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‘General power of attorney bad for economy’

business Updated: Jun 25, 2009 01:59 IST
Hindustan Times
General Power of Attorney (GPA)

Observing that property transactions under the General Power of Attorney (GPA) is adversely affecting the economy and leading to growth of real estate mafia, the Supreme Court has directed the government to suggest measures to check the trend.

“If GPA transactions were allowed to go on, it would lead to criminalisation of real estate transactions, besides allowing people to stash away their undisclosed income and assets,” a bench headed by Justice R.V. Raveendran said.

The apex court requested Solicitor General Gopal Subramanium to appear before it on the next date (in August) to give suggestions on behalf of the Centre.

The direction came on a petition filed by Suraj Lamp and Industries (P) Ltd that was allegedly cheated by some persons of a two-acre land in Haryana’s Gurgaon district. One of those allegedly involved in the case was a former state minister and his father.

In a GPA transaction, a person surrenders all his rights to another person (under the General Power of Attorney) who, in turn, executes sale of the property without paying any stamp duty/registration fees to the government.

Such transactions are only by way of mutual agreements without getting the sale deeds registered as required under the law, often to avoid payment of registration fees to the government. Many of these transactions end up in litigation as those claiming GPA rights cheat purchasers.

But the SC said: “Whatever be the intention, the consequences are disturbing and far-reaching, adversely affecting the economy, civil society and law and order.”

The court said: “First, 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. Second, such transactions enable persons with undisclosed wealth/income to invest their black money and also earn profit/income, thereby encouraging circulation of black money and corruption. This kind of transactions has disastrous collateral effects also.”

“It is the dream of every citizen to own a house or a plot of land. The citizens must be enabled by the government to do so with safety, security and without fear of litigation or defects in title,” it said.

The SC said registration of documents involving a transaction of Rs 100 is mandatory under the Indian Registration Act, 1908, as it gives a clear title to the purchaser and provides them with safety and security against fraudulent claims. It lamented that in several cases even courts approved such illegal transactions.