Saturday, October 15, 2011

Registered Deed of Conveyance - Only Valid form to transfer an Immovable Property

The abuse of General Power of Attorney Sales (“GPA Sales”) or Sale Agreement/General Power of Attorney/Will Transfers (“SA/GPA/WILL”) has come before the notice of the Supreme Court recently in the case of Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana wherein it has been held by the Court that transfer made by any of the means mentioned above does not transfer any kind of interest whatsoever as long as they are not duly registered. These kinds of sales, according the court, promotes sham sale of land and also furthers land mafia. Court further made it clear that such transaction shall not be confused with the genuine transfers made under By an earlier order of this case Suraj Lamp & Industries Pvt.Ltd. vs. State of Haryana & Anr. - 2009 (7) SCC 363, court opined the ill-effects which these transactions can entail. Court in this earlier order had held that –
“Recourse to `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.”
Court clarified that these transaction leads to the evasion of income tax, wealth tax, stamp duty because of which a huge amount of loss has to be incurred by the state. State is not able to impose any of these taxes simply because of the reason that it is not possible, under these transactions, to indentify the real owner of the property in dispute because of the lack of the registration. Further, it has been argued by the court that these transactions are being used by several persons in order to hide black money. Further, it endangers the genuine purchaser since the vendor can again sell the same piece of property to some other person in return of consideration. In addition, court was of the view that it is used by the land mafia as a means to gain the property from a genuine purchaser by means of threat or force. Court, in this case, asked Gopal Subramaniam, former Solicitor General of India, for his view on the instant matter and he complied with the same. It has further been found out that those with ulterior motives either to indulge in black money transactions or land mafia continue to favour such transactions. It is very important to note here that registration is mandatory in cases where conveyance of the property is made, and this is the reason why no other form of transaction will be valid except where conveyance is made along with a registered deed.
Section 5 of the Transfer of Property Act, 1882 (“The Act”) defined what one can mean by the term “transfer of property”. Section 54 of the act stipulates the explanation of the term “sale”, and further signified how a sale shall be made. Section 53A of the act defines what is meant by part performance and the conditions under which a transferee would be able to save himself in case he has performed the imperative stipulations of the agreement to sell. It shall be noted here that agreement not in itself creates any interest in favour of the transferee.
Court further, while referring to its earlier judgment Suraj Lamp (Supra) in relation to the essence of registration, stated that –
"The Registration Act, 1908, was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer. This is achieved by requiring compulsory registration of certain types of documents and providing for consequences of non-registration. Section 17 of the Registration Act clearly provides that any document (other than testamentary instruments) which purports or operates to create, declare, assign, limit or extinguish whether in present or in future "any right, title or interest" whether vested or contingent of the value of Rs. 100 and upwards to or in immovable property. Section 49 of the said Act provides that no document required by Section 17 to be registered shall, affect any immovable property comprised therein or received as evidence of any transaction affected such property, unless it has been registered. Registration of a document gives notice to the world that such a document has been executed. Registration provides safety and security to transactions relating to immovable property, even if the document is lost or destroyed. It gives publicity and public exposure to documents thereby preventing forgeries and frauds in regard to transactions and execution of documents. Registration provides information to people who may deal with a property, as to the nature and extent of the rights which persons may have, affecting that property. In other words, it enables people to find out whether any particular property with which they are concerned, has been subjected to any legal obligation or liability and who is or are the person/s presently having right, title, and interest in the property. It gives solemnity of form and perpetuate documents which are of legal importance or relevance by recording them, where people may see the record and enquire and ascertain what the particulars are and as far as land is concerned what obligations exist with regard to them. It ensures that every person dealing with immovable property can rely with confidence upon the statements contained in the registers (maintained under the said Act) as a full and complete account of all transactions by which the title to the property may be affected and secure extracts/copies duly certified.
To support the view that agreement to sale does not in itself create any interest over the property, court relied on the judgments of Narandas Karsondas v. S.A. Kamtam and Anr. (1977) 3 SCC 247, Rambaran Prosad v. Ram Mohit Hazra [1967]1 SCR 293 and Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra [2004 (8) SCC 614]. Court in the instance case added that contract of sale which is not registered would fall short of the requirements of sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an immovable property. In the case of GPA, court was of the view that it is usually executed between a principal and an agent under which certain powers are conferred over the agent by the principal to act on his behalf. Court opined that under this power, agents can surely a deed of conveyance. On the issue of will, court held that it is the transfer of property between the living humans because it only comes into existence after the death of the testator, and testator has the power to alter the will during his lifetime and the same cannot be considered as a valid transfer of property. Eventually court, while concluding the case stated that –
“We therefore reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance. 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 recognized or valid mode of transfer of immoveable property. 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. They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act”

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