Facts: The petitioner, a company incorporated under the Companies Act, claims that one Ramnath and his family members sold two and half acres of land in Gurgoan to them by means of an agreement of sale, General Power of Attorney (for short `GPA’) and a ‘Will’ in the year 1991 for a consideration. It was further alleged that the petitioner verbally agreed to sell a part of the said property measuring one acre to one Dharamvir Yadav for Rs.60 lakhs in December 1996. It was stated that the said Dharamvir Yadav, and his son Mohit Yadav (an ex MLA and Minister), instead of proceeding with the transaction with the petitioner, directly got in touch with Ramanath and his family members and in 1997 got a GPA in favour of Dharamvir Yadav in regard to the entire two and half acres executed and registered and illegally cancelled the earlier GPA in favour of petitioner. The petitioner claims that when its Director, S.K. Chandak, confronted Dharamvir Yadav in the year 1999 in this behalf, the said Yadav apologized and issued a cheque for Rs.10 lakhs towards part payment and agreed to pay the balance of Rs.50 lakhs shortly but that the said cheque was dishonoured. It was further alleged that in the year 2001, petitioner lodged a criminal complaint against Ramanath and members of his family who executed the sale agreement/ GPA/will in favour of the petitioner and another complaint against Dharambir Yadav and his son in the District Court, Gurgoan. The petitioner claims that as no action was taken on its FIR by the Investigation Officer the petitioner filed an application under Right to Information Act, 2004 seeking the Status. An appeal filed by the petitioner was disposed of by the Chief Information Commissioner, merely directing that Police should re-investigate the FIR. Petitioner filed a writ petition challenging the order of the Chief Information Commissioner and seeking initiation of proceedings under section 20 of the RTI Act and imposition of penalty. The said writ petition was disposed of by the High Court by the impugned order holding that section 20 was directory and not mandatory.

Issue: Whether the sale of immovable property through execution of power of attorney sale agreement/general power of attorney/will instead of execution and registration of regular deeds of conveyance could be deprecated as illegal and irregular?

Views: The Hon’ble Court observed that the issue was in respect of avoidance of execution and registration of deeds of conveyance as the mode of transfer of freehold immovable property by increasing tendency to adopt `Power of Attorney Sales’, that is execution of sale agreement/ general power of attorney/will (for short `SA-GPA-Will transactions’) instead of execution and registration of regular deeds of conveyance, on receiving full consideration. The `Power of Attorney Sales’ as a method of `transfer’ was evolved by lawyers and document writers in Delhi, to overcome certain restrictions on transfer of flats by the Delhi Development Authority (for short `DDA’). DDA had undertaken large scale development by constructing of flats. It is stated that when DDA allotted a flat to an allottee, any transfer of the assignment by the allottee required the permission of DDA and such permission was granted only on payment to DDA of the `unearned increase’, that is the difference between the market value/sale price and the original cost of allotment. To avoid the cumbersome procedure in obtaining permission and to avoid payment of the huge part of the price to the DDA as unearned increase, a hybrid system was evolved whereby the allottee/holder of the flat, on receiving the agreed consideration would deliver the possession of the flat to the purchaser and execute such power of attorney sales/will etc. Such transactions were obviously irregular and illegal being contrary to the rules and terms of allotment. Further, in the absence of a registered deed of conveyance, no right, title or interest in an immovable property could be transferred to the purchaser. 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.  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. Such power of attorney sales indirectly lead to growth of real estate mafia and criminalization of real estate transactions.

Held: The present case is a typical example of the consequences of not obtaining a registered sale deed. There is apparently no reason as to why a company registered under the Companies Act should resort to such a transaction. Execution of a will by an individual bequeathing an immovable property to a company, is also incongruous and absurd. If there was a bar and the process was adopted to overcome such bar regarding sale of lands, then courts should not go to their assistance, as that would amount to perpetuating illegalities. The illegal and irregular process of `Power of Attorney Sales’ spawns several disputes relating to possession and title, and also results in criminal complaints and cross complaints and extra-legal enforcement and forced settlements by land mafia. Therefore, requested the Solicitor General to appear in the matter and give suggestions on behalf of Union of India. ( SLP No. of 2009, CC 5804/2009 dt 15 -5 2009 )

Editorial: Court observed that the illegal and irregular process of `Power of Attorney Sales’ spawns several disputes relating to possession and title, and also results in criminal complaints and cross complaints and extra-legal enforcement and forced settlements by land mafia. Therefore, requested the Solicitor General to appear in the matter and give suggestions on behalf of Union of India. In view of the above decision in many States the transfer through POW suffers stamp duty as if it is a sale deed unless the POW is in favor of a spouse or blood relationship.

“Beautiful things are not always good but good things are always beautiful!”

 SWAMI VIVEKANANDA