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Only genuine GPA transactions count

After a recent high court order, the Delhi government has to frame guidelines for registration of valid general power of attorney deals

real estate Updated: May 31, 2013 19:48 IST

The revenue department of the Delhi government has a tough task to handle. It has to give clear instructions again to its sub-registrars on how to distinguish between a genuine ‘GPA transaction’ and a ‘GPA sale’. This is due to a recent Delhi High Court order which has set aside the revenue department’s April 26, 2012, circular and observed that the circular misconstrued the observations of the Supreme Court in the Suraj Lamp vs Haryana case. The revenue department, through the circular, had directed all registrars and sub-registrars not to register any sale deed for an immovable property based on a GPA, will or agreement to sell.

The high court case related to an agreement, dated September 11, 2011, between a certain Rani Puri and Pace Developers and Promoters Pvt Ltd for the construction of a building on her plot. Puri also executed a GPA in favour of the company, authorising it to enter into an agreement of sale, transfer, lease etc with respect to the first floor. She executed a will in favour of the owner of the company empowering him to construct the building as per the collaboration agreement and enjoy other rights as stated in the GPA in case of her demise.

When the construction was complete, the company decided to execute a sale deed for the first floor in favour of a prospective buyer. The sub-registrar accepted the documents for the registration of sale deed but verbally informed the company that the transaction seemed to be ‘GPA sale’. The point to be noted here is that the sub-registrar just accepted the document. He did not register it.

The process of registration

In the process of registration, the buyer and seller first present all the sale documents to the sub-registrar, who accepts all the papers, examines them and then decides whether he has to register the sale deed or pass a refusal order.

Before the sub-registrar formally passed a refusal order, Pace Developers filed a case in the Delhi High Court alleging that, first the circular issued by the Delhi government’s revenue department was contrary to the Supreme Court judgment as the circular barred registration of even genuine GPA transactions. Secondly, Pace pleaded that the sale deed it had executed in favour of the prospective buyer was a genuine transaction so the high court should order the sub-registrar to register the sale deed.

The high court agreed to his first plea and set aside the existing circular but instead of ordering the sub-registrar to register the said sale deed, it said, “It will, however, be open to the respondents (read revenue department/ sub-registrar) to examine the genuineness of the transactions which are reflected in the documents filed, at the time of registration of conveyance. In case the sub-registrar concludes that the transaction is not genuine, as would be expected, he would call upon the persons/entity presenting the documents to explain their case and thereafter, if not convinced, pass a speaking order as to why the documents is/are not liable to be registered.”

Circular to be modified

Legal experts say the court’s order setting aside the revenue department’s circular does not mean that the court has allowed registration of ‘GPA sale’. Contrary to news reports, Delhi government lawyer Shariq Mohammad clarifies that the court’s Pace Developers order in no way contradicts the SC judgment in the Suraj Lamp case.

While setting aside the said circular, HC has reproduced a paragraph from the SC judgment in its order and held, “Quite clearly, the Supreme Court has not said that in no case a conveyance (read sale deed) can be registered by taking recourse to a GPA. As long as the transaction is genuine, the same will have to be registered by the sub-registrar.”

Now after this high court direction, the revenue department will have to modify its circular, making provisions for registration of genuine transactions. However, senior officials in the revenue department have no clarity on how fresh provisions are to be formulated that will precisely differentiate between genuine GPA transactions and those which amount to ‘GPA sale’.

“We were already under pressure from the builder lobby and other sections of society to lift the curb on registration of GPA transactions. However, we managed to honour the Supreme Court judgment and imposed a ban on ‘GPA sale’ in Delhi. Now there is a huge pressure to allow such sale following the new high court order but we will not do it. We are working to modify our circular to accommodate the concern raised by the high court,” says a senior revenue officer, requesting anonymity.
He adds, “Our problem is that every case has unique facts and circumstances.

How can we issue guidelines dealing with each and every type of transaction? There are no broad guidelines that will cover all sorts of genuine GPA transactions. It is complicated,” says a senior revenue officer, requesting anonymity.
Asked if the department would appeal, Dharam Pal, divisional commission (revenue), says, “We are examining the order and have asked for suggestions from the legal department. It will take approximately 15 days to come up with a final conclusion. It’s not appropriate on my part to comment on anything at this stage.”

Examining genuineness

Since the high court has asked the sub-registrar to examine the genuineness of the transactions of Pace Developers and the prospective buyer, legal experts are divided on the issue of whether this is a genuine GPA transaction or a ‘GPA sale’.

“When plot owner Rani Puri executed a GPA in favour of Pace Developers, the latter paid 3% stamp duty for its registration. Now when the company is selling the floor to a prospective buyer, the government is earning 6% stamp duty on that from the buyer, too. There is no evasion of stamp duty and so it’s a genuine GPA transaction and the sub-registrar should register it,” says Rajiv Dutta, senior SC advocate, who argued the matter in the high court on behalf of Pace Developers.

“Had Pace Developers executed another agreement of sale/GPA/will in favour of the prospective buyer, then it would have amounted to GPA sale but this is not the case,” adds Dutta.

In the Suraj Lamp vs Haryana case, the SC had very categorically held that “A person may enter into a development agreement with a land developer or a builder for developing the land either by forming plots or by constructing apartment buildings and execute an agreement of sale and grant a power of attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided share in the land relating to apartments in favour of the prospective purchaser.”

Kumar Dushyant Singh, another SC lawyer, drawing a parallel between the case before the high court and the SC judgment, says, “The Supreme Court has already decided this point. The court says that if the developer has a GPA from the owner he can enter into agreement of sale or conveyance with a prospective buyer.”

Contrary to Dutta’s view, other lawyers hold that since Pace Developers, by virtue of having a GPA, becomes merely an agent of the property owner, he can enter into an agreement of sale with a prospective buyer but cannot execute a sale deed.
“By executing a sale deed and receiving the proceeds thereof, Pace Developers acts as the owner, which it is not. Only a title holder is entitled to receive the proceeds of sale in a genuine transaction and not the agent. In my opinion, Pace Developers can get a clear title only by paying the remaining 3% stamp duty, (it has already paid 3% at the time of registering the GPA). Otherwise the registration of the same is liable to be refused,” says Mohammad.

Now it is up to the sub-registrar to decide whether the sale deed should be registered or refused.