• Oct
  • 15
  • 2011

Sale of immovable property only through registered deeds, Power of attorney sales not valid – SC

Article ID 44611 | Posted In Corporate Law | | 3 Comments » Print Friendly and PDF

The Supreme Court today ruled in the case of Suraj Lamp & Industries Pvt Ltd Vs State Of Haryana   that sale transactions carried in the name of general power of attorney will have no legal sanctity and immovable property can be sold or transferred only through registered deeds.  “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 recognised or valid mode of transfer of immovable 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.

“Such transactions cannot be relied upon or made the basis for mutations in municipal or revenue records,” Justice Raveendran, writing the judgement, said.

The apex court said the amendments to stamp and registration laws by various states do not address the larger issue of generation of black money and operation of land mafia and hence there was a need to reduce the stamp duty though it may result in loss or revenue.

“When high stamp duty is prevalent, there is a tendency to undervalue documents even where sale deeds are executed.

When properties are undervalued, a large part of the sale price changes hand by way of cash thereby generating `black’ money.

“Even when state governments take action to prevent undervaluation, it only results in the recovery of deficit stamp duty and registration charges with reference to the market value but the actual sale consideration remains unaltered,” the bench said.

The apex court said the Delhi High Court was wrong in upholding the validity of GPA sales in the Asha Jain case(2001).

“Such decisions to the extent they recognise or accept SA/GPA/WILL transactions as concluded transfers, as contrasted from an agreement to transfer, are not good law.

“We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance, Justice Raveendran said.

The apex court, however, clarified the sale and other transactions entered through GPAs and Wills till date will not be affected by its today’s orders and will be treated as valid agreements.

“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,” the bench said.

According to the apex court, any agreement entered till date may be relied upon to apply for regularisation 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 municipal or revenue authorities to effect mutation, they need not be disturbed merely on account of this decision.

““We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions,” the apex court added.

A three-judge bench of justices R V Raveendran, A K Patnaik and H L Gokhale also asked the states to reduce stamp duty rates to prevent undervaluation of property and stashing of black money by vested interests. The apex court said high stamp rates has led to rampant abuse of the general powr of attorney (GPA), sale agreements (SA) and Wills, resulting in huge loss of money to the exchequer.

Download Full Text of the Judgment