This article has been written by Khalid Ali Khan Afridi, a student of PSIT College of Law
POWER OF ATTORNEY (POA):
Two Indian statutes—the Powers of Attorney Act of 1882 and the Indian Stamp Act of 1899—have both addressed the idea of an attorney-in-fact. A Power of Attorney is an agreement that authorizes a certain individual to act on behalf of the party carrying out the transaction. In essence, someone grants another person the legal authority to represent themselves as their agent and carry out the activities that have been officially delegated on their behalf.
Non-Resident Indians (NRIs) typically use this tool as they may not be able to travel to their country of origin at a certain time due to their jobs, circumstances, or personal commitments. Persons who are very busy or preoccupied, such as businessmen and people who are unable to complete their many personal and professional tasks, may also find a POA useful.
GENERAL POWER OF ATTORNEY (GPA):
A General Power of Attorney is a legal document that allows one person to delegate certain tasks to another. The individual granting the power of attorney is known as the “Principal,” and the person acting on the Principal’s behalf is known as the “Agent.” A general power of attorney, as the name implies, is not written for a specific reason and allows the agent to act on behalf of the principal in any of the topics stated. The Principal is bound by the act(s) of an Agent operating under the General Power of Attorney.
A general power of attorney is frequently used to address circumstances in which a person needs someone else to act on his or her behalf because they are unable to do so themselves. A general power of attorney is frequently needed when the principal is unable to act on his or her own or to complete the necessary responsibilities due to a physical or mental disease or impairment. It can also be utilized to fill in for the Principal when he or she isn’t there and needs to make choices or complete specific responsibilities, etc.
SPECIAL POWER OF ATTORNEY (SPA):
SPA is the process by which one person gives another the power to carry out a particular task. For instance, when you give someone permission to act as your advocate or legal representative in a given matter, that person will only represent you in that particular case. A SPA restricts the choices that the agent is permitted to make, whereas a GPA grants the agent or representative extensive authorizations.
DO YOU NEED TO REGISTER A GPA?
For legal validity, a GPA must be registered with the Sub Registrar’s Office. Additionally, the GPA is only good for as long as the principal, or the person who is issuing the GPA, is alive. It is not, in any way, valid for an endless amount of time. Additionally, it may be revoked at any moment throughout the owner’s lifetime. On the other hand, the SPA is terminated after the precise duty for which it was constituted is finished.
CAN A REGISTERED GPA HOLDER SELL A PROPERTY?
No, a registered GPA holder is not permitted to sell a house. The GPA holder is under no circumstances permitted to sell the property on behalf of the owner, even if the GPA is registered with the Sub Registrar’s Office. The sale of a property through GPA was clearly disallowed in the most recent ruling by the Honorable Supreme Court of India. The only tasks that a GPA holder may complete are those that the owner assigns them; selling property is not one of those tasks.
WHY DO GPA TRANSACTIONS ATTRACT PEOPLE?
The GPA route, from the standpoint of a seller, enables them to sell a property even if they do not possess clear titles to it. The GPA transactions are fueled by a number of legal regulations. Numerous Urban Development Authorities (Municipal Corporations) schemes that allocate leasehold properties have lengthy gestation periods before the property can be sold in a legal manner. The GPA approach is frequently used to get around such restrictions.
GPA is another shady method of investing unreported funds in the real estate industry. Mr. Mukesh Jain, an attorney and the founder of Mukesh Jain & Associates, responded when asked about the repercussions of a GPA transaction, “Generally, it is not desirable to purchase a property through the holder of a Power of Attorney. With one exception, one may deal with the power holder if they have gained an irrevocable power in exchange for payment. Even in that situation, a person needs to make sure that the holder has a legal claim to the property through a sale agreement or other comparable document. Such power ought to be registered, ideally. An irrevocable authority with interest endures even after the grantor’s passing.
Any additional form of authority is dangerous; made even more so if it is not even registered. Even if an authority is made irrevocable, it can still be repealed at any point. Additionally, it expires at the grantor’s passing. Any irrevocable power is not recognized by the law unless it is accompanied with an interest. Such a power is not at all secure and is likely to increase the likelihood of an unanticipated problem (s). Therefore, it must be avoided.
THE HONORABLE SUPREME COURT ON GPA:
The Supreme Court held that property transfers conducted through POA are invalid in its 2011 decision in the Suraj Lamp & Industries Private Limited v. State of Haryana case.
According to a three-judge panel led by the Honorable Justice RV Raveendran, “A POA is not an instrument of transfer with regard to any right, title, or interest in an immovable property, and “Property may only be lawfully transferred through a registered sale deed.”
The Honorable Court further concluded that a power of attorney is merely a legal entity established in the grantor’s (grantee’s) favor. Furthermore, even an irrevocable power of attorney does not result in the receiver receiving the title. The GPA is therefore irrelevant to the selling or acquisition of real estate. According to the applicable State Government Act, only stamped and registered conveyance deeds may be used for transactions involving immovable property.
The Honorable Apex Court issued a directive to the municipal organizations not to register properties based on the GPA documents in view of the aforementioned ruling. Genuine transactions made or carried out through GPA would still be valid, nevertheless. The Honorable Supreme Court has observed and accepted that the GPA makes it possible to systematically evade taxes such as income tax, wealth tax, stamp duty, and registration fees. The GPA transactions also make it easier to hold on to dark money and make illegal gains.
ORDER OF DELHI HIGH COURT ON POWER OF ATTORNEY (2013):
Many property owners in the national capital region (NCR), where GPA sales have become pervasive, were impacted by the Delhi government’s circular. Numerous applications seeking relief were filed with the Honorable Delhi High Court after the notification. According to the Honorable High Court, the Honorable Supreme Court’s decision made it plain that registration cannot be denied in legitimate instances.
The Honorable Supreme Court has not ruled that using a general power of attorney will never allow a transaction to be registered. The Sub-Registrar will need to register the transaction as long as it is legal and authentic. “A person may enter into a development agreement with a land developer, for the development of a parcel of land, or for the construction of apartments in a building, and for this specific reason; a Power of Attorney to execute sale agreements can be executed,” the Honorable High Court said.
CONCLUSION:
Even if you purchased the property using a general power of attorney, you will not be regarded as the rightful or legal owner of the property if there is no registered sale deed. Additionally, you won’t be able to sell the property further without the sale deed. Additionally, banks have a policy of refusing to fund projects that require a GPA.
SOURCES:
- The Powers of Attorney Act, 1882
- The Indian Stamp Act, 1899
- The Transfer of Property Act, 1882
- https://www.99acres.com
- https://housing.com
- https://lawrato.com
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