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| M J Antony: Shady land transactions | | SC says power-of-attorney sales have adverse effects |
| M J Antony / New Delhi Jun 17, 2009, 00:25 IST |
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The SC says power-of-attorney sales adversely affect the economy, civil society as well as law and order.
Buy land, they’re not making it anymore, said Mark Twain. So there is a mad rush for property in urban centres and rules are broken with impunity. Several illegalities are taken for granted. One of them is the transfer of property through power-of-attorney (POA). The legal profession and document-writers invented it in the national capital and the Delhi High Court has virtually anointed this practice in its orders over the years.
However, the Supreme Court has made some harsh observations about this devious device and initiated reforms in an order in Suraj Lamp & Industries vs State of Haryana. This has become necessary, according to the court, as “this case is a typical example of an irregular process spreading across the country.” This case, confounded by POA deeds to hand over the same property to different people by the same owner, bounced cheques, criminal cases and an application under the Right to Information Act is still pending. But this is the first time any court, that too the Supreme Court, candidly dealt with the misuse of POA.
This POA pandemic in the capital has its origin in the restrictions imposed by the Delhi Development Authority in selling property directly to a buyer. These were bypassed by the POA route. The so-called buyer got most of the substantial rights in the property by creating a POA which is notarised but not registered. It is not a public document and only the parties to the deed know about it.
The POA is further fortified by a will of the seller bequeathing the property to the buyer. A typical POA, available on the net, has some 20 paragraphs couched in legalese, starting with the grant of the power of management, control and enjoyment of the property and ending with the power to transfer the property to yet another person using the same stratagem.
All these result in heavy losses to the government in revenues and spawn corruption. It is now not a mere Delhi-phenomenon, nor is it confined to the sale of flats. The Supreme Court gives some examples of people who misuse POAs: (a) Vendors with imperfect title who cannot or do not want to execute registered deeds of conveyance; (b) Purchasers who want to invest undisclosed income in immovable properties without any public record of the transactions; (c) Purchasers who want to avoid the payment of stamp duty and registration charges. Persons who deal in real estate resort to these methods to avoid multiple stamp duties/registration fees so as to increase their profit margin.
The Supreme Court says that whatever be the intention, the consequences are disturbing and far-reaching, adversely affecting the 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 persons with undisclosed wealth to invest their black money and also earn profit, thereby encouraging the circulation of black money as well as corruption.
These transactions have disastrous collateral effects also. For example, when the market value increases, many vendors (who helped make the POA 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 buyer under such POA sales comes to know about the vendor’s action, he invariably tries to take help of musclemen to ‘sort out’ the issue and protect his rights. On the other hand, real estate mafia often purchase property that is already subject to POA sale and then threaten the previous POA purchasers to prevent them from asserting their rights.
Some states have made half-hearted efforts to control such sales by subjecting agreements of sale involving delivery of possession and irrevocable POA 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 by greedy and unscrupulous vendors and/or purchasers, giving nightmares to bona fide purchasers intending to buy a property with certainty regarding title. It also makes it difficult for lawyers to trace and certify titles.
The court deprecated all processes that interfered with regular transfers under deeds of conveyance properly stamped, registered and recorded in the registers of the registration department. It wanted to take some initiative as the “situation warrants special measures.” It has asked the Solicitor General and the chief secretaries/revenue secretaries of Delhi, Punjab, Haryana, Uttar Pradesh and Maharashtra to devise a formula to stop this practice.
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