Power of attorney includes any instrument empowering a specified person to act for and in the name of the person executing the same. The person who is empowered through the instrument is called donee or attorney(agent) of the person. The person who executes the power is called donor or principal. The relationship between both are similar to that of a principal and an agent. The donee acts as an agent to do lawful act in stead of/ in the place of donor.
Usually Power of attorney is of two types-
1. Special Power of Attorney- a PoA executed for the purpose of doing a specific act(including all acts necessary for performing the specific act) is called ‘ Special Power of Attorney’.
2. General Power of Attorney: a PoA executed by donor empowering a person for the purpose of representing the donor (principal) in more than one transaction. For eg. trusts, business transactions, sale of property, tax purposes, for legal proceedings, banking purposes etc.
A power of attorney may also be executed by more than one principals jointly in favour of one agent or more than one agent. In case of PoA executed jointly by more than one person, the death of any of them will not revoke the PoA of remaining persons.
Principal and agent
The donor shall be competent to contract and the document shall bear his signature. It is the donor who prepares the instrument based upon the nature of intended transaction (s) ie. the purpose and scope of PoA. The agent (donee) cannot delegate power granted to him without consent of the principal. Fraud by agent will not bind the principal, as the agent is accountable to the principal subject to limits laid under PoA.
Authentication & Registration
To ensure legality of document, the PoA to be authenticated by a Notary Public or any Court Judge, Indian Consul or Vice Consul or representatives of the Central Govt. Where a PoA gives power to a person to present a document for registration, then that PoA shall be authenticated by Registrar or Sub Registrar of Assurances.
Registration of PoA is not compulsory. It may be deposited in the High court or District Court within the local limits of whose jurisdiction the instrument is with an affidavit verifying its execution and a copy may be presented at the office and stamped as the certified copy.
Stamp Duty
As per the provisions of Indian Stamp Act 1889, a PoA shall be liable to stamp duty. The stamp duty may vary from state to state. If a PoA is executed in foreign country, it should be stamped within 3 months of its being received in India. Where a PoA not stamped, then the same will lose legally validity.
Company
Subject to Article of Association, a company may appoint a person(directors, officers etc) as an attorney of the company to do acts like
> To institute and defend legal proceedings on behalf of the company and take decisions in such matters.
> To represent company before courts/tribunals/authorities and file documents or receive documents or copies of documents from such offices.
> To execute deeds/documents/contracts and to register them in compliance with applicable legal provisions. Eg. lease deed
>To deal with properties of the company and to make payments or receive monies on from bank or other persons on behalf of the company for business purposes.
> To do statutory acts which are required to be performed by the company under Tax laws
etc…
Transfer of Property via Power of Attorney
In 2011 the Supreme court had ruled that sale of property through General Power of Attorney will have no legal sanctity and the sale shall take place through Registered sale deeds in compliance with the Transfer of Property Act. No transfer of property shall take place in the absence of a duly stamped deed of conveyance. Following this, one of the State Govts issued a circular bringing a complete ban on sale of property through GPA, a will and an agreement to sell collectively or separately, in respect of an immovable property. The circular created confusion among the holders of properties. A Delhi builder filed petition in the High court alleging the failure of the government to make distinction between genuine transactions and the ones intended to evade stamp duty. The High court struck down the controversial circular while considering the petition for following reasons. (summary only)
> The Supreme Court has not said that in no case a conveyance can be registered thorugh GPA. As long as the transactions are genuine, there is no ban on resorting to GPAs.
> A person can give a PoA to his spouse or relative for managing his affairs or to execute a conveyance deed. This power is not restricted by the said Supreme Court judgement.
>The Supreme Court’ s rule was to ensure proper verification of ownership of property and was intended to prevent evasion of stamp duty & registration charges and flow of black money.
> The State Govt ‘s interpretation regarding the SC judgement was wrong.
Revocability
The PoA shall be automatically revoked in following cases-
> By principal himself
> On death/insanity/bankruptcy/insolvency of principal
>On death of agent
> By mutual agreement between both.
> On completion of purpose/business
> On renouncement of right by the agent
> By efflux of time
A power of attorney is irrevocable in following cases-
-PoA is for a transaction which also affects the interest of the agent.(Agency coupled with interest cannot be terminated without consent of the other party- Indian Contract Act, 1872)
-PoA is executed for a consideration and the same cannot be unilaterally revoked prejudicial to the interest of the agent.
-where PoA is related to a subject matter in which agent has an interest which will not terminated by death/insolvency/incompetence of the principal to prejudice interests of the agent.
Drafting
The seriousness of Power of Attorney increases as more and more powers are granted to the donee (agent). The power of attorney is a legal instrument (accepted as evidence under Indian Evidence Act) which binds the principal and agent and is relevant till its revoked. So the donor shall ensure that the PoA is drafted properly, if possible, by a Lawyer and the terms expressed are clear-cut and is not vague & not capable of interpreted with double meaning.
Ref: Section 85- Indian Evidence Act, Sec48 The Companies Act 1956, The Power-of-Attorneys Act.
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