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All about Power of Attorney

15 min read
_Laws for Power of Attorney Law Insider

By Abhijit Mishra

Published on: 01 August, 2022 at 00:40 IST

What is Power of Attorney?

Wharton defines a Power of Attorney as

A writing given and made by one person Authorising another, who, in such case, is called the attorney of the person (or donee of the power), appointing him to do any lawful act in stead of that person, as to receive rents, debts, to make appearance and application in court, before an officer of registration and the like. It may be either general or special, i.e., to do all acts or to do some particular act.

As per Stroud Judicial Dictionary

Power of Attorney as an authority whereby one is “set in turn, stead or place” of another to act for him.

Laws of Power of Attorney

The law relating to the powers of attorney is governed by Powers-of-Attorney Act, 1882.

Section 1A of the Powers-of-Attorney Act, 1882

Power of Attorney includes an instrument empowering a specified person to act for and in the name of the person executing it. It is always kept by the attorney.

Section 2 (21) Indian Stamp Act, 1899

Power-of-attorney includes any instrument (not chargeable with a fee under the law relating to Court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.

Power of Attorney: Contract Act

Power of Attorney is an authority in writing to another person to act for and in the name of the person who executed the power.

Donee of a Power of Attorney is an Agent of the Donor.

Hence concerning Law of Agency are dealt with the Indian Contract Act, 1872.

(a)         who may execute a power;

(b)         who may become an attorney;

(c)          when is a power terminated; and

(d)         whether a power coupled with interest is revocable.

Power of Attorney: Stamp Act

1. Power of attorney is liable to stamp duty under the provisions of the Indian Stamp Act, 1889. Duty varies from one particular State to another State. The exact amount of the duty will depend upon the State in which the power of attorney is executed.

2. If a power of attorney executed in one State has to be sent to another State where the stamp duty payable is higher, then the power of attorney should be stamped with the difference in the duty before it is so used. Else, the power of attorney could be impounded.

3. If a power of attorney is executed in a foreign country, it should be stamped within three months of its being received in India. If it is not so stamped within the period of three months of its being brought to India, then the same will be deemed to be unstamped and cannot be acted upon.

Power of Attorney: Registration Act

1.  Registration of a power of attorney is not compulsory.

2. Section 4 of the Powers-of-Attorney Act, 1882

Provides that it may be deposited in the High Court or District Court within the local limits of whose jurisdiction the instrument is with an affidavit verifying its execution, and a copy may be presented at the office and stamped as the certified copy and it will then be sufficient evidence of the contents of the deed.

3. In certain cases, registration of power of attorney may become compulsory under Section 17 of the Indian Registration Act, 1908.

4. Thumb Rule

a. Immovable Property – YES (Mandatory): Registration

b.  Movable Property- NO (Not Mandatory | However Advised): Registration

What are the Types of Power of Attorney?

Special Power of Attorney

A power of attorney executed for the purpose of a specific. It is also called a “particular power of attorney”. A specific act is meant to imply either a specific act or acts related to each other as to form one judicial transaction, such as all the acts necessary to perfect a mortgage or a sale of a particular property.

General Power of Attorney

A power of attorney executed for the purpose of generally representing another person, or for performing more than one act.

Note: A power of attorney can be executed in favour of more than one person. If a power of attorney is executed in favour of more than one person it would be desirable to provide whether such Donees will act jointly or severally. In the absence of such an express provision authorising them to act severally, they will be entitled to act only jointly.

Types of Power of Attorney

Revocable Power of Attorney

A power of attorney executed in favour of a person can always, at the discretion of the donor thereof, be revoked. As we have seen earlier, the donee of a power of attorney is an agent of the donor.

Irrevocable Power of Attorney

• If a donee himself has an interest in the matters covered by the power of attorney, which forms the subject matter thereof, the power of attorney in the absence of express contract cannot be terminated to the prejudice of such interest.

•  In other words, agency coupled with interest cannot be terminated without the consent of the other party (Section 202 of the Indian Contract Act, 1872). Therefore, a power of attorney executed, in which the donee himself has an interest, is irrevocable.

•  Such irrevocable powers of attorney are executed usually in favour of the financial institutions by a Donor who offer financial assistance to the latter. (Bank Loans)

•  Through such irrevocable powers of attorney, powers are given to the financial institutions for executing a security document for securing the financial assistance in the event of a company failing to execute such a document by a certain date.

