[Case Brief] Suraj Lamp & Industries v/s State of Haryana and Another, 2011

Case NameSuraj Lamp & Industries v/s State of Haryana & Another
Case NumberSpecial Leave Petition No 13917 of 2009
CourtSupreme Court of India
BenchJustice RV Raveendran, Justice AK Patnaik, Justice HL Gokhale
Author of the JudgmentRV Raveendran
Decided On11.10.2011
Relevant Act/Sections1) Transfer of Property Act, 1882- Section 5, 53A and 54.

2) Registration Act, 1908- Section 17
Author of the case briefAditya Gor

Brief Facts and Procedural History-

(This judgment is in continuance to an earlier judgment of the Supreme Court delivered in the year 2009. The Case Brief of the same can be found here)

The Power of Attorney Sales is not to be confused or equated with genuine transactions where the owner of property grants a power of Attorney in favor of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. These are transactions, where a purchaser pays the full price, but instead of getting a deed of conveyance gets an SA/GPA/WILL as a mode of transfer, either at the instance of the vendor or at his own instance.

The Supreme Court had, therefore, requested the learned Solicitor General and four other states to give suggestions on behalf of Union of India. It has been responded and confirmed that SA/GPA/WILL transfers required to be discouraged as they lead to loss of revenue (stamp duty) and increase in litigations due to defective title. It was suggested that the SA/GPA/WILL transactions should be curbed and expressed their willingness to take remedial steps.

The issue before the Court-

What is the validity and legality of SA/GPA/WILL transactions?

The Ratio of the Court-

The scope of an Agreement of sale

Section 54 of Transfer of Property Act 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. It is thus clear that a transfer of immovable 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 immovable 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 Sections 54 and 55 of Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of Transfer of Property Act).

According to Transfer of Property Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of Transfer of Property Act enacts that sale of immovable 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.

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 Sections 54 and 55 of Transfer of Property Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of Transfer of Property Act). According to Transfer of Property Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of Transfer of Property Act enacts that sale of immovable 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 Will

A will is the testament of the testator. It is not a transfer inter-vivo. 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 lifetime 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. Registration of a will does not make it any more effective.

Decision Held-

An SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. The observations by the Delhi High Court 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, unintended 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. An 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 immovable property.  This decision is to be applied prospectively to avoid hardship.

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