Legal Opinion on Proposed Transaction Structure

Background Summary:

You propose to acquire rights in an industrial plot allotted by Greater Noida Industrial Development Authority (GNIDA), presently held by a Muslim allottee. As per GNIDA rules, transfer of such plots is restricted unless the following conditions are fulfilled:

1. The building on the plot must be constructed and a Completion Certificate (CC) issued.

2. The project must be made functional (in line with its designated ITES/BPO use), and a Functional Certificate must be obtained from GNIDA.

The seller, who is only an investor and not engaged in any IT/ITES activity, intends to sell the plot prior to completing construction or making the unit functional. To circumvent the restriction, he proposes a structure involving an Agreement to Sell (ATS), an irrevocable Special Power of Attorney (SPA), and a registered Will, while accepting full payment in cash and cheque.

1. Can stamp duty paid on the Agreement to Sell (approx. 6%) be adjusted during registry of the final conveyance deed?

As per the current legal position under the Uttar Pradesh Stamp Act and prevailing GNIDA practices, stamp duty paid on an unregistered or even registered Agreement to Sell is not adjustable against the stamp duty payable at the time of execution of the final transfer deed (sub-lease or conveyance). Unless the State Government has issued a specific notification allowing such adjustment, which as of now it has not, you will be required to pay full stamp duty again at the time of final registry or lease transfer.

Recommendation: Execute the Agreement to Sell on nominal stamp paper (Rs. 100) and keep the main duty reserved for the actual transfer at a later stage when GNIDA allows execution of the Transfer Memorandum and registration of title.

2. Is stamp duty applicable on an irrevocable Special Power of Attorney (SPA)?

Yes. Under the Indian Stamp Act as applicable in Uttar Pradesh, an irrevocable SPA—especially one authorizing another person to carry out acts such as construction, dealing with GNIDA, applying for CC/FC, executing Transfer Memorandum, and representing before the Sub-Registrar—will attract stamp duty. If the SPA is construed as being coupled with interest or conveying substantial rights over immovable property (i.e., having elements akin to sale or transfer), the applicable stamp duty could be up to the same as for a conveyance deed.

Recommendation: The SPA should be carefully drafted to avoid language that suggests transfer of interest or ownership. Limit its scope to administrative powers, with construction responsibility clearly delegated but without conferring alienation rights.

3. Can the original allottee cause trouble after executing the SPA and ATS, particularly at the stage of applying for CC, FC, Transfer Memorandum, or final registration?

Yes. Despite having executed an ATS and SPA, the original allottee remains the legal and beneficial owner of the plot until GNIDA permits the transfer and the sub-lease is executed in your company's name. Therefore, the allottee can still:

• Refuse to cooperate with GNIDA procedures.

• Delay or obstruct construction approvals, submission of forms, or final registry.

• Refuse to sign the Transfer Memorandum at the time of title transfer.

• Deny the authenticity or intent of the SPA or Will, thereby complicating the transfer.

ATS and SPA do not amount to title transfer and do not bind GNIDA, which only recognizes ownership after registration of the transfer in its records.

Recommendation: Include strict penal and indemnity clauses in the ATS to compel cooperation. However, enforcement will still require litigation if the allottee becomes uncooperative.

4. Can the Muslim allottee later execute a Hiba (gift) or Wakf, thereby undermining your rights?

Yes. Under Muslim personal law, a Hiba (gift) can be made orally or in writing, and is valid if three essential elements are fulfilled: declaration, acceptance, and delivery of possession. A Muslim allottee may execute a Hiba in favor of a family member or unrelated third party, even after having executed an SPA or ATS, so long as he is the legal owner. Similarly, creation of a Wakf is valid in law and irrevocable.

Since SPA and ATS do not extinguish ownership rights, the allottee legally retains the right to dispose of the property until registry is complete. This exposes your investment to a significant legal risk.

Recommendation: Obtain an undertaking from the seller not to execute any Hiba, gift, or third-party transfer pending final registry. Though not binding on third parties, this may provide a basis for equitable relief in court.

5. What precautions can be taken to protect your investment of Rs. 2 crores towards construction and sale consideration?

Given that GNIDA prohibits transfer until issuance of Completion and Functional Certificates, and considering that substantial funds will be deployed for construction and part-payment of sale consideration, the following precautions are essential:

• Execute a detailed and registered Agreement to Sell with milestone-linked payments.

