One of the most consequential Supreme Court decisions in Indian property law was also one of the clearest.
In Suraj Lamp and Industries Private Limited versus State of Haryana, the Supreme Court held that transactions styled as GPA sales, including the structure of an agreement to sell, a general power of attorney, and a will, do not create or transfer title to immovable property. Section 54 of the Transfer of Property Act, 1882 requires that a sale of immovable property of value above one hundred rupees be made by a registered instrument. A general power of attorney is not a registered conveyance.
Dr. Sravan Kumar, author of The Indian Law of Property Due Diligence and Title Examination, devotes a full chapter to power of attorney transactions because despite the Supreme Court’s clear ruling, GPA sales continue to circulate in Indian property markets in significant numbers.
Why GPA sales became common and what they signify:
GPA sales evolved primarily as mechanisms for avoiding stamp duty on registered conveyances, for transferring properties where the seller’s title was itself incomplete or informally acquired, and for enabling transactions between parties who wished to defer or avoid full registration for various reasons.
A buyer who purchased through a GPA sale before the Supreme Court’s clarification may have done so in good faith, paying full market value and taking possession in the belief that the transaction was legally adequate. The Supreme Court’s ruling does not validate the buyer’s possession but it does not create a registered title where one was never created.
The implication for due diligence is direct. Any property whose chain of title includes a GPA sale requires independent legal assessment of the strength of that link in the chain. The advocate must examine whether the GPA transaction was subsequently regularised through a registered conveyance, whether the original grantor of the power of attorney subsequently executed a registered sale deed in favor of the buyer, and whether the entire chain from that point forward can be traced through properly registered instruments.
What a valid use of power of attorney looks like:
Not all power of attorney transactions are GPA sales. A validly constituted power of attorney used by an authorized attorney to execute a registered sale deed on behalf of the principal is a different legal situation. The attorney signs and presents for registration. The principal’s name appears in the registered instrument as seller. The registered sale deed is executed by the attorney under authority conferred by the power.
This is registerable, legally effective, and creates valid title in the buyer provided the power of attorney was validly executed, covers the specific property and transaction, had not been revoked by death, incapacity, or express revocation at the time of use, and the attorney acted within the scope of authority conferred.
The advocate conducting due diligence on a power of attorney transaction must examine all of these elements. An inadequate examination of a power of attorney used in a title-creating transaction leaves a risk that may surface when the buyer later seeks to sell, mortgage, or defend their title.
The Indian Law of Property Due Diligence and Title Examination by Dr. Sravan Kumar is available on Amazon, Flipkart, Kindle, and Google Books. Buy now and understand the power of attorney transactions that create title risk before you encounter one in a property file.
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