Friday, October 19, 2012

Validity Of “Unregistered Agreement For Sale / General Power Of Attorney/Will Transfers” - Supreme Court Ruling


This article is written by Sushant Shetty.

Power of Attorney General Special Banned stamp red
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 was
passed 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.
(To see How to Make a Will or get some Sample Will formats go here.)


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.

                                                                        Or


            (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.






Court's  Observations


(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.


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.


 Court's Observations:


 (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.



C.        WILL


legal Last Will and Testament Paper Document Estate, legal will document on paper with spectacles

  A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).


 Court's Observations
    
 (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.







SUGGESTIONS


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.





Exception :

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.
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.



This article is written by Sushant Shetty.

Sushant Shetty Advocate Lawpoint licensed Maharashtra goa
 Sushant Shetty
Advocate
Sushant Shetty is a young Advocate, licensed to practice in the state of Maharashtra and Goa. He graduated from the Government Law College, and is currently working with one of Mumbai’s leading boutique Real Estate Law firms. His practice focuses primarily on Real Estate and Commercial Laws.






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

19 comments:

  1. Appreciate this post. Will try it out.
    Also visit my page ; las vegas bail bondsman

    ReplyDelete
  2. hello sirs, S made an agreement to sell his property to G for rs.60 lakh and received 10 lakh advance on 03/03/2011 with some conditions like last period for regn. was 3 months from the date of agreement, after that the agreement stands invalid and if G fails to pay balance money and finish the deal with in the agreed period he would lose the advance money and if S refused to accept the balance money and finish the deal, buyer has to go to court and pay the balance amount and ger the property registered . and after 5 months of time no regn. performed. S returned 10 lakh advance money to G. but failed to collect the unregistered sale agreement. after that no communication served between them. after nearly one year. G tried to occupy the property and then S sent a letter mentioning details of retuned money and demanded old agreement. now G occupied the property and by giving some money to tenent. with out the concent of S tenent hand over the property to G and blocked S to enter the building and filed a case for regn. in dec 2012 and deducting the money given to tenent from balance amount of 50 lakh.

    now what would S do? he is not interested in that deal. wants to occupy his property. is it possible to forfeit the advance amount.

    ReplyDelete
  3. Hello Mr. Anonymous,

    Your matter is very straight-forward. As per the Agreement, Mr.S had every right to forfeit and retain the earnest money of Rs.10 lacs since Mr.G failed to pay the balance sum within the stipulated period of 3 months. The Agreement would stand automatically cancelled.

    Despite this, at his own option and out of good faith, Mr.S could even return the earnest money to Mr.G. I hope that Mr.S took a receipt from Mr.G while returning this sum. After this, the Agreement would stand automatically cancelled.

    Mr.G would have no more rights under the old Agreement and in the said property. Any attempt to forcibly occupy the property would be illegal. Since Mr.S is still the owner of the said property, Mr.G cannot deal with the tenants without the permission of the Landlord i.e. Mr.S.

    My advise to Mr.S would be not to accept any sum from Mr.G which be construed as revival/continuation of the Old Agreement or creation of a fresh Agreement. Since Mr.G has already filed a case, Mr.S will have to deal with that and simultaneously file eviction proceedings against Mr.G.

    I hope that this answers your queries.

    Best Regards,

    Sushant Shetty.

    ReplyDelete
  4. Dear Sir,

    I had sold a property for more than 80 Lacs to Mr. X. The cash received was also deposited in the bank by providing reference documents to bank. However there is another document that I had signed with buyer for a lesser amount that the buyer is using as a legal evidence. I had however filed my income tax with all back-up documents for the initial amount. Now I have received summon from IT. Kindly advise

    ReplyDelete
  5. Hello,

    Please explain to us the nature of both the documents entered into by you so that we can best solve your query.

    Best Regards,
    Mowing the Law

    ReplyDelete
  6. Sir,
    Appreciate this nice article with some clarity on various types of transactions and appreciate if some details are provided on below doubts:
    1) how long (duration) is a sale of agreement valid ?
    2) Mr.Buyer has entered into sale of agreement with Mr.Vendor for 10L rupees. Mr.B paid partial amount of 5L and then would like to withdraw or cancel this sale of agreement and like to get back the payments from Mr.V. What is the procedure ? and can we enter into a payment agreement that Mr.V will pay Mr.B the amount in instalments via cash, etf or cheques ? and whether this new agreement can be enforceable if Mr.V doesn't return full payment back ?

    Please help clarify. Thanks.

    ReplyDelete
  7. Dear Sir, I have a query and will be grateful if you can share your views on the same. I am the 3rd owner of a flat in a registered CHS and staying there since the last 18 years. The 1st owner who purchased the flat from the builder has it registered but the 2nd owner and myself have not registered the property (stamp duty has been paid in all the 3 transactions). Will there be any difficulty in case I find a buyer who wishes to avail of a bank loan, since the property is not registered?. Please suggest a legal solution to my problem. Thanking you in advance.

