Can You Buy Property on a General Power of Attorney? The Law After Suraj Lamp

Across several Indian property markets, secondary transactions are frequently proposed through a mechanism informally known as a "GPA sale"—a bundle comprising an Agreement to Sell, a General Power of Attorney (GPA), an Affidavit, and occasionally a Will. Sellers often market these transactions as cost-effective alternatives to formal conveyance, noting that the parties can circumvent stamp duty and registration charges.

However, Indian property law does not recognise a Power of Attorney as an instrument of ownership transfer. Relying on a GPA to acquire real estate exposes buyers to catastrophic title defects, denial of institutional mortgage financing, and protracted civil litigation.

The Legal Character of a Power of Attorney

A Power of Attorney is governed by the Powers of Attorney Act, 1882, read alongside the Indian Contract Act, 1872. By definition, a Power of Attorney is an instrument of agency, not of conveyance. It merely clothes the appointed agent (the attorney) with the authority to act on behalf of the principal (the executant).

Under settled principles of agency law:

• No Title Transfer: The execution of a GPA does not divest the principal of ownership, nor does it vest any proprietary title in the attorney.
• Agent Remains Accountable: The attorney cannot act outside the specific mandates stipulated in the deed and remains legally accountable to the principal.
• Termination of Authority: Agency terminates automatically upon the death, mental incapacity, or insolvency of the principal, or upon express revocation by the principal, unless the agency is coupled with an interest under Section 202 of the Indian Contract Act, 1872.

The Supreme Court Precedent: Suraj Lamp Industries

To curb systemic tax evasion, illegal plotting, and the proliferation of unrecorded land transactions, the Supreme Court of India settled the legal status of GPA sales in the landmark judgment Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2012) 1 SCC 656.

The Supreme Court categorically held that:

1. No Transfer of Title: Transactions styled as "SA/GPA/WILL transfers" (Sale Agreement, General Power of Attorney, and Will) do not convey title and do not amount to a transfer of immovable property.
2. Conveyance Requires Registration: Immovable property can be legally transferred or conveyed only by a registered deed of conveyance (Sale Deed) duly stamped as required by law.
3. No Marketable Title: A GPA holder cannot claim to be the lawful owner of the property, nor can the purchaser from a GPA holder acquire a better title than what the law permits.

Following Suraj Lamp, revenue authorities across Indian states were directed not to mutate land records based on GPAs, and sub-registrars were restrained from treating unregistered or GPA-backed sales as completed conveyances.

Statutory Framework: Transfer of Property Act and Registration Act

The findings in Suraj Lamp are rooted directly in India's primary property statutes:

Transfer of Property Act, 1882

Under Section 54 of the Transfer of Property Act, 1882, a sale of tangible immovable property of a value exceeding one hundred rupees can be made only by a registered instrument. Furthermore, Section 54 expressly provides that a contract for sale (agreement to sell) does not, of itself, create any interest in or charge on such property.

Registration Act, 1908

Section 17(1) of the Registration Act, 1908 mandates the compulsory registration of non-testamentary instruments that operate to create, declare, assign, limit, or extinguish any right, title, or interest in immovable property. Under Section 49 of the same Act, an unregistered document that requires compulsory registration cannot affect any immovable property comprised therein or be received as evidence of any transaction affecting such property, save for limited collateral purposes.

Genuine GPAs vs. "GPA Sales"

The Supreme Court in Suraj Lamp made an important distinction between bogus "GPA sales" and legitimate agency transactions.

The judgment does not invalidate genuine Powers of Attorney. An owner who is unable to manage their affairs directly—such as a Non-Resident Indian (NRI), an elderly person, or a property developer managing large layouts—can legally execute a registered Power of Attorney appointing an agent to execute sale deeds on their behalf.

However, in a legitimate agency transaction:

• The attorney acts merely as a representative who signs the registered Sale Deed in favour of the buyer.
• The Sale Deed explicitly recites that title is moving from the original principal to the buyer.
• Applicable ad valorem stamp duty and registration fees are paid on the final conveyance deed.

In contrast, executing a GPA in lieu of a sale deed to complete the purchase is void as a method of title transfer.

Key Risks of Entering a GPA-Based Purchase

Prospective buyers contemplating a GPA-based deal must weigh several structural legal hazards:

• Vulnerability to Cancellation: The principal may unilaterally revoke the GPA at any time. Even if marked "irrevocable", establishing that the agency is coupled with an interest requires complex litigation.
• Risk of Subsequent Transfers: Since the original owner remains the record owner in government revenue registers, they may fraudulently execute a registered sale deed to a third party. The registered buyer will hold superior legal standing over an unregistered GPA claimant.
• Extinguishment upon Death: If the principal dies before a formal registered sale deed is executed, the GPA automatically lapses. The property falls to the legal heirs of the principal under the relevant succession laws.
• No Bank Lending: Commercial banks and housing finance corporations governed by Reserve Bank of India (RBI) norms will not sanction home loans against properties lacking a clear, registered chain of title.
• Failure of Mutation: Municipal and revenue authorities routinely reject mutation applications where the applicant relies solely on an unregistered agreement and GPA.

Practical Recommendations for Property Buyers

To ensure marketable and indisputable title, buyers should observe standard due diligence safeguards:

1. Insist on a Registered Sale Deed: Never accept a GPA, agreement to sell, or will as evidence of ownership. Title vests only when a definitive Deed of Conveyance is registered under Section 17 of the Registration Act, 1908.
2. Scrutinise Attorney Authority: If the seller is executing the sale deed through an attorney, verify that the GPA is duly registered, contains an express clause authorising sale and receipt of consideration, and has not been revoked.
3. Confirm Principal's Life Status: Obtain independent proof of life and written confirmation from the principal on the date of execution to eliminate the risk of lapsed agency.