• Buying a residential plot from a general PoA holder

Hello,
I am planning to buy a residential NA plot from a PoA holder. PoA holder is a mother of the plot owner who is located in US. The PoA is geneal and its registered. I will be executing a sale deed. Is it safe to buy that plot from her ( money transfer will be done to her account ). Pls help !!!
Asked 4 years ago in Property Law
Religion: Hindu

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18 Answers

Yes it is safe to buy from a registered POA holder.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Firstly, though there has been a latest judgement of the POA wth respect to the property transaction as it doesn’t hold good practice.

Secondly, but, there has been a exception in it as to if it is in favour of a close relative then may be legally executed.

Thirdly, yes you can very well go, and buy the property.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

1) insist on specific POA from plot owner in favour of his mother to sell the plot and for receipt of sale consideration .

2) POA should be attested before Indian consulate in USA

Ajay Sethi
Advocate, Mumbai
87932 Answers
6207 Consultations

5.0 on 5.0

specific POA in favour of mother for sale of plot is necessary

Ajay Sethi
Advocate, Mumbai
87932 Answers
6207 Consultations

5.0 on 5.0

1) If POA is on mother's name than you can buy the plot.

Ganesh Kadam
Advocate, Pune
12335 Answers
191 Consultations

4.9 on 5.0

Dear Sir,

If it is first time purchase then avoid such PoA transaction. Secondly if you transfer sale consideration to the account of mother you will in risk if there is no such clause in PoA. They wish to avoid tax payments. The law on PoA sales is as follows. If you decided to purchase then also there will no harm withe some risk if somebody challenges. The conditions are also given below.

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No property sale on power of attorney: Supreme Court

The court rules that transfer through general power of attorney cannot give ownesrship title to the buyer.

Property sales through the common practice of general power of attorney (GPA) will not give ownership title to the buyer.

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Imp points on Power of Attorney by NRI

A property transaction through Power of Attorney executed by NRI calls for extra checks/scrutiny. A sale deed can be declared NULL and VOID because of a small mistake or error in the execution of Power of Attorney by NRI. Sometimes these errors/mistakes are intentional and most of the times unintentional. In recent past, i came across multiple cases wherein a property transaction was challenged based on error/mistake in the execution of Power of Attorney (POA) by NRI. In many cases, the status of NRI is being concealed by his lawyer/CA in POA to avoid TDS. An NRI executing POA in India cannot declare his/her status as Resident Indian. As i keep highlighting that a buyer or seller in India should mention the status of another party in sale deed to avoid any future tax disputes. A case of the false declaration in sale deed may not put the onus of concealment of facts on the resident Indian in the property transaction.

My general observation is that Resident Indian’s are not aware of do’s and don’t of Power of Attorney executed by NRI. Even professional help does not help in most of the cases due to lack of knowledge. A Power of Attorney is issued by NRI if he/she cannot be physically present in India for the execution of property transaction. As a buyer or seller, you should insist on the physical presence of NRI Buyer/Seller in India for sale deed. It will avoid a lot of future hassles. The risk is HIGH if the buyer is Resident Indian, and Seller is NRI, who is represented by Power of Attorney holder. In this post, we will discuss this particular scenario for simplicity purpose. Though it is equally important if a seller is Resident Indian, and Power of Attorney holder represents the NRI Buyer. Reason being, it is important to trace money trail from NRI buyer i.e. whether money is being properly channeled for the property transaction. Let’s check important points or Do’s and Dont’s by Resident Indian Buyer if the transaction is through Power of Attorney by NRI.

Reason for Execution of Power of Attorney

A resident Indian buyer should AVOID property transaction through Power of Attorney holder of an NRI. The best case scenario is the presence of an NRI seller in India for execution of sale deed. Sometimes the circumstances do not permit so a buyer you should check the reason for the execution of Power of Attorney. The reason should be reasonable and logical. If the buyer is convinced with the reasoning, then he should insist that NRI Seller should include this particular reason, in Power of Attorney. In short, the purpose/reason for the execution of a power of attorney should be clearly mentioned in the Power of Attorney.

Process to Execute Power of Attorney

The most critical step is to check whether the Power of Attorney is executed as per the laid down process. It’s a 2 step process i.e. attestation of POA at Indian Consulate/Embassy and the registration of same in India. Attestation of POA is required even if the seller is not an NRI i.e. not completed 180 days outside India. On the other hand, if NRI executes POA on Indian Soil then attestation is not required. In short, a POA executed on foreign soil irrespective of the status of a seller require attestation at Indian Consulate/Embassy. The registration process in India follows it. Let me highlight steps/checks for a buyer.

Step1: NRI seller creates two copies of Power of Attorney with detailed terms and conditions. As a buyer, you should go through each and every clause carefully to understand the content.

Step 2: Check whether the POA is signed by two witnesses present in the country of residence of a seller.

Step 3: Check whether the witnesses were physically present in Indian Consulate/Embassy at the time of signature or not. If they were not physically present, then their signatures should be attested by the Local Notary.

Step 4: The POA should be attested by the Indian Consulate/Embassy.

Step 5: The Attested POA should be registered in the India by the resident Indian i.e. POA holder. The registration process in India should be completed within three months from the date of execution of POA. The POA can be registered in SDM (Sub Divisional Magistrate) office or Sub-Registrar Office. The rule may vary from state to state.

The relation between the NRI and POA holder should be mentioned in the POA. Preferably the details of ID proof of a POA holder issued by Indian Govt should be specified in the POA. The buyer retains the original copy of Power of Attorney for future reference.

Also, note that in some cases POA holder simply notarize the POA in India instead of registering it in SDM or Sub-registrar office. A “Notarized POA” is not the same as “Registered POA”. A notarized POA is legally not valid in India. A POA executed by NRI on foreign soil should be registered in SDM or Sub-Registrar office.

