New Delhi, October 13
In a decisive move to check the generation of black money and tame the land mafia, the Supreme Court has ruled that property transfers through sale agreement (SA), general power of attorney (GPA) and will would be invalid with immediate effect, except in ‘genuine’ cases involving transactions among relatives or with builders.

“Immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance,” a Bench comprising Justices RV Raveendran, AK Patnaik and HL Gokhale held.

Directing the courts below not to treat transactions through SA/GPA/will as “completed or concluded transfers”, the Bench also asked the civic bodies such as the municipal corporation and development and revenue authorities not to effect mutation in such cases.

However, if SA/GPA/ will documents had been accepted by such authorities for the purpose of mutation before “this day” (October 11, 2011), “these need not be disturbed merely on account of this decision,” the SC clarified.

Besides effectively dealing with the problems of black money and land mafia, the invalidation of such sales would also result in better revenue generation for the government through stamp duty, minimise legal wrangles over property transactions and prevent criminalisation of civil disputes, the Bench reasoned.

The SC has clamped the conditions after assessing the views of Punjab, Haryana, Uttar Pradesh and Delhi which had been asked to file their affidavits on the issue.

“The four states have responded and confirmed that SA/GPA/will transfers require to be discouraged as they lead to a loss of revenue (stamp duty) and increase in litigations due to defective title,” the Bench pointed out.

The court noted that amendments made to the Registration Act and stamp laws by some states had plugged the loss of revenue by way of stamp duty only “to some extent. Further, such transactions which were only prevalent in Delhi and the surrounding areas have started spreading to other states also. The amendments to stamp and registration laws do not address the larger issue of generation of black money operation of the land mafia.”

The Bench acknowledged that Haryana had taken a “positive step” by reducing stamp duty on deeds of conveyance from 12.5 per cent to 5 per cent. “A high rate of stamp duty acts as a damper for execution of deeds of conveyance for full value and encourages SA/GPA/will transfers,” it pointed out.

Reducing the stamp duty on conveyance to realistic levels would encourage the public to disclose the maximum sale value and have the sale deeds registered, it said.

“We make it clear that our observations are not intended, in any way, to affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance.” Further, “a person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and, in that behalf, execute an agreement of sale and grant power of attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers. Our observations regarding SA/GPA/will transactions are not intended to apply to such bona fide/genuine transactions,” the SC clarified further.