    ReplyDelete
  8. I am interseted in selling property in an area where registry is not being done (unauthorised colony). The buyers and their broker are comfortable with Notarized GPA/Agreemnt to sell/Will method, knowing fully that registry is prohibited and these sales are not valid as per SC judgement.

    My question is: Can I declare the consideration as Income from Capital gain thru sale of house property for IT return.

    ReplyDelete
  9. I am a registered agreement to sale of an immovable property holder. After 70 % of work with 70 % payment the vendor absconds and he is in police custody and his business is going to liquidation. In this case can I take the possession of the property after doing balance work by myself.

    ReplyDelete
    Replies
    1. Since you have a registered Agreement for Sale, I would say that you prima facie have a good title on the property. Depending on the terms of the Agreement for Sale, you can enforce the Agreement subject to making the balance 30% payment in favour of the Vendor. But you must ensure that the property is not attached by Court due to liquidation. Also assuming that Vendor is in police custody and since his credentials are in doubt, you must also ascertain that he has not sold/ agreed to sell the property to other person/s. Issuing a public notice for the same is a good way of finding this out.

      Delete
  10. Dear sir,
    I am in possession of property since few years and I am a beneficiary of tat property through Unregistered Will. Can I sale the property lawfully and legally without getting the Probate Certificate. And how does the judgement mentioned above affects me.

    ReplyDelete
  11. The father (who is no more), the Settlor, had settled a house absolutely in favour of his wife, the Settlee, out of natural love and affection through a registered Settlement Deed some 30 years ago.
    Query 1: Since there was no financial consideration involved, can we say that the Settlement Deed amounts to a Gift Deed giving absolute and sole right over the property to the wife?
    Later she sold this house and bought another house and again sold this to buy another land on which she constructed a house. The last house was recently sold by her through a registered sale deed to Mr. M.
    Recently her son has gone to court against the mother and Mr. M asking for a partition deed on the property and cancellation of the sale deed to Mr.M, claiming it to be ancestral property in as far as his father had settled a house in favour of the mother some 30 years ago. He has produced a seven year old unregistered "undertaking" presumably given by his mother stating that she authorizes him to construct a house in a part of the land and that she relinquishes all her rights on that part of the land.
    Query 2: What is the legal status of this unregistered "undertaking" given by the mother to her son? The mother is currently not available to clarify the situation. Kindly enlighten in view of Suraj Lamp vs Taate of Haryana case. case judgment or otherwise.
    Query 3: What is the overall merit of the case?

    ReplyDelete
  12. i had given some amount of money to one person and he had written an acknowledgement on a non judicial stamp paper that he had taken money from me and he will be returning in instalments but he did not turn up in doing so. now what will be the validity of that acknowledgement on a non registered non judicial stamp paper can i file a complaint in any local police station that he had cheated me

    ReplyDelete
  13. sir my mother had given some amount of money to one wife and husband when they had claimed that they will sell us some immovable property. they had taken the amount and had acknowledged the same on a non judicial stamp paper and it is not registered stating that they are taking money from my mother as a personal loan. after that they turned out to be illegal / false relationships with each other when we had asked the amount to be returned they did not turn up. now what will the validity of their acknowledgement on a non judicial stamp paper which is not registered. can we lodge a complaint in local police station stating that they had cheated us and lured money from us

    ReplyDelete
  14. Dear Mr/Ms. egeonfs,

    I have gone through your query and based on the limited facts, I will answer your query in serial order :

    1. (a) No. Settlement Deed is not same as Gift Deed. A duly stamped and registered Gift Deed is a proper title document.

    (b)Whether this property is "ancestral property" or not would depend on the facts stated in the court case.

    2. A registered "undertaking" is not a title document and would not amount to transfer or release of property, regardless of what the Suraj Lamp judgement would have to say.

    3. It would be wrong for me to give you a false impression of the merits of the case without knowing the entire facts of the matter.

    Best Regards,
    Sushant Shetty,
    Advocate.

    ReplyDelete
  15. hello sir,
    'A' made an unregistrad agreement to sell his property to B for rs.10 lakh and received 30000 advance on 20/05/2013 with some conditions like last period for regn. was 10 days from the date of agreement, if 'A' refused to accept the balance money and finish the deal, is 'Mr.A' can go to court and pay the balance amount and get the property registered?
    thank you.

    ReplyDelete
  16. Dear Sir,
    My Late Father has bought the Residential plot 1640sqyrds in the year 1998,
    I could find the original Sale deed copy and checked the EC which show him as owner, but recently when I visited the plot there was a house built on the plot, and when enquired house owner is showing a agreement of sale signed by my father.
    But how to validate that document,when Original Sale deed and EC is in my pocession.
    Kindly help in this regard, how to approach this matter.
    Pradeep Jupalli

    ReplyDelete
    Replies
    1. Dear Mr. Pradeep,

      Could you please tell us where this property is situated, since Property Laws differ from State to State.

      Regards,
      Team of Mowing the Law

      Delete
  17. can an unregistered power of attorney can deal with immovable property of value a few lakhs of rupees.the power of attorney is also not attested by sub registor.kindly advise.
    V.Natarajan

    ReplyDelete