court also clarifies that its observations do not affect the validity of genuine transactions involving powers of attorney and sale agreements executed for legitimate purposes.The judgment concludes by appreciating the assistance of the Amicus Curiae and scheduling the special leave petition for final disposal.