Suraj Lamp & Industries v. State of Haryana
Mallika Rani Garimella
Veeravalli College of Law, Adikavi Nannayya University
This Case Commentary is written by Mallika Rani Garimella, a LLM Student of Veeravalli College of Law, Adikavi Nannayya University
1. Primary Details of the Case:
· Jurisdiction: Supreme Court
· Petitioner: Suraj Lamp & Industries Pvt. Ltd.
· Respondent: State of Haryana & Others
· Case No: Special Leave Petition No. 13917/2009
· Date of Judgement: 11 October 2011
· Judges/Bench: H. L. Gokhale, A. K. Patnaik, R. V. Raveendran
· Author : R. V. Raveendran
· Citation: AIR 2012 Supreme Court 206,
Introduction:
The amount of stamp duty depends on the value of the property. If someone is buying a house or even buying a second home, holiday home, or buy–to–let property, he /she will have to pay stamp duty. So, it applies to both transferring immovable property and renting a house or flat. Hence stamp duty is also one of the types of fiscal crime like tax evasion.
Tax Evasion is an illegal practice to avoid paying taxes by a person, organization, or corporation. The tax evader, if caught is generally subject to criminal charges and substantial penalties.
Facts of the case:
The Petitioner, a company incorporated under the Companies Act, claims that one Ramnath and his family members sold two and a half acres of land in Wazirabad Village, Gurgaon to them using an agreement of sale, general power of attorney and a will in the year 1991 for a consideration of Rs. 7,16,695.
It is further alleged that the petitioner verbally agreed to sell a part of the said property measuring one acre to one Dharamvir Yadav for Rs 60 Lakhs in Dec 1996. It is stated that the said Dharamvir Yadav and his son, Mohit Yadav an ex-MLA and Minister, instead of proceeding with the transaction with the petitioner, directly got in touch with Ramnath and his family members and in 1997 got a GPA in favour of Dharamvir Yadav regarding entire two and a half acre executed and registered and illegally cancelled the earlier GPA in favour of the petitioner.
The petitioner claims that when its director S. K. Chandak, confronted Dharamvir Yadav in 1999 on this behalf, Yadav apologised and issued a cheque of Rs. 10 Lakhs towards part payment and agreed to pay the balance of Rs. 50 Lakhs shortly but that said cheque was dishonoured necessitating a complaint under sec 138 of the NI Act, being filed against Yadav which is pending in a criminal court at Patiala House, New Delhi.
We are of the view that the matter involves an issue whose seriousness is underestimated. The issue to be addressed is avoidance of execution and registration of deeds conveyance as the mode of transfer of freehold immovable property by increasing tendency to adopt Power of attorney sales that is execution of Sale agreement/GPA/Will instead of execution and registration of regular deeds of conveyance, on receiving full consideration.
1. Execution of an agreement of sale, one or two powers of attorney with or without a will, all unregistered.
2. Execution of agreement of sale, powers of attorney, and will, registering either all of them, or any two of them, or any one of them.
3. Recourse to SA/GPA/WILL transactions is taken regarding freehold properties, even if there is no bar or prohibition regarding the transfer or conveyancing of such property by the following categories of persons:
· Vendors with imperfect titles who cannot or do not want to execute registered deeds of conveyance.
· Purchasers who want to invest undisclosed wealth/income in immovable properties without any public record of the transactions. The process enables them to hold any number of properties without disclosing them as assets held
· Purchasers who want to avoid the payment of stamp duty and registration charges either deliberately or on the wrong advice. Persons who deal in real estate resort to these methods to avoid multiple stamp duties and registration fees to increase their profit margin.
4. Whatever the reason, the consequences of SA/GPA/WILL transactions are disturbing and far-reaching adversely affecting the economy, civil society, and law and order. Firstly, it enables large-scale evasion of income tax, wealth tax, stamp duty, and registration fees by denying the benefit of such revenue to the Government and the public. Secondly, such transactions enable persons with undisclosed wealth to invest their black money and also earn a profit, thereby encouraging the circulation of black money and corruption.
