Execution Of Power Of Attorney Can Not Transfer Title To The Grantee, Reiterates SC [Read Judgment]

The Supreme Court reiterated that GPA sales and SA/GPA/WILL transfers are not legally valid modes of transfer and they do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property

The bench comprising Justice Arun Mishra, Justice MR Shah and Justice BR Gavai made this observation in Shiv Kumar vs. UoI in which it held that a subsequent purchaser of the property after issuance of notification under section 4 of the Land Acquisition Act, 1894 cannot invoke the provisions contained in section 24 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

In this case, the purchaser ‘purchased’ the notified land by SA/GPA/Will. The purchase made through Agreement to Sale, Power of Attorney, or Will did not confer a title upon him to transfer it to the purchasers apart from the fact that it was void in view of purchase after Section 4, the bench held in this case. It observed that no right can be claimed based on a transfer made by way of execution of Power of Attorney, Will, etc., as it does not create any interest in immovable property

Suraj Lamp Judgment

While examining the validity of such ‘purchase, the bench noted the judgment rendered in Suraj Lamp and Industries Pvt. Ltd. through Director v. State of Haryana & Anr. (2012) 1 SCC 656. In the said judgment, it was noted that the following modus operandi were being adopted to kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (`black money’) and to avoid payment of `unearned increases’ due to Development Authorities on transfer.

SA/GPA/WILL transfers- Modus Operandi

  • (a) An Agreement of sale by the vendor in favour of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future Or 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.
  • (b) 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.
  • (c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).

In Suraj Lamp judgment, the Court held that SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. It was observed thus:

“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. 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.

They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act. Such transactions 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 time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales.

It was observed in the said judgment that these transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. The judgment also contained the following clarification.

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. 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. Our observations regarding `SA/GPA/WILL transactions’ are not intended to apply to such bonafide/genuine transactions.

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