Power of Attorney: Construct – I

•  Power of Attorney, should be construed strictly and general words must be interpreted in the light of the special powers, although they include incidental powers necessary for carrying out the authority.

•  The general words used in the subsequent clauses of a Power of Attorney must be read with the special or specific powers given in the earlier clauses and cannot be construed so as to enlarge the restricted powers mentioned in the powers of attorney.

Rules of Thumb in Construction while interpreting a Power of Attorney:

1. That regard must be had to the recitals, if any, as showing the scope and object of the power, as such recitals will control any general terms in the operative part of the instrument. Thus, when it was recited that the principal was going abroad, and the operative part gave authority in general terms, it was held that the authority continued only during the principal’s absence.

2. Where special powers are afforded by general words, the general words are to be construed as limited to what is necessary for the exercise of the special power and as enlarging those powers only when necessary for the carrying out the purposes for which the authority is given.

Power of Attorney: Construct – II

Principles governing the construction of a power of attorney are:

1. The operative part of the deed is controlled by the recitals;

2. Where an authority is given to do particular acts, followed by general words, the general words are restricted to what is necessary for the performance of the particular acts;

3. General words do not confer general powers, but are limited to the purpose for which the authority is given and are construed as enlarging the special powers only when necessary for that purpose;

4. Power of Attorney is construed so as to include all incidental powers necessary for its effective execution

Execution of Power of Attorney

• A power of attorney can be executed by any person, who can enter into a contract i.e. a person of sound mind who has attained majority.

• A power of attorney can be executed only in favour of a major. While functioning as an attorney the donee is acting as an agent of the donor i.e. the executor of the power of attorney, who is the principal.

• Thus, in such cases there is relationship of agent and principal and such relationship can be entered into by majors and not by minors.

• The Execution Power of the Power of Attorney is usually Governed by mainly Section 2 and in case of a married women via Section 5 of the Powers-of-Attorney Act, 1882

Execution of Power of Attorney

Section 2 of the Powers-of-Attorney Act, 1882

Provides that the donee of a power of attorney may execute or do any assurance, instrument or thing in his own name and signature, and an instrument or thing so executed or done shall be as effectual in law as if it had been executed or done “by the donee of the power in the name and with the signature and seal of the donor thereof”.

Section 5 of the Powers-of-Attorney Act, 1882

Married women’s power to execute a power of attorney provides that a married woman of full age shall, by virtue of this Act, have power, as if she were unmarried, by a non testamentary instrument, to appoint an attorney on her behalf, for the purpose of executing any non tenstamentary instrument or doing any other act which she might herself execute or do; and the provisions of this Act relating to instruments creating powers-of-attorney, shall apply thereto.

Power of Attorney: Liability

•  The potential tensions between the Donor and Donee can arise due to misinterpretation, act of omission or abuse of Power of Attorney or Act of Ultra Vires

•  There are basically two Remedy for disputes

Civil Remedy-

Claiming damages under Section 73 & 74 of the Indian Contract Act

Specific Performance & Injunctions under Specific Relief Act, 1963

Criminal Remedy

Section 406 of the Indian Penal Code of Breach of Trust

Section 419 of the Indian Penal Code of Cheating by Impersonation

Section 420 of the Indian Penal Code of Cheating by Promise

Do’s & Don’t

If you are for the Donor

• Be careful to whom you are giving the Power of Attorney

• If possible, restrict the strength of Power of Attorney to limit the damage by adding revokable clauses and limitation to power clauses.

If you are a Donee

• Ensure your acting according to the limitations of the Power of Attorney.

• The criminal Act of Breach of Contract u/s 406 of Indian Penal Code is a serious threat so act in best interest of the Donor and avoid omissions.

•  Ensure, you are covered under the Section 188, 189 and 202 of the Indian Contract Act to challenge the revokable clauses

FORMAT FOR SPECIAL POWER OF ATTORNEY

Power-of-Attorney to Present Document for Registration

BY THIS POWER OF ATTORNEY I,……….. of etc., do hereby appoint……….of, etc., my attorney for me and on my behalf to appear for and represent me before the Sub-Registrar of District of all times as may be necessary and to present before him for registration the deed dated the…………..

    ……………….. day of 20XX made between, etc., to admit the execution of the said deed by me (if necessary to admit the receipt of consideration), to do any act, deed or thing as may be necessary to complete the registration of the said deed in the manner required by law and when it has been returned to him after being duly registered, to give proper receipt and discharge for the same. And I, the said AB, do hereby agree and declare that all acts, deeds and things done, executed or performed by the said CD shall be valid and binding on me to all intents and purposes as if done by me personally which I undertake to ratify and confirm whenever required.

