Sale is perhaps the most popular mode of transfer of immovable property in India. Gift and Exchange are the other modes which transfer the rights, titles and interest in the property with immediate effect.
Sale is perhaps the most popular mode of transfer of immovable property in India. Gift and Exchange are the other modes which transfer the rights, titles and interest in the property with immediate effect. All these documents of transfer require to be registered, which is possible only when appropriate stamp duty has been paid on the same. The stamp duty is a state subject and the payable duty may vary from 6% to 10% on the agreed sale consideration. Since the steep stamp duty adds to the cost of acquisition many of the intending transferor and transferee find ways to avoid payment of the stamp duty. The most commonly used manner is to avoid execution and registration of the sale deed. Instead the parties opt for the combination of documents like Agreement to Sell/GPA/SPA/WILL/Receipt with or without handing over of the possession of the property. The Hon’ble Supreme Court in the matter of Suraj Lamp and Industries Private Limited had the occasion to discuss and elaborate the law on the subject of the transactions popularly known as GPA sales. The Supreme Court criticized the practice of GPA sales and observed that these kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money (‘black money’) and to avoid payment of ‘unearned increases’ due to Development Authorities on transfer. The Supreme Court further reiterated that an immovable property can only be transferred/conveyed only by a registered conveyance. Transactions of the nature of ‘GPA sales’ or ‘SA/GPA/WILL transfers’ do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. The combination of documents of GPA Sale can however be used to obtain specific performance or defend possession of an immovable property. Where the combination of documents were executed before the date of the judgment i.e. 11th Oct, 2011, they can be relied upon to apply for regularisation of allotment/leases by the Development authorities, however where these documents were executed after the above mentioned date, they cannot be used even for the purpose of regularization. Further where the documents relating to ‘SA/GPA/WILL transactions’ has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision. The Supreme Court has however, made an exception to what is called as “genuine transactions”. What is a genuine transaction has not been spelt out, however few illustrations have been provided like, where the power of attorney has been executed in favour of the spouse, children, relative to manage the affairs of the property or to execute a deed of conveyance. The conclusion thus is that the combination of these documents do not convey any right title or interest in the property in favour of the transferee, hence it is best avoided. The buyers should not shy away from making the payment of the stamp duty and registration of the document. Absence of the stamp duty and registration would/could cause a greater loss to the buyer than the cost of the stamp duty saved. The author of this Article is Anupam Srivastava who can be reached at firstname.lastname@example.org