THE SIGNIFICANCE OF POWER OF ATTORNEY IN INDIA

A “power of attorney” is a legal instrument whereby one person gives another person the authority to act on his or her behalf as his legal representative and to make binding legal and financial decisions on your behalf.

DEFINING THE POWER OF ATTORNEY.

In Blacks dictionary, it is described as the instrument by which a person is authorized to act as an agent of the granting it. It is pertinent to mention here a person need not be a lawyer to hold a Power of Attorney as an agent for someone else. In Stroud’s judicial dictionary “power of attorney is defined extensively as an authority whereby one is set in the stead or place of another to act for him”.

Power of Attorney is a document of agency whereby the principal appoints an agent to do and execute certain acts or deeds on his behalf. Various can be found in different enactments like according to the Bombay Stamp Act it is defined as “any instrument empowering a person to act for and in the name of the person executing it and includes an instrument by which a person a not being a legal practitioner is authorized to appear on behalf of any party in proceedings before any court tribunal or authority”

The Indian Stamps Act defines it “any instrument empowering any specified person to act for and in the name of the person executing it”

The Power of Attorney can be effective immediately upon signing or only upon disability.

Some illustrations of legal aspects contained in the Power of Attorney:

CONTRACTS, AGREEMENTS

1. To enter into contacts,

2. Perform any contract, agreement, writing, or thing

3. To make, sign, execute, and deliver, acknowledge any contract, agreement,

THE POWER OF ATTORNEY IN THE REAL ESTATE FIELD.

1. To sell, exchange, lease, collect rents, grant, bargain, or borrow and mortgage.

2. To execute all deeds, bonds, contracts, mortgages, notes, checks, drafts, and money orders;

3.  To manage, compromise, settle, and adjust all matters relating to real estate.

BANK ACCOUNTS, CERTIFICATES OF DEPOSIT, MONEY MARKET ACCOUNTS

1. To add to or withdraw any amounts from any of my bank accounts, Certificates of Deposit, Money Market Accounts, etc.

2. To make, execute, endorse, accept, and deliver any and all cheques and drafts

3. Execute or release such deeds of trust or other security agreements as may be necessary

4. Deposit and withdraw funds Acquire and redeem certificates of deposit, in banks, savings and loan

TAX RETURNS, INSURANCE, AND OTHER DOCUMENTS.

1. To file, and sign all tax returns, insurance forms, and any other documents

2. To represent in all matters concerning the foregoing.

STOCKS, BONDS, AND SECURITIES

1. To sell any and all shares of stocks, bonds, or other securities

2. To make, execute, and deliver any assignment, or assignments, of any such shares of stock, bonds, or other securities.

KINDS OF POWER OF ATTORNEY.

 Every act performed by the agent within the authority of the Power of Attorney is legally binding upon the persons granting it. A power of attorney must be given only to a trustworthy person, and only when it is absolutely necessary. The person who empowers is the Principal and the person to whom the power is conferred is the Agent.

There are two kinds of power of attorney viz., “General Power of Attorney” and “Special (or limited) Power of Attorney”.

THE GENERAL POWER OF ATTORNEY

1. The principal empowers the agent with the right to carry out all legal acts on his behalf without restricting it to a particular transaction or act,

2. Gives the agent very broad powers to act on behalf of the Principal

SPECIAL POWER OF ATTORNEY

1. The authority is restricted to act only on certain matters or only a particular kind of transaction or to carry out a specific legal transaction for the Principal.

2. The agent’s power of attorney expires on the completion of the transaction.

DIFFERENCE BETWEEN GENERAL AND SPECIAL POWER OF ATTORNEY

A General Power of Attorney is very much different from a Special Power of Attorney. The GPA always confers a general power of performing while the Special Power of Attorney confers only a specific power to perform any particular act or task. The GPA covers a wide range of powers and is not restricted to any particular work. Hence, it needs to be given only to a very trustworthy person. The Special power on the other hand comes to an end once the task or specific act is done and is always work-specific. A person can authorize the Attorney to sell, buy, rent out, recover his debts, open bank accounts, close accounts, attend the courts, appear on behalf of the principal in legal matters or file tax returns, etc under the General Powers. It is not restrictive.

But in Special Power of Attorney, only one act among the above-mentioned acts is to be performed. You cannot create a Special Power of Attorney for many acts. In that case, you have to create separate Special Power of Attorney deeds for each act.

REVOCABLE AND IRREVOCABLE POWER OF ATTORNEY

•          Revocable: If the Power of Attorney is revocable at the will of the principal.

•          Irrevocable: If the Power of Attorney is not revocable at the will of the principal.

REVOCABLE POWER OF ATTORNEY

Generally, the principal has the right to terminate the Power of Attorney whenever he wills to do so. Some of the conditions for revocation are ( by virtue of Section 201 of the Indian Contract Act, 1872):

1.         If the principal revokes the Power of Attorney granted to the agent.

2.         If either the principal or the Power of Attorney holder or both become unsound of mind, die, or are adjudicated as insolvent by the court.

3.         If the Power of Attorney holder renounces his powers.

4.         If the business for which the Power of Attorney was granted gets completed.

Power of Attorney may also be revoked if there is an implied revocation of the Power of Attorney or in case of time barred agency, the term of the Power of Attorney expires.

IRREVOCABLE POWER OF ATTORNEY

A power of attorney may have a clause in it stating that such power of attorney is irrevocable.

A Power of Attorney shall not be deemed to be an irrevocable one merely because it states, in the clauses of the deed executed for grant of such Power of Attorney, of it being irrevocable. Such Power of Attorney may be revoked by the principal or the Power of Attorney holder by the procedure according to law.

For revocation of irrevocable Power of Attorney, the principal is required to issue a public notice through local newspapers, without which, the revocation shall stand void.

