The Supreme Court, in the case of Suraj Lamp & Industries Pvt. Ltd. Vs. State of Haryana & Anr., held that the 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 as valid mode of transfer of immoveable property and that 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. The judgement waspassed by a Bench Justice R.V. Raveendran, Justice A.K. Patnaik and Justice H.L. Gokhale. A copy of the Judgement can be found here.
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1. SA/GPA/WILL transfers cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act as these are transactions, where a purchaser pays the full consideration for acquisition of an immovable property, but instead of entering into a Deed of Conveyance, enters into a SA/GPA/WILL for acquiring the right, title and interest in the immovable property, either at the instance of the vendor or at his own instance.
2. The modus operandi adopted in such SA/GPA/WILL transactions by the vendor or person claiming to be the owners of the immovable property is to (i) enter into and execute Agreement for Sale / unregistered General Power of Attorney / Will / Agreement / Deeds/ Documents/ writings etc.; (ii) hand over / deliver quiet, peaceful and vacant possession of the immovable property to the Purchaser; and (iii) receive the Consideration as mentioned in the Agreement and to fully discharge the Purchaser from his / her / their / its obligation of payment of the agreed Consideration without payment of stamp duty and going through the process of registration.
3. Details of three different modes of transaction with Court's comments in context of each mode :
A. AGREEMENT FOR SALE
(i) An Agreement of Sale by the Vendor in favour of the Purchaser confirming the terms of sale, delivery of possession payment of full consideration and undertaking to execute any vesting document as and when required in future.
(ii) 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.
(i) Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of sections 54 and 55 of The Transfer of Property Act, 1882 (“the TP Act”) and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under section 53A of the TP Act) for defending possession. According to the TP Act, an Agreement of Sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act states that sale of immoveable property can be made only by a registered instrument and an agreement of sale is not a document of transfer and does not create any interest or charge on its subject matter.
B. GENERAL POWER OF ATTORNEY
(i) 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.
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.
(a) It is revocable or terminable at any time unless it is made irrevocable in a manner know to law.
(b) Except in cases where power of attorney is coupled with interest, it is revocable.
(c) Even an irrevocable attorney does not have the effect of transferring title to the grantee.
(d) 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.
(e) A power of attorney is creation of an agency whereby the grantor authorizes to do the acts specified therein on behalf of the grantor, which when executed will be binding on the grantee as if done by him. A power of attorney is a document executed for convenience of the grantor as well as the grantee as may be contemplated in transaction.
A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).
(i) The two essential characteristics of a will are that (a) it is intended to come into effect only after the death of the testator and (b) is revocable at any time during the life time of the testator.
(ii) Section 69 and 70 0f the Indian Succession Act, 1925, states that, if the testator who is not married, marries after making the will, by operation of law, the will stands revoked.
(iii) Registration of a Will does not make it any more effective.
4. 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) Vendor 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.
It also makes title verification and certification of title, which is an integral part of orderly conduct of transactions relating to immovable property, difficult, if not impossible, giving nightmares to bonafide purchasers wanting to own a property with an assurance of good and marketable title.
5. A SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. The observations by the Delhi High Court, in Asha M. Jain v. Canara Bank - 94 (2001) DLT 841, that the “concept of power of attorney sales have been recognised as a mode of transaction” when dealing with transactions by way of SA/GPA/WILL are unwarranted and not justified, unintendedly misleading the general public into thinking that SA/GPA/WILL transactions are some kind of a recognised or accepted mode of transfer and that it can be a valid substitute for a sale deed. 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.
6. The Hon’ble Supreme Court has enunciated that transactions in the nature of SA/GPA/WILL transfers cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is high time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales.
7. However, it has been submitted that making declaration that GPA sales and SA/GPA/WILL transfers are not legally valid modes of transfer is likely to create hardship to a large number of persons who have entered into such transactions and they should be given sufficient time to regularize the transactions by obtaining deeds of conveyance. It is also submitted that this decision should be made applicable prospectively to avoid hardship. Moreover the Hon'ble Court recommended that
If S.A./GPA are entered before the date of judgement day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities and 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.
8. The Hon'ble Court has categorically stated that its observations are not intended to in any way 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. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. The Court has observed that the judgement is not intended to apply to such bonafide/genuine transactions.
1. Since operation of the judgement is to be effective prospectively, Central Government should come out with Amnesty Scheme for payment of stamp duty and registration of documents of such transfer where the title has not passed to real purchaser/beneficiary.
2. Documents executed but not registered within prescribed period should be allowed to be registered after expiry of the prescribed period of 8 months, as stated in Section 23 of the Registration Act. Normally such documents are annexed to Deed of Confirmation which is registered. However, the Registrar invariably affixes stamp "Annexure Not Registered" which adversely affects the title.
The Sub-Registrar should be instructed to register the original (duly signed) unregistered documents after the expiry of prescribed period without requiring the execution of Deed of Confirmation by both the parties provided that respective parties or their constituted attorney admits the execution before the Sub-Registrar.
Where the Seller/his constituted attorney is not available for admitting execution before the Sub-Registrar, such documents should be allowed to be registered with the Deed of Confirmation / Declaration by the Purchaser only.
3. Where a Power of Attorney is registered assigning a power to the Constituted Attorney to enter into a Conveyance on behalf of the grantor then, the Conveyance can be executed by the Constituted Attorney on behalf of the owner in favour of the purchasers.
4. Where Agreement for Sale is also registered, Conveyance can be executed only on Rs.100/- stamp paper to perfect the title and transfer the land revenue records in the name of the Purchaser.
This will not be applicable to the cases where documents are not required to be compulsorily register u/s. 17(1)(b) of the Transfer of Property Act. Further this will not be applicable in case of Sale / transfer of flats, offices, units in registered co-operative housing society or limited company, as in such cases the title passes upon execution of a Agreement for Sale alongwith handing over of possession of the Premises and transfer of share certificates by the Society or the Limited Company in favour of the Purchaser.
The ratio of this judgement will not apply to transactions where the Developer has commenced the development work on the project in pursuance of unregistered Development Agreement.
|Justice R.V. Raveendran, Justice H.L. Gokhale and Justice A.K. Patnaik: Coram of the Suraj Lamp & Industries Pvt. Ltd. Vs. State of Haryana & Anr.|
| Sushant Shetty|
Keywords: GPA sales, SA/GPA/WILL transfers, General Power of Attorney sales, Special Power of Attorney transfers, registration, will india, Suraj Lamp Industries Pvt Ltd State of Haryana Anr, Justice R.V. Raveendran, Justice H.L. Gokhale and Justice A.K. Patnaik, Transfer of Property Act