R.V. Raveendran, J. - (1.) By an earlier order dated 15.5.2009 (reported in Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana and Anr., (2009) 7 SCC 363 we had referred to the ill -effects of what is known as General Power of Attorney Sales (for short GPA Sales) or Sale Agreement/General Power of Attorney/Will transfers (for short SA/GPA/WILL transfers). Both the descriptions are misnomers as 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. As noticed in the earlier order, these kinds of transactions were 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.
(2.) The modus operandi in such SA/GPA/WILL transactions is for the vendor or person claiming to be the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof: (a) An Agreement of sale by the vendor in favor of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future. Or An agreement of sale agreeing to sell the property, with a separate affidavit confirming receipt of full price and delivery of possession and undertaking to execute sale deed whenever required. (b) An Irrevocable General Power of Attorney by the vendor in favor of the purchaser or his nominee authorizing him to manage, deal with and dispose of the property without reference to the vendor. Or A General Power of Attorney by the vendor in favor of the purchaser or his nominee authorizing the attorney holder to sell or transfer the property and a Special Power of Attorney to manage the property. (c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected). These transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favor 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. III-Effects of SA/GPA/WILL transactions
(3.) The earlier order dated 15.5.2009, noted the ill-effects of such SA/GPA/WILL transactions (that is generation of black money, growth of land mafia and criminalization of civil disputes) as under: Recourse to Rs. SA/GPA/WILL transactions is taken in regard to freehold properties, even when there is no bar or prohibition regarding transfer or conveyance of such property, by the following categories of persons: (a) Vendors with imperfect title who cannot or do not want to execute registered deeds of conveyance. (b) Purchasers who want to invest undisclosed wealth/income in immovable properties without any public record of the transactions. The process enables them to hold any number of properties without disclosing them as assets held. (c) Purchasers who want to avoid the payment of stamp duty and registration charges either deliberately or on wrong advice. Persons who deal in real estate resort to these methods to avoid multiple stamp duties/registration fees so as to increase their profit margin. Whatever be the intention, the consequences are disturbing and far reaching, adversely affecting the economy, civil society and law and order. Firstly, it enables large scale evasion of income tax, wealth tax, stamp duty and registration fees thereby denying the benefit of such revenue to the government and the public. Secondly, such transactions enable persons with undisclosed wealth/income to invest their black money and also earn profit/income, thereby encouraging circulation of black money and corruption. This kind of transactions has disastrous collateral effects also. For example, when the market value increases, many vendors (who effected power of attorney sales without registration) are tempted to resell the property taking advantage of the fact that there is no registered instrument or record in any public office thereby cheating the purchaser. When the purchaser under such Rs. power of attorney sales comes to know about the vendors action, he invariably tries to take the help of musclemen to Rs. sort out the issue and protect his rights. On the other hand, real estate mafia many a time purchases properties which are already subject to power of attorney sale and then threaten the previous Rs. Power of Attorney Sale purchasers from asserting their rights. Either way, such power of attorney sales indirectly lead to growth of real estate mafia and criminalization of real estate transactions. It also makes title verification and certification of title, which is an integral part of orderly conduct of transactions relating to immovable property, difficult, if not impossible, giving nightmares to bonafide purchasers wanting to own a property with an assurance of good and marketable title. ;