A Three-Judge Bench of Supreme Court of India comprising of Justices R.V.
Raveendran, A. K. Patnaik and H. L. Gokhale in Special Leave Petition (C) No.
13917 of 2009 titled Suraj Lamp & Industries Pvt. Ltd. Vs State of Haryana &
Anr., after interpreting various provisions of the law concerning Property
Sales, held that the sale of immovable property through Sale Agreement, Will,
General Power of Attorney is not valid.
The Bench held that this type of transaction are not transfers or sales and
such transactions cannot be treated as completed transfers or conveyances.
However, the Bench said the Judgment will not affect genuine transactions under
the General Power of Attorney. To avoid such transactions, the Bench asked the
States, to reduce the Stamp Duty to encourage registration of Sale Deeds.
The seller of the immovable property in these indirect sales after receiving the
agreed consideration, deliver the possession of the said property and executes
some or all of the following documents:
- An Irrevocable General Power of Attorney in favor of the purchaser or
- An understanding of sale containing the terms which would be like terms
of sale by the seller in favor of the purchaser and undertaking to execute
any document as and when required in future.
- A Special Power of Attorney either to sell or to manage the property.
The Supreme Court noted that this kind of Indirect Sales badly affected the
economy, civil society and law and order.
This Indirect Sales enables:
- Large scale evasion of Wealth Tax, Income Tax, Registration Fees and
Stamp Duty etc. This causes the benefit of revenue to the public and loss to
- These type transactions tend to persons with undisclosed wealth or
income to invest their black money and also earn profit or income. This
prompts empowering circulation of black money and corruption.
Relevant Legal Provisions
Section 5 of the Transfer of Property Act, 1882 defines transfer of property
5. Transfer of Property defined:
In the following sections transfer of property means an act by which a
living person conveys property, in present or in future, to one or more other
living persons, or to himself [or to himself] and one or more other living
persons; and to transfer property is to perform such act.
Section 54 of the Transfer of Property Act, 1882 defines Sales thus:
Sale is a transfer of ownership in exchange for a price paid or promised
or part-paid and part-promised.
Sale how made. Such transfer, in the case of tangible immoveable property of the
value of one hundred rupees and upwards, or in the case of a reversion or other
intangible thing, can be made only by a registered instrument.
In the case of tangible immoveable property of a value less than one hundred
rupees, such transfer may be made either by a registered instrument or by
delivery of the property. Delivery of tangible immoveable property takes place
when the seller places the buyer, or such person as he directs, in possession of
Contract for sale - 54. Sale defined—‘‘Sale is a transfer of
ownership in exchange for a price paid or promised or part-paid and
Sale how made
Such transfer, in the case of tangible immoveable property of the value of one
hundred rupees and upwards, or in the case of a reversion or other intangible
thing, can be made only by a registered instrument. 1In the case of tangible
immoveable property of a value less than one hundred rupees, such transfer may
be made either by a registered instrument or by delivery of the property.
Delivery of tangible immoveable property takes place when the seller places the
buyer, or such person as he directs, in possession of the property.
Contract for sale
A contract for the sale of immoveable property is a contract that a sale of such
property shall take place on terms settled between the parties. It does not, of
itself, create any interest in or charge on such property.
Section 53-A of the Transfer of Property Act, 1882 defines Part Performance
Part Performance: Where any person contracts to transfer for
consideration any immoveable property by writing signed by him or on his behalf
from which the terms necessary to constitute the transfer can be ascertained
with reasonable certainty, and the transferee has, in part performance of the
contract, taken possession of the property or any part thereof, or the
transferee, being already in possession, continues in possession in part
performance of the contract and has done some act in furtherance of the
contract, and the transferee has performed or is willing to perform his part of
the contract, then, notwithstanding that where there is an instrument of
transfer, that the transfer has not been completed in the manner prescribed
therefore by the law for the time being in force, the transferor or any person
claiming under him shall be debarred from enforcing against the transferee and
persons claiming under him any right in respect of the property of which the
transferee has taken or continued in possession, other than a right expressly
provided by the terms of the contract.
Provided that nothing in this section shall affect the rights of a transferee
for consideration who has no notice of the contract or of the part performance
Referring to the relevant provisions of the Indian Stamps Act, 1999 (Note: Stamp
Laws may vary from State to State, though generally the provisions may be
Section 27 of the Indian Stamp Act, 1899 casts upon the party, liable to pay
stamp duty, an obligation to set forth in the instrument all facts and
circumstances which affect the chargeability of duty on that instrument.
