Real Estate Basics : Power of Attorney

A HOLISTIC VIEW OF POWER OF ATTRONEY :

   The present article is pen downed with a view not only to highlight the basics about document such as ‘Power Of Attorney’ but also to give you the holistic view of such legal documents with the support of various legal precedents of Hon’ble Apex Court’s and other High Courts. The decision below revolves under the following heads as under:

1)  What is Power Of Attorney?

2)  Object behind execution of Power Of Attorney?

3)  What are the types of Power Of Attorney?

4)  Revocation of Power Of Attorney?

5) Is Power of Attorney an instrument to transfer any right, title or interest in an immovable property? 

“Thus form the above head notes one can gather that the present article sets the parameters by addressing the confused concept of Power Of Attorney amongst the common masses in the light of Judicial Pronouncements”.      

1)      What is Power Of Attorney?

[NOTE: To discuss the Power Of Attorney in its true spirit, endeavor has been made to bring the public prospective, as well as legal prospective on the same platform, so that people in general will have greater understanding by rectifying there notions of such documents/instruments.]

In General Parlances Power Of Attorney is understood as under:

(a) “A document that allows individual to appoint a person or an organization to manage   his/her affairs.”

(b) “A document that allows individual to sign contracts for the Principal/Doner”.

(c) “A document that gives agent a legal authority to take decisions for the Principal in regards to property, finances or medical care”.

(d) “A document that allows another person to act on behalf by means of delegation or authorization, and which shall be considered as an act of Principle.” 

      In Legal Parlances the definition Of Power Of Attorney differs from one act to other but without distorting its spirit. Thus following are the Definitions from various statute books as under:

(a)  THE POWER OF ATTORNEY ACT, 1882

Section 1A

“Power-Of-Attorney” includes any instruments empowering a specified person to act for and in the name of the person executing it.   

(b)  THE INDIAN STAMP ACT, 1899

Section 2(21)

“Power-of-attorney” includes any instruments (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.

(c)   INDIAN CONTRACT ACT, 1872

Section 182

‘Agent” and ‘Principal’ defined-

An ‘Agent’ is a person employed to do any act for another, or to represent another in dealing with third person. The person from whom such act is done, or who is so represented, is called the ‘Principal’.

Thus, by perusing both the general prospective, as well as the definition of Power Of Attorney through legal prospective, it seems prima facie that there is no big discrepancy in the way the layman understand the concept of Power Of Attorney than the lawyer/judges, however it is not so the case, and as a result of such limited/distorted understanding, the Civil Courts are piled up with number of disputes arising out of Agreement/Contract through POA and Criminal Courts are piled with numerous Fraud and Criminal Impersonation cases. And as a result, it is need of time to dwell into the actual concept of this famously misunderstood instrument/document ‘Power Of Attorney’.    

2)     Object behind execution of ‘Power Of Attorney’?

There are various objects behind execution documents such as ‘Power Of Attorney’, out of many factors; some factors are reproduced herein as a ready reference for the sake of better understanding the concept of ‘Power Of Attorney’. Some examples are as under.

a)    Physical Incapacity:

     A person who is physically incapable of approaching other person may execute POA with his near and dear ones for representation like signing the documents, opening bank accounts, and acting for the Principal as if the Principal would have acted or omitted. To elaborate more lets follow the example below.

‘A’ son of ‘B’ went to Foreign Country in consonance of Higher Education or Job. Now, in such circumstances ‘A’ may authorize ‘B’ i.e. his father or to any near or dear ones, to do all the necessary act like opening the Bank Account, to purchase the property in the name of ‘A’ in his absences, collecting rents, to represent him before any Quasi-judicial Authority, or Judicial Authority or do to any other Act which the principal could have function in his presence.    

b)    Age Oldness:

     A person who is senior citizen may due to efflux of time develop aliments such as Joints Pain, Loss of Memory, Low Vision, and thus due to such physical disabilities he/she may find themselves difficult to enter into any contract. And thus to overcome such disabilities, it is advisable to invoke the provisions under Power Of Attorney Act, 1882 and appoint an agent or any person form family to look into the affairs which you could have attainted in the absence of such Agedness.

c)    Spouses: 

     A wife can execute POA in favor of husband or vice-versa, to look after their affairs like putting Signatures on Bank Papers, to buy shares, to look after Demat Account etc.

d)   For Developing Resources:

     A Principal can appoint an Agent to act on his behalf of developing resources; the above points can be understood well by reading following illustration as under:

‘A’ a person in village owes 40R of Agricultural Land, now the said village comes within the boundary of Municipal Corporation coupled with the notification that, the land can be used for purpose of urbanization.

    Now in such cases ‘A’ have three options, 1) To carry on the Agricultural Activities as usual 2) To sell the said land, since the Potential Of the Land has enlarged and he can earn handsomely 3) To develop the said land by himself.

