A "Power of Attorney" is a legal instrument
whereby an individual (principal) gives a person (agent) willingly
the authority to act on his or her behalf as his legal representative,
and to make legally binding financial, legal and other decisions
on his behalf. A person need not be a lawyer to be a Power of
Attorney holder.
Power of Attorney plays an important role in transferring the lawful ownership of immovable property like land, building from one person to another. It is generally done where an individual finds it convenient, wants to avoid court proceedings or is incapacitated due to severe illness or injury rendering him/her unfit to make sound decisions. He/She can appoint one person or several persons to act on his behalf.
The person who empowers is the Principal and the person upon whom the power is conferred is the Agent or the Power of Attorney holder. Granting a Power of Attorney is a legal process that involves the drafting of a document. Hence, it must be strictly interpreted.
Duties of an Agent:
The Agent is legally bound to perform the tasks honestly, faithfully
and according to the wishes of the Principal. If he causes the
Principal any loss by acting otherwise, he must compensate for
it. He is expected to keep all accounts in a proper manner and
produce it to the principal on demand.
If the Power of Attorney authorizes the Agent to carry on a
business with limitations, any act done by him in excess of
such power will not bind the principal. Power to dispose of
property does not confer a power to mortgage the property. Also,
an Agent cannot, by fraud or any other act bind the Principal
to a larger extent than he is empowered to do within the sphere
of the Power of Attorney.
Selection of an Agent:
The Power of Attorney can grant substantial power to a third party
to act on your behalf. Therefore, before you sign your name to
legal contracts, you should give extra thought to your choice
of person to whom you choose to grant those powers. You should
decide sensibly on whether any limits should be imposed on the
duration or within the scope of the Power of Attorney.
The execution must be done while the Principal is competent, alert
and aware of the consequences of his/her decision, as every act
performed by an Agent within the authority of the Power of Attorney
is legally binding upon those granting it.
Types of Power Of Attorney:
Broadly speaking, there are two types of Power of Attorney; "General" and "Special" (or limited).
- A General Power of Attorney gives the
Agent very broad powers to act on behalf of the Principal
for more than one transaction. The Principal empowers the
Agent with the right to carry out all legal acts on his behalf.
The latter possesses authority to:
- execute all contracts, deeds, bonds, mortgages, notes, cheques, drafts, money orders,
- lease, collect rents, grant, bargain, sell, borrow and mortgage property
- manage, compromise, settle, and adjust all matters pertaining to real estate
- A Special Power of Attorney/ Limited Power of Attorney:
- The authority of the Agent extends to only certain matters or only a particular kind of transaction or to carry out a specific legal transaction for the Principal, for a court case, for appointing one attorney in place of another, for collection of debts and for admitting execution.
- The Agent's Power of Attorney is terminated on the completion of the transaction.
Duration of Power of Attorney:
A general Power of Attorney may continue to be in force until
it is revoked.
Revocation of Power of Attorney:
Power of Attorney can be revoked or would stand revoked by the
Principal himself by a cancellation deed or if he dies or becomes
insane or is declared insolvent or the business for which the
Agent was appointed is over and also in the event of mutual
agreement between the two or if the Agent renounces the rights
or dies..
However, it cannot be done in matters pertaining to debt security till the debt is cleared, even though the debtor might not be alive. It cannot be revoked if it is made irrecoverable.
Acts governing Power of Attorney:
Provisions of several acts like the Indian Stamp Act, Registration Act, Indian Contract Act, Indian Partnership Act and Indian Evidence Act apply to Power of Attorney. By an amendment to the Stamp Duty Act, a Power of Attorney executed by a promoter to a builder for construction of apartments under flat ownership scheme will attract stamp duty according to the value of the property.
Registration of Power of Attorney:
Registration of Power of Attorney authenticates the Deed of Power of Attorney. In India, where the Registration Act, 1908 is in force, the Power of Attorney must be authenticated by a Sub Registrar only, whenever a person signs the document and his attorney presents/ admits execution. Power of Attorney shall be attested by two or more adult independent witnesses who are of sound mind. If a Power of Attorney has been has been registered outside India, it is required to be stamped by the Collector within 3 months from date of its receipt in India.