Article 23 of the Indian Stamp Act, 1899 prescribes stamp duty on Conveyance. In
many States appropriate amendments have been made whereby agreements of sale
acknowledging delivery of possession or power of Attorney authorizes the
attorney to sell any immovable property are charged with the same duty as
leviable on conveyance.
Section 17 of the Registration Act, 1908 which makes a deed of conveyance
compulsorily registerable is extracted below. the relevant portions of section
17 reads as under:
Section 17 - Documents of which registration is compulsory-
following documents shall be registered, if the property to which they relate is
situate in a district in which, and if they have been executed on or after the
date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or the
Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act
came or comes into force, namely:-
(a) instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate 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 one
hundred rupees and upwards, to or in immovable property.
(1A) The documents containing contracts to transfer for consideration, any
immovable property for the purpose of section 53A of the Transfer of Property
Act, 1882 (4 of 1882) shall be registered if they have been executed on or after
the commencement of the Registration and Other Related laws (Amendment) Act,
2001 and if such documents are not registered on or after such commencement,
then, they shall have no effect for the purposes of the said section 53-A.]
Advantages of Registration
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, 1908 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
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. Registration
provides information to people who may deal with a property, as to the nature
and extent of the rights which 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 see the record and
enquire and ascertain what the particulars are and as far 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.
Scope of an Agreement of sale
Section 54 of the Transfer of Property Act, 1882 makes it clear that a contract
of sale, that is, an agreement of sale does not, of itself, create any interest
in or charge on such property.
Supreme Court in Narandas Karsondas v/s S. A. Kamtam & Anr., (1977) 3 SCC 247,
A contract of sale does not of itself create any interest in, or charge on, the
property. This is expressly declared in Section 54 of the Transfer of Property
Act, 1882. See Rambaran Prosad Vs Ram Mohit Hazra,  1 SCR;
293. The fiduciary character of the personal obligation created by a contract
for sale is recognised in Section 3 of the Specific Relief Act, 1963, and
in Section 91 of the Trusts Act. The personal obligation created by a contract
of sale is described in Section 40 of the Transfer of Property Act as an
obligation arising out of contract and annexed to the ownership of property, but
not amounting to an interest or easement therein.
In India, the word transfer is defined with reference to the word convey.
The word conveys in Section 5 of Transfer of Property Act is used in the
wider sense of conveying ownership....that only on execution of conveyance
ownership passes from one party to another....
In Rambhau Namdeo Gajre v/s Narayan Bapuji Dhotra, [2004 (8) SCC 614] the
Supreme Court held:
Protection provided under Section 53-A of the Act to the proposed transferee is
a shield only against the transferor. It disentitles the transferor from
disturbing the possession of the proposed transferee who is put in possession in
pursuance to such an agreement. It has nothing to do with the ownership of the
proposed transferor who remains full owner of the property till it is legally
conveyed by executing a registered sale deed in favour of the transferee.
Such a right to protect possession against the proposed vendor cannot be pressed
in service against a third party.
It is thus clear that a transfer of immoveable property by way of sale can only
be by a deed of conveyance (sale deed). In the absence of a deed of conveyance
(duly stamped and registered as required by law), no right, title or interest in
an immoveable property can be transferred.
Any contract of sale (agreement to sell) which is not a registered deed of
conveyance (deed of sale) would fall short of the requirements of Section 54 and
55 of Transfer of Property Act, 1882 and will not confer any title nor transfer
any interest in an immovable property (except to the limited right granted
under Section 53-A of Transfer of Property Act, 1882). According to Transfer of
Property Act, 1882 an agreement of sale, whether with possession or without
possession, is not a conveyance. Section 54 of Transfer of Property Act, 1882
enacts that sale of immoveable property can be made only by a registered
instrument and an agreement of sale does not create any interest or charge on
its subject matter.
Scope of Power of Attorney
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 authorizes the grantee to do the acts specified
therein, on behalf of grantor, which when executed will be binding on the
grantor as if done by him (see Section 1A and Section 2 of the Powers of
Attorney Act, 1882). It is revocable or terminable at any time unless it is made
irrevocable in a manner known to law. Even an irrevocable attorney does not have
the effect of transferring title to the grantee.
