SUPREME COURT: NO PROPERTY SALE ON POWER OF ATTORNEY
GPA will not be valid unless it`s a Registered PoA. No property sale on power of attorney: Supreme Court
Property sales through the common practice of general power of attorney (GPA) will not give ownership title to the buyer. In a landmark judgment that is expected to send a large number of property owners into a tizzy, the Supreme Court held that the GPA method of immovable property sales is not a valid form of transfer of property. A three-judge bench presided over by Justice R. V. Raveendran said that property can be lawfully transferred only through registered sale deeds.
"A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property," the bench said, after interpreting various provisions of the law concerning property sales. However, the bench said the judgment will not affect "genuine transactions" under the GPA.
The judgment delivered would have an impact on both freehold and leasehold properties and affect the mode of transfer of property in Delhi and the National Capital Region (NCR) where GPA sales are very common. Even though it can cause some hardship to those who have already purchased property through the GPA, the order will help curb evasion of duties, flow of black money into real estate and also save people from being cheated by unscrupulous owners selling the same property to several people.
The court's decision will help to curb the circulation of black money to some extent in the real estate sector where titles are manipulated. Besides, many property transactions where prices are rounded off will be affected. However, overall there won't be any significant impact on normal property sales.
The apex court said there can be no mutation of property in municipal and revenue records on the basis of such documents. The bench, however, clarified that its order should not be a ground for disturbing mutations already effected by the Delhi Development Authority (DDA) or any other authority.
But, there is little relief for thousands of people who hold property without mutation as GPA sales can only be treated as existing sale agreements. An application of the order with prospective effect would have protected their interest. The court, though, stressed that it had merely reiterated the well- settled legal position that such transactions cannot be treated as completed transfers.
The court could not make the order applicable with prospective effect as it had not laid down any new law. However, it said that those who had already bought property through GPA before its judgment could use the documents to apply for regularisation of allotments and leases by development authorities. "Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under section 53A of TP (Transfer of Property) Act," the court said.
In order to ensure that GPA continues to serve its purpose, the court said its judgment will not 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."
The court further said that a person can enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings. In that connection he can execute an agreement of sale and grant a power of attorney that will allow the developer to further sell the property to prospective purchasers.
While hearing a matter on the subject, the court had decided to clarify the law on the issue as such transfers had not only led to evasion of stamp duty and registration charges but had also provided scope for investing black money in real estate. Besides, such transfers were giving nightmares to bona fide purchasers as the same property could be sold to several people in the absence of verification or certification of title. A proper verification of ownership was possible only if all property were transferred through registered sale deeds.
Noting that such transactions were now not just limited to Delhi but had spread to neighbouring areas, the court had sought the views of the Centre and the states of Delhi, Haryana, Punjab and Uttar Pradesh. There was a near unanimity that such transactions should be discouraged as it caused loss of revenue and increased litigation due to defective titles.
Going into the legality of such transfers, the court said any contract of sale which was not a registered sale deed would fall short of the requirements of the relevant provisions of the Transfer of Property Act and could not confer any title. The court said a transfer of property by way of sale could only be by a 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 immovable property can be transferred," the bench
Is Notarized Power of Attorney same as Registered power of attorney?
The simple and straight-forward answer is NO.
How Power Of Attorney (Registered) can Help NRIs Manage their India Assets & Sale them
If you are living abroad and managing your assets in India has become a headache for you, Power of Attorney (PoA) is the perfect instrument for you. Because of its various benefits, even resident Indians tend to execute POAs. People having numerous assets find it tough to be present everywhere physically. Therefore, they execute POAs to delegate the responsibility.
What is a PoA?
In the simplest of terms, it is the power (right) that a person (principal) grants to an attorney (a legal representative). A principal-legal representative relationship is established between the two and the principal would be bound by the acts of the legal representative. For instance, if a person has purchased a property in India and cannot be physically present to process the registration, he can delegate these rights/duties to any relative/friend by means of a registered power of attorney.
Various Types of PoA
Special PoA:
In a special PoA, the power of the agent is restricted and limited to a specific purpose. A special POA may be transaction specific and the POA ceases on the completion of transaction. (More details given below)
General PoA:
Under a general PoA, broad powers are granted to the representative to make decisions on behalf of the principal. Besides, the representative can also carry out the various activities on behalf of the principal without any limitation on transactions.
Durable PoA:
A durable POA remains effective for a lifetime, unless it is explicitly cancelled. A specific clause can be inserted in the document, stating that the representative's power would remain valid even if the principal becomes incapacitated.
POA in real estate
In real estate, PoA could be used for the purposes mentioned below:
ü Mortgage, exchange, sell, lease, collect rent, grant, borrow
ü Manage and settle the disputes
ü Perform the acts as required by banks, insurance companies and enter into contracts, deal with bonds, etc.
Power of attorney by more than two persons
In cases where a property has numerous owners, it would be difficult for all the people concerned to collectively complete a transaction. In such cases, granting the power of attorney to one person would make matters simple. As a result, this person would be empowered to act on behalf of all the owners collectively.
How Power of Attorney can be executed in India
If an NRI is present in India, he could before going abroad execute the POA from India itself.
Step 1: The NRI needs to get the desired matter of the POA drafted and typed on non-judicial stamp paper of adequate value which is generally Rs 100/ or Rs. 500/ depending upon rules in state concerned.