• Use escrow arrangements to defer major payments until GNIDA approvals are achieved.

• Include detailed indemnity, arbitration, and refund clauses in ATS and SPA.

• Obtain specific undertaking from the seller to not revoke SPA, execute any Hiba, or deal with the property until final registration.

• Execute development agreement (if permissible under GNIDA rules) giving your company permission to construct and use the premises.

• Ensure that the SPA authorizes construction, application for CC/FC, and representation before GNIDA, but avoids conferring any sale rights to avoid stamp duty complications.

6. What other legal risks are present in light of property value appreciation and the seller’s urgency?

Several legal and practical risks exist:

• Change in GNIDA policy or refusal to transfer the plot after completion, if the transaction structure appears to circumvent their rules.

• Valuation disputes—the seller may later demand higher consideration citing market escalation.

• Revocation of SPA or disputes among seller’s family in case of death or incapacity.

• Involuntary cancellation of allotment by GNIDA for breach of development conditions.

• Litigation risk—if seller refuses to cooperate at the final stage, your only recourse will be to file a suit for specific performance or damages.

Given the appreciation potential, the seller’s desperation to sell before cancellation, and the regulatory restrictions, the seller has every incentive to cooperate until he receives payment, but may not act in your interest thereafter.

7. Conclusion and Legal Position

While the proposed structure of Agreement to Sell, Irrevocable SPA, and Will may appear workable for the time being, it does not create any legal title in your favour until GNIDA allows the Transfer Memorandum and the lease is officially registered in your company's name. Until then, you bear significant financial and legal risk. Under Indian law, and as reinforced by the Supreme Court in Suraj Lamp Industries v. State of Haryana (2012), SPA, ATS, and Will do not constitute title transfer and cannot be relied upon to claim ownership.

Therefore, extreme caution is advised. If you still wish to proceed, ensure that all documentation is professionally drafted, indemnity and enforcement provisions are included, and payments are made in stages, not in full upfront.

1. Agreement to sell and the SPA are not the title documents hence the buyer cannot claim title or interest over the property he proposes to purchase. Even the so called Will is not an effective instrument because the Will can enforced only upon the death of the Testator.  If the allottee is taking away the entire sale consideration amount and not cooperating at a later stage then there is no point to run behind  him with unwanted litigations.

The arbitration clause in the ATS or the SPA is not maintainable and neither there is a provision to challenge the dispute that will arise out of these two documents through an arbitration clause.

2.   If the power of attorney is given for consideration (meaning the attorney is receiving something of value for their services), the stamp duty is 4% of the consideration amount. If the power of attorney is not given for consideration, the stamp duty is 8% of the market value of the property, but whether the the irrevocable POA deed is maintainable in this situation is a question of law.

3. Nothing can be predicted without knowing the background details and the intentions of the allottee.

4.  If the allottee wants to cancel the registered power of attorney then he has to resort to legal process if the power agent is refusing to cooperate, though the principal can very well revoke the power deed. The allottee can very well execute a Hiba or gift deed or can transfer the property by any mode if his intention is to defraud the buyer at a later stage after receiving the full consideration amount and in that case you may have to approach court of law for relief as per provisions of law.

5  The allottee's  genuineness is to be verified and proper precautionary measures are to be adopted before finalising the deal due to risky situation.

6. It depends on the contractor or the builder.

7. No comments

You need to pay stamp duty on POA 

2) allotted can execute hibanama 

3) don’t go in for the deal .it does not make sense to invest 2 cr in project where seller does not have clear and marketable title to sell the plot as on date 

4) will can be revoked any tome by seller 

Yes he can execute hiba. But it’s better to do a registered document 

 

1. ATS Stamp Duty Usage:
   ➤ NO, stamp duty paid on ATS cannot be adjusted against final registry stamp duty. Registry will attract separate full stamp duty based on circle rate.

2. SPA Stamp Duty:
   ➤ YES, stamp duty is payable on Irrevocable SPA under the Indian Stamp Act/UP Stamp Rules. Amount depends on clauses and powers given (approx ₹100–₹5000 or more).

3. Allottee Misuse / Blocking Risk:
   ➤ YES, despite SPA/ATS, original allottee remains owner on record till registry. He can create trouble (deny signature, file objections, misuse position with GNIDA, revoke unofficial acts).

