Supreme Court invalidates power of attorney sales

The recent Supreme Court decision in Suraj Lamp and Industries Private Limited and Ors v State of Haryana and Ors invalidates the transfer of property through agreement of sale and power of attorney, except in specific genuine cases.

The Supreme Court came down heavily on the prevalent practice of sale through power of attorney, observing that the practice involved an agreement for sale, followed by execution of a general power of attorney in favour of the purchaser to deal with the property in any way. The net effect of such a transaction was transfer of the property to the purchaser, but without a registered instrument of sale.

This allows the purchaser to avoid the payment of a hefty stamp duty and is also used to invest black money, as there is no record of such a transaction. In the absence of any record, a vendor with an imperfect title may pass on the property to one or more purchasers, who then must pursue expensive and circuitous litigation or approach the land mafia to get their properties vacated.

Utsav Mukherjee is an associate at Vidhii Partners and can be reached at utsav.mukherjee@vidhiipartners.com.