IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL
LEAVE PETITION (C) NO.13917 OF 2009
Suraj Lamp & Industries Pvt. Ltd.
.....Petitioner
Vs.
State of Haryana & Anr.
....Respondents
J U D
G M E N T
R. V. Raveendran J.
By an
earlier order dated
15.5.2009 [reported in
Suraj Lamp &
Industries Pvt.Ltd. vs. State of Haryana & Anr. - 2009 (7) SCC 363], we
had referred to
the ill -
effects of what
is known as
General Power of
Attorney Sales (for short `GPA Sales') or Sale
Agreement/General Power of
Attorney/Will
transfers (for short
`SA/GPA/WILL' transfers). Both
the
descriptions are misnomers as there cannot be a sale by
execution of a power
of attorney nor can there be a transfer by execution of an
agreement of sale
and a power of attorney and will. As noticed in the earlier
order, these kinds
of transactions were
evolved to avoid
prohibitions/conditions
regarding
certain transfers, to avoid payment of stamp duty and
registration charges on
2
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.
2. The modus
operandi in such
SA/GPA/WILL transactions is
for the
vendor or person
claiming to be
the owner to
receive the agreed
consideration,
deliver possession of
the property to
the purchaser and
execute the following documents or variations thereof:
(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).
3
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. These are
transactions, where a purchaser pays the full price, but
instead of getting a
deed of conveyance gets a
SA/GPA/WILL as a mode of transfer, either at
the instance of the vendor or at his own instance.
Ill-Effects of SA/GPA/WILL transactions
3. The earlier
order dated 15.5.2009,
noted the ill-effects
of such
SA/GPA/WILL transactions (that is generation of black money,
growth of
land mafia and criminalization of civil disputes) as under:
"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) Vendors
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
4
who
deal in real estate
resort to these methods to avoid
multiple
stamp
duties/registration fees so as to increase their profit margin.
Whatever be
the intention, the
consequences are disturbing
and far
reaching, adversely
affecting the economy,
civil society and
law and
order. Firstly,
it enables large
scale evasion of
income tax, wealth
tax,
stamp duty
and registration fees
thereby denying the
benefit of such
revenue to
the government and
the public. Secondly,
such transactions
enable persons
with undisclosed wealth/income to
invest their black
money and
also earn profit/income, thereby
encouraging circulation of
black money and
corruption.
This kind
of transactions has
disastrous collateral effects
also. For
example, when
the market value increases,
many vendors (who effected
power of
attorney sales without
registration) are tempted
to resell the
property taking
advantage of the fact that there is no registered instrument
or record in
any public office thereby cheating the purchaser. When the
purchaser under such `power of attorney
sales' comes to know about the
vendors action,
he invariably tries to take the help of musclemen to `sort
out' the issue
and protect his rights. On the other hand, real estate mafia
many a
time purchase properties
which are already
subject to power
of
attorney sale
and then threaten
the previous `Power
of Attorney Sale'
purchasers from
asserting their rights. Either way, such power of attorney
sales
indirectly lead to growth of real estate mafia and criminalization of
real estate
transactions."
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
4. This Court
had therefore requested
the learned Solicitor
General to
give suggestions on behalf of Union of India. This Court
also directed notice
to States of Delhi, Haryana, Punjab, Uttar Pradesh to give
their views on the
matter. The four states have responded and confirmed that
SA/GPA/WILL
transfers required to be discouraged as they lead to loss of
revenue (stamp
duty) and increase in litigations due to defective
title. They also referred to
some measures taken in that behalf. The measures differ from
State to State.
In general, the
measures are: (i)
to amend Registration Act,
1908 by
Amendment Act 48 of 2001 with effect from 24.9.2001
requiring documents
containing
contract to transfer
for consideration (agreements
of sale etc.)
relating to any immoveable property for the purpose of
section 53A of the
Act, shall be
registered; and (ii)
to amend the
stamp laws subjecting
agreements of sale with delivery of possession and/or
irrevocable powers of
attorney in favour
of non-family members
authorizing sale, to
the same
stamp duty as
deed of conveyance.
These measures, no
doubt, to some
extent plugged the
loss of revenue
by way of
stamp duty on
account of
parties having recourse to SA/GPA/WILL transactions, instead
of executing
deeds of conveyance.
But the other
ill-effects continued. Further
such
transaction
which was only
prevalent in Delhi
and the surrounding
areas
have started spreading
to other States
also. Those with
ulterior motives
6
either to indulge
in black money
transactions or land
mafia continue to
favour such transactions. There
are also efforts
to thwart the
amended
provisions by not referring to delivery of possession in the
agreement of sale
and giving a separate possession receipt or an affidavit
confirming delivery
of possession and
thereby avoiding the
registration and stamp
duty. The
amendments to stamp and registration laws do not address the
larger issue of
generation of black money and operation of land mafia. The
four States and
the Union of India are however unanimous that SA/GPA/WILL
transactions
should be curbed and expressed their willingness to take remedial
steps.