4. Hiba / Wakf Risk:
   ➤ YES, he can execute Hiba (oral or written) or Wakf to bypass your rights, especially as GNIDA still lists him as owner.

5. Precautions to Take:

   • Get registered ATS and registered GPA, not just notarized.

   • Take post-dated cheques for refund amount (ATS amount).

   • Keep indemnity bond & affidavit from seller acknowledging risks & responsibility.

   • Escrow agreement can help hold payment until milestones.

   • Include arbitration clause in all documents (ATS, SPA).

   • Regularly liaison with GNIDA yourself, not just through SPA holder.

6. Future Value Conflict Risk:
   ➤ Allottee may resist transfer once value rises. Without registered sale deed, your control remains weak.

7. Cancel Risk from GNIDA:
   ➤ GNIDA may cancel due to non-construction; you're taking over a risky timeline. Check if time extension is formally approved in writing.

You're essentially looking to acquire the rights to an ITES/BPO plot without a direct transfer of ownership (registry) upfront, due to the GNIDA rules. You plan to rely on an Agreement to Sell (ATS) and an Irrevocable Special Power of Attorney (SPA) to gain control, construct the building, get necessary certifications, and then execute the final transfer. This is a common but risky workaround in such scenarios.

1) Can ATS stamp paper value (approx 6%) be used in the registry papers?

• No, generally not in Uttar Pradesh. As per the current legal position under the Uttar Pradesh Stamp Act, stamp duty paid on an Agreement to Sell (ATS), whether registered or unregistered, is not adjustable against the stamp duty payable at the time of execution of the final transfer deed (Registry/Conveyance Deed).

• You will likely have to pay the full stamp duty again at the time of the final registry.

• Recommendation: Many lawyers advise executing the Agreement to Sell on nominal stamp paper (e.g., Rs. 100 or Rs. 500) and reserving the main stamp duty payment for the actual Transfer Memorandum and final registry. Paying 6% stamp duty on the ATS is essentially a sunk cost for that document itself and won't reduce your final registry stamp duty.

2) Do we need to pay stamp duty for irrevocable special power of attorney?

• Yes, definitely. In Uttar Pradesh, an irrevocable Special Power of Attorney (SPA), especially one that authorizes acts related to immovable property like construction, dealing with authorities, obtaining certificates, and executing transfer documents, will attract stamp duty.

• If the SPA is construed as being "coupled with interest" or effectively conveys substantial rights over the immovable property (having elements akin to a sale or transfer), the applicable stamp duty could be significantly higher, potentially even close to the stamp duty for a conveyance deed.

• Consult your lawyer: The precise stamp duty will depend on the wording of the SPA and how the sub-registrar's office interprets it. An improperly stamped or unregistered SPA might be deemed invalid or unenforceable in court, which is a massive risk.

3) Can the allottee change or do any mischief or block or create trouble for transfer / issue of completion certificate/ functional certificate/ transfer memorandum for change of ownership at GNIDA / registry time?

• Yes, this is a significant risk. Despite the ATS and irrevocable SPA, the allottee remains the legal owner on GNIDA's records until the Transfer Memorandum (TM) is issued and the final sale deed is registered.

• Potential mischief includes:

  • Revoking the SPA: While you call it "irrevocable," legal challenges to its irrevocability are possible, especially if it's not strongly drafted or not supported by a registered ATS.

  • Refusing to cooperate: Even with an SPA, the allottee's cooperation might be required for certain GNIDA formalities or if the SPA is challenged.

  • Creating encumbrances: The allottee could try to mortgage the property, create a charge, or even attempt to sell it to a third party (though your ATS, if registered, would provide some protection).

  • Death of the allottee: This is a major risk. If the allottee dies, the SPA might become invalid, and you would have to deal with his legal heirs, who might not honor the agreement.

  • Disputes over payments: If any payment is pending or if there's a dispute over the "cash" component, the allottee might use it as leverage.

• Mitigation (not elimination):

  • Registered ATS: Ensure your Agreement to Sell is properly stamped and registered. An unregistered ATS has very limited enforceability regarding specific performance and cannot transfer title.

  • Robust SPA: Draft the SPA meticulously to grant comprehensive powers and include clauses acknowledging consideration and irrevocability.

