Sale of Property Through Power of Attorney Not Valid - Supreme Court


Image Source: The Hindu

“A Power of Attorney is a legal instrument that provides ease of carrying out business to individuals who may otherwise not able to do so”

Principal/ Grantor/ Donor is the person who gives his power/ responsibility/ authority to another person to act on his behalf. 

Attorney/ Agent/ Donee is the person to whom the power/ responsibility/ authority is given.

A power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. The power of attorney is creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him (Section 1 A and Section 2 of the Powers of Attorney Act, 1882). Power of Attorney is not an authentic instrument to execute transfer of property titles. Although, the practice of selling and buying property through General Power of Attorney (GPA) and Special Power of Attorney (SPA) had been really common all across Indian cities. The same was because of the monetary benefits such selling and buying offered to both the buyer as well as the seller.

Scope of Power of Attorney

In State of Rajasthan v. Basant Nehata MANU/SC/0547/2005 : 2005 (12) SCC 77 this Court held:

"A grant of power of attorney is essentially governed by Chapter X of the Contract Act. By reason of a deed of power of attorney, an agent is formally appointed to act for the principal in one transaction or a series of transactions or to manage the affairs of the principal generally conferring necessary authority upon another person. A deed of power of attorney is executed by the principal in favor of the agent. The agent derives a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, the same shall be read as if done by the donor. A power of attorney is, as is well known, a document of convenience.

Execution of a power of attorney in terms of the provisions of the Contract Act as also the Powers-of-Attorney Act is valid. A power of attorney, we have noticed hereinbefore, is executed by the donor so as to enable the done to act on his behalf. Except in cases where power of attorney is coupled with interest, it is revocable. The done in exercise of his power under such power of attorney only acts in place of the donor subject of course to the powers granted to him by reason thereof. He cannot use the power of attorney for his own benefit. He acts in a fiduciary capacity. Any act of infidelity or breach of trust is a matter between the donor and the donee."

An attorney holder may however execute a deed of conveyance in exercise of the power granted under the power of attorney and convey title on behalf of the grantor.

What did the 2011 Supreme Court judgment say?

A Three-Judge Bench of Supreme Court of India comprising of Justices R.V. Raveendran, A. K. Patnaik and H. L. Gokhale in Leave Petition (C) No. 13917 of 2009 titled  Suraj Lamp & Industries Pvt Limited vs the State of Haryana case, ruled that property transactions carried out by way of PoA do not hold legal validity. A three-judge bench presided over by Justice R. V. Raveendran said that property can be lawfully transferred only through registered sale deeds.

The Supreme Court of India in this case declared that:

“a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property”.

 In consonance to the same the Indian Apex court directed the municipal bodies not to mutate or register properties based on such documents. The Supreme Court, however, reinstated that valid transactions that have been carried out through GPA would be legal.

The court further said, "Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under Section- 53 A of the Transfer of Property Act, 1882."

Following the SC’s ruling, the Delhi government, in 2012, came up with a circular banning the sale of property through GPA, a will and agreement to sell, collectively or separately.


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