Payment to NRI Seller

In a recent case, i observed that buyer was cheated by Power of Attorney holder of an NRI Seller. It’s a misconception that payment towards property transaction should be transferred to POA holder. Please understand that Power of Attorney holder is only a representative of an NRI seller. The resident Indian buyer should make payment only to the NRI seller in his her NRE/NRO account. An NRI seller can authorize POA holder to accept payment on his behalf but cannot authorize payment to POA holder. Even if NRI seller authorizes POA holder to receive direct payment, the buyer should avoid such property transactions. It may land a buyer in tax trouble.

In the case of multiple NRI sellers, the payment should be transferred in the proportion of ownership in the property to each seller. In another case, one of my clients was cheated by NRI Seller. NRI couple jointly held the property. There was a dispute between husband and wife & my client was not aware of same. NRI husband insisted on transferring 100% consideration value in his account. After the deal had been done, the wife of a seller filed a case of cheating and fraud by his husband. Therefore, all the payment should be made in the proportion of ownership in the property. Each of the sellers should execute separate Power of Attorney.

TDS u/s 195

In one of the case, my client received notice for not deducting TDS u/s 195. In my post, How to deduct TDS on NRI u/s 195? i explained this in detail. In this case, the transaction was completed by POA holder. The POA holder told my client that as she (POA holder) is resident Indian therefore relevant TDS will be 1% u/s 194IA. Again i would like to clarify that POA holder is only a representative of NRI Seller. The TDS will be deducted u/s 195 in the case of NRI seller. The only exception is if NRI seller produces NIL or Lower Tax deduction certificate that i explained in my post How NRI’s can lower TDS on property sale?.

Indemnity Clause

Lastly, each property transaction is unique with multiple permutations and combinations. Therefore, a buyer can safeguard his/her financial interests by including a blanket indemnity clause in the sale deed. To avoid being caught on the wrong side also ensure that sale deed clauses are in concurrence with the terms and conditions of the POA. It will eliminate any possibility of legal/tax hassles.

Concluding Remarks: If you are buying/selling property from NRI then it is advisable to seek professional help to avoid any unpleasant surprises in future. The rules and regulations governing such transactions are bit complicated, especially on the taxation front. Always remember that Indian Law or Tax Authorities will not have any jurisdiction on the NRI residing abroad. On the other hand, a buyer who is resident Indian cannot escape the Indian Law/Tax Authorities. Moreover, the 100% onus of legal/tax compliance rests with the Resident Indian buyer.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

1. IF the POA is duly Stamped and Registered Gift Deed with relevant clauses for Sale /Leasee /Gift /Etc.... ONLY THEN the POA holder is legally authorised to sell the property. ELSE NO.

2. The POA document MUST be annexed with the Sale Deed.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

5.0 on 5.0

Hi

If PoA is validly excuted then only the mother can sell the plot. After perusing the PoA I would be able to take a call.

Thanks

Prafulla Paranjape
Advocate, Pune
27 Answers
6 Consultations

4.9 on 5.0

1. check the powers granted in the power of attorney

2. there must be a power to sell and also to receive sale proceeds on behalf of the owner

3. check whether the powers pertain to the property which you intend to buy

4. check whether there is a power to appear before sub-registrar for complying with registration formalities

5. if such powers are there, then you can proceed

6. also issue public notices in newspapers informing that you are buying the property from so and so owner through the POA holder

Yusuf Rampurawala
Advocate, Mumbai
6881 Answers
79 Consultations

5.0 on 5.0

In one decision SC has held that the POA conferred to close relatives can be acted upon. However, go through the complete original documents before embarking to purchase.

Rajaganapathy Ganesan
Advocate, Chennai
2085 Answers
8 Consultations

4.9 on 5.0

Hii

You can buy the property .

But to be safer side you should do few things

1) communicate with actual owner on video chat 2) ask him to draft a email to you the concern terms.

3) have some formal end to end communication with owner and like discussion that will you some records.

safer and positive as weIl as you proceed.

Rita Rajput
Advocate, Thane
189 Answers
2 Consultations

Not rated

Dear,

The Apex court of India is clearly pronounced that sale of immovable property via general power

attorney is not valid as it does not convey any ownership right in respect of the purchased property

in favor of the buyer.

Tarun Agarwal
Advocate, Jaipur
769 Answers
3 Consultations

4.9 on 5.0

Dar Client,

Buying property through POA is fine. If possible get the confirmation letter from son and mention it in sale deed.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

Hello,

It would be risky to purchase a property from a POA holder.

Regards

Swarupananda Neogi
Advocate, Kolkata
2941 Answers
6 Consultations

4.7 on 5.0

This is my response to you:

1. Make sure that the general POA has 'Sale' clause in it;

2. Only if that clause is there she can sell it you;

3. Also get an NOC from the owner for your safety purposes;

4. You can also ask them to take out newspaper publications to check if there are any more claims to the plot of land;

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

You can go ahead to buy the said property by way of registered POA, if the title of the property is clear.

Siddharth Jain
Advocate, New Delhi
5928 Answers
101 Consultations

5.0 on 5.0

If all other aspects in respect of this property are alright and if the legal opinion recommends you to go ahead with the purchase, the aspects what you mentioned here are absolutely okay, you can go ahead.

T Kalaiselvan
Advocate, Vellore
78089 Answers
1543 Consultations

5.0 on 5.0

Property is located in Pune.

If there is a registered POA on the name of the power agent representing the owner , you can proceed in Pune also.

T Kalaiselvan
Advocate, Vellore
78089 Answers
1543 Consultations

5.0 on 5.0

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