  • Indemnity Bond: Get a strong indemnity bond from the allottee, indemnifying your company against any loss or damage arising from their actions or non-cooperation, including any claims by their heirs.

  • Physical Possession: Ensure you take clear and documented physical possession of the plot.

  • Notice to GNIDA: Although not a formal transfer, you could explore if GNIDA would acknowledge a registered ATS or SPA on their records to indicate your interest.

4) Can allottee execute hiba / wakf after spa / ats and create problem?

• Yes, it's a potential risk, especially for Hiba.

  • Hiba (Gift under Muslim Law): A Hiba requires three essential conditions: (1) declaration by the donor, (2) acceptance by the donee, and (3) delivery of possession. If the allottee attempts to execute a Hiba after entering into an ATS and SPA with you, and particularly if you have taken possession, it could lead to a legal dispute. However, if the ATS is registered and clearly outlines the transfer of rights and you have taken possession, it would be difficult for a Hiba to supersede your pre-existing contractual rights, especially for valuable consideration. The principle of lis pendens (suit pending) could also apply if there's a registered ATS.

  • Waqf: A Waqf involves dedicating property for religious or charitable purposes. Similar to Hiba, if the property has already been subjected to a legally binding agreement for sale (ATS) with consideration and possession has been delivered, establishing a valid Waqf later on would be legally challenging for the allottee.

• Protection: The primary protection here lies in the registered Agreement to Sell and the delivery of possession to you. If the ATS is registered, it serves as a public notice of your interest in the property. The arbitration clause in the ATS/SPA also provides a mechanism for dispute resolution.

5) What other precautions can be taken as building construction and will take 2cr from our pocket and in case of problem, we will end up losing construction amount as well as cash amount, with presumption that cheque of ATS amount will be refunded.

This is the biggest concern. You are investing significant capital before legal ownership transfer.

• Payment Structure:

  • Avoid large cash payments. Insist on payments via verifiable banking channels (cheques, NEFT, RTGS). This provides an audit trail.

  • Stagger payments: If possible, link remaining payments to specific milestones (e.g., sanction of plans, issuance of CC, issuance of FC, signing of TM, final registry). The current plan of taking complete cash and cheque upfront is very risky.

  • Bank Guarantee/Escrow: For the substantial upfront payment, consider demanding a bank guarantee from the seller or placing the funds in an escrow account, to be released only upon successful transfer of the property to your company. This provides financial security.

• Documentation and Due Diligence:

  • Verify Allottee's Title: Thoroughly check the original allotment letter, lease deed, and all previous transfer documents (if any) to ensure clear and marketable title.

  • GNIDA Dues: Obtain a "No Dues Certificate" from GNIDA. Ensure all lease rent, extension charges, and any other outstanding dues are cleared by the allottee before taking over the construction.

  • Encumbrance Certificate: Get an up-to-date encumbrance certificate to check for any existing mortgages or charges on the property.

  • Indemnity Bond: A comprehensive indemnity bond from the seller (and possibly his family, witnessed) indemnifying your company against any claims, encumbrances, or losses arising from his actions or legal defects.

  • Will (as you mentioned): While a will is revocable and comes into effect only upon death, having one executed in your company's favor (as a supplementary measure) with proper witnesses can add a layer of intent, though it's not a substitute for a robust ATS and SPA.

  • Physical Possession Agreement: Document the transfer of physical possession clearly.

• Legal Representation:

  • Dedicated Lawyer: Have your own independent lawyer review all documents and guide you through every step. Do not rely on the seller's lawyer.

  • Registration of all documents: Ensure the Agreement to Sell and the Special Power of Attorney are both registered with the Sub-Registrar. This provides stronger legal standing and notice to the public. An unregistered ATS/SPA has limited legal value in India, particularly for immovable property.

• Arbitration Clause: Good that you are including this. Ensure it's clearly defined and the arbitration process is efficient.

6) What other problems can be faced considering the value of the property will go up within 2 years, the time required for construction of building.

• Seller's Backing Out due to Increased Value: This is a major practical risk. If the property value significantly increases, the allottee might be tempted to renege on the deal, even if it means facing legal action. He might offer to refund your money (as you presumed) and try to sell it to a new buyer at a higher price.

