HC allows ‘genuine’ GPA transactions
Court strikes circular issued by Delhi government to registrars to not register any GPA sale
The recent case of Pace Developers and Promoters Private Limited v. Government of NCT dated April 30, 2013 (Pace Developers case) has generated much attention. In this case, the Delhi High Court set aside a circular dated April 27, 2012 (circular) issued by the government of NCT of Delhi on the issue of GPA sales.
In common parlance, GPA sale refers to transfer of immovable property by execution of a combination of general power of attorney (GPA), agreement to sell (ATS) and will, instead of a sale deed/ conveyance deed.
The reason why the circular was struck down by the Delhi High Court was that it was contrary to the Hon’ble Supreme Court’s landmark judgment in the Suraj Lamp and Industries Private Limited v state of Haryana and another.
As per recent news reports, the revenue department of the Delhi government has prepared a fresh circular on this issue, to be placed before the state cabinet for approval. To appreciate the current legal position, it is important to know both the contents of the circular and the ratio of the Supreme Court’s judgment in the Suraj Lamp case. In this case, the Supreme Court had held that a GPA sale of immovable property (both leasehold and freehold properties) is not a valid sale/conveyance under the Transfer of Property Act. That is, a GPA sale does not transfer any valid title of ownership in favour of the buyer. The court came down strongly on the practice of GPA sales as they led to evasion of stamp duty and registration fee, circulation of black money, growth of land mafia and criminalisation of real estate disputes.
The court also highlighted the difference between GPA and ATS executed by parties in genuine transactions on one hand and GPA sales on the other hand. In paragraph 27 of the Suraj Lamp case, the Supreme Court had clarified that GPA and ATS executed by parties in genuine transactions would continue to be valid and not be affected by the ruling. For example, a person can give GPA to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a sale deed. A person may even sign an agreement with a developer for developing land (either by forming plots or by constructing apartments) and execute an agreement of sale and grant a power of attorney empowering the developer to execute agreements of sale or conveyances for individual plots of land or undivided shares in the land for apartments he (developer) sells.
In the impugned circular, government of NCT of Delhi had issued a directive to all registrars and sub-registrars of Delhi, not to register any conveyance vis-à-vis an immovable property which is based on a GPA, will or ATS. However as per Delhi High Court in the Pace Developers case, the circular had misconstrued the observations of the Supreme Court specifically contained in paragraph 27 of the Suraj Lamp case. The language used in the circular had in effect prohibited the registration of even those GPA that were validly executed by par- ties in genuine transactions. To reiterate, the Supreme Court had clarified in paragraph 27 that GPA and ATS executed in genuine transactions would not be affected by the ruling (and hence, would be registrable).
There is widespread confusion amongst citizens regarding the effect of Delhi High Court’s order in the Pace Developers case. The Delhi High Court has only set aside the directions given in the circular, in so far as it prohibited registration of GPA executed in genuine transactions of the nature described in Paragraph 27 of the Suraj Lamp case. However, this does not alter the position of law laid down in the Suraj Lamp case on GPA sales. In the eyes of law, GPA sales continue to remain a legally invalid mode of sale/conveyance of immovable property. Registrars and sub-registrars are empowered to refuse registration of documents that purport to sell immovable property by GPA, ATS and will mode.