GPA sale deeds not legal, says 3-judge bench

GPA sale deeds not legal, says 3-judge bench

The apex court has also asked the states to reduce stamp duty rates to prevent undervaluation of property and stashing of black money by vested interests.
A three-judge bench of justices R V Raveendran, A K Patnaik and H L Gokhale said high stamp rate has led to rampant abuse of the general power of attorney (GPA), sale agreements (SA) and Wills, resulting in huge loss of money to the exchequer. "Transactions of the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ do not convey title and do not amount to transfer nor can they be recognised or valid mode of transfer of immovable property,” the court ruled. “The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property,’ the bench ordered.

"Such transactions cannot be relied upon or made the basis for mutations in municipal or revenue records," Justice Raveendran, writing the judgement, said. The judgment, likely to have an impact on both freehold and leasehold properties and affect the mode of transfer of property, would be applicable prospectively,” the court observed.
The apex court passed the ruling while dealing with the appeal filed by Suraj Lamp &Industries challenging certain actions of Haryana government in a title dispute.
The Centre, Delhi, Haryana, Punjab and Uttar Pradesh told the apex court that SA/GPA/WILL transfers need to be discouraged as they lead to loss of revenue (stamp duty) and increase in litigations due to defective titles. "A high rate of stamp duty acts as a dampner for execution of deeds of conveyance for full value, and encourages SA/GPA/WILL transfers. When parties resort to SA/GPA/WILL transfers, the adverse effect is not only loss of revenue (stamp duty and registration charges) but the greater danger of generation of ‘black’ money. "Reducing the stamp duty on conveyance to realistic levels will encourage public to disclose the maximum sale value and have the sale deeds registered," the apex court said.

The apex court said the amendments to stamp and registration laws by various states do not address the larger issue of generation of black money and operation of land mafia and hence there was a need to reduce the stamp duty though it may result in loss or revenue.

"When high stamp duty is prevalent, there is a tendency to undervalue documents even where sale deeds are executed. When properties are undervalued, a large part of the sale price changes hand by way of cash thereby generating ‘black’ money.

The apex court, however, clarified the sale and other transactions entered through GPAs and Wills till date will not be affected by its today's orders and will be treated as valid agreements. "Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said ‘SA/GPA/WILL transactions’ may also be used to obtain specific performance or to defend possession," the bench said.

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