TRANSFER OF IMMOVABLE PROPERTY (GPA SALE)
I have been dealing with queries/ cases related to property and property disputes and often come across queries /cases which involves transfer/ sell of immovable property through an ‘alternate mechanism’ [a) a General Power of Attorney (GPA, in short), b) an Agreement to Sell and c) a Will], instead of the execution of a proper and valid conveyance deed, i.e. Registered Sale Deed.
The dispute/s arises when the owner with title of the property presents a suit terming the GPA holder as illegal occupant or various GPA holders fight for their right over the property.
The law only recognises the title over the immovable property via ‘registered conveyance deed’. In other words, a transfer of immoveable property by way of sale can only be done by a deed of conveyance, i.e. 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.
These transactions via ‘alternate mechanism’ 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.
Thus, through this paper I am making an attempt to educate the readers about the pros and cons of the so called ‘GPA Sale’.
TRANSFER OF IMMOVABLE PROPERTY IS DONE THROUGH FOLLOWING TWO MODES:
A) Through a sale deed executed between the buyer and seller. (This mode attracts Approx. 5% to 13% of the sale consideration towards the registration in the form of stamp duty, etc.); and
B) Through execution of a) a GPA, b) an Agreement to Sell and c) a Will by the seller in favour of the buyer. (This mode attracts alluringly much lesser amount towards stamp duty only).
Before I go into the nitty-gritty of the GPA Sale, it is pertinent to outlay what exactly a Power of Attorney, an Agreement to Sale and a Will is?
1. POWER OF ATTORNEY - A power of attorney is an instrument by way of which one can confer such authority on someone to legally act on his/ her behalf. “Power of Attorney" include any instrument empowering a specified person to act for and in the name of the person executing it. (See Section 1A of the Power of Attorney Act, 1882.) However, it is strictly not an instrument of transfer in regard to any right, title or interest in an immovable property. It is therefore correct to say that a power of attorney holder may however execute a conveyance deed in exercise of the power granted under the power of attorney and convey the title on behalf of the grantor.
TYPES OF POWER OF ATTORNEY
A) Special Power of Attorney (SPA): this instrument can be used to transfer ‘a specific right’ to a person on whom it is conferred; and
B) General Power of Attorney (GPA): this instrument can be used to transfer ‘all the rights’ to a person.
Thus, with regards to an immovable property, a GPA authorises its holder to do anything with the subject (which here is immovable property) which includes the right to further transfer all the rights to someone else. This means a GPA holder can sale the immovable property to someone else by executing another GPA.
It is very important to note that Power of Attorney does not confer any title on its holder with regards to the immovable property involved, it merely authorises the holder to act as grantor’s ‘lawful attorney’ thus it is not incorrect to say that the title of the property vests with the original owner or the 1st grantor of the Power of Attorney. Secondly, with the death of the 1st grantor, the Power of Attorney (and the subsequent ones) comes to an end; therefore, the authority to deal with the immovable property given by the grantor also ceases to exist.
2. AGREEMENT TO SALE - A contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property. Such contract for sale merely created a fiduciary character of a personal obligation which is annexed to the ownership of property, but does not amount to an interest or easement therein.
Any contract of sale (i.e., agreement to sell) which is not a registered deed of conveyance (i.e., deed of sale) fall short of the requirements the law and will not confer any title nor transfer any interest in an immovable property. According to Transfer of Property 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.
3. WILL - 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
RELEVANT LEGAL PROVISIONS
Before starting with the subject, its relevant to have a bird’s eye view on the relevant laws governing transfer of property in India.
A) The Transfer of Property Act, 1882
a. Section 5 defines ‘Transfer of Property’ as under:
“xxx xxx… … “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”
b. Section 54 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.
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.”
c. Section 53-A 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.
B) Indian Stamp Act, 1899
a. Section 27 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.
b. Article 23 prescribes stamp duty on ‘Conveyance’.
c. 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.
C) the Registration Act, 1908
a. Section 17 - Documents of which registration is compulsory- (1) The following documents shall be registered, namely:--
Xxxxx
i. 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.
THE CONCEPT OF GPA SALE:
Now, I will focus on the concept of GPA Sale. I will explain the entire concept for your better understanding. GPA based sales goes like this:
1. ‘A’ owns a property ‘P’ that ‘B’ wants to purchase.
2. ‘B’ pays money to buy ‘P’ from ‘A’ and takes ‘P’s’ possession.
- Now, there can be two situations:
a. ‘B’ does not intend to keep the property ‘P’ and will sell it on a higher price in future; and
b. ‘B’ wants to keep the property.
In both the above situations ‘B’ is required to get the property registered in his name but doing so would attract the registration fee in the form of stamp duty, etc.
If, for example, the sale consideration of ‘P’ is Rs.1 Crore and the registration fee is 10% of sale consideration, ‘B’ is required to pay Rs. 10 Lacs to get the property ‘P’ registered in his name.
Therefore, ‘B’ will not get the ‘Sale Deed’ registered in his name and will save the cost towards registration fees and stamp duty, etc.
- Since ‘B’ has paid the sale consideration to ‘A’ and has taken the possession of ‘P’ but the property ‘P’ still stands registered in the name of ‘B’ (in the absence of its registration). Therefore, ‘B’ will take a GPA in his name from ‘A’, which would mean that ‘B’ is authorized by ‘A’ to act as ‘A’s’ ‘lawful attorney’ in both selling the property ‘P’ owned by ‘A’ and receiving money on ‘A’s ‘behalf.
- When ‘B’ finds a buyer ‘C’, he will execute another GPA in ‘C’s’ name saying that ‘C’ is his representative (as ‘A’s’ lawful attorney) or execute a sale deed and got it registered.
In the above transaction ‘A’ (the person wanting to sell) is the lawful owner of property ‘P’, has granted a GPA to ‘B’ (the buyer) authorising ‘B’ to deal with the property ‘P’ as his lawful attorney and subsequently ‘B’ has executed a GPA to ‘C’ (the future buyer) transferring his authority to ‘C’. Here, in the afore-stated sale transaction, the important thing to notice is that the title over the property ‘P’ remains with ‘A’ and ‘A’ may revoke the Power of Attorney any time despite having received the sale consideration. Therefore typically, the buyer ‘B’ will insist upon owner ‘A’ that the GPA must be ‘irrevocable’ and the transaction must be backed by an ‘Agreement to Sale’ since ‘B’ wants to ensure that ‘A’ does not back out on the deal after the money has been paid. The other vital thing to notice is the law governing Power of Attorney according to which a Power of Attorney comes to an end with the death of its executor, acting smartly, to fill this lacunas in the transaction buyer ‘B’ will also insist on ‘A’ for a Will and perhaps even on all legal heirs of the seller ‘A’ submitting affidavits revoking their claim to the property ‘P’. However, there is nothing in law which prevents a person from making numerous will’s, the law only recognises the last will and testament.
WHAT IS WRONG HERE?
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. These kinds of transactions have been 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.
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. Thus, it is clear that registration of a document makes the process of verification of title easier therefore reduces the risk of dispute in future.
HOW GPA SALE IS VIEWED BY COURTS:
The Hon’ble Supreme Court of India in Special Leave Petition (C) No. 13917 of 2009 titled as ‘Suraj Lamp & Industries V. State of Haryana’ has examined the validity and legality of GPA Sales (SA/GPA/Will transaction). The Hon’ble Court has held that “… … … 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 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.”
CONCLUSIONa 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 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 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.
