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Right from the time of barter and cartel in the world of business and finance, contracts started playing an important role in transactions.
Power of Attorney (POA) is a legal instrument authorising someone to act as an agent of another.
It is a very important document that has to be drafted with care much like a will.
The POA must be strictly perused and construed as giving only such authority as they confer expressly or by necessary implications.
The courts added that there are four most important rules of construction.
They are:
*The operative part of the deed is controlled by the recitals
*Where authority is given to carry out a particular act, followed by general words, the general words are restricted to what is necessary for the proper performance of the particular acts
*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
*The deed must be construed so as to include all powers necessary for its effective execution
An agent in law may be either general or special. It is true that a general agent has authority to act for his principal in all matters concerning a particular trade or business of a particular nature.
The special agent is to carry out a particular or specific act.
Who can execute a POA
(a) any one who has attained majority; and is (b) of sound mind
When a GPOA gets cancelled
(a) on the death of the executants (b) when the principal terminates it
What does irrevocable POA mean
If the POA is executed for consideration in respect of property it cannot be unilaterally revoked, prejudicial to the interest of the agent as provided under section 202 of the Contract Act.
“Power of Attorney sales” is becoming very popular in India to overcome certain restrictions.
The agent pays sale money to the owners and gets an irrevocable power of attorney authorising the agent to manage, deal with and dispose of the property without reference to the vendor.
Should POA for sale and purchase of property be registered?
Registration Act, 1908, was enacted with the intention of providing orderliness, discipline and public notice in regard to transactions relating to immovable property and protection from fraud and forgery of documents of transfer.
This is achieved by requiring compulsory registration of certain type of documents and providing for consequences of non registration. POA has to be registered if there is power provided to transfer the property.
The Supreme Court (in the Suraj Lamp and Industries case that was decided on May 15) expressed anguish when it found that recourse to POA is taken by a person who deals with real estate and others in regard to freehold properties, without registration.
To avoid multiple stamp duties
They found that the POA was created to avoid multiple stamp duties so as to increase the agent’s profit margin.
The court also found the consequence of non registration disturbing because firstly, it enables large scale evasion of tax, stamp duty and registration revenue, thereby denying the benefit of such revenue to the government and the public. Secondly, it enables circulation of black monies and corruption.
The serious effect is the increase of the market value and artificial inflation; many vendors who effected power of attorney sales without registration are tempted to resell the property without the knowledge of the agent; taking advantage of the fact that there is no registered instrument thereby cheating the purchaser, then come the musclemen to sort out issues.
It is the dream of every citizen to own a house or a plot of land. The citizen must be enabled by the government to do so with safety, security and without fear of litigation or defects in title.
What do we require from the government?
*Irrevocable power of attorney for consideration should be compulsorily registered and stamped as deed of conveyance.
*Full particulars of the agent including their PAN number should be obtained at the time of registration of the sale by the agent as vendor.
*The common man should be educated about the consequences of writing a power of attorney, surrendering all their rights to another person.
*Make it a criminal offence to make any misleading statements about properties for sale.
*The government should also bring legislation to have durable power of attorney by appointing agents to manage properties even after death. This saves one from writing a will.
*When general power of attorney is drafted, it should be made mandatory on the part of the principal to disclose the existence of any other power agent for the same principal.
(The writer is a qualified solicitor from the UK and practising lawyer from Chennai High Court. He may be contacted at svsudheer2002@yahoo.com)