  • Protection: A registered Agreement to Sell is your strongest legal defense here. It allows you to seek "specific performance" from the court, compelling the seller to complete the sale. However, specific performance cases can be lengthy and expensive.

• Litigation: Any dispute (seller backing out, challenges from family/heirs, issues with GNIDA) can lead to protracted litigation, tying up your capital and project for years.

• GNIDA Policy Changes: While less common for existing allotments, the authority could introduce new policies or interpret existing ones differently, affecting the transfer process.

• Death of Allottee: As mentioned, this is a significant risk. If the allottee dies, the SPA may lose its validity, and you would need to deal with his legal heirs, who might dispute the transaction or demand more money, especially if the property value has appreciated. The will, while helpful, doesn't guarantee a smooth transfer against reluctant heirs.

7) The desperate attempt by Muslim allottee to dispose of the property is because of cancellation by GNIDA if building is not constructed within time frame and he is just an investor with no linkage to ITES industry.

• This confirms the allottee's motivation and the urgency. While it presents an opportunity for you to acquire a plot below market value (potentially), it also highlights the inherent risks. His desperation could make him agreeable to your terms, but it doesn't eliminate his potential for mischief or legal complications later if the situation changes (e.g., property value increases drastically, or he finds a new buyer).

• His lack of ITES linkage could simplify the "functional certificate" aspect somewhat if you have a genuine ITES plan, but you will still need to demonstrate the unit being functional to GNIDA.

Dear querist,

As per what i am able to understand from your query :

You can proceed with the transaction to purchase the ITES/BPO plot in Greater Noida, but the structure being proposed by the seller involves significant legal and financial risks. The current GNIDA rules prohibit transfer of such plots until a building is constructed and a Completion Certificate (CC) and Functional Certificate are obtained. Despite this restriction, the allottee proposes to transfer rights through an Agreement to Sell (ATS), an irrevocable Special Power of Attorney (SPA), and a Will, while accepting full payment upfront.

You cannot adjust the stamp duty paid on the ATS against the final registry. You must pay full stamp duty again at the time of executing the registered sale deed. The SPA will also attract stamp duty, especially because it authorizes possession, construction, and dealings with immovable property. The value of the duty depends on the nature and content of the SPA. You should get it adjudicated before execution.

The allottee can still cause trouble after executing the SPA and ATS. Even if the SPA is labeled as irrevocable, he may revoke it or interfere with the construction process, the completion certificate, or the functional certificate. Since legal title remains with him, he may also create third-party rights, delay the transfer, or refuse to cooperate at the time of registry. He may even execute a Hiba (gift) or declare the property as Wakf, which may override earlier documents unless the transaction has already resulted in legal transfer of title through a registered sale deed.

To protect your investment, avoid paying the entire amount upfront in cash. Structure the payment in tranches and document all payments thoroughly. Execute a registered Development Agreement that records your rights to construct and deal with the property. Ask the allottee to execute a registered indemnity bond and secure no-objection affidavits from his legal heirs. Appoint a reliable attorney of your own choosing to act under the SPA. Add an arbitration clause to all documents, including the ATS and SPA, to allow dispute resolution in case of non-cooperation. Issue a public notice before execution to identify and prevent hidden claims.

You face the risk that the allottee, once the property appreciates in value after construction, may seek to cancel or dispute the transfer. He may refuse to sign the transfer memorandum or registry documents. Heirs may challenge the Will or claim that the property has already been gifted or dedicated as Wakf. GNIDA can also cancel the allotment if it finds that usage norms or timelines were violated. In that case, you would lose both the construction cost and the upfront money.

Proceed only after executing strong, registered documents that establish your legal rights to possess, construct, and seek transfer. Use proper legal channels for payment and registration. Work with a lawyer familiar with GNIDA procedures and ensure continuous monitoring of compliance requirements to secure your interest fully.

You can call me for any assistance, if any. 

Dear Sir/Madam

It is suggested that you put all the favourable points in the SPA and other documents which are being prepared so that the said allottee has no point to escape and if at all he tries for the same, he would in your clutches. The required stamp duty will be required to paid. In crux, what I need to suggest to reduce your worries is that the drafting and contents of the documents forms heart and mind (strength of the parties) and you must give special attention to this, so that you don't fail at any stage and your money does not go in waste.