Power of Attorney and Will Do Not Confer Title
In a landmark ruling on property law, the Supreme Court of India recently delivered a significant judgment clarifying that an agreement to sell is not a document of title or a deed of transfer of property by sale. The judgment, delivered by Justices Dipankar Datta and Pankaj Mithal on June 2, 2023, in the case of Ghanshyam v. Yogendra Rathi (Civil Appeal Nos. 7527-7528 of 2012), addressed several key aspects of property law, including possessory rights, agreements to sell, general powers of attorney, and wills.
The case, which revolved around a dispute regarding the eviction of a tenant and the termination of a license, has far-reaching implications for property transactions across the country, particularly in relation to how possessory rights are determined under the Transfer of Property Act, 1882.
Key Points of the Judgment:
- Agreement to Sell Not a Deed of Transfer: The Supreme Court ruled that an agreement to sell is not a document of title or a deed of transfer of property by sale. As such, it does not automatically confer absolute ownership over the property upon the purchaser. This judgment underscores the distinction between an agreement to sell and a registered sale deed. While an agreement to sell may indicate the intention to transfer property, it is not sufficient to establish legal ownership in the absence of a formal sale deed registered under the Indian Registration Act, 1908.
- Possessory Rights in Part Performance: Despite the absence of a sale deed, the Court acknowledged that the purchaser may acquire possessory rights under Section 53A of the Transfer of Property Act, 1882. In this case, the plaintiff-respondent (Yogendra Rathi) was found to have lawful possessory rights over the disputed property due to part performance of the agreement to sell. The defendant-appellant (Ghanshyam) had handed over possession of the property to the plaintiff-respondent, and his subsequent occupation of the property was ruled to be merely as a licensee. The Court emphasized that possessory rights gained through part performance of an agreement cannot be disturbed by the seller.
- Power of Attorney and Will Do Not Confer Title: The judgment also clarified that a general power of attorney (GPA) and a will cannot serve as documents of title or instruments conferring ownership rights in immovable property. A power of attorney merely authorizes another individual to act on behalf of the principal, but it does not transfer ownership unless a registered sale deed is executed. Similarly, a will only comes into effect after the death of the testator and cannot confer ownership during the lifetime of the person making the will.
Case Background:
The dispute in question involved a property located in J.J. Colony, Shakarpur, Delhi. The plaintiff-respondent (Yogendra Rathi) sought the eviction of the defendant-appellant (Ghanshyam) from the suit premises and the recovery of mesne profits (compensation for unlawful occupation). The plaintiff-respondent claimed that he was entitled to possession of the property based on an agreement to sell, a power of attorney, a possession memo, and a receipt of payment.
The defendant-appellant, who had initially transferred possession of the property to the plaintiff-respondent under the agreement to sell, continued to occupy part of the property as a licensee. When the license was terminated, the defendant-appellant refused to vacate the premises, leading to the plaintiff-respondent filing a suit for eviction.
Court’s Findings:
The trial court, as well as the first appellate court and the High Court, had all ruled in favour of the plaintiff-respondent, holding that the defendant-appellant no longer had any right to occupy the property. In the Supreme Court, the defendant-appellant challenged these rulings, arguing that the documents relied upon by the plaintiff-respondent did not confer any legal title or ownership.
However, the Supreme Court dismissed the appeals, reaffirming the lower courts’ findings that the defendant-appellant had no valid claim to the property beyond his status as a licensee. The Court ruled that since the plaintiff-respondent had fulfilled his obligations under the agreement to sell and had taken possession of the property, his possessory rights were protected under Section 53A of the Transfer of Property Act, 1882.
The Court further noted that the power of attorney and the will executed by the defendant-appellant were ineffective in this context, as neither document had been followed by the execution of a sale deed or any other action that would legally transfer ownership to the plaintiff-respondent. Additionally, the Court observed that the will would only become relevant upon the death of the testator, which had not occurred in this case.
Significance of the Judgment:
This Supreme Court judgment reinforces the importance of adhering to the statutory requirements for transferring ownership of immovable property. Under Section 54 of the Transfer of Property Act, 1882, and Section 17 of the Indian Registration Act, 1908, a sale of property can only be completed through a registered sale deed. An agreement to sell, even if coupled with a power of attorney or a will, does not suffice to transfer title.
Furthermore, the judgment underscores the significance of possessory rights acquired through part performance of a contract. Even without a sale deed, a purchaser in lawful possession of a property under an agreement to sell has the right to protect their possessory title from interference by the seller or any other party.
Broader Legal Implications:
This ruling is likely to impact a large number of property disputes across India, particularly in cases where agreements to sell, powers of attorney, and wills are used in place of formal sale deeds. The Supreme Court’s decision serves as a reminder that the transfer of property must comply with the requirements of the Transfer of Property Act and the Registration Act, and that any deviation from these statutory provisions may result in the denial of ownership rights.
In addition, the judgment may influence the way property transactions are conducted in states where informal practices, such as relying on powers of attorney and wills, have been used as substitutes for registered sale deeds. The Supreme Court’s clear rejection of these practices sets a legal precedent that emphasizes the need for formal registration of property transactions to confer legal title.
The Supreme Court’s decision in Ghanshyam v. Yogendra Rathi provides crucial clarity on the legal status of agreements to sell, powers of attorney, and wills in property transactions. The ruling reinforces the necessity of complying with statutory requirements for the transfer of immovable property and highlights the protection of possessory rights gained through part performance of a contract. This judgment will serve as a key reference point for future property disputes in India.
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