SURAJ LAMP & INDUSTRIES (P) LTD. THRU. DIR v. STATE OF HARYANA & ANR

Citation: [2009] 9 S.C.R. 1048

Court: Supreme Court of India

Bench: R.V. RAVEENDRAN, J.M. PANCHAL

Case summary

SURAJ LAMP & INDUSTRIES (P) LTD. THRU. DIR v. STATE OF HARYANA & ANR.pdf

Judgment text

[2009] 9 S. C. R. 1048 v -f SURAJ LAMP & INDUSTRIES (P) LTD. THRU. DIR v. STATE OF HARYANA & ANR. ,_ (SLP (C) No. 13917 of 2009 @ C. C. No. 5804 of 2009) MAY 15, 2009 [R. V. RAVEENDRAN AND J. M. PANCHAL, JJ. ] ... --; Registration Act, 190~: ss. 17 and 49 - Registration of deeds of conveyance - Purpose of - Practice of transferring freehold properties by means of sale agreement with General Power ofAttorney and Will (SA-GPA-Will) - Held: Consequences of transactions by means of SAGPA Will are disturbing and far reaching, adversely affecting the economy, civil society and law and order - Jt 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 - Such transactions encourage circulation of black money and corruption and directly lead to growth of real estate mafia and criminalization of real estate transactions - Some States have · made some efforts to control such transactions by subjecting agreements of sale involving delivery of possession and y I,. irrevocable powers of attorney for consideration to the same stamp duty as deeds of conveyance or by making such documents compulsorily registrable - But the steps taken are neither adequate nor properly implemented, resulting in multiple transactions in regard to the same property and leading to legal and other complications - Solicitor GeneraT of India would appear in the matter and give suggestions on behalf of Union of. India - Notice-f~ssue to States of Punjab, -- )- seriousness is underestimated.

The issue to be addressed is 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. This method adopted has the following variants: - the vendor before transfer. • 6. The 'Power of Attorney Sales', as noticed above was adopted to overcome the restrictions/prohibitions in terms of allotment and the rules of allotment of DOA governing the allotment of flats. Such transactions were obviously irregular and illegal being contrary to the rules and terms of allotment. y 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.

However, the Delhi High Court in a few cases accepted such 'Power of Attorney Sales' as creating an 'interest' in the DOA flat which was so 'transferred' and consequently, protected such interest of the purchaser by issuing injunctions or decrees preventing the vendor from further dealing with the property. This lied to a general l _,, impression the ·~ower of Attorney Sales' were valid recognized modes of transfer and the very purpose ODA prohibiting transfers and requiring permission on payment of certain difference in price was defeated by this process. ·H 10F HARYANA [RV. RAVEENDRAN, J. ] ' .... t We ~re not presently concerned with the validity, propriety or wisdom of such judgments which virtually put the seal of approval cf. the court on transactions which were irregular and illegal.

In fact, it is stated that DOA itself ultimately recognizes 'Power of Attorney Sales' by accepting applications from purchasers under 'Power of Attorney Sales' for conversion from leasehold to freehold and conveyance of the flats. We will therefore presently exclude the 'power of attorney sales' of DOA ... ;. flats from the purview of the present exercise,. 7. What we are concerned is extension of the concept of such 'Power of Attorney Sales' by execution of SA/GPA/Will with reference to freehold properties. .... 8. 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 con. sequences of nonregistration.

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 . I> .... 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 document gives notice to the world that such a document has been executed. Registration provides safety and security to .. )I: transactions relating to immo'1able 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 ·~ ~ ' . -r a property, as to the nature and extent of the rights which t 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 -t ~ see the record and enquire and ascertain what the particulars are and as tar 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. ,.. _ 9. 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 conveya'nce. _,. .. (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 G. , stamp duty and registration charges either :( ..... deliberately or on wrong ~dvice. Persons who deal in real estate resort to these methods to avoid multiple stamp dutiestregistration fees so as to increase their profit margin. "«( t 10.

Whatever be the intention, the consequences are .... disturbing and far reaching, adversely affecting thP 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 8 persons with undisclosed wealth/income to invest their black money and also earn profit/income, thereby encouraging )" ~ circulation of black money and corruption. This kind of transactions has disastrous collateral effects also. For example, when the market value increases, many . vendors (who effected power of attorney sales without registration) are tempted to resell the property taking advantage of the fact that there is no registered instrument or record in any public office thereby cheating the purchaser.

When the purchaser under such 'power of attorney sales' comes to know about the vendors action, he -4 invariably tries to take the help of musclemen to 'sort out' the ..... issue and protect his rights. On the other hand, real estate mafia many a time purchase properties which are already subject to power of attorney sale and then threaten the previous 'Power of Attorney Sale' purchasers from asserting their rights. .. Either way, such power of attorney sales indirectly lead to growth of real estate mafia and criminalization of real estate -4 transactions. ~ - 11. Some states have made some efforts to control such 'Power of Attorney Sales' by subjecting agreements of sale involving delivery of possession and irrevocable powers of attorney for consideration, to the same stamp duty as deeds of conveyance or by making such documents compulsorily registrable. But the steps taken are neither adequate nor }'.

t:,· properly implemented resulting in multiple transactions in regard ,- to the same property by greedy and unscrupulous vendors and/ or purchasers giving nightmares to bonafide purchasers intending to buy a property with certainty regarding title. It also makes it difficult for lawyers in tracing and certifying title. Any process which interferes with regular transfers under deeds of ,,... -t conveyance properly stamped, registered and recorded in the registers of the Registration Department, is to be discouraged and deprecated. 12. 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. t- 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. If there was no bar, then the questions that arise are: why should -company hold a property in a state of suspended animation from 1991? How can a company 'verbally' agree to sell a property to someone? What is the reason for the delay in ). lodging the complaints? If petitioner had purchased the property under a registered sale deed, numerous disputes, litigations ~ and criminal proceedings could have been avoided. 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 extralegal enforcement and forced settlements by land mafia. y .. 13. We are therefore of the view that the situation warrants special measures.

We are informed that sometime back in 2008, there was a. proposal to amend section 147 of Delhi Municipal Corporation Act, 1957 to check and discourage 'power of attorney sales'. There was also a propos~I to have I,_ special enactment relating to registration and recording of title in Delhi. But so far nothing appears to have fructified. It is the ~~ ' dream of every citizen to own a house or a plot of land. The --... citizens must be enabled by the government to do so with safety, security and without fear of litigation or defects in title. 14. We therefore request the Solicitor General to appear in the matter and give suggestions on behalf of Union of India. ' I SURAJ LAMP & INDUSTRIES (P) LTD. THRU. DIR v. 1057 STATE OF HARYANA [R. V. RAVEENDRAN, J. ] We also direct notice to the States of Punjab, Haryana, Delhi, Uttar Pradesh and Maharashtra (represented by their respective Chief Secretary/Revenue Secretary) to consider the ··.

following issues: (a) Whether 'power of attorney sales' (that is 8 ·transactions involving execution of Sale Agreement/GPA/Will) instead of regular sales is r t prevalent in their respective states? (b) What are the views of the respective state government in respect of such transactions? (c) What steps have been taken and/or proposed to be taken by the respective states to deal with the chaotic situation and confm~ion arising from such transactions? ~ List the matter in the last week of August, 2009. R. P. Matter adjourned.