Real estate has always been one of the primary asset sectors for hiding unexplained funds. Over time, several methods for seeming legal were developed, such as the sale and acquisition of property through the use of power of attorneys (POA).

In reality, property sales using powers of attorney have been extremely popular over the past several decades in locations like Delhi. Property sales made with the use of a power of attorney typically involve two parties working together to skirt the law.

Beginning in the 1990s, as the real estate market grew, so did the adoption of this strategy. So much so that the Supreme Court (SC) was compelled to take cognizance of the situation. In 2011, the SC issued a historic decision outlawing the sale of property through power of attorney.

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Property cannot be sold via a power of attorney: SC

The Supreme Court (SC) concluded that only registered sale documents provide such transactions any legal standing, although declaring that property transactions made through general powers of attorney (GPA) had no legal legitimacy.

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What is a power of attorney, and how does one sell property with one?

The POA is discussed in detail below, along with how and why sales made using this instrument are prohibited.

Property Power of Attorney (PoA)

The Powers of Attorney Act of 1882 and the Indian Stamp Act of 1899, two statutes of India, both address the idea of POA. According to these regulations, a POA is a document authorizing a certain person to act on behalf of the person carrying out the transaction.

In essence, a person grants another person the authority to act as his agent and to carry out particular responsibilities on his behalf.

Non-resident Indians (NRIs) frequently utilize this tool as they might not be able to travel back to their home country at a certain time due to their professional or personal commitments.

A POA is useful for very busy people, such as businesspeople and those who are unable to undertake numerous personal and professional obligations, because to the ease it offers.

Different POA types:  Special POA (SPA) and General POA (GPA) 

A special power of attorney (SPA) is provided in order to complete specialized activities, as opposed to a general power of attorney (GPA), which provides an agent the authority to carry out normal tasks on behalf of the principal.

An SPA talks about a specific act that the representative can carry out on behalf of the principle, whereas a GPA talks about wide powers granted to a representative. If you give someone a GPA, they may function as your agent and pay your bills, collect rent for you, handle and resolve conflicts, or handle all of your bank business, according to Supreme Court attorney. However, he says, if an NRI has to sell a property in India, they would do it through a local agency and an SPA.

Both the GPA and SPA must be register in order for them to be consider legally binding. Once the task it was design for is finished, an SPA loses its impact. The executor has the right to revoke a GPA at any point throughout their lifetime. If they pass away, the GPA is no longer recognized legally.

How did the property sales through GPA occur?

On the transaction, the buyer is require to pay stamp duty and registration fees. The seller is responsible for paying capital gains tax.

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How did the property sales through GPA occur?

On the transaction, the buyer is require to pay stamp duty and registration fees, whilst the seller is responsible for paying capital gains tax. In addition, information include in a sale document that has been register becomes public and may be utilize at any moment to discover benami transactions.

Buyers and sellers frequently agreed on an intricate three-step strategy to carry out the selling transaction. The goal to skirt the law and dodge paying taxes on real estate transactions. To put down the terms of the transaction. A sale agreement (not to be confuse with a sale document) was first establish. The seller would then draught an irrevocable POA, giving the purchaser complete control over the property’s management. The seller would leave this property to the buyer through a will as the third and last stage.

In 2009, a hybrid system was evolve, that holder of the flat, on receiving the agreed consideration. Would deliver the possession of the flat to the purchaser and execute the following document. This was done to avoid the time-consuming process of obtaining permissions and to avoid paying a significant portion of the price to the Delhi Development Authority (DDA) as unearned increase.

People who receive apartments through lotteries for the DDA’s different housing plans and afterwards sold them to interest parties for extravagant prices found this type of ownership transfer to be increasingly popular.

Most recent SC ruling on power of attorney

The POA cannot be revoke orally: SC

The SC declared verbal revocation of a power of attorney to be invalid in January 2022. The highest court stated in its ruling that the POA-holder may sell and register the property. Presenting a copy of the POA and was not necessary to produce the original copy in the case. Where the POA-holder proceeded with the sale of property despite the property owner orally cancelling the POA.

Order on powers of attorney from the Delhi High Court in 2013

Many property owners in the national capital region (NCR), where sales through GPA. It has become pervasive, were impact by the Delhi government’s circular. Numerous applications seeking remedy were file with the Delhi High Court after the notification. According to the HC, the SC judgment made it plain that registration cannot be denies in legitimate instances.

The SC has not state that a conveyance cannot ever be register by using a GPA. The sub-registrar will need to register the transaction as long as it is legitimate, the HC states. A POA to execute sale agreements can be use for this purpose. A person may engage into a development agreement with a property developer. For the development of a piece of land or for the construction of flats in a building.

In 2019, the Delhi government also extend legal validity to unlicensed projects that had previously been transfer through POA.

Making a power of attorney registration

A POA must be register, according to the SC, if it is sign for the sale of real estate. Also keep in mind that a notarize Power of Attorney would be admissible as evidence in court. However, depending on the state in which the document is being create, the regulations may change. For instance, the Gujarat Registration (Amendment) Bill’s clauses mandate the state’s need that notarize power of attorney paperwork be register.

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