MUDA is regularly placing advertisements in local newspapers announcing
the sale of MUDA-allotted sites through General Power of Attorney. The
advertisements state that if no objections are received within 15 days,
MUDA will transfer the site to the buyer.
But in a historic judgment (pdf)
given on 11-10-2011, a three-man bench of the Supreme Court (Justices
R.V. Raveendran, A.K. Patnaik and H.L. Gokhale) has outlawed GPA sale of
sites allotted by Urban Development Authorities. As the Supreme Court
observed in its judgment, the purpose of GPA Sales is to avoid stamp
duty and registration charges, avoid payment of capital gains, invest
black money, avoid any public record of transactions, enable persons to
hold any number of properties without disclosing them as assets held and
avoid payment of 'unearned increases' due to Development Authorities on
transfer. Persons who deal in real estate resort to these methods to
increase their profit margin, the Supreme Court noted.
As the Supreme Court observed, GPA sales adversely affect the
economy, civil society and law and order. Firstly, it enables large
scale evasion of income tax, wealth tax, stamp duty and registration
fees thereby denying the benefit of such revenue to the government and
the public. Secondly, such transactions enable persons to invest their
black money profitably, thereby encouraging circulation of black money
and corruption. The Court also noted many serious side-effects of GPA
sales. When the market value increases, many vendors (who effected power
of attorney sales without registration) are tempted to resell the
property taking advantage of the fact that there is no registered
instrument or record in any public office thereby cheating the
purchaser. The purchaser then tries to take the help of musclemen to
'sort out' the issue and protect his rights. On the other hand, real
estate mafia often purchase properties which are already subject to
power of attorney sale and then threaten the previous 'Power of Attorney
Sale' purchasers from asserting their rights. Either way, such power of
attorney sales indirectly lead to growth of real estate mafia and
criminalization of real estate transactions.
"It also makes title verification and certification of title,
which is an integral part of orderly conduct of transactions relating to
immovable property, difficult, if not impossible, giving nightmares to
bonafide purchasers wanting to own a property with an assurance of good
and marketable title", the Supreme Court said.
After having made these blistering observations on the GPA sale
of sites, the Supreme Court went on to say "We therefore reiterate that
immovable property can be legally and lawfully transferred/conveyed
only by a registered deed of conveyance. Transactions of the nature of
'GPA sales' or 'Sale Agreement/GPA/Will transfers' do not convey title
and do not amount to transfer, nor can they be recognized or valid mode
of transfer of immoveable property."
Even before the Supreme Court decision, MUDA must have
realized the illegal and criminal motives (listed above) behind GPA
sales and must have prohibited them. But it did not do so. What is
shocking is that even after explicit outlawing of GPA sales by the
Supreme Court, MUDA is still publishing advertisements and promoting GPA
sale of its sites.