In India, property sales through the common practice of POA (Power of attorney will not give ownership title to the buyer.
In a landmark judgment that is expected to send a large number of property owners into a tizzy, the Supreme Court held that the POA method of immovable property sales is not a valid form of transfer of property.
A 3 judge bench presided over by Justice R. V. Raveendran said , ''The property can be lawfully transferred only throgh registered sale deeds. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property."
“It is time that an end is put to the pernicious practice of a sale agreement through a general power of attorney or a will transaction.sales,” the bench said.
After interpreting many provisions of the law concerning property sales. However, the bench said the judgment will not affect "genuine transactions" under the power of attorney.
Curb Black money ..!The judgment delivered on recently would have an impact on both freehold and leasehold properties and affect the mode of transfer of property in Delhi and the National Capital Region (NCR) where GPA sales are very common. Even though it can cause some hardship to those who have already purchased property through the POA, the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.
The Supreme court said there can be no mutation of property in municipal and revenue records on the basis of such documents. The bench, however, clarified that its order should not be a ground for disturbing mutations already effected by the Delhi Development Authority (DDA) or any other authority. Same time, there is little relief for many thousands of people who hold property without mutation as POA sales can only be treated as existing sale agreements. An application of the order with prospective effect would have protected their interest. The court, though, stressed that it had merely reiterated the well settled legal position that such transactions cannot be treated as completed transfers.
"Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under section 53A of TP (Transfer of Property) Act," the court said.
In order to ensure that POA continues to serve its purpose. The judgment will not 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 spouse, son, daughter, brother, sister or a blood relative to manage his affairs or to execute a deed of conveyance.
Registered sale deeds only..!The court further said that a person can enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings. In that connection he can execute an agreement of sale and grant a power of attorney that will allow the developer to further sell the property to prospective purchasers.
While hearing a matter on the subject, the court had decided to clarify the law on the issue as such transfers had not only led to evasion of stamp duty and registration charges but had also provided scope for investing black money in real estate. Besides, such transfers were giving nightmares to bona fide purchasers as the same property could be sold to several people in the absence of verification or certification of title. A proper verification of ownership was possible only if all property were transferred through registered sale deeds.
Delhi, Haryana, Punjab and Uttar Pradesh...!
Noting that such transactions were now not just limited to Delhi but had spread to neighbouring areas, the court had sought the views of the Centre and the states of Delhi, Haryana, Punjab and Uttar Pradesh. There was a near unanimity that such transactions should be discouraged as it caused loss of revenue and increased litigation due to defective titles. The court said a transfer of property by way of sale could only be by a sale deed.
The market size of POA transactions, but some rough estimates suggest this could constitute as much as 70% of the total real estate deals in parts of northern India, especially Delhi. The apex court cited rampant use of general POA to transfer properties in the national capital, Punjab, Haryana and Uttar Pradesh, to put a stop to the practice and check generation of black money.
The bench said "In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred."
In a verdict aimed at discouraging loss of revenue to the exchequer, the Supreme Court on 13-10-2011 ruled that no immovable property can be legally transferred or conveyed through a general power of attorney, sale agreement or will.
The court observed that high stamp duty rates had led to rampant abuse of the GPA, sale agreements and wills.
Mr. Navin Raheja, MD, Raheja Developers said, "The Apex Court's decision will help to curb the circulation of black money to some extent in the real estate sector where titles are manipulated. Overall there won't be any significant impact on normal property sales."
Real estate industry associations have also highlight the significance of the supreme court verdict in trying to transform the sector. Mr. Lalit Jain, Chairman, CREDAI (Confederation of Real Estate Developers Association of India ), said," The move will go “a long way” in redefining real estate business transactions."
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Today’s Technical Term - Power of Attorney
In a landmark judgment that is expected to send a large number of property owners into a tizzy, the Supreme Court held that the POA method of immovable property sales is not a valid form of transfer of property.
A 3 judge bench presided over by Justice R. V. Raveendran said , ''The property can be lawfully transferred only throgh registered sale deeds. A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property."
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| Supreme Court judgement copy |
“It is time that an end is put to the pernicious practice of a sale agreement through a general power of attorney or a will transaction.sales,” the bench said.
After interpreting many provisions of the law concerning property sales. However, the bench said the judgment will not affect "genuine transactions" under the power of attorney.
Curb Black money ..!The judgment delivered on recently would have an impact on both freehold and leasehold properties and affect the mode of transfer of property in Delhi and the National Capital Region (NCR) where GPA sales are very common. Even though it can cause some hardship to those who have already purchased property through the POA, the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.
The Supreme court said there can be no mutation of property in municipal and revenue records on the basis of such documents. The bench, however, clarified that its order should not be a ground for disturbing mutations already effected by the Delhi Development Authority (DDA) or any other authority. Same time, there is little relief for many thousands of people who hold property without mutation as POA sales can only be treated as existing sale agreements. An application of the order with prospective effect would have protected their interest. The court, though, stressed that it had merely reiterated the well settled legal position that such transactions cannot be treated as completed transfers.
"Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under section 53A of TP (Transfer of Property) Act," the court said.
In order to ensure that POA continues to serve its purpose. The judgment will not 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 spouse, son, daughter, brother, sister or a blood relative to manage his affairs or to execute a deed of conveyance.
Registered sale deeds only..!The court further said that a person can enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings. In that connection he can execute an agreement of sale and grant a power of attorney that will allow the developer to further sell the property to prospective purchasers.
While hearing a matter on the subject, the court had decided to clarify the law on the issue as such transfers had not only led to evasion of stamp duty and registration charges but had also provided scope for investing black money in real estate. Besides, such transfers were giving nightmares to bona fide purchasers as the same property could be sold to several people in the absence of verification or certification of title. A proper verification of ownership was possible only if all property were transferred through registered sale deeds.
Delhi, Haryana, Punjab and Uttar Pradesh...!
Noting that such transactions were now not just limited to Delhi but had spread to neighbouring areas, the court had sought the views of the Centre and the states of Delhi, Haryana, Punjab and Uttar Pradesh. There was a near unanimity that such transactions should be discouraged as it caused loss of revenue and increased litigation due to defective titles. The court said a transfer of property by way of sale could only be by a sale deed.
The market size of POA transactions, but some rough estimates suggest this could constitute as much as 70% of the total real estate deals in parts of northern India, especially Delhi. The apex court cited rampant use of general POA to transfer properties in the national capital, Punjab, Haryana and Uttar Pradesh, to put a stop to the practice and check generation of black money.
The bench said "In the absence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immovable property can be transferred."
In a verdict aimed at discouraging loss of revenue to the exchequer, the Supreme Court on 13-10-2011 ruled that no immovable property can be legally transferred or conveyed through a general power of attorney, sale agreement or will.
The court observed that high stamp duty rates had led to rampant abuse of the GPA, sale agreements and wills.
Mr. Navin Raheja, MD, Raheja Developers said, "The Apex Court's decision will help to curb the circulation of black money to some extent in the real estate sector where titles are manipulated. Overall there won't be any significant impact on normal property sales."
Real estate industry associations have also highlight the significance of the supreme court verdict in trying to transform the sector. Mr. Lalit Jain, Chairman, CREDAI (Confederation of Real Estate Developers Association of India ), said," The move will go “a long way” in redefining real estate business transactions."
ALSO READ
Today’s Technical Term - Power of Attorney
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