In State of Rajasthan Vs Basant Nehata, 2005 (12) SCC 77, Supreme Court held:
A grant of power of attorney is essentially governed by Chapter X of the
Contract Act. By reason of a deed of power of attorney, an agent is formally
appointed to act for the principal in one transaction or a series of
transactions or to manage the affairs of the principal generally conferring
necessary authority upon another person. A deed of power of attorney is executed
by the principal in favour of the agent.
The agent derives a right to use his name and all acts, deeds and things done by
him and subject to the limitations contained in the said deed, the same shall be
read as if done by the donor. A Power of Attorney is, as is well known, a
document of convenience.
Execution of a power of attorney in terms of the provisions of the Contract
Act as also the Power of Attorney Act, 1882 is valid. A power of attorney, we
have noticed hereinbefore, is executed by the donor so as to enable the donee to
act on his behalf. Except in cases where power of attorney is coupled with
interest, it is revocable.
The donee in exercise of his power under such power of attorney only acts in
place of the donor subject of course to the powers granted to him by reason
thereof. He cannot use the power of attorney for his own benefit. He acts in a
fiduciary capacity. Any act of infidelity or breach of trust is a matter between
the donor and the donee.
An attorney holder may however execute a deed of conveyance in exercise of the
power granted under the power of attorney and convey title on behalf of the
Scope of Will
A will is the testament of the testator. It is a posthumous disposition of the
estate of the testator directing distribution of his estate upon his death. It
is not a transfer inter vivos. The two essential characteristics of a will are
that it is intended to come into effect only after the death of the testator and
is revocable at any time during the life time of the testator.
It is said that so long as the testator is alive, a will is not be worth the
paper on which it is written, as the testator can at any time revoke it. If the
testator, who is not married, marries after making the will, by operation of
law, the will stands revoked. (see Sections 69 and 70 of Indian Succession Act,
Registration of a will does not make it any more effective.
The Bench while passing the landmark Judgment concluded as under:
15. Therefore, a SA/GPA/WILL transaction does not convey any title nor create
any interest in an immovable property. The observations by the Delhi High Court,
in Asha M. Jain Vs Canara Bank, 94 (2001) DLT 841, that the concept of
power of attorney sales have been recognized as a mode of transaction when
dealing with transactions by way of SA/GPA/WILL are unwarranted and not
justified, unintendedly misleading the general public into thinking that
SA/GPA/WILL transactions are some kind of a recognized or accepted mode of
transfer and that it can be a valid substitute for a sale deed. Such decisions
to the extent they recognize or accept SA/GPA/WILL transactions as concluded
transfers, as contrasted from an agreement to transfer, are not good law.
16. We therefore reiterate that immovable property can be legally and lawfully
transferred/conveyed only by a registered deed of conveyance.
Transactions of the nature of GPA sales or SA/GPA/WILL transfers do not
convey title and do not amount to transfer, nor can they be recognized or valid
mode of transfer of immoveable property. 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. They
cannot be recognized as deeds of title, except to the limited extent of Section
53-A of the Transfer of Property Act, 1882. Such transactions cannot be relied
upon or made the basis for mutations in Municipal or Revenue Records.
What is stated above will apply not only to deeds of conveyance in regard to
freehold property but also to transfer of leasehold property. A lease can be
validly transferred only under a registered Assignment of Lease. It is time that
an end is put to the pernicious practice of SA/GPA/WILL transactions known as
17. It has been submitted that making declaration that GPA sales and SA/GPA/WILL
transfers are not legally valid modes of transfer is likely to create hardship
to a large number of persons who have entered into such transactions and they
should be given sufficient time to regularize the transactions by obtaining
deeds of conveyance. It is also submitted that this decision should be made
applicable prospectively to avoid hardship.
Going into the legality of such transfers, the Supreme Court held that any
contract of sale which was not a registered sale deed would fall short of the
requirements of the relevant provisions of the Transfer of Property Act and
could not confer any title.
The Supreme Court further held that said a transfer of property by way of sale
could only be by a sale deed. In the absence of a deed of conveyance (duly
stamped and registered as required by law), no right, title or interest in an
immovable property can be transferred, the bench said.
Written By: Damini Singh Chauhan, Semester 9th, The Law School,
University of Jammu.
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