A document which conveys an authorization of a person empowering another to represent the former and to act on his behalf is called a Power Of Attorney (PoA), vide section 2(21) of the Power of Attorney Act 1822. The person who gives the power is called Principal and the person who is given the same is called Agent.
The powers conferred by the principal on the agent, the terms, purposes etc. should be mentioned in the document of Power of Attorney. There is an implied responsibility on the part of the agent that he has to keep records of all transactions which are made on behalf of the principal. The actions of the agent are treated legally effective as if they have been done by the principal himself and as such, the principal should take utmost care to select only an individual with proven integrity as his agent.
Moreover, power of attorney confers a right on the agent to utilize the principal’s name. To avoid the validity of the power of attorney being challenged by third parties, some people get it attested by Notary Public. It should however be noted that this attestation is not mandatory for making the PoA authenticated.
A power of attorney executed outside India should be attested by a Magistrate or the Indian Consulate in the country concerned.
Types of Power of Attorney
Broadly speaking, there are two types of Power of attorney viz; Special Power of Attorney and General Power of Attorney.
Special Power of Attorney denotes a power which is restricted to a particular act or particular class of acts whereas a General Power of Attorney is a power granted to manage the principal’s affairs generally.
General Power of Attorney may include powers relating to the principal’s personal as well as business transactions.
As slightly distinct from the aforesaid two types of power of attorney, a Temporarily Limited Power of Attorney meant for a limited period also can be granted.
According to the nature of powers delegated to the agent, there are other types of power of attorney viz; Irrevocable power of attorney and Durable power of attorney.
What is an Irrevocable Power of Attorney ?
In certain cases, power of attorney is created on some consideration for ensuring a benefit to the person in whose favour it is created. Such a power of attorney is called Irrevocable Power of Attorney. In other words, this type of PoA cannot be reversed. An irrevocable power of attorney is therefore very much different from a general power of attorney. This is the type of PoA which is widely used in real estate transactions.
What is Durable Power of Attorney ?
Ordinarily, a power of attorney becomes invalid if the principal expires or becomes incapacitated (eg; losing capacity due to head injury, dimensia, unsound mind etc.). If the principal becomes incapacitated after the PoA has been granted, it will no longer be treated as valid. On the other hand, if the principal specifies in the power of attorney that it will continue to be valid even if the principal becomes incapacitated, such PoA is called a Durable Power of Attorney or Enduring Power of Attorney. In other words, in the case of a Durable Power of Attorney the powers of the agent to act on behalf of the principal continue even if the principal becomes incapacitated.
How the Power of Attorney Gets Terminated ?
Any power of attorney, whether registered or not, gets terminated by death of its principal. Besides, an unregistered PoA stands terminated by the procedure specified in the original PoA document or destroying the document when the principal is still not incapacitated or revoking the Durable power of attorney by means of a document that is signed, notarised and sent to the agent by registered mail (when the principal is still not incapacitated)
Even if the power of attorney is registered it is treated as terminated in the following circumstances:
- If the agent is unavailable and
- In the case of a Durable power of attorney when it is revoked by registering a deed of revocation in the same office where the original document was registered.
Should the PoA be Registered ?
Is power of attorney containing authorization for registering documents, to be registered mandatorily? The Supreme Court of India has decided this question as follows:
The power of attorney granted for execution and registration of documents is not to be mandatorily registered whereas if the sale deed has been signed by the owner and presented for registration by the power holder, then the PoA should be registered.
Power of Attorney in Real Estate Transactions
In real estate transactions, Power of Attorney plays a very vital role. In many situations PoA facilitates real estate transactions.
Eg; If the seller of the property is expected to be out of station at the probable time of registration, a PoA can be granted to a third person who can duly sign the registration documents on behalf of the seller. But this convenience, going forward, paved the way for avoiding stamp duty which resulted in great loss to the government exchequer.
The under mentioned illustration will make the point clear:
Suppose A is the seller and B is the buyer. If B wants to buy the property only for making some business, ie; not for acquiring the property for his own use, he may request the seller to grant him an irrevocable power of attorney instead of making registration of the sale. Stamp duty for power of attorney is nominal when compared to that of sale transaction. When the price gets escalated, B can sell it to C and will make the sale transaction on behalf of A on the strength of the PoA as if the property was sold by A directly to C. Here, B has saved the stamp duty which should have been paid by him if he had got the sale registered in his favour instead of getting the PoA.
Having understood the volume of loss to the government exchequer, several state governments have introduced some amendments in registration rules relating to real estate transactions. Kerala government have introduced an amendment in such a way that PoA for real estate transactions can be made on Rs.300.00 stamp paper only if it is granted in favour of spouse and blood relatives viz; parents, children, brothers and sisters. In other cases, of course, power of attorney can be granted but with the same stamp duty required for registration of sale transaction of the property concerned.
It may however be noted that transfer of properties is not permitted now on the strength of General Power of Attorney.
Reference:
Power of Attorney Act,1822