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Power of Attorney and its Legality During Sale of Property in India
“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”
There may be many circumstances in a person’s life who owns assets, properties, bank accounts, etc. but who at that moment may not be in the right condition to appropriately execute his/ her duties due to unforeseen circumstances like being ill, being abroad (in case of an NRI) or even when the person is too old to perform his/ her duties, etc.
As a result, during circumstances where a financial transaction has to be carried out mandates the attendance of the person who is unable to appear personally, then the only solution towards this is to delegate his own powers i.e. to act on behalf of the person to another individual.
This procedure of delegation of power is called Power of Attorney (PoA) and during such an unforeseen situation where the rightful owner cannot utilize his power is when a Power of Attorney deed is executed. This practice is highly popular to give one’s powers to a dependable and honorable person to conduct operations like sale, renting out, registrations, etc. provided that person is busy or unable to do those things personally.
However, in 2011, the Supreme Court of India in a landmark judgment observed that transferring property title through a General Power of Attorney (GPA) is illegal. But before learning the legality of the Supreme Court order let us understand the concept of Power of Attorney.
Power of Attorney (PoA)
A Power of Attorney is a legal document where 1 person grants the right to execute i.e. the power to transact in matters regarding the property, legal and judicial proceedings, banking, payment of tax, etc, to another person due to any of the reasons explained above earlier.
A Power of Attorney is an authorization granted by a written formal instrument whereby an individual termed as the principal/ donor authorizes another individual termed as the attorney/ agent/ donee to act on his/ her behalf.
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.
Who should utilize the option of a Power of Attorney?
Ordinarily a Power of Attorney is executed by someone who cannot perform his transactions himself or herself (in person) due to numerous reasons. The following are the numerous reasons that make an individual delegate his powers to perform a duty to some other individual:
- If the Principal resides in a foreign country and due to that he is unable to be present for the responsibility
- If the Principal is ill and is bedridden because of that
- If the Principal is a senior citizen who is suffering from health problems
- or any other valid reason on the part of the Principal for being unable to perform his duties on his own
What are the different types of Power of Attorney in India?
A Power of Attorney (PoA) can be of 2 types:
- General Power of Attorney (GPA)
When a person is authorized with absolute general right or power to act legally with respect to the property or bank accounts or tax payments, or registration work or to file a case against 3rd party, etc by another person is termed as a GPA.
An individual can either give a GPA for all his properties, banking transactions, tax affairs, registration, legal disputes as well as court matters etc. or can simply grant a general power pertaining to just one category from above. For instance, power relating to property matters only. This transfer of general power is extremely broad and therefore, has a lot of risks involved in case the Agent/ Attorney is not a dependable individual.
- Special Power of Attorney (SPA)
A SPA is the transfer of special power which is only granted for a specific assignment and once the specific assignment is completed the SPA automatically comes to an end.
A typical example of a SPA is when people rent out their property or when the agent appears for the registration of the principal’s property or when the agent appears in a court or before the Tax authorities on behalf of the Principal etc.
