Nowadays, it is evident that every individual is running out of time and still has to manage numerous responsibilities, ranging from property management to contesting a lawsuit. However, fulfilling all these obligations single-handedly can be extremely challenging, especially when the person is not physically well or residing abroad. In such situations, the most viable option is to delegate the management of your business or professional affairs to a trusted individual who can oversee them in your absence. This can be done through a legal instrument known as a ‘Power of Attorney’, wherein all the powers and duties relating to the assets are transferred to a selected individual.
In this article, we will discuss the concept, meaning and definition of the power of attorney which is also known as POA. Further, we will go through the types of power of attorneys along with the legal provisions governing its revocation and cancellation.
What is a Power of Attorney?
In simple terms, a POA is an important legal instrument that allows an individual to authorise another individual or entity to act on their behalf to manage his property, medical matters, and finances. The individual granting this authority is referred to as ‘Principal’, while the person to whom the authority is transferred is known as ‘Attorney Agent’. It is important to note that the attorney agent may be granted either limited or extensive rights, depending upon the type of power of attorney.
Definition of Power of Attorney
The Black Law Dictionary defines ‘Power of Attorney’ as a legal instrument whereby authority is transferred from one person to another person to act and appear on behalf of the former. It is important to note that a POA doesn’t need to be only executed in favour of a lawyer as other people are eligible to act as attorney agents. As per the Bombay Stamp Act, a POA enables a person, not being limited to a legal practitioner, to appear on behalf of any other person before any Court or Tribunal.
Laws Governing Power of Attorney in India
In India, the POAs are governed by the provisions of the Power of Attorneys Act, of 1882. It is a well-settled law that when an attorney agent operates under a POA, he typically acts on behalf of his principal. Anything carried out or document signed by an agent using this authority will be considered as if the same was done by the principal only. Thus, an attorney agent always represents the principal and can exercise only those powers which are explicitly granted to him in the POA. Also, in the landmark case of Suraj Lamp and Industries Private Limited vs. State of Haryana & Anr. (2012) 1 SCC 656, the Hon’ble Supreme Court held that the basic principles of the Indian Contract Act, 1872 are also applicable to the power of attorneys as it falls within the purview of ‘Agency’.
Types of Power of Attorneys (POA)
Broadly, there are four types of Power of Attorneys based on responsibility or authority delegated by the principal to the attorney holder, which are as follows:
Conventional Power of Attorney
It is also known as General POA or Limited POA as a limited authority is transferred for a specific period. Under this POA, the authority is limited to making only personal and business decisions, which are specified beforehand. For instance – A authorises B through a Power of Attorney to sign a sale deed when he is out of the country.
Durable Power of Attorney
As the term suggests, durable Power of Attorney is given for the lifetime of the grantor and the power to make the decisions will be exercised despite the grantor becoming incapacitated or unfit to make business decisions. It is pertinent to note that durable POA shall be valid until the death of the grantor or it is cancelled through a mutual agreement. The authority to manage the investment portfolio is a good example of durable Power of Attorney.
Springing Power of Attorney
The Springing Power of Attorney is used only for a specific event, date or condition and the authority stands cancelled from the very moment the event is completed. For instance – if a military man is disabled or deployed overseas, he can appoint a POA agent to handle financial affairs.
Medical Power of Attorney
This category of POA is covered in both the Spring and Durable POAs. As the name suggests, this POA is used to authorise someone to make healthcare decisions. Interestingly, the Medical Power of Attorney cannot be invoked until the grantor is conscious and has a sound mind.
Is it Possible to Choose Multiple Power of Attorney?
Yes, a person can have multiple power of attorney for different matters or even multiple attorney holders for a single matter so that even if one person is not available, the other person can handle the business affairs. There is no bar or restrictions on having multiple powers of attorney under the POAs Act, of 1882 and the Indian Contract Act, of 1872. Having multiple powers of attorney ensures sound decision-making and detailed discussion between all the relevant stakeholders. However, it may also lead to serious disagreement and delay in decision-making.
