Introduction
A power of attorney is simply a document that permits the principal in a transaction to appoint another to act as their agent, granting that agent authority to conduct particular acts or tasks on their behalf and generally at their request. Such authority is commonly granted to allow the agent to handle a variety of activities in the place of the principal, such as executing a stock transaction, responding to a tax audit, or maintaining a safe deposit box or bank account. A power of attorney might be written to have a broad (unlimited) or narrow (limited) authority. When the principal dies or becomes disabled, the power of attorney is normally terminated.
Power of Attorney and Sales Deed in India
- A power of attorney is not a legal document that may be used to transfer property titles when purchasing or selling a home. However, because of the financial advantages it provides to both the buyer and the seller, selling a property through a general power of attorney has become normal practise in Indian cities.
- A sale deed must be completed in order to transfer property titles, following which the buyer must pay stamp duty and registration fees. In addition, the seller will be required to pay capital gains tax on the sale.
- These charges can be avoided by transferring property title through a general power of attorney.
- A general power of attorney enables the sellers to complete the transaction even if they do not own the property outright. From the buyer’s point of view, they can afford a home at much cheaper prices than those on the market.
- The sellers can finalise the transaction even if they do not own the property entirely thanks to a general power of attorney. From the buyer’s perspective, they can afford a home at far lower prices than those on the market.
Furthermore, in most government-sponsored housing schemes where units are allocated on a leasehold basis, there is a specified gestation period during which the supposed resident is prohibited from selling that property to another party, and in such cases, it is not uncommon for the owner to execute a power of attorney on their agent before leaving.
To avoid this, such units are typically transferred via a general power of attorney, which was also viewed as a way to invest accounted for assets in real estate. Through a general power of attorney, members of a family can sometimes award each other property rights. In many situations, naïve homebuyers become victims of scams and invest in properties without realising the transaction is illegal.
Supreme Court Judgement
In 2011, the Supreme Court of India ruled that “a power of attorney is not an instrument of transfer in respect of any right, title, or interest in immovable property.” As a result, the Supreme Court of India directed municipal governments not to modify or register properties based on such documents. The Supreme Court, on the other hand, upheld the legitimacy of lawful GPA transactions.[1]
The court ruled that “nothing stops affected parties from obtaining registered conveyance deeds to complete their title.” The aforementioned transactions may also be utilised to acquire particular performance or defend possession under Section 53 A of the Transfer of Property Act of 1882.’
Many Indian states have made it illegal to register properties sold through a GPA as a result of the Supreme Court’s judgement. Furthermore, the Supreme Court’s landmark ruling has already helped to curtail the free flow of black money in India’s real estate sector, where property titles are much too regularly falsified.
After this blanket restriction on the registration of such assets was announced in 2012, the Delhi government proceeded to enable registration in favour of spouses, sons, daughters, brothers, sisters, and any other relative or person of apparent trust by a registered owner.
Delhi High Court order of 2013
The circular issued by the Delhi government impacted many property owners in the national capital region (NCR), where GPA sales had become routine. Following the notification, a slew of relief petitions were filed in the Delhi High Court. The HC held that the Supreme Court’s decision stated unequivocally that registration cannot be denied in real-world situations.
The Supreme Court has not stated that a conveyance can never be registered through the use of a GPA. The HC stated that as long as the transaction is real, it must be registered by the sub-registrar. “A person may enter into a development agreement with a land developer for the development of a parcel of land or the construction of flats in a building, and a POA to execute sale agreements can be executed for this purpose,” it added.[2]
Conclusion
To summarise, a power of attorney is not a transfer instrument for any right, title, or interest in immovable property; however, any genuine transaction carried out through a general power of attorney is recognised lawful under the law.
[1] Rudra Krishna, Can a sale deed be executed by power of attorney? – vakilsearch: Blog Vakilsearch (2021), https://vakilsearch.com/blog/can-a-sale-deed-be-executed-by-power-of-attorney/
[2] Sunita Mishra, Transfer of property through power of attorney: Is it legal? Housing News (2021), https://housing.com/news/transfer-of-property-through-power-of-attorney/
Written by: Aryan Gupta
College: Kirit P. Mehta School of Law, NMIMS (2nd Year)