PoA deals cheat government of rightful revenue

PoA deals cheat government of rightful revenue

G P Khungar

In Delhi, 95 per cent of the properties built upon leasehold land change hands through the execution of a Power of Attorney (PoA) by the seller in favour of the purchaser or his nominee and the writing of a last will and testament willing the property in question to the purchaser or his nominees.

Since registration of such PoAs came under a ban in Delhi, sellers began to either register such PoAs in the neighbouring states of Uttar Pradesh and Haryana, or else merely having both the PoA and will notarised. Whilst these documents along with an agreement to sell drawn on a Rs 10 stamp paper, admitting receipt of full consideration money stipulated therein and admitting handing over of vacant and unencumbered possession are also handed over to the purchaser of the property, neither banks nor housing finance companies agree to extend loans to the borrowers against the security of such purchases. Why? Could you kindly elaborate upon the pitfalls inherent in such PoA transactions and what should be doneto overcome these deficiencies?

-- Rohit Bhasin, NOIDA

Any attempt to transfer the property through the PoA/will route as described by you is a gross violation of the law of the land in which the transfer of property can only be undertaken by adhering to the provisions of the Transfer of Property Act. That is execution of a conveyance deed and having the same registered with the Registrar/ Sub-Registrar of Assurances after payment of specified stamp duties and registration charges and complying with the other provisions as specified in law such as securing a no objection certificate from the L&DO/DDA and clearances under Sections 230A and 269 UC of the Income-Tax Act, etc.

The PoA/will route not only deprives the government of its rightful revenue earnings, but also makes the title imperfect in the hands of the purchaser. Consider the following facts:

The PoA registration can be revoked by the giver at any time at his pleasure and the property purchaser has no control over such anoccurrence. It also stands automatically cancelled upon the death of the seller and his legal heirs and successors in interest can reclaim the property. Even if the successors wish to give a fresh PoA to the property purchaser, they will be able to do so only after the estate of the deceased has been probated in their favour by the court of law-a time-consuming process that could cause the purchaser several sleepless nights.

The last will and testament of the testator drawn at the time of handing over possession of the property to the purchaser, though declared as the testator's last will and testament, can be changed by the testator at any time even on his death-bed by merely stating that he is in his full senses and possessing a sound mind and thus depriving the purchaser of the right to inherit and possess the property absolutely even after his death.

Furthermore, the assignments in the wills are generally made without any reference to the payments that may have been made in the past for acquiringa right to any particular asset and, therefore, in the event of such an assignment in the will being challenged by other successors of the testator, the purchaser would be hard put to establish his right and claim to the property in a courts of law-the basis of claim being the proof of payments having been made and also any other action that was initiated by the seller to have the property transferred in the name of the purchaser in the records of the Municipal Corporation of Delhi and/or the NDMC.

It is on account of these imponderables that banks/housing finance companies desist from extending loans to owners holding their properties under a PoA arrangement. Of course, they also have in mind the fact that such owners, by opting for a PoA purchase, are circumventing government rules and laws and denying the government, the MCD/NDMC and DDA/L&DO, etc., of their rightful revenue for personal gains. As a responsible citizen, if you are coerced into purchasing property under a PoA arrangement, then I wouldsuggest the following line of action to protect your long-term interests:

Inform MCD/NDMC of such a purchase within 30 days of the completion of the transaction and request that henceforth, they raise the property tax bills directly in your name. These authorities may ask you to deposit 5 per cent of the transaction amount with them in lieu of their share of stamp duties payable upon registration of the property under the Transfer of Property Act and this amount, as and when registration of the property takes place, would be offset against the stamp duties payable at that time.

Inform the Delhi Vidyut Board and the Delhi Water & Sewage Board regarding the change of occupancy in the property and request that the electricity and water meters be transferred in your name. In the event of a dispute, this would serve to establish your claim that you have in fact been in possession and occupation of the property from a specified date.

As the PoA holder of the seller, write to the DDA/L&DO topermit conversion of the land tenure from leasehold to freehold upon payment of specified charges and request that the conveyance deed be mutated in your favour. As a PoA holder, you will be required to pay a surcharge of 33 1/3 per cent over and above the charges normally payable but this would ensure that you do receive the proper ownership documents. Currently, the facility of land tenure conversion is available to owners of apartments on leasehold land and the owners of built-up houses on plots of land not exceeding an area of 505 square metres.

Ensure that the PoA drawn by the seller in your favour not only allows you to do the above acts, but also satisfies the other conditions that have been laid down in the land tenure conversion notification.

Top

Printer-friendly page