Where do you need Power of Attorney?
Nowadays, the Power of Attorney is widely used in the following areas:
Contract/Agreement
The POA is used in entering a formal contract or to perform, sign, execute, deliver or acknowledge any contract. In case, you want to file a patent application in India and you do not have the knowledge to file a patent application, then you can hire a Patent agent by giving him the POA to file a patent application on your behalf. You can do the same to file the Design patent application and other Intellectual Property rights with the help of POA.
Real Estate
Power of Attorney is used to authorise someone to sell, exchange or collect rent from the rented property. Further, it can be used to execute all deeds, bonds, contracts and mortgages. Moreover, POA is an effective option to settle and adjust real estate matters.
Bank Accounts
POA is a viable option to authorise someone to add or withdraw money from your bank account and to make, execute or deliver any cheque on your behalf. Further, entering into a loan agreement can be done by the Attorney holder.
Filing Tax Returns
Through POA, you can authorise someone to file and sign tax returns and represent your interest before all the appropriate judicial forums.
Stocks/Securities
Through a valid Power of Attorney, you can sell all the shares of stocks, bonds any other securities.
Language of The Power of Attorney
Since a POA is a legal document, it must be in a language which is known to both the parties i.e., the Grantor and the Attorney holder. If the person to whom authority is transferred is illiterate, then all the contents of the POA must be explained to him in a language best known to him and it is mandatory to get a certification from him that he has understood all the content and put his thumb mark only after that. Thereafter, the administrative officer will take the oath from the Grantor and put his sign and seal after completing the verification.
How do you interpret a Power of Attorney?
In the last couple of decades, some important rules for the construction of Power of Attorney are derived, which are discussed below-
- The word used in the document shall be given a simple and plain meaning.
- Where a general word is followed after the usage of a couple of specific words, then the doctrine of Ejusdem Generis will be used to decipher the real intention.
- The deed must be interpreted in a way to include all necessary powers for its execution
Stamp Duty on Power of Attorney
As per Section 48 of the Indian Stamp Act, 1899, a POA is chargeable to stamp duty, which must be compulsorily paid by the Grantor or the attorney holder in the Registrar’s office falling within the jurisdiction. To give legal effect and avoid future issues, there must be no deficit in the payment of stamp duty.
Duties of The Attorney Holder
As discussed above, an attorney holder is a person to whom authority is transferred through a POA. The first and foremost duty is to act within the specified or limited authority and not transgress it. If he acts beyond the authority, he can be held liable to pay adequate damage or compensation. Further, the attorney holder shall exercise reasonable care while discharging all the functions. All the acts must be done in good faith to protect the interest of the grantor. If there is any ambiguity about the wording of the Power of Attorney, legal assistance shall be sought.
How to Register a Power of Attorney?
In our country, it is not mandatory to register a POA as it is an optional requirement. However, if you intend to register it, then it must be authenticated by a Sub Registrar and attested by a Notary or diplomatic agent. Foreign Power of Attorney should be stamped by the Collector within 3 months from the date of receipt in the country.
Revocation or Cancellation of Power of Attorney
A POA shall be cancelled in the event of happening of any of the following events:
- Death, insolvency or insanity of the grantor;
- Revocation of Power of Attorney by the grantor;
- Winding up of business for which the agent was appointed;
- Mutual cancellation of POA.
- Renunciation of the rights under Power of Attorney by the Attorney Holder.
In case of any dispute about the revocation of POA, the Provisions of the Indian Contract Act are applied.
Conclusion
From the above discussion, it can be said that a POA authorises the attorney holder to represent his interest for a particular purpose (as stated in the document). The attorney holder cannot exceed its authority and he must act in a way to protect the best interest of the grantor. In India, it is not necessary to register a Power of Attorney and it can be cancelled on the events, such as insolvency, insanity, or liquidation. You can give your view related to this in the comment box.