Comprehension
“… 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 … and to avoid payment of ‘unearned increases’ due to Development Authorities on transfer.
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 favour 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.
or
(b) An Irrevocable General Power of Attorney by the vendor in favour 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 favour 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 favour 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.”
[Extracted from Suraj Lamp & Industries (P) Ltd v. State of Haryana (2012) 1 SCC 656].
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 favour 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.
or
(b) An Irrevocable General Power of Attorney by the vendor in favour 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 favour 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 favour 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.”
[Extracted from Suraj Lamp & Industries (P) Ltd v. State of Haryana (2012) 1 SCC 656].
Question: 1
‘SA/GPA/WILL’ transfers for the transfer of immovable property lead to:
‘SA/GPA/WILL’ transfers for the transfer of immovable property lead to:
Updated On: Nov 7, 2024
- Enabling 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.
- Enabling persons with undisclosed wealth/income to invest their black money and also earn profit/income, thereby, encouraging circulation of black money and corruption.
- Both (A) and (B).
- None of the above
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The Correct Option is C
Solution and Explanation
The use of SA/GPA/WILL transfers can lead to tax evasion and facilitate the in-
vestment of black money, as they avoid formal registration and disclosure processes.
The correct option is (C): Both (A) and (B).
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Question: 2
Which of the following is an incorrect proposition?
Which of the following is an incorrect proposition?
Updated On: Nov 7, 2024
- A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property.
- The power of attorney is creation of an agency whereby the grantor authorises the grantee to do the acts specified therein, on behalf of the grantor, which when executed will be binding on the grantor as if done by him
- A Will is a posthumous disposition of the estate of the testator directing distribution of his estate upon his death.
- A Will is a transfer inter vivos.
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The Correct Option is D
Solution and Explanation
A will is not a transfer inter vivos (during the lifetime of the person); it takes effect
only after the death of the testator.
The correct option is (D): A Will is a transfer inter vivos
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Question: 3
Which of the following is a correct proposition as regards an agreement to sell an immovable property?
Which of the following is a correct proposition as regards an agreement to sell an immovable property?
Updated On: Nov 7, 2024
- An agreement to sell does not, of itself, create any interest in or charge on such property.
- An agreement to sell does create an interest in or charge on such property.
- An agreement to sell, with possession, is a conveyance
- An agreement to sell, whether with possession or without possession, is a conveyance.
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The Correct Option is A
Solution and Explanation
An agreement to sell an immovable property does not transfer ownership or create
any interest in the property until a sale deed is executed.
The correct option is (A): An agreement to sell does not, of itself, create any interest in or charge on such property.
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Question: 4
In relation to the sale of immovable property, in Suraj Lamp & Industries (P) Ltd v. State of Haryana, the Supreme Court held that as per the Transfer of Property Act, 1882:
In relation to the sale of immovable property, in Suraj Lamp & Industries (P) Ltd v. State of Haryana, the Supreme Court held that as per the Transfer of Property Act, 1882:
Updated On: Nov 7, 2024
- Transactions in the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ do convey legal title in the immovable property
- An immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance
- Transactions in the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ are also recognised or valid mode of transfer of immovable property.
- The Court will treat ‘GPA sales’ or ‘SA/GPA/WILL transfers’ as completed or concluded transfers (as conveyances) of immovable property
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The Correct Option is B
Solution and Explanation
The Supreme Court ruled in Suraj Lamp Industries (P) Ltd v. State of Haryana that
GPA sales do not transfer legal ownership and that only a registered deed can transfer title in
immovable property.
The correct option is (B): An immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance
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Question: 5
Compulsory registration of certain types of documents ensures:
Compulsory registration of certain types of documents ensures:
Updated On: Nov 7, 2024
- Orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer
- The process of verification and certification of title easier and simpler.
- Both (A) and (B)
- None of the above
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The Correct Option is C
Solution and Explanation
Property registration serves multiple purposes, including providing public notice of
ownership and preventing fraud, which streamlines the verification process.
The correct option is (C): Both (A) and (B)
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