5. The State
of Haryana has however
taken a further
positive step by
reducing the stamp duty on deeds of conveyance from 12.5% to
5%. A high
rate of stamp duty acts as a damper for execution of deeds
of conveyance for
full value, and encourages SA/GPA/WILL transfers. When
parties resort to
SA/GPA/WILL
transfers, the adverse
effect is not
only loss of
revenue
(stamp duty and registration charges) but the greater danger
of generation of
`black' money.
Reducing the stamp
duty on conveyance to realistic
levels
will encourage public to disclose the maximum sale value and
have the sale
deeds registered. Though the reduction of the stamp duty,
may result in an
immediate reduction in the revenue by way of stamp duty, in
the long run it
7
will be advantageous for
two reasons: (i)
parties will be
encouraged to
execute
registered deeds of conveyance/sale deeds
without any under
valuation, instead of entering into SA/GPA/WILL
transactions; and (ii) more
and more sale transactions will be done by way of duly
registered sale deeds,
disclosing the entire
sale consideration thereby
reducing the generation
of
black money to a large extent. When high stamp duty is
prevalent, there is a
tendency to undervalue
documents, even where
sale deeds are
executed.
When properties are undervalued, a large part of the sale
price changes hand
by way of
cash thereby generating
`black' money. Even
when the state
governments
take action to
prevent undervaluation, it
only results in
the
recovery of deficit stamp duty and registration charges with
reference to the
market value, but
the actual sale
consideration remains unaltered.
If a
property worth `5
millions is sold for `2 millions, the
Undervaluation Rules
may enable the state government to initiate proceedings so
as to ensure that
the deficit stamp duty and registration charges are
recovered in respect of the
difference of `3 millions. But the sale price remains `2
millions and the black
money of `3 millions generated by the undervalued sale
transaction, remains
undisturbed.
8
6. In this
background, we will
examine the validity
and legality of
SA/GPA/WILL
transactions. We have
heard learned Mr.
Gopal
Subramanian,
Amicus Curiae and
noted the views
of the Government
of
NCT of Delhi,
Government of Haryana,
Government of Punjab
and
Government of Uttar Pradesh who have filed their submissions
in the form
of affidavits.
Relevant Legal Provisions
7. Section 5 of
the Transfer of Property Act, 1882 (`TP Act' for short)
defines `transfer of property' as under:
"5. Transfer
of Property defined
: In the
following sections "transfer of
property" means an
act by which
a living person
conveys property, in
present or in
future, to one or more other living persons, or to himself [or
to
himself] and one
or more other
living persons; and
"to transfer
property"
is to perform such act." xxx xxx
Section 54 of the TP Act defines `sales' thus:
"Sale" is a transfer of ownership in exchange for a price paid
or promised
or part-paid
and part-promised.
Sale how
made. Such transfer,
in the case
of tangible immoveable
property of the
value of one hundred rupees and upwards, or in the case of
a reversion
or other intangible
thing, can be
made only by
a registered
instrument.
In the
case of tangible
immoveable property of
a value less
than one
hundred rupees,
such transfer may
be made either
by a registered
instrument or
by delivery of the property.
9
Delivery of
tangible immoveable property
takes place when
the seller
places the
buyer, or such
person as he
directs, in possession
of the
property.
Contract for
sale.-A contract for
the sale of
immovable property is a
contract that
a sale of
such property shall
take place on
terms settled
between the
parties.
It does not, of
itself, create any interest in or charge on such property."
Section 53A of the TP Act defines `part performance' thus :
"Part Performance. -
Where any person
contracts to transfer
for
consideration
any immoveable property by writing signed by him or on his
behalf from
which the terms
necessary to constitute
the transfer can
be
ascertained with
reasonable certainty,
and the
transferee has, in
part performance of
the contract, taken
possession of
the property or
any part thereof,
or the transferee,
being
already in
possession, continues in possession in part performance of the
contract and has
done some act in furtherance of the contract,
and the
transferee has performed or is willing
to perform his part of the
contract,
then,
notwithstanding that where there is an instrument of transfer, that the
transfer has not
been completed in the manner prescribed therefor by the
law for the time
being in force, the transferor or any person claiming under
him shall
be debarred from enforcing against
the transferee and persons
claiming under
him any right
in respect of
the property of
which the
transferee has
taken or continued
in possession, other
than a right
expressly
provided by the terms of the contract :
Provided that
nothing in this section shall affect the rights of a transferee
for consideration who
has no notice
of the contract
or of the
part
performance
thereof."
