WHAT IS POWER OF ATTORNEY?
Black Law Dictionary has defined Power of Attorney as “An instrument granting someone authority to act as agent or attorney-in-fact for the grantor”. In ordinary words, Power of Attorney is a document which can be used to authorize or appoint another person to do some act on your behalf. The ordinary power of attorney is revocable and automatically terminates upon the death or incapacity of the principal i.e. the person who provided the authority to any agent in POA. However, the Principal can also execute an irrevocable Power of Attorney which can never be revoked and the provision that the Power of Attorney is irrevocable needs to be clearly specified in the POA itself. The act performed by the Agent in pursuance of the POA is legally binding upon the Principal and that is why, the General Power of Attorney is usually created by the people only in favor of their Trustworthy acquaintances and relatives.
What are the Types of Power of Attorney?
Depending upon the purpose or the business for which Power of Attorney (POA) is being executed, there are two types of Power of Attorney:-
- General Power of Attorney; and
- Special Power of Attorney.
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What is General Power of Attorney (GPA)?
The General power of Attorney is executed to provide the broad power and authority to the Agent to perform various functions on behalf of the Principal without restricting his role to perform only pre-meditated specific acts. GPA holder i.e. Agent can undertook and fulfill medical, financial, or legal obligations etc. on behalf of the Principal and the Principal has to ratify the acts done by the agent. Registered GPAs can be revoked or cancelled by execution of registered Deed of Revocation or cancellation mutually by Principal and the agent or, unilaterally by Principal. The unilateral revocation or cancellation through execution of registered cancellation Deed is only allowed where the POA was not executed for valuable consideration and POA Holder failed to fulfill the purpose or object of execution of POA. In case the POA Holder or agent has created any right or interest in favor of someone else by the use of POA before the revocation or cancellation, then that act of creation of right and interest will be binding upon the Principal, no matter whether the GPA gets cancelled unilaterally or mutually. For E.g. A authorized B through a registered General Power of Attorney for property in good faith and love that B will have power to sale, lease or gift A’s properties and B under that GPA sold one property to C. Later, A cancelled the GPA. In this case, the Transfer of Property made by B is final and binding upon A even after the cancellation of the GPA. The GPA will be deemed to be revoked only regarding other properties.
What is Special Power of Attorney (SPA)?
Special Power of Attorney is executed by the Principal to authorize the Agent only for specific act/s, transaction/s, etc. The Role of the Agent is usually clearly defined in SPAs with specific restrictions. SPA’s clearly defines the scope of the functions and authority of the Agent and provides restricted powers ordinarily. SPA automatically becomes ineffective after the fulfillment of special purpose for which it was executed or death of the Principal unlike GPAs which can have long term effects due to broad powers provided in them and can be enforceable and effective even after death of the Principal. Registered SPA can also be revoked similarly like GPA before the fulfillment of purpose for which it was executed.
What are the consequences of Unregistered GPA?
Unregistered GPAs are not valid in law especially those which are created after 11th October, 2011 as Supreme Court in the judgment of Suraj Lamps and Industries Pvt. Ltd. versus State of Haryana and Anr., 183 (2011) DLT 1 (SC) on 11th October 2011, has held that:-
“13. 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 (see section 1A and section 2 of the Powers of Attorney Act, 1882). It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. Even an irrevocable attorney does not have the effect of transferring title to the grantee. In State of Rajasthan vs. Basant Nehata – 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 favour 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 donee to act on his behalf. Except in cases where power of attorney is coupled with interest, it is revocable. The donee 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.
- Therefore, a SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property. The observations by the Delhi High Court, in Asha M. Jain v. Canara Bank– 94 (2001) DLT 841, that the “concept of power of attorney sales have been recognized as a mode of transaction” when dealing with transactions by way of SA/GPA/WILL are unwarranted and not justified, unintendedly misleading the general public into thinking that SA/GPA/WILL transactions are some kind of a recognized or accepted mode of transfer and that it can be a valid substitute for a sale deed. Such decisions to the extent they recognize or accept SA/GPA/WILL transactions as concluded transfers, as contrasted from an agreement to transfer, are not good law.
- We therefore reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.
Transactions of the nature of `GPA sales’ or `SA/GPA/WILL transfers’ do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immoveable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property.
They cannot be recognized as deeds of title, except to the limited extent of section 53A of the TP Act. Such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue Records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as GPA sales.
- It has been submitted that making declaration that GPA sales and SA/GPA/WILL transfers are not legally valid modes of transfer is likely to create hardship to a large number of persons who have entered into such transactions and they should be given sufficient time to regularize the transactions by obtaining deeds of conveyance. It is also submitted that this decision should be made applicable prospectively to avoid hardship.
- We have merely drawn attention to and reiterated the well-settled legal position that SA/GPA/WILL transactions are not `transfers’ or `sales’ and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale.
Nothing prevents affected parties from getting registered Deeds of Conveyance to complete their title. The said `SA/GPA/WILL transactions’ may also be used to obtain specific performance or to defend possession under section 53A of TP Act. If they are entered before this day, they may be relied upon to apply for regularization of allotments/leases by Development Authorities. We make it clear that if the documents relating to `SA/GPA/WILL transactions’ has been accepted acted upon by DDA or other developmental authorities or by the Municipal or revenue authorities to effect mutation, they need not be disturbed, merely on account of this decision.
- We make it clear that our observations are not intended to in any way affect the validity of sale agreements and powers of attorney executed in genuine transactions. For example, a person may give a power of attorney to his spouse, son, daughter, brother, sister or a relative to manage his affairs or to execute a deed of conveyance. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a Power of Attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers. In several States, the execution of such development agreements and powers of attorney are already regulated by law and subjected to specific stamp duty. Our observations regarding `SA/GPA/WILL transactions’ are not intended to apply to such bonafide/genuine transactions.”
Is there any process to apply to the Court for declaration of GPA as illegal, null and void?
Yes, a person can file the Suit for Declaration before a Civil Court to get a GPA declared as illegal or null void on various grounds including fraud, misrepresentation, coercion, execution by minor or person with unsound mind etc.
Conclusion:
It is always better to create the registered Power of Attorney (POA) only in favor of the people you can trust and can remain assured that they will not misuse the power provided under it. Sometimes, people execute power of attorneys as security for loans which can have repercussions and for the same reason, many legal consultants advice that one should avoid doing such an act.