Signed, sealed and delivered

Witnesses

1.           ABC

2.           XYZ

POWER-OF-ATTORNEY

TO SELL A PARTICULAR PROPERTY

BY THIS POWER OF ATTORNEY I, , of etc., hereby appoint………………..

……… of, etc., my attorney, in my name and on my behalf to do inter alia the following acts, deeds and things, viz.:

1. To negotiate on terms for and to agree to and sell my house No  (or, etc.) situate at, etc., fully mentioned and described in the Schedule hereto to any purchaser or purchasers at such price which my said attorney, in his absolute discretion, thinks proper, to agree upon and to enter into any agreement or agreements for such sale or sales and/or to cancel and/or repudiate the same.

2. To receive from the intending purchaser or purchasers any earnest money and/or advance or advances and also the balance of purchase money, and to give good, valid receipt and discharge for the same which will protect the purchaser or purchasers without seeing the application of the money.

3. Upon such receipt as aforesaid in my name and as my act and deed, to sign, execute and deliver any conveyance or conveyances of the said property in favour of the said purchaser or his nominee or assignee.

4.  To sign and execute all other deeds, instruments and assurances which he shall consider necessary and to enter into and/or agreement to such covenants and conditions as may be required for fully and effectually conveying the said property as I could do myself, if personally present.

5. To present any such conveyance or conveyances for registration, to admit execution and receipt of consideration before the Sub-Registrar or Registrar having authority for and to have the said conveyance registered and to do all acts, deeds and things which my said attorney shall consider necessary for conveying the said property to the said purchaser or purchasers as fully and effectually in all respects as I could do the same myself.

And I hereby agree to ratify and confirm all and whatever other act or acts my said attorney shall lawfully do, execute or perform or cause to be done, executed or performed in connection with the sale of the said property under and by virtue

of this deed notwithstanding no express power in that behalf is hereunder provided.

IN WITNESS WHEREOF I, the said…………… , have hereto signed (or, put my signature,      or          set         hand     and       seal              at…………………………

this………………………… day of…………………………

Schedule of the property to be sold.

Signed, sealed and delivered

Witnesses

1.           ABC

2.           XYZ

IRREVOCABLE POWER-OF-ATTORNEY

(To be stamped as a General Power of Attorney)

THIS      POWER OF         ATTORNEY         granted at           this                                   day        of

                               2013 by ‘A Limited’ a company within the meaning of the Companies        Act,       1956,    and       having  its          registered              office

at           (hereinafter referred to as ‘the Borrower’

which expression shall, unless excluded by or repugnant to the context include its

successors and assigns) in favour of…………..a corporation constituted by   and having its Head office at        (hereinafter referred to as “the LENDER”, which expression shall, unless excluded by or repugnant to the context, include its successors and assigns).

1. WHEREAS by an Agreement dated the    day of 2007 (hereinafter referred to as “the said Agreement”) made between the ‘Borrower’ and the ‘Lender’. ‘Lender’ has agreed to grant the ‘Borrower’ financial assistance by way of a term of Rs             (Rupees ) (hereinafter referred to as “the financial assistance”) for the purposes and on the terms and conditions set out therein.

2. ‘Lender’ has stipulated, inter alia, that if so required by ‘Lender’ at any time, the ‘Borrower’ shall secure Lender’s loan of Rs (Rupees In Words) together with interest, commitment charge, additional interest by way of liquidated damages, costs, charges, expenses and other moneys payable by the Borrower to Lender under the said Agreement by a registered legal mortgage in English form of all the properties of the Borrower immovable and movable, present and future and other assets, including uncalled capital and the charge in favour of the Lender to rank pari passu with the charge or charges created and/or to be created by the Borrower in favour of the Lender, AND the charge of Lender on movables to be subject to the charge or charges created and/or to be created by the Borrower in favour of its bankers on stocks of raw-materials, semi-finished and finished goods and consumable stores and book debts and such other movables as may be permitted by Lender in writing to secure borrowings for working capital requirements.

3. Lender has also stipulated that the Borrower shall, for the aforesaid purpose, execute an undertaking in favour of the Lender and shall simultaneously with the execution of such undertaking, grant an irrevocable power of attorney to the Lender, being these presents, authorising the Lender to execute in favour of itself a first legal mortgage in English form for and on behalf of the Borrower in the event of the Borrower failing, when required by the Lender, to duly execute and register a first legal mortgage in English form of all its immovable and movable properties as aforesaid.