8. We may next
refer to the relevant provisions of the Indian Stamp Act,
1999 (Note : Stamp Laws may vary from state to state, though
generally the
10
provisions may be similar). Section 27 of the Indian Stamp
Act, 1899 casts
upon the party,
liable to pay
stamp duty, an
obligation to set
forth in the
instrument all facts and circumstances which affect the
chargeability of duty
on that instrument.
Article 23 prescribes
stamp duty on
`Conveyance'. In
many States appropriate amendments have been made whereby
agreements
of sale acknowledging delivery
of possession or
power of Attorney
authorizes the attorney to `sell any immovable property are
charged with the
same duty as leviable on conveyance.
9. Section 17
of the Registration Act,
1908 which makes
a deed of
conveyance compulsorily registrable. We extract below the
relevant portions
of section 17.
"Section
17 - Documents of which registration is compulsory- (1) The
following
documents shall be registered, namely:--
xxxxx
(b) other
non-testamentary instruments which purport or operate to create,
declare, assign,
limit or extinguish,
whether in present
or in future,
any
right, title
or interest, whether
vested or contingent,
of the value
of one
hundred rupees
and upwards, to or in immovable property.
xxxxx
(1A) The
documents containing contracts to transfer for consideration, any
immovable property
for the purpose
of section 53A
of the Transfer
of
Property Act,
1882 (4 of
1882) shall be
registered if they
have been
executed on
or after the commencement
of the Registration and
Other
Related laws
(Amendment) Act, 2001
and if such
documents are not
registered on
or after such commencement, then, they shall have no effect
for the purposes
of the said section 53A.
11
Advantages of Registration
10. In the
earlier order dated
15.5.2009, the objects
and benefits of
registration were explained and we extract them for ready
reference :
"The
Registration Act, 1908, was enacted with the intention of providing
orderliness,
discipline and public notice in regard to transactions relating
to immovable
property and protection from
fraud and forgery
of
documents of
transfer. This is
achieved by requiring
compulsory
registration of
certain types of documents and providing for consequences
of
non-registration.
Section 17
of the
Registration Act clearly
provides that any
document
(other than
testamentary instruments) which purports or operates to create,
declare, assign,
limit or extinguish
whether in present
or in future
"any
right, title or
interest" whether vested or contingent of the value of Rs. 100
and upwards to
or in immovable property.
Section 49
of the
said Act provides
that no document
required by
Section 17
to be
registered shall, affect
any immovable property
comprised
therein or received as evidence of any transaction affected such
property, unless it has been registered. Registration
of a document gives
notice to the
world that such a document has been executed.
Registration provides safety
and security to
transactions relating to
immovable property,
even if the
document is lost
or destroyed. It
gives
publicity and
public exposure to documents thereby
preventing forgeries
and frauds
in regard to
transactions and execution
of documents.
Registration
provides information to people who may deal with a property,
as to the
nature and extent of the rights which persons may have, affecting
that property.
In other words,
it enables people
to find out
whether any
particular
property with which they are concerned, has been subjected to
any legal
obligation or liability and who is or are the person/s presently
having right,
title, and interest in the property. It gives solemnity of form
and perpetuate
documents which are of legal importance or relevance by
recording them,
where people may
see the record
and enquire and
ascertain what
the particulars are
and as far
as land is
concerned what
obligations
exist with regard to them. It ensures that every person dealing
with immovable
property can rely
with confidence upon
the statements
contained in
the registers (maintained
under the said
Act) as a
full and
complete account
of all transactions by which the title to the property may
be affected and
secure extracts/copies duly certified."
12
Registration of documents makes the process of verification
and certification
of title easier
and simpler. It
reduces disputes and
litigations to a
large
extent.
Scope of an Agreement of sale
11. Section 54 of
TP Act makes it clear that a contract of sale, that is, an
agreement of sale does not, of itself, create any interest
in or charge on such
property. This Court
in Narandas Karsondas
v. S.A. Kamtam and
Anr.
(1977) 3 SCC 247, observed:
A contract of
sale does not of itself create any interest in, or charge on, the
property. This
is expressly declared
in Section 54 of the
Transfer of
Property Act.
See Rambaran Prosad
v. Ram Mohit Hazra
[1967]1 SCR
293. The
fiduciary character of
the personal obligation
created by a
contract for
sale is recognised
in Section 3 of the
Specific Relief Act,
1963, and in
Section 91 of the Trusts Act. The personal obligation created
by a contract of sale is described in Section
40 of the Transfer of Property
Act as an
obligation arising out of contract and annexed to the ownership
of property,
but not amounting to an interest or easement therein."
In India,
the word `transfer'
is defined with
reference to the
word
`convey'. The
word `conveys' in section 5 of Transfer of Property Act is
used in
the wider sense
of conveying ownership... ...that
only on
execution of
conveyance ownership passes from one party to another...."
