Power of attorney is a legal instrument that empowering any specific person to act for and in the name of the person executing such instrument.[i] Power of attorney is created for matters relating to property, tax payments, banking and legal proceedings. The person who is executing such power of attorney or who grants such power is called as the donor and the person to whom such power is granted is called as attorney / agent / done.
Power of attorney is created by persons who cannot do certain transactions due to their physical unavailability. They may not be present within the country, or due to their old age they could not perform certain functions or they would have certain reasons which would render them impossible to perform certain duties.
In Kasthuri Radhakrishnan and ors V. M. Chinnaiyan[ii] the Supreme Court has stated that the law relating to the power of attorney must be governed by the provisions of the Power of Attorney Act, 1882.
Types of Power of Attorney:
- General Power of Attorney: When a donor gives his complete right or power to act lawfully with respect to his property is called general power of attorney.
- Specific Power of Attorney: A special power of attorney is to be made by a person when a specific act is said to be done. Once such act is accomplished, the power of attorney comes to an end.
Important clauses to be present:
- The name, age, address and occupation of the person appointing the power of attorney. i.e. The principal
- The person to whom such power is granted i.e. The donee or the attorney
- The date and place of making power of attorney deed and the date from which it came into force.
- The date of termination of the power of attorney deed if it is limited by time. In case if it no specific time is mentioned then a mention has to be made whether those are durable or not.
- In special power of attorney, the special act that has to be done by the agent and the time period within which such act has to be performed must be clearly mentioned.
- In cases where general power is granted, then all the acts that the principal authorises the attorney to do must be clearly mentioned. If the donor wishes certain act not to be done, then such acts must also be mentioned.
- The reason for which such power of attorney was created. Such reason must be valid in the eyes of the law.
Relationship between the donor and the attorney:
The donor of the power of attorney authorises some person to act on behalf of him called as the attorney. This case is primary example of agency. The person appointing any person to administer any act through power of attorney can be known as principal and the any person appointed could be known as agent. They maintain principal- agent relationship between them.
Registration of Power of Attorney:
As per the Registration Act, 1908, registration of Power of Attorney is not compulsory. But when the power of attorney is concerned with the transfer of immovable property and when the possession of such property is given to the attorney then such Power of Attorney needs to be registered.
It is recommended that the Power of Attorney must be registered in order to avoid any disputes in future.
- Any power of attorney may be registered with the Sub registrar.
- The attorney holder must provide the registrar with proof of identity and proof of address.
- Two passport size photographs of the attorney must be submitted
- There shall be two witnesses with sufficient proofs to affix their signature to the document.
Stamp duty for the Power of Attorney:
As per Section 48, Schedule 1 of the Indian Stamp Act, Stamp duty is duly payable for all kinds of Power of Attorney. Notarizing a Power of attorney is advisable in general. A power of attorney which is notarised is presumed to have been executed properly. [iii]
Power of attorney made by NRI:
Any power of attorney executed by NRI’s residing abroad must be registered. Such POA must be attested by the Indian Consulate of that country and it must be used within 3 months which it was executed. The POA must be executed on a stamp paper as applicable in that particular country. Any signature made in the POA must be authenticated by the authorities of the Indian embassy. [iv]
Revocation of the power of attorney:
A power of attorney can be made revocable only with the consent of the agent when such agent has interest in the subject matter of the Power of Attorney. Section 202 of the Indian Contract Act, 1872 states that when the agent has an specific interest in the property that forms the subject matter of the agency, such an agency cannot be terminated which would prejudice the interest of the agent.
Procedure in revoking a power of attorney:
- When any party to the agency requires revoking the power of attorney such persons must send a reasonable notice to the other party before revocation.
- When the power of attorney is unregistered, then the revocation can be made by an unregistered instrument and a public notice of such a revocation must be published in the local newspapers.
- When the power of attorney is registered, then it can be revoked only by a registered deed.
- In case where the execution of power of attorney is made jointly, then the revocation must be made only with the consent of other such principal.
Liability of the principal in power of attorney:
The principal experiences the liability as under The Indian Contract Act. When any agent acts within the authority conferred upon by him and does any fraudulent act, then the principal will be held liable for the acts of the agent. When an agent acts beyond the powers that have been given to him then the principal need not be held liable.[v]
Power of attorney deed:
The power of attorney must include the following:
- Agent: Any person can be appointed as an agent when the principal trusts such person with his properties.
- Principal: The person who executes the power of attorney to the agent.
- The Power of Attorney must grant any general or specific authority to the agent that is required to be administered by him by the principal.
- The date from which the instrument becomes effective
- The signatures of the principal and the agent must be affixed to the instrument.
Limitations of powers granted through POA:
- A Power of Attorney holder cannot open bank accounts on behalf of the donor. He can operate the bank accounts of the donor and it can be done only when the donor permits him to do so. A POA holder cannot repatriate funds outside India. He can only repatriate funds to the foreign bank account of the account holder. This is in accordance with the circular issued by the RBI. [vi]
- Transfer of immovable property occurred through general power of attorney cannot confer any ownership. In a famous case, the apex court stated that a power of attorney is not an instrument of transfer with regard to any right or interest in the property. [vii]
Amendment made to the Power of Attorney Act:
The Power of Attorney was enacted in the year 1882 and it contains 6 sections. An amendment was introduced in the year 1982 which brought a new section (Section 1A) into the act. Section 1 A of the Power of Attorney defines power of attorney to be an instrument which empowers any person to act in behalf of the person who is executing such instrument.
Power of attorney is made only when the principal who is making such instrument is unable to take of his financial matters due to health reasons or intending to move to any foreign country. The agent to whom the principal transfers the right to administer must be trustworthy and such instrument must be clear with the regard to the powers that it confers to the agent.
Edited by Pragash Boopal
Approved & Published – Sakshi Raje
[i] Section 1A of the Power of attorney Act 1882.
[ii] AIR 2016 SC 609
[iii] Section 85 of the Indian Evidence Act, 1872
[v] Section 227 of the Indian Contract Act, 1882.