Sale of the properties by way of General Power of Attorney, Agreement to Sell & Will

Section 5 of The Transfer of Property Act defines the "transfer of properties" and Chapter III of the Act governs the "sale of immoveable property". While the sale is complete, irrevocable transfer accompanied by a lawful consideration, the same was conceptualized in a little lesser/different way in respect of certain special properties, particularly in case of leasehold properties.

The title of the property is always the subject matter of the sale because the purchaser steps into the shoes of the seller and gets nothing more than what the seller owns. Sale of leasehold properties, therefore, carry with it only leasehold rights in the property under sale.

In case of self-owned properties, the purchaser gets a sale deed executed in his favour but while dealing with the leasehold properties, there were two hurdles, one that there was a bar against the sale of the property and secondly that complete rights in the subject property could not be transferred even after the payment of the entire sale consideration.

It's true that necessity is the mother of invention. A person possessing a leasehold property and requiring money looked for the ways to transfer the property and that too legally. The anxiety of the purchaser was the assurance that he would not be required to contact the seller ever in future for any purpose after the payment of the sale consideration and receipt of possession of the property and further that the transfer of the property (presence of the seller was required for the execution of sale deed after the conversion of the property from leasehold into freehold) was in accordance with law (though despite the bar against the sale).

Section 53A of the Transfer of Property Act provides that "Where any person enters into an agreement to sell, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof in part performance of the contract and has done some act in furtherance of the contract, then, notwithstanding that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken possession".

The legal practitioners chalked out a way to avoid the constraints of the bar against the sale which was not against the agreement to sell. Therefore, the Agreement to Sell came into existence for the sale of the leasehold properties for which there was a hurdle against the sale.

The purchaser was also required to have the rights to approach the concerned authorities for the purpose of the management of the property on behalf of the allottee, therefore, the General Power of Attorney (even for the purpose of conversion of the property into freehold and for the purpose of execution of the sale deed on behalf of the seller in favour of the purchaser) was made a necessary supplement of the agreement to sell.

The General Power of Attorney also has a lacuna which makes it unsuitable to be used in perpetuity because it ceases to have an effect after the death of the executant. Therefore, the purchaser had a query, “What after the death of the seller". To encompass the said problem, the execution of a "will" (along with agreement to sell and general power of attorney) came into practice. This was like,"Jindagi ke sath bhi jindagi ke baad bhi", the famous tagline of LIC.

The compendium of three documents ensured that the purchaser would not have to contact the seller again in respect of the property under sale. To further reinforce the transaction, the purchaser also used to get executed a possession letter, an affidavit and a receipt of payment of sale consideration.

Even the landmark judgment of Suraj Lamp & Industries (P) Ltd. Vs. State of Haryana & Anr passed by the Hon'ble Supreme Court of India does not debar the execution of the General Power of Attorney in respect of an immoveable property, as it only frowns at the sale of the property on the basis of unregistered documents and avoiding execution of sale deed to save the stamp duty.

Article 23A of the Schedule I to the Stamp Act provides that the appropriate stamp duty on the contracts for the transfer of immovable property in the nature of part performance in any Union territory under section 53A of the Transfer of Property Act, 1882 (4 of 1882) is 90% of the duty as a conveyance. Therefore, even today, we can get the sale completed with the help of agreement to sell, general power of attorney and will but to make the title complete, one has to get the sale deed executed by paying the balance stamp duty at an appropriate stage.