In Rambhau Namdeo
Gajre v. Narayan Bapuji Dhotra [2004 (8)
SCC 614]
this Court held:
"Protection provided under
Section 53A of the Act to the
proposed
transferee is
a shield only against the transferor. It disentitles the transferor
from disturbing
the possession of
the proposed transferee
who is put
in
possession in
pursuance to such an agreement. It has nothing to do with
the ownership
of the proposed transferor who remains
full owner of the
13
property till
it is legally conveyed by executing a registered sale deed in
favour of
the transferee. Such
a right to
protect possession against
the
proposed
vendor cannot be pressed in service against a third party."
It is thus clear that
a transfer of
immoveable property by
way of sale
can
only be by a deed of conveyance (sale deed). In the absence
of a deed of
conveyance (duly stamped and registered as required by law),
no right, title
or interest in an immoveable property can be transferred.
12. 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 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 TP Act). According to TP Act, an agreement of sale,
whether with
possession or without possession, is not a conveyance.
Section 54 of TP Act
enacts that sale of immoveable property can be made only by a registered
instrument and an agreement of sale does not create any
interest or charge on
its subject matter.
Scope of Power of Attorney
13. A power of
attorney is not an instrument of transfer in regard to any
right, title or
interest in an
immovable property. The
power of attorney
is
14
creation of an agency whereby the grantor authorizes the grantee
to do the
acts specified therein,
on behalf of
grantor, which when
executed will be
binding on the grantor as if done by him (see section 1A and
section 2 of the
Powers of Attorney
Act, 1882). It
is revocable or
terminable at any
time
unless it is made irrevocable in a manner known to law. Even
an irrevocable
attorney does not have the effect of transferring title to
the grantee. In State
of Rajasthan vs. Basant Nehata - 2005 (12) SCC 77, this
Court held :
"A grant
of power of attorney is essentially governed by Chapter X of the
Contract Act.
By reason of
a deed of
power of attorney,
an agent is
formally
appointed to act for the principal in one transaction or a series of
transactions
or to manage the affairs of the principal generally conferring
necessary
authority upon another person. A deed of power of attorney is
executed by
the principal in favour of the agent. The agent derives a right
to use his
name and all acts, deeds and things done by him and subject to
the limitations
contained in the
said deed, the
same shall be
read as if
done by the donor.
A power of attorney is, as is well known, a document
of
convenience.
Execution of a
power of attorney in terms of the provisions of the Contract
Act as also
the Powers-of-Attorney Act is valid. A power of attorney, we
have noticed
hereinbefore, is executed
by the donor
so as to
enable the
donee to
act on his
behalf. Except in
cases where power
of attorney is
coupled with
interest, it is revocable. The donee in exercise of his power
under such power of attorney only acts
in place of the donor subject of
course to the
powers granted to him by reason thereof. He cannot use the
power of
attorney for his own benefit. He acts in a fiduciary capacity. Any
act of
infidelity or breach of trust is a matter between the donor and the
donee."
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.
15
Scope of Will
14. A will is the
testament of the testator. It is a posthumous disposition of
the estate of the testator directing distribution of his
estate upon his death. It
is not a transfer
inter vivos. The two essential
characteristics of a will are
that it is intended to come into effect only after the death
of the testator and
is revocable at any time during the life time of the
testator. It is said that so
long as the testator is alive, a will is not be worth the
paper on which it is
written, as the testator can at any time revoke it. If the
testator, who is not
married, marries after making the will, by operation of law,
the will stands
revoked. (see sections
69 and 70
of Indian Succession
Act, 1925).
Registration of a will does not make it any more effective.
Conclusion
15. Therefore, 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 recognized 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
16
into thinking that SA/GPA/WILL transactions are some kind of
a recognized
or accepted mode of transfer and that it can be a valid
substitute for a sale
deed. Such decisions
to the extent they recognize or accept SA/GPA/WILL
transactions as concluded
transfers, as contrasted
from an agreement
to
transfer, are not good law.
16. 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. 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
17
end is put to the pernicious practice of SA/GPA/WILL
transactions known
as GPA sales.
17. 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.
18. 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. The said `SA/GPA/WILL
transactions'
may also be
used to obtain
specific performance or
to defend possession
under section 53A of TP Act. If they are entered before this
day, they may
be relied upon
to apply for
regularization of allotments/leases by
Development Authorities.
We make it clear that if the documents relating to
18
`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.
19. 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.
19
20. We place
on record our
appreciation for the
assistance rendered by
Mr. Gopal Subramaniun, Senior Counsel, initially as
Solicitor General and
later as Amicus Curiae.
21. As the issue
relating to validity of SA/GPA/WILL has been dealt with
by this order, what remains is the consideration of the
special leave petition
on its merits. List the special leave petition for final
disposal.
.................................J
(R. V. Raveendran)
.................................J
(A.
K. Patnaik)
.................................J
(H.
L. Gokhale)
New Delhi;
October 11, 2011.
