BUYING A PROPERTY THROUGH GENERAL POWER OF ATTORNEY

POWER OF ATTORNEY (POA):

The concept of Power of Attorney has been discussed under two statutes of India which includes The Powers of Attorney Act, 1882, and The Indian Stamp Act, 1899. The Power of Attorney has been defined as the instrument which empowers a specified person to act on behalf of the person executing the transaction.

Basically, a person gives another person a legal right to present himself or herself as his or her representative to perform specifically mentioned assigned tasks on his or her behalf.

This instrument is generally used by Non-Resident Indians (NRIs), as it may not be possible for an NRI to visit his or her country of origin at a given time, because of his or her businesses, situations or personal work. A POA is also handy for extremely busy or occupied people, such as businessmen and people who are unable to perform their various personal and professional tasks.

GENERAL POWER OF ATTORNEY (GPA):

A General Power of Attorney is a legal document in which one person authorizes another person to act on his or her behalf. The person authorizing is referred to as the ‘Principal’ and the person being authorized under the power of attorney by the Principal is called an ‘Agent’. As the name suggests, a General Power of Attorney is not drafted for a specific purpose and the agent can act on behalf of the Principal on various mentioned matters. The act(s) of an Agent acting in accordance with the General Power of Attorney binds the Principal.

A General Power of Attorney is often utilized to provide for situations wherein a person is unable to act for himself and is need of another to act on his or her behalf. Common situations wherein a General Power of Attorney may be required are when the Principal is suffering from some legal or physical disability, illness or is incapacitated to act for himself or to perform his or her required tasks. It may also be used to cover for the Principal’s absence in situations wherein he or she is required to take decisions or carry out specific tasks etc.

SPECIAL POWER OF ATTORNEY (SPA):

When a person grants another person the authority to carry out a specific task specifically, it is known as SPA. For instance, when you authorize a person to act as your legal representative in a particular case, an advocate, then he or she will represent only for that specific case for which he or she has been authorized. While a GPA gives broad authorizations to the agent or representative, whereas, a SPA narrows the choice that the agent is allowed to make.

DO YOU NEED TO REGISTER A GPA?

A GPA has to be registered with the Sub-Registrar’s Office to get legitimate validity. Moreover, the GPA is not at all valid for an indefinite period, but, it is valid for the lifetime of the principal or the one who is awarding the GPA. And it can be revoked within the lifetime of the owner too. On the contrary, the SPA stands revoked when the specific task assigned to the SPA for which it has been appointed is completed.

CAN A REGISTERED GPA HOLDER SELL A PROPERTY?

No, a registered GPA holder cannot sell a property. Even if the GPA is registered with the Sub-Registrar’s Office, the GPA holder is not at all authorized to sell the property on the behalf of the owner. In the latest judgment by the Honorable Supreme Court of India, the Honorable Court categorically invalidated the sale of a property through GPA. A GPA holder only has the authority to carry out tasks assigned by the owner, which does not include the selling of property.

WHY DO GPA TRANSACTIONS ATTRACT PEOPLE?

From the perspective of a seller, the GPA route allows them to sell a property even if they do not hold clear titles of the property. There are various legal provisions which give impetus to the GPA transactions. And many schemes of Urban Development Authorities (Municipal Corporations), where the properties are allotted on the basis of leasehold, it comes with a significant gestation period before the property can be sold legitimately. For sidestepping such provisions, the GPA route is employed habitually.

GPA is also an illegitimate way of investing unaccounted money in the Real Estate sector. When asked about the consequences of a GPA transaction, Mr.Mukesh Jain, Lawyer and Founder of Mukesh Jain & Associates, stated that, “Generally, it is inadvisable to purchase a property through the holder of a Power of Attorney. However, there is an exception, when the holder has obtained an irrevocable power against the consideration, then, one may deal with the power holder. Even in that particular case, an individual needs to ensure that the holder also has some substantive right in the property through an agreement to sell or a similar document. Ideally, such power should be registered. Even after the death of the grantor, an irrevocable power coupled with interest remains valid.

Any other type of power is unsafe, more so, when it is not even registered. A power like GPA can be revoked at any time even if it is made irrevocable. And, it lapses on the death of the grantor. The law does not recognize any irrevocable power unless it is coupled with an interest. Purchase of a property through such power is not at all safe and is likely to enhance the chances of an unforeseen complication(s). Hence, it shall be avoided.”

THE HONORABLE SUPREME COURT ON GPA:

While delivering its judgment in the Suraj Lamp & Industries Private Limited versus the State of Haryana case, the Supreme Court, in 2011, ruled that property transactions carried out by way of POA do not hold legitimacy.

“A POA is not an instrument of transfer in regard to any right, title or interest in an immovable property,” a three-judge bench, headed by the Honorable Justice RV Raveendran, said, adding that property can legitimately be transferred through a registered sale deed only.

The Honorable Court further held that power of attorney is only an agency created in the favor of the recipient (grantee), on behalf of the grantor. Moreover, even an irrevocable power of attorney does not have the effect of transferring the title to the recipient. Therefore, the GPA is invalid for the sale or purchase of a property. Transactions related to an immovable property can only be done or performed by the way of stamped and registered conveyance deed, as applicable under the respective State Government Act(s).  

In the light of the above decision, the Honorable Apex Court directed the municipal bodies for not registering properties based on the GPA documents. However, genuine transactions done or performed through GPA would remain valid. As observed and acknowledged by the Honorable Supreme Court, the GPA enables large-scale evasion of taxes, including income tax, wealth tax, stamp duty and registration charges. Moreover, the GPA transactions facilitate holding the black money and earning illegitimate profits.

ORDER OF DELHI HIGH COURT ON POWER OF ATTORNEY (2013):

The Delhi government’s circular affected many property holders in the national capital region (NCR), where the sales through GPA had become rampant. Following the notification, various applications were moved in the Honorable Delhi High Court, seeking relief. The Honorable High Court ruled that the Honorable Supreme Court’s verdict clearly mentioned that registration cannot be barred in genuine cases.

“The Honorable Supreme Court has not stated that in no case a conveyance can be registered by taking recourse to the General Power of Attorney. As long as the transaction is legitimate and genuine, the same will have to be registered by the Sub-Registrar”. The Honorable High Court stated that “A person may enter into a development agreement with a land developer, for development of a parcel of land or for construction of apartments in a building and for this specific purpose; a Power of Attorney to execute sale agreements can be executed”.

CONCLUSION:

You might have bought the property through General Power of Attorney, but in the absence of a registered sale deed, you will not be considered the legitimate or legal owner of the property. And without the sale deed, you will not be able to sell the property further too. Moreover, the banks also have a policy of NOT financing the projects which involves a GPA.

SOURCES:

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