In today’s busy world, it is not possible to do everything by oneself. Hence we often delegate our duties to others. Similarly, one can delegate specific legal responsibilities to another under a Power of Attorney. The principle originates from a Latin phrase Qui facit per alium facit per se that means, “He who acts through another does the act himself.” Power of Attorney is a legal document governed by the Power of Attorney Act, 1882.
To begin by busting the myth, whether a power of attorney is a transfer document?
The Hon’ble Supreme Court of India in Suraj Lamp and Industries Private Limited vs State of Haryana & Anr. (2012) 1 SCC 656 clarified as follows:
“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 authorises 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 1-A 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.”
A Power of Attorney (“POA”) can be of three kinds:
General POA - is one by which the principal/grantor is authorising the agent/grantee to do certain acts in general on its behalf. The word ‘General’ here means that the power must be general regarding the subject matter and not general concerning powers in respect of a subject matter;
Specific POA - an agent/grantee appointed by the principal/grantor to do some specified act or acts. In this type of POA, an agent/grantee conferred with a power to do a specific act in a single or specified transaction in the name of the principal/grantor; and
Durable POA – A POA that remains in effect in the event of future incapacity of the principal/grantor such a POA is called a durable POA.
There are few important things to note when parties execute a POA, as follows:
The parties shall be competent to contract as per the law.
In the case of the Company granting a POA, the same shall conform with its Articles of Association.
The principal/grantor shall understand the language of the POA.
Acts for which POA can be granted, few examples:
To enter into contracts;
Perform any contract, agreement, writing, or thing;
To make, sign, execute, and deliver, acknowledge any contract, agreement;
Lodge executed documents for registration before the sub-registrar of assurances;
To sell, exchange, lease, collect rents, grant, bargain, or borrow and mortgage;
To execute all deeds, bonds, contracts, mortgages, notes, checks, drafts, money orders;
To manage, compromise, settle, and adjust all matters relating to real estate;
To add to or withdraw any amounts from any of bank accounts, Certificates of Deposit, Money Market Accounts, etc.;
To make, execute, endorse, accept and deliver any, and all cheques and drafts execute or release such deeds of trust or other security agreements as may be necessary;
Deposit and withdraw funds;
Acquire and redeem certificates of deposit in banks, savings and loan;
To file, sign all tax returns, insurance forms and any other documents;
To sell any and all shares of stocks, bonds, or other securities; and
To make, execute, and deliver any assignment, or assignments, of any such shares of stock, bonds, or other securities, etc.
Registration and Stamp Duty
A POA is not required to be compulsorily registered. A POA shall be signed in the presence of and authenticated by a Notary or a Judicial Magistrate. However, registration is compulsory in the event of POA being in relation to immovable property.
It is important to note that registration requirements vary from state to state. For example in Maharashtra, a POA for immovable property in favour of a family member is compulsorily registerable.
The POA shall also be adequately stamped as per the state stamp act. In Maharashtra, the POA shall be stamped as per the Maharashtra Stamp Act, 1958.
A POA can be revocable and irrevocable. In case of revocable POA, the POA can be revoked in the following circumstances:
It is revoked by the principal/grantor.
The principal/grantor dies, or agent/grantee dies.
The principal/grantor becomes insane or becomes bankrupt.
The business for which the agent/grantee was appointed is over.
Mutually agreed upon by the principal/grantor and agent/grantee.
The right under the POA is renounced by the agent/grantee.
The principal/grantor is adjudged insolvent.
With the efflux of time.
An irrevocable power of attorney can be revoked where the agent/grantee’s or third-party interest has not been created by undertaking specific public steps or revocation of such a POA.
A POA can serve as a strategic tool for both personal and business purposes.
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