The Lender has called upon the Borrower to execute these presents which the Borrower has agreed to do in the manner hereinafter expressed.

NOW THIS DEED WITNESSETH THAT in consideration of the Lender having sanctioned the said financial assistance to the Borrower, the Borrower hereby irrevocably appoints the Lender to be the true and lawful attorney of the Borrower in the name and for and on behalf of the Borrower to do, execute and perform the following acts, deeds and things, namely:

I.  To make, execute, sign, seal and deliver in favour of the Lender, at the expense of the Borrower, in all respects, a first legal mortgage in English form of all its immovable and movable properties, present and future, including lands, here-ditaments and premises and fixed plants and machinery and uncalled capital agreed to be mortgaged to the Lender, with all such covenants, conditions, provisions, and stipulations, as may, in the absolute discretion of the Lender, be deemed necessary or expedient and in particular granting in favour of the Lender a right to take over the management of the Borrower, a right to appoint a receiver of the undertaking of the Borrower and a right to sell the Borrower’s properties without intervention of the Court, for the purposes of securing to the Lender all the moneys payable by the Borrower’s under the said Agreement, as aforesaid, the charge of the Lender to rank pari passu with the charge or charges created and/or to be created by the Borrower in favour of the Lenders for the purposes and in the manner mentioned therein. PROVIDED THAT the charge of the Lender on movables shall be subject to the charge or charges created and/or to be created by the Borrower in favour of its bankers on its stocks of raw materials, semi- finished and finished goods and consumable stores and book debts and such other movables as may be permitted by the Lenders in writing to secure borrowings for working capital requirements.

II.  To investigate or cause to be investigated, at the expense of the Borrower in all respects, the Borrowers’ title to the immovable properties agreed to be mortgaged by the Borrower to the Lender and to take all steps to make

out title to the said properties to the satisfaction of the Lender as and when required by the Lender.

III. To apply for and obtain necessary clearance certificates under Section 230A of the Income Tax Act, 1961.

IV. To do or cause to be done all such acts, deeds and things as may be necessary or proper for the effectual completion and registration of the said mortgage.

V. AND GENERALLY to do or cause to be done every other act, matter or thing which the LENDER may deem necessary or expedient for the purposes of or in relation to these present.

VI. The Borrower hereby agrees to deposit in advance with the Lenders sufficient sums to cover the expenses to be incurred on investigation of title, stamp duty and registration charges and other miscellaneous expenses for the purpose of and in connection with the execution and registration of the said mortgage deed in English form.

VII. In the event of failure on the part of the Borrower to deposit sufficient amounts with the Lenders, the Lenders may, but shall not be obliged to, incur the expenditure for the said purposes and the Borrower shall, on receipt of notice of demand from the Lenders, reimburse the same to the Lenders together with interest at the rate stipulated by the Lender from the date of payment by the Lender.

VIII. The Borrower hereby agrees that all or any of the powers hereby conferred upon the Lender may be exercised by any officer or officers of the Lender nominated by the Lender in that behalf.

IX.  AND the Borrower does hereby declare that all and every receipts, documents, deeds, matters and things which shall by the Lender or by any of its officers appointed by the Lender in that behalf, be made, executed or done for the aforesaid purposes by virtue of these presents shall be as good, valid and effectual to all intents and purposes whatsoever as if the same had been made, executed or done by the Borrower in its own name and person. The Borrower hereby agrees to ratify and confirm all that the Lender or any of its officers appointed by the Lender in that behalf shall do or cause to be done in or concerning the premises by virtue of this power of attorney.

X.  AND the Borrower does hereby declare that this Power of attorney shall be irrevocable.

IN WITNESS WHEREOF the Borrower company has caused its Common Seal to be hereunto affixed the day and year first hereinafter written.

The Common Seal of the Borrower Company was hereunto affixed pursuant to the resolution of its Board of Directors passed on the………………… in the presence of Shri………………… Director and Shri…………………

Director who have signed these presents in token thereof.

Signed, sealed and delivered

Witnesses

1.           ABC

2.           XYZ

Laws that would be Covered

•            Powers of Attorney Act, 1882

•            Indian Stamp Act, 1899

•            Transfer of Property Act, 1882

•            Registration Act, 1908