Property can be sold on power of attorney - Delhi High Court

As reported in the Hindusthan Times on 5th May:- http://www.hindustantimes.com/India-news/NewDelhi/Property-can-be-sold-on-power-of-attorney/Article1-1054964.aspx

In a judgment that will benefit lakhs of Delhi residents living in co-operative housing societies and DDA flats, the Delhi High Court has quashed a Delhi government circular banning property sale in the Capital through general power of attorney (GPA).

The court found that the directions in the circular, issued by the revenue department on April 27 last year, were contrary to the Supreme Court judgment dated October 11, 2011.


The HC order will increase the number of saleable properties in Delhi and could bring down the value of freehold properties.

According to realty watchers, on an average, around 20% of properties are registered through GPA transfers — a common way of selling leasehold properties and those that don’t have a clear title.

The judgment came on a petition filed by a company, Pace Developers and Promoters, questioning the validity of the circular and registrar’s refusal to register the sale of a property through GPA.

 “The directions contained in the circular are quite contrary to the observations made by the Supreme Court and are set aside. Quite clearly, the Supreme Court has not said that in no case a conveyance can be registered by taking recourse to a GPA. As long as the transaction is genuine, the same will have to be registered by the Sub-Registrar,” said Justice Rajiv Shakdher.

The judge pointed out that the Supreme Court had specifically said that a “person may enter into a development agreement with a land developer or builder for development of a parcel of land or for construction of apartments in a building, and for this purpose a power of attorney empowering the developer to execute sale agreements can be executed”.

The controversial circular had not only made future sale of properties difficult, but its retrospective nature also invalidated the sale of thousands of properties across the Capital made after the date of apex court ruling. It forced the owners to register the transfers afresh with complete documents and a clear sale deed.

Agreeing with the argument by the builder’s counsel Rajiv Dutta, the court said the revenue department had “completely misconstrued” the apex court judgment by issuing an “across the board” directive to all registrars and sub-registrars not to register any sale of an immovable property through power of attorney.

The court found merit in Dutta’s argument that the apex court had only termed those sales through GPA invalid where the buyer and seller were evading registration and payment of stamp duty. 



Background

The bone of contention here was a circular issued on April 2012 by the Govt. in Delhi wherein they had put a blanket ban on transfer of property through GPA (General Power of Attorney), SA (Agreement for Sale) & Will citing a 2011 Judgment of the Hon'ble Supreme Court.

In this Judgment SURAJ LAMP & INDUSTRIES PVT. LTD. VS STATE OF HARYANA & ANR., the Hon'ble being aware of the seriousness of the issue went at length into the details of the matter and passed the judgment while providing detailed breakup of the various issues involved.

The Hon'ble Supreme Court said:-


We therefore reiterate that 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.
.........


We have merely drawn attention to and reiterated the well-settled legal position that SA/GPA/WILL transactions are not `transfers' or `sales' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale. Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title.
.........
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 earlier judgments , the Hon'ble Supreme Court has said while explaining the Sec. 53a of the Transfer of Property Act that:-

But there are certain conditions which are required to be fulfilled if a transferee wants to defend or protect his possession under Section 53-A of the Act. The necessary conditions are

1) there must be a contract to transfer for consideration any immovable property;

2) the contract must be in writing, signed by the transferor, or by someone on his behalf;

3) the writing must be in such words from which the terms necessary to construe the transfer can be ascertained;

4) the transferee must in part performance of the contract take possession of the property, or of any part thereof;

5) the transferee must have done some act in furtherance of the contract; and

6) the transferee must have performed or be willing to perform his part of the contract.




Comment

So a very good judgment followed through by correct stance taken by the Hon'ble Delhi High Court. A deed of  conveyance can be executed by a Power of Attorney holder. However, the court has also declared that the Delhi authorities are at liberty to verify the merit of the transactions and confirm whether such transactions are being executed only to avoid stamp duty. POA agreement with developers are routinely done in Kolkata, where eventually at the time of sale deed, the developer becomes a confirming party as well.