5. The four states Delhi, Haryana, Punjab, and Uttar Pradesh have responded and confirmed that Power of Attorney transfers required being discouraged as they lead to deprivation of revenue stamp duty and an increase in litigations due to defective title. They also took some measures which vary from state to state. For instance, Haryana reduces stamp duty on the deed of conveyance from 12.5% to 5% which may lead to an immediate loss in revenue but in the long run, it has advantages
6. The State of Haryana has however taken further positive steps by reducing the stamp duty on deeds of conveyance, the adverse effect is not only loss of revenue but the greater danger of generation of black money. Hence, the Supreme Court decided that immovable property can be legally and lawfully transferred only by a registered deed of conveyance.
Transfer of Property Act, 1882 Sec 54:
S. 54 Sale- Power of Attorney- Sale of Immovable Property through execution of power of attorney sale agreement/general power of attorney/will instead of execution and registration of regular deeds of conveyance deprecated as illegal and irregular.
Sec 17 of the Registration Act, 1908 which makes a deed of conveyance compulsorily remittable. b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property.
Sec 49 of the said Act provides that no document required by Sec 17 to be registered shall, affect any immovable property comprised therein or received as evidence of any transaction affected such property unless it has been registered. Registration of a document gives notice to the world that such a document has been executed.
Scope of Agreement of Sale:
Sec 54 of the Transfer of Property Act makes it clear that a contract of Sale, that is, an Agreement of Sale does not, of itself, create any interest in or charge on such property. Narandas Karsondas Vs S. A. Kamtam and Others (1977)3 SCC 247 Observed.
A Contract of Sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Sec 54 Transfer of Property Act. Rambaran Prosad Vs Ram Mohit Hazra, (1967) 1 SCR 293. In India, the word Transfer is defined concerning the word Convey. The word Conveys in Sec 5 of the Transfer of Property Act is used in the wider sense of conveying ownership… that only on execution of conveyance ownership passes from one party to another….
Scope of Power of Attorney:
A power of Attorney is not an instrument of transfer regarding any right, title, or interest in an immovable property. The Property of Attorney is the creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of the grantor, which when executed will be binding on the grantor as if done by him. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee. State of Rajasthan Vs Basant Nehata (2005) SCC 77
Scope of Will:
A Will is the testament of the testator. It is a posthumous disposition of the estate of the testator directing the distribution of his estate upon his death. It is not transferred inter vivo. The two essential characteristics of a Will are that it is intended to come into effect only after the death of the testator and is revocable at any time during the lifetime of the testator.
Issues Involved:
· Whether SA/GPA/WILL transfers are legally valid and enforceable?
· Whether SA/GPA/WILL transfers lead to adverse consequences such as the generation of black money, growth of land mafia, or real estate transactions.
· Whether measures taken by the states and the Union of India to discourage SA/GPA/WILL transfers are sufficient.
· Suraj Lamp Industries a landmark case relating which explains how Power of attorney Sales have been used as a tool to evade stamp duty and create black money circulation. It also stated that along with stamp duty evasion different other crimes will be germinated. Despite, this effort Supreme Court, has still opened a gateway for criminals to commit crimes. If the purchaser can skip a huge amount of stamp duty through means of Power of attorney sales, then why the purchaser will be using a deed of conveyance? The purchaser may buy using Power of attorney sales and sell using the same instrument to others taking profit because all the purchasers will likely buy the land free of stamp duty. This will lead to a great loss of revenue. It will also foster a black market and the emergence of several land mafias.
Conclusion:
To tackle this problem, the rate of stamp duties may be reduced by states so that the purchaser will be motivated to buy land through legal means, also the law should strictly levy an equal burden of stamp duty to both buyer and seller because both are beneficial by a land transaction i. e. the land price keeps hiking. This decreases burden on purchase burden on the purchaser and thereby motivates the purchaser to avoid illegal means of transactions and avoid losses in Government.
References:
Transfer of Property Act 1882
Indian Stamp Act 1899