In our day-to-day life, we have to manage our multiple affairs simultaneously, like handling bank accounts, properties, etc. However, it is not possible to perform all such duties on your own owing to multiple reasons, such as illness, staying abroad, etc. At this juncture, the only solution is to appoint someone who can take care of all your resources in your absence. For this purpose, all the necessary powers and duties relating to the properties are transferred to a desired person through a legal document called ‘Power of Attorney’. Nowadays, having a Power of Attorney has become an absolute necessity and it is widely used in the legal domain.
In this article, we are going to discuss the meaning and types of Power of Attorneys in India. Further, we will uncover the legal provisions surrounding the Power of Attorneys and the manner of its revocation and cancellation.
What is a Power of Attorney?
In simple words, a Power of Attorney can be understood as an important legal document which enables a person to appoint any other person or any organisation to act and appear on his behalf to manage his property, medical and financial affairs, etc., The person who authorises the other person is known as the principal and the person to whom the authority is transferred is known as the attorney agent. The attorney agent may be entrusted with limited or extensive rights relating to the property, depending upon the type of Power of Attorney executed by the principal.
Meaning of Power of Attorney
As per Black Law Dictionary, the term ‘Power of Attorney’ is defined as a legal instrument whereby authority is transferred by a person to another person to act and appear on his behalf. It is important to note that it is not necessary that a Power of Attorney is only executed in favour of a lawyer as other people are eligible to act as attorney agents. As per the Bombay Stamp Act, a Power of Attorney enables a person, not being limited to a legal practitioner, to appear on behalf of any other person before any Court or Tribunal. The Power of Attorneys is governed by the basic principles of the Indian Contract Act, of 1872.
Types of Power of Attorneys (POA)
Broadly, there are four types of Power of Attorneys on the basis of responsibility or authority delegated by the principal to the attorney holder, which is as follows:
Conventional Power of Attorney
It is also known as General Power of Attorney or Limited Power of Attorney as a limited authority is transferred for a specific period of time. Under this Power of Attorney, the authority is limited to making only personal and business decisions, which are clearly 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 take the decisions will be exercised despite the grantor becoming incapacitated or unfit to take business decisions. It is pertinent to note that durable Power of Attorney 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 Power of Attorney agent to handle financial affairs.
Medical Power of Attorney
This category of Power of Attorney is covered in both the Spring and Durable Power of Attorney. As the name suggests, this Power of Attorney 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.
Where do you need Power of Attorney?
Nowadays, the Power of Attorney is widely used in the following areas:
- Contract/Agreement – The Power of Attorney is used in entering a formal contract or to perform, sign, execute, deliver or acknowledge any contract.
- 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, Power of Attorney is an effective option to settle and adjust real estate matters.
- Bank Accounts – Power of Attorney 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 Power of Attorney, 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 Power of Attorney is a legal document, it must be in a language which is known to both the parties i.e., Grantor and the Attorney holder. If the person to whom authority is transferred is illiterate, then all the contents of the Power of Attorney 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 to 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 Power of Attorney 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 Power of Attorney. 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 the good faith with the objective to protect the interest of the grantor. If there is any ambiguity pertaining to 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 Power of Attorney 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 a period of 3 months from the date of receipt in the country.
Revocation or Cancellation of Power of Attorney
A Power of Attorney 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 Power of Attorney.
- Renunciation of the rights under Power of Attorney by the Attorney Holder.
In case of any dispute pertaining to the revocation of Power of Attorney, the Provisions of the Indian Contract Act are applied.
Conclusion
From the above discussion, it can be said that a Power of Attorney authorises the attorney holder to represent his interest for a particular purpose (as stated in the document). The attorney holder cannot exceed their 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.