Stopping misuse of GPA, ATS, wills
The Supreme Court judgment on ‘GPA sales’ has made buyers aware of the value of properly executed sale and conveyance deed for property transfers
The Supreme Court’s recent judgment in the case of Suraj Lamp and Industries Private Limited Vs. State of Haryana and Another, has generated much debate and discussion. This judgment has highlighted the far-reaching and ill-effects of what are known as “GPA sales”.
Such sales referred to transfers of immoveable properties effected through executing a combination of general power of attorney (GPA), agreement to sell (ATS) and will, instead of a sale deed/conveyance deed.
The Supreme Court observed that to avoid payment of stamp duty and registration fee on transfer of immoveable property, parties were blatantly circumventing the law by resorting to execution of GPA, ATS and will. So widespread was the phenomena that even transfers of freehold properties (where the seller was the actual owner of the property and did not require any prior permission from any land-owning authority for effecting a transfer) were being made through GPA, ATS and will combinations.
The Supreme Court observed that on the macro level, such transactions contributed to generation and circulation of black money, growth of land mafia and criminalisation of real estate disputes, adversely affecting the economy, civil society and law and order system. On the individual level, such transactions made title verification of immoveable property a nightmare for the average buyer who wanted to invest in a property only after being assured that it had a clear, marketable title.
The judgment reiterated that GPA sales of immoveable property did not amount to valid ‘transfer’ or ‘sale’ under the Transfer of Property Act. GPA Sales were not valid sales/transfers/conveyances and did not transfer any title of ownership in favour of the buyer, for both leasehold and freehold properties. The Supreme Court had clearly stated that GPA and ATS executed by parties in genuine transactions would not be hit. For example, a husband may still validly execute GPA in favour of his wife/ any other person to enable his wife/relative to manage affairs with respect to the property on his behalf or to execute a sale deed/conveyance deed with buyers on his behalf. Similarly, a person may still validly
enter into a development agreement with a developer/builder for developing the land owned by him (by constructing apartments on the land) and execute an ATS and GPA in favour of the developer/ builder to enable the developer to further execute sale deeds of the apartments in favour of prospective purchasers.
The judgment also took into account persons who had purchased a property through GPA sale prior to the date of the judgment (October 11, 2011). They could still apply for regularisation of their allotment/lease with the development authorities (DDA, HUDA) on the basis of ATS, GPA and will that had been executed in their favour. The judgment would also not affect cases in which people had appealed for mutation of property records in their favour on the basis of GPA, ATS and will – which the development authority had accepted and acted upon. However, buyers who had purchased property through GPA sale but had not yet made an application for mutation in municipal/revenue records, could no longer rely on their GPA sale documents for applying for muta- tion, unless they perfected their title of ownership by having sale deed/conveyance deed executed in their favour. All of this applied equally to property transactions that hade taken place in builders’ flats as well as cooperative/group housing societies.
Following this judgment, buyers who had purchased property through GPA sales were now required to perfect their title of ownership by having a proper sale deed/conveyance deed executed in their favour and by paying requisite stamp duty and registration fee. Not doing could directly hamper their ability to further transfer/sell the property in question in future. After this judgement, buyers would undoubtedly realise the value of a properly executed sale/ conveyance deed in cases of secondary sale of property. Since buyers would want to invest in a property where they would be assured of a clear and encumbrance-free title of ownership, they should verify whether the seller in turn also held a clear title through a validly executed sale deed/conveyance deed.