If you are stuck in such a situation, here is what to do.

A common scenario has emerged in the real estate market, particularly in rapidly developing urban areas like Avadhpuri. A prospective homebuyer, Mr. Sharma, is in the final stages of purchasing a flat from a reputed developer, “Apex Homes Ltd.” Upon reviewing the documents, Mr. Sharma discovers that Apex Homes Ltd. does not hold the title to the property. Instead, they operate under a registered Agreement to Sell and a General Power of Attorney (GPA) from the original landowner. This arrangement allows the developer to construct and sell individual units.

The developer justifies this by claiming it is a standard industry practice to avoid the financial burden of paying stamp duty twice—once when acquiring the land and again when selling the flat to the final buyer. They assure Mr. Sharma that all other units in the project have been sold this way and even offer an indemnity bond to cover any future claims related to stamp duty. This situation raises significant legal questions about the validity of the transaction, the “cleanliness” of the title, and the potential future liabilities for the buyer.

Advice in such cases

• Title Scrutiny: Conduct a thorough due diligence and title search of the property, going back at least 30 years. This must confirm that the original landowner has a clear, absolute, and marketable title, free from any encumbrances, liens, or litigation.
• Verify the Power of Attorney (PoA): The PoA must be a registered, irrevocable Power of Attorney coupled with interest (i.e., given for consideration). It should explicitly grant the developer the power to sell the property, receive payment, and execute and register a sale deed on behalf of the original owner.
• Insist on a Tripartite Agreement: If possible, execute a tripartite sale agreement that includes the buyer, the original landowner, and the developer (as the PoA holder). This legally binds the original owner to the transaction.
• Payment Trail: Ensure all payments are made through banking channels like cheques or online transfers. It is crucial to document whether the payment is being made to the developer or the original landowner as per the terms of the PoA.
• Indemnity Bond: While an indemnity bond from the builder offers some psychological comfort, its real value depends on the builder’s long-term financial health and integrity. It is a tool for risk mitigation, not a substitute for a clear title.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

• The Registration Act, 1908: Section 17 of the Act mandates that any instrument creating or transferring a right in an immovable property of value more than Rs. 100 must be registered. A title in a property can only be transferred through a registered conveyance deed (Sale Deed).
• The Indian Stamp Act, 1899 (and State Stamp Acts): This method is a clear attempt to evade stamp duty. The state revenue authorities have the power to conduct an audit and demand the deficient stamp duty along with a hefty penalty (which can be up to ten times the amount of deficient duty) from the person holding the property, which would be the new buyer.
• Supreme Court Precedent: The Supreme Court of India in the landmark case of Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana (2011) has explicitly held that property cannot be legally transferred through an Agreement to Sell or a General Power of Attorney. Such instruments do not convey title. This ruling aimed to curb illegal transactions and the circulation of black money in real estate.

If you are the complainant

If you are a buyer who has entered into such an agreement and are now facing issues, you have several recourses:

• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• Issue a Legal Notice: Your lawyer can send a formal legal notice to the developer demanding the execution and registration of a proper sale deed in your favour, as per the terms of your agreement.
• File a Complaint with RERA: If the project falls under the Real Estate (Regulation and Development) Act, 2016, you can file a complaint with the state’s RERA authority for unfair trade practices and failure to provide a clear title.
• Suit for Specific Performance: You can file a civil suit in the appropriate court, asking the court to direct the developer and the original landowner to execute the sale deed as promised in the agreement.

If you are the victim

If you have already purchased the property and later discovered fraud or title defects, or if the developer is refusing to cooperate:

• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• File a Criminal Complaint: If there is evidence of fraudulent intent, forgery, or misrepresentation from the beginning, you can file an FIR with the police for cheating under Section 318 of the Bharatiya Nyaya Sanhita (BNS) and criminal breach of trust.
• Initiate Civil Suit for Damages: Alongside criminal proceedings, you can file a civil suit for cancellation of the agreement, recovery of the money paid, and compensation for the damages and mental agony suffered.

How the police behave in such cases

Police authorities often perceive such matters as being of a “civil nature.” They may be hesitant to register an FIR and might advise the aggrieved party to seek remedy in a civil court. However, a skilled lawyer can draft a complaint that clearly highlights the criminal elements, such as fraudulent inducement, false promises, or forged documents, which can compel the police to register a case under relevant sections of the BNS. Persistence and proper legal representation are key to initiating criminal action.

FAQs people normally have

• Is this PoA-based sale model truly “normal”?
  While it may be a common shortcut used by some developers to save costs, it is legally flawed and highly risky for the buyer. The Supreme Court has unequivocally declared it invalid for the purpose of transferring property title.
• What happens if the original landowner dies or backs out?
  If the original landowner dies, a standard PoA becomes invalid. If they are alive, they could potentially revoke the PoA (unless it’s an irrevocable PoA for consideration) or dispute the transaction, leaving the buyer in a legal nightmare with no title to the property.
• Will a bank approve a home loan for this property?
  Reputable banks and housing finance companies conduct stringent legal checks. Most will refuse to sanction a loan for a property with a defective title chain, such as one being sold through a GPA instead of a direct sale deed. This itself is a major red flag.

What evidence is required?

To pursue legal action, you must gather all relevant documents, including:

• The Agreement to Sell between you and the developer.
• Copies of the Agreement to Sell and Power of Attorney between the developer and the original landowner.
• All payment receipts, bank statements, and proof of transactions.
• Any written correspondence, emails, or brochures from the developer.
• The title search report prepared by your lawyer.

How long will the investigation take?

• Civil Court: A suit for specific performance or recovery of money is a lengthy process. It can easily take 5-10 years, or even longer, to get a final verdict after appeals.
• RERA: Proceedings before RERA are designed to be much faster, with a statutory goal of resolving complaints within 60 days, although practical timelines may vary.
• Police Investigation: A criminal investigation under the Bharatiya Nagarik Suraksha Sanhita (BNSS) has prescribed timelines, but complex financial and property-related cases can often take many months to investigate before a chargesheet is filed in court.

Advocate Sudhir Rao, Supreme Court of India