     Now if in case ‘A’ chooses option 1 or 2 it make no wider difference, but if ‘A’ choose to opt for option no. 3 he has to look for the person who is expert in Real Estate Sector, who can manage to bring him the (i) Order of NA, (ii) who can engage architect to prepare Layouts and Sanction Plan, (iii) coupled with permission of Municipal Corporation of Commencement Certificate.

     Thus, in such cases ‘A’ may appoint an agent for this limited purpose by registering Power Of Attorney, in the Jurisdiction of  Sub-Register’s office where the land is situated, so that in future work can be done smoothly and efficiently since the agent is expert and A is layman.

     Thus, above are some of the head notes which showcases factors for which execution of Power Of Attorney will be appropriate, however it is to be born in mind that, the spirit behind the execution of POA is that work can be done efficiently and without hindrance, in the absence of a person. It is further, noted that, execution of POA through registration is optional since it does not fall under S. 17 of Indian Registration Act, however it is pertinent to note that, registration for commercial transaction like developing resources is advisable to be registered since its evidentiary value increases and can be proved as a yardstick to prove the act or omission was bona-fide or authority given was exceeded.

3)     What are types Of Power Of Attorney?

     There are mainly two types of ‘Power Of Attorney’ i.e. General Power Of Attorney and Special Power Of Attorney; however it is observed that, people mostly get carried away by the nomenclature used as a Prefix to Power Of Attorney. Now a days to perform different acts different kinds of Nomenclature are used, the most commonly used nomenclatures are as under: 

1.       General Power Of Attorney.

2.      Special Power Of Attorney.

3.      Durable Power Of Attorney.

4.      Revocable Power Of Attorney.

5.      Irrevocable Power Of Attorney.

6.      Health Care Of Attorney.

     However, it will not be an understatement to say that it is a futile exercise in dwelling with all aforesaid concepts of Power Of Attorney, since law stands settled by the Hon’ble Gujarat High Court in Manubhai Vs Jayantilal in Special Civil Application No. 16056 of 2003 wherein it as been specifically observed as “The title which as been given to the Document read as ‘General Power Of Attorney’. However while constructing document one cannot just go by the title to the document or the nomenclature, but, Court owes a duty to see the substances of the document’.    

     It is further to be noted that, even S. 94 of the Evidence Act lays down the rule of interpretation of the language of document.

     “Thus to sum up the context above, one needs to be careful while drafting the Documents such as Power Of Attorney, and the terms should be very clear as to the purpose of the POA, clauses of revocation, authority given to agent, acts which needs prior consent of Principal etc, even a person holding General Power Of Attorney can be said to be holding it in the manner of irrevocable Power Of Attorney if the substance is proved to otherwise, thus the nomenclature makes no difference but substance  altogether does makes difference’.  

   

4)     Revocation of Power Of Attorney?

     It is to be noted that, documents/instruments such as ‘Power Of Attorney’ do not create any interest in the property. It is mere a license to act as a agent in a good faith. And thus there is a fiduciary relation between ‘Principal’ and ‘Agent’.

     However, Principal can revoke its POA if he losses his confidence in an Agent. It is to be noted that, revocation of POA takes places due to many reasons. The following are some of the factors which are enumerated for better understanding as under:

i) When POA is for time bond manner, it may get revoke after the laps of time.

ii) When Principal dies or becomes insane.

iii) When Principal becomes insolvent.

iv) By mutual agreed terms between Principal and Agent.

v) When POA is executed for Specific Transactions, and after its accomplishment.

It is further advised to look into the provisions of S. 201 of Indian Contract Act 1872 for better understanding on revocation.

It is further to noted that, POA cannot be revoked if it is coupled with interest, and to substantiate the statement it is helpful to look settle position of law on this aspect. The Hon’ble Apex Court in Seth Loon Karan Sethiya vs Ivan E John and Others AIR 1969 SC 73 the Supreme Court has specifically laid down that, “The Power Of Attorney which is coupled with interest, and hence same is not revocable”.

5)     Is POA an Instrument to Transfer Right, Title or interest in an immovable property?

     Answering to this question the Hon’ble Apex Court constituted the Full Bench in the year 2009, thus in the judgment of Suraj Lamp & Inds vs State Of Harayana SLP(C) No. 13917 Of 2009 it was been held that,

     “A ‘Power Of Attorney’ is not an instrument of transfer in regards to any right, title or interest in an immovable property.  The Power Of Attorney is creation of agency whereby the grantor authorizes the grantee to do the act specified therein, on behalf of grantor, which when executed will be binding on the Grantor as if done by him.”

     It is further to be noted that, ‘even an irrevocable Attorney does not have the effect of transferring the title to the Grantor’.

6)     Conclusion

     The object of the present article is not to deal with the every nook and corner of the concept Power Of Attorney, the object was simply to give the bird view to the common masses and law students, by projecting the rightful prospective of Legal Fraternity and convincing them to look from that spectacles.

"This article is authored by Adv. Rushikesh R Chavan, you can reach out to him at rushichavan14@gamil.com"