Step 2: Along with the legal representative and two witnesses, the person is now required to visit the Sub-Registrar's Office.
Step 3: It should be ensured that all the persons going to the Sub-Registrar's Office are carrying their valid identity proof preferably Aadhar and PAN and Photographs. Photocopy of the POA, along with the original copy, must also be taken along.
Step 4: At the Sub-Registrar's office signatures, photographs and fingerprints of the party will be collected. At that time Sub-Registrar would look at their valid identity proof preferably Aadhar (not applicable in case of NRI), Passport and PAN and Photographs
Step 5: Now, you need to collect the registered POA on the due date from the Sub-Registrar's Office. This might take three-five days after the formalities have been completed.
What if you are outside India?
If you are settled abroad and won't be able to visit India in the near future, you may execute a POA from the country of your domicile through the Indian Embassy/ Consulate. There are two ways to execute a POA from abroad:
Legalisation: In this case, signatures of the notary or judge before whom the POA is executed are required to be authenticated by the duly accredited representative of the Indian Embassy/Consulate. According to Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948, notarising a deed from an authorised officer of the Indian Consulate/Embassy would be considered a valid notary. Such a POA is not required to be stamped at the time of execution. However, it needs to be stamped within three months from the date of receipt of the POA in India. Stamp duty would be payable according to Section 2(17) read with Schedule-I of the Indian Stamp Act, 1899, when the deed is presented for registration in India.
Apostalisation: The deed of POA executed outside India is proven through an apostallisation process which is governed by the Hague Convention, 1961. Also known as super legalisation, Apostille is a certificate which confirms and verifies the signature/seal of the person who authenticated the document. However, this deed, too, needs to comply with Indian laws such as the Indian Registration Act, 1908, and the Power of Attorney Act, 1882. You also have to pay the stamp duty on this. If one wants to obtain apostille in the US, he/she can refer to this.
Regulation of Power Of Attorney
A PoA paper should be interpreted to include all the necessary powers for its execution. The POA has to be given a strict interpretation and no extra rights should be construed, unless they are specifically mentioned. For instance, if the POA mentions “right to lease”, the “right to sell” can't be attributed to it.
The representative has to act within his scope and cannot bind the principal by his acts which are beyond his authority. As an NRI, you can't be sued or held responsible for the fraud of the representative; unless it is proved that the fraud was done in connivance with you.
Revocation of Power Of Attorney
If the principal thinks that the legal representative is misusing the power granted to him or is unable to properly discharge the duties assigned to him, he has the option to revoke the PoA. Revocation might also be required if the principal thinks that now he is in a position to take care of his assets.
How to revoke a Power Of Attorney?
· You may revoke a PoA during your lifetime.
· PoA is also revoked when the principal dies or becomes insane or is declared insolvent.
· PoA can be revoked on mutually agreed terms between the principal and the representative.
· A PoA is revoked when the specific transaction for which it was executed has been accomplished.
Revocation of POA has to be done in the same manner in which it was executed. If the PoA was registered with the Sub-Registrar, you have to get it cancelled from the same office. Also, the representative and the parties concerned need to be duly informed about the cancellation of the POA. If interests of a reasonably large number of people are involved, it is recommended that a notice be published in a newspaper. A notice about the revocation of the POA could also be posted on the property where it can be visible to the general public.
Special Power Of Attorney for Sale of Property
Selling a property is often considered a cumbersome process. It involves a number of activities ranging from getting all property related documents up to date, finding a buyer, drafting an agreement to sale, executing a sale deed and then proceeding with the registration. The matters get further complicated in case the registered owner of the property is out of country or is unable to attend the proceedings due to any other complications not limited to physical incapacity and old age.
Many states in India gives rebate in stamp duty if the power of attorney is given to blood relatives otherwise there may be impact of stamp duty.
A Special PoA is the popular choice for most prospective sellers who are certain to have difficulties in attending to the execution and registration of a sale deed. It is a preferred choice owing to the narrower ambit of rights granted to the attorney as compared to the general power of attorney.
Things to include in a Special Power Of Attorney for Sale of Property
ü The brief acknowledgment of ownership and description of the property
ü Declaration of the intention to sell the property
ü The reason for executing the power of attorney should be clarified and the details about the incapacity should be mentioned in detail such as the principal is residing abroad, or in another town, due to physical infirmity or old age.
ü The description of identities of both the principal and the attorney is given in detail along with their current addresses.
ü The most important clause is the appointment clause which gives validity to the appointment of the second party as the true and lawful attorney of the principal.
How to Make It Legally Valid?
A special Power of Attorney for Sale of Property is a compulsorily registrable document under the Indian Registration Act, 1908. Therefore, the stamp duty shall be collected in the prescribed format and embossed on the paper while registering the same before the concerned Sub-Registrar. If the Power of Attorney is being created in a foreign country, it needs to be printed on a plain paper and taken to the appropriate Indian Embassy or Consulate in that particular country to get it attested by the authorities before sending it to the attorney who may get the document registered in India.
The attorney may then proceed with the creation of the agreement to sale and then subsequently the sale deed along with registration of the same. The consideration or payment can be received on behalf of the principal and then be transferred to him/her after fulfilling tax responsibilities.