Relevant links and references:

SectionS 5,53A, 54 and other provisions of the Transfer of Property Act, 1882 (‘TP Act’ for short).

Section 17 and other provisions of the Registration Act, 1908

Provisions of Indian Stamp Act, 1999 with modifications by concerned state.

Suraj Lamp & Industries Pvt Ltd Vs State Of Haryana (SC) [2011 -TMI - 206337 - SUPREME COURT OF INDIA]

 NarandasKarsondas v. S.A. Kamtam and Anr.(1977) 3 SCC 247,

Recently A three-judge bench of justices R V Raveendran, A K Patnaik and H L Gokhale of the Supreme Court has decided that sale transactions carried in the name of general power of attorney (GPA) will have no legal sanctity and immovable property can be sold or transferred only through registered deeds. Transactions in nature of sale vide general power of attorney or specific authority (SA) or under will do not  convey title and do not amount to transfer of immovable property. Such transactions cannot be recognized as valid mode of transfer of immovable property.

The court further held that   “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.

“Such transactions cannot be relied upon or made the basis for mutations in municipal or revenue records,”.

The apex court said the amendments to stamp and registration laws by various states do not address the larger issue of generation of black money and operation of land mafia and hence there was a need to reduce the stamp duty though it may result in loss of revenue.

“When high stamp duty is prevalent, there is a tendency to undervalue documents even where sale deeds are executed.

When properties are undervalued, a large part of the sale price changes hand by way of cash thereby generating `black’ money.

The bench also said that “Even when state governments take action to prevent undervaluation, it only results in the recovery of deficit stamp duty and registration charges with reference to the market value but the actual sale consideration remains unaltered,” The apex court said the Delhi High Court was wrong in upholding the validity of GPA sales in the Asha Jain case (2001).

“Such decisions to the extent they recognise or accept SA/GPA/WILL transactions as concluded transfers, as contrasted from an agreement to transfer, are not good law.

“We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance, Justice Raveendran said.

Past transactions not to be effected:

The apex court, clarified that the sale and other transactions entered through GPAs and Wills till date will not be affected by the judgment delivered by the Court and will be treated as valid agreements. Under such agreements or  transactions parties can seek  specific performance or to defend possession, and also seek registration of conveyance. Any agreement entered till date may be relied upon to apply for regularisation of allotments/leases by Development Authorities. Thus the interest of persons having contractual rights under contracts entered into  have been saved.

Acted upon documents:

The Court also clarified in the following manner:

“We make it clear that if the documents relating to `SA/GPA/WILL transactions  has been accepted acted upon by DDA or other developmental authorities or by municipal or revenue authorities to effect mutation, they need not be disturbed merely on account of this decision.

““We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions,”

Reduction of stamp duty:

The Court also asked the states to reduce stamp duty rates to prevent undervaluation of property and stashing of black money by vested interests. The apex court said high stamp rates has led to rampant abuse of the general power of attorney (GPA), sale agreements (SA) and Wills, resulting in huge loss of money to the exchequer.

Position after October 11, 2011:

According to the judgment, transactions entered into prior to the delivery of the judgment that is 11^th October, 2011 will not be affected and parties are free to enforce them and seek registration and can enforce other remedies. The actions taken in relation to such transactions shall not be affected. This means that transactions entered into after 11^th October, 2011 shall not be valid and therefore, it is desirable that transactions should be entered into by registered agreements. Many people who may not be aware of the judgments and who have entered into an unregistered agreement of nature that require registration can take steps to enter into registered transactions to regularize the things.    

Other reasons of black money:

The major reasons of generation of black money are corruption, powers of government officers to harass the public and to charges bribe for not harassing, siphoning and misuse of public funds by bureaucrats and politicians. It is general feeling of public that the cases of corruption as displayed on websites of anti corruption departments are just a tip of the iceberg.

 The reasons for corruption need to be plugged.

High stamp duty is one of reason of generation of black money in use of property transaction. However, this reason is very insignificant ,particularly after introduction of system to levy stamp duty on the basis of market value and also computation of capital gains based on valuation adopted for stamp duty purposes. 

Rate of income tax has also been brought down and though rate of income-tax is still high and is not conducive to create capital base, still it is  not a major reason for generation of black money.

The net rates of  Central Excise / VAT/Service tax etc. are still higher and they need to be brought to lower level at which public can pay them comfortably .

Taxes can be brought to comfortable levels by:

Curbing corruption and ensuring proper use of public funds.

Stoppage of siphoning of public funds.

Curbing powers to harass public in hands of officers of government.

Ensuring proper utilization and spending of public funds.

Ensuring that government officers and staff work timely, properly and at least seven hours a day on all working days. The work task of government employees is very low, it need to be brought on reasonable level to reduce government spending on account of salary.