Strongly disapproving of the sale of immovable properties through general power of attorney (GPA), agreement to sell and will, the Supreme Court has declared that such sales of property are not only illegal, but also cause huge loss of revenue to the state exchequer, besides encouraging the real estate mafia and their musclemen to indulge in fraudulent sale of properties to more than one purchaser.
A bench comprising Justices R V Raveendran and J M Panchal also issued notices to the Union government and the states of Punjab, Haryana, Delhi, Uttar Pradesh and Maharashtra seeking details of the steps taken or proposed to be taken by the respective states to deal with the chaotic situation arising from such transactions.
The apex court, while directing the matter to be listed for hearing in the last week of August, has also directed the states to inform the court whether power of attorney sales (that is, transactions involving execution of sales agreement/GPA/will) instead of regular sales are prevalent in their respective states and sought the views of the respective state governments in respect of such transactions.
Justice Raveendran, writing a 13-page judgment for the bench noted, "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/income to invest their black money and also earn profit/ income, thereby encouraging circulation of wealth, and corruption.
This kind of transaction 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 re-sale 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 vendor section, he 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-times purchase properties which are already subject to power of attorney sales and then threaten the previous power of attorney sales purchasers from asserting their rights.
Either way, such power of attorney sales indirectly leads to growth of real estate mafia and criminalisation of real estate transactions."