However, in the following cases a principal cannot revoke a Power of Attorney:

1.         Where the Power of Attorney holder, i.e. the agent himself has an interest in the subject matter of the Power of Attorney. For revocation of the Power of Attorney falling under this category, consent of the Power of Attorney holder is mandatory.

2.         Where the agent has partly exercised the act for which Power of Attorney was granted, he cannot be stripped with the right for the act which he already exercised.

The Basic Principles To Remember in regard to power of attorney:

1. The general rule of power of attorney is that it should be strictly construed.

2. Unless an express power is conferred on an agent to enter into contracts of guarantees on behalf of his principal or to execute or negotiate, negotiable instruments for his principal jointly with others

3. An agent cannot by his acts bind the principal to a larger extent than he is empowered to do under the power of attorney.

4. Fraud by the power agent does not bind the principal. He cannot be sued or otherwise held responsible for fraud by the agent

5. If the power does not authorize the agent to carry on a business except with limitations any act done by him in excess of such power will not bind the principal.

6. For example power to dispose of property does not confer a power to mortgage the property.

7. Power to manage immoveable property cannot permit principal’s ornaments which are a moveable proper .

IMPORTANT RULES FOR CONSTRUCTION OF POWER OF ATTORNEY

1. The operative part of the deed is controlled by the recitals

2. Where authority is given to do a particular act, followed by general words, the general words are restricted to do what is necessary for the proper performance of the particular acts.

3. General words do not confer general powers, but are limited to the purpose for which the authority is given, and are construed as enlarging the special powers only when necessary for that purpose

4. The deed must be construed so as to include all powers necessary for its execution.

REGISTRATION OF POWER OF ATTORNEY

1. Registration of power of attorney is not compulsory. it is optional

2. In India, where the Registration Act, 1908, is in force, the Power of Attorney should be authenticated by a Sub Registrar only, (Whenever a person signs the document and his attorney presents/ admits execution).

3. In other areas, attestation should be by a Notary or diplomatic agents

4. In case an attorney under a valid Power of Attorney himself signs a document, he may, as an executing (signing) party present/admit execution of a document though it is attested by a Notary unless the text of the power specifically excludes such powers

5. Foreign Power of Attorney should be got stamped by the Collector after its receipt in India within prescribed time of 3 months

6. Registration of power of attorney authenticates the deed of power of attorney

7. Power of Attorney shall be attested by two or more adult independent witnesses who are of sound mind

8. If a power of attorney is in respect of an immovable property of value more than Rs100 it must be registered.

REVOCATION OF POWER OF ATTORNEY.

Power of Attorney can be revoked in the following cases, in case of :

1. Revoked by the principal himself

2. The principal dies or becomes insane or becomes bankrupt

3. The business for which the agent was appointed is over

4.  Mutually agreed upon by the principal and agent

5. The right under the power of attorney is renounced by the agent

REVOCATION OF GENERAL POWER OF ATTORNEY.

According to the judicial perception, under the following circumstances, the power of attorney can be revoked.

If the power given to the attorney is coupled with an interest it is irrevocable.

To decide whether a given power is coupled with interest or not regards are to be given to the facts of each case and the wordings of the instrument itself.

 The right of an agent to remuneration through stipulated in the form of property to be produced by exercise of power is not an interest in the required sense.

If the power is irrevocable as per the test laid down the parties are nevertheless free to make it revocable by an express stipulation to the contrary.

If the power is revocable then the parties cannot make it irrevocable merely by writing that the instrument is irrevocable.

The position in our country is the same as that in England.

A power of attorney is automatically terminated if- One of the parties to the instrument dies or becomes insane, the principal becomes insolvent or bankrupt, any specific condition in the instrument is breached, and the business comes to an end.

Courts refer to Indian Contract Act provisions to determine this question.

MISUSE OF POWER OF ATTORNEY BY THE AGENT.

It is possible that the agent, to whom power of attorney is given, uses such authorization to commit fraud or misrepresentation. If such fraud or misrepresentation falls within the limits of the authority provided to him, the principal shall be held liable, however, if it falls outside the limits of the authority granted by the Power of Attorney, he shall be held solely liable for such fraud/misrepresentation. The principal is not liable for any act by the agent which exceeds the authority granted to him.[4]

Therefore, a principal since cannot be held to liable for fraud/misrepresentation by the agent if it is outside the limits of the authority provided by the Power of Attorney, he may not need to revoke it.

The Power of Attorney may be revoked if it is revocable upon such misconduct by the agent.

In case where the agency is irrevocable owing to the interest of the agent in the subject matter, and he commits an act unfavorable to you, there needs to be a separate agreement/contract between the principal and the agent as per Section 202 of the Indian Contract Act regarding termination of agency upon commission or continuation of such act to enable the principal to terminate such agency, otherwise, the Power of Attorney remains irrevocable.

However, if the acts done by the agent are not in good faith and are not lawful, the principal is not liable to indemnify him. In fact, if the acts of the agent are criminal, and the principal has agreed to indemnify him, such indemnification is not valid.[5] It is advisable to issue a public notice warning the  misuse of the POA by the agent to commit unlawful acts in at least two local newspapers, and to approach the court of law to terminate the agency, even if it happens to be irrevocable.

Conclusion

As important as the concept of Power of Attorney is to facilitate the principal to carry on his work even without actually being present at the place where such work is to be done, so is the right of the principal to revoke it to avoid any harm to his interest by the agent. While in most of the cases revocation is possible, there are some exceptions to it. Before giving someone or accepting the power of attorney, the principal/agent should be aware of these conditions.

References:

legaldesk.com/power-of-attorney

blog.ipleaders.in/revocation-power-attorney/

legalservicesindia.com