Power of attorney

A Power of Attorney (POA) is a legal instrument through which one person (called the principal or donor) authorises another person (known as the agent, attorney, or donee) to act on their behalf in matters of business, property, finance, or personal affairs. It enables the appointed agent to make decisions, sign documents, and carry out transactions as if they were the principal, subject to the terms and conditions specified in the document. The Power of Attorney is an important mechanism in both personal and commercial legal practice, ensuring continuity of decision-making when the principal is unable or unwilling to act personally.

Nature and Purpose

The Power of Attorney does not transfer ownership of property or rights; rather, it delegates authority to perform specific acts on behalf of the principal. It is often used in situations where:

• The principal is physically absent, such as being abroad or incapacitated.
• The principal wishes to delegate management of affairs to a trusted individual.
• Legal or business transactions require representation by another person.

It is an essential tool in legal, financial, and real estate contexts, offering convenience and continuity of operations while ensuring that the agent’s powers are clearly defined and legally enforceable.

Parties to a Power of Attorney

A typical Power of Attorney involves two parties:

1. Principal (Donor) – The person who grants authority to another to act on their behalf.
2. Agent (Attorney or Donee) – The person who is authorised to act for the principal within the scope defined by the document.

Both parties must be legally competent, and the Power of Attorney must be executed voluntarily, without coercion or undue influence.

Types of Power of Attorney

The Power of Attorney can be categorised based on the extent of authority and duration of operation.

1. General Power of Attorney (GPA)
   • A General Power of Attorney grants broad powers to the agent to manage all or most of the principal’s affairs.
   • It may include authority to manage property, operate bank accounts, enter into contracts, collect rents, or appear before public authorities.
   • Example: A person residing abroad may execute a GPA authorising a relative to manage their real estate and financial matters in India.
2. Special or Specific Power of Attorney (SPA)
   • A Special Power of Attorney is granted for a specific purpose or transaction.
   • Once that task is completed, the authority automatically ceases.
   • Example: Authorising an agent to sell a particular piece of property or represent the principal in a specific court case.
3. Durable Power of Attorney
   • This form remains valid even if the principal becomes incapacitated due to illness or mental incompetence.
   • It is particularly relevant in jurisdictions such as the United States and the United Kingdom for healthcare and estate planning.
4. Non-Durable (Ordinary) Power of Attorney
   • This ceases to be effective if the principal becomes mentally incapacitated or withdraws the authority.
   • It is typically used for short-term or routine transactions.
5. Springing Power of Attorney
   • This becomes effective only upon the occurrence of a specific event or condition, such as the principal’s illness or absence.
6. Medical or Healthcare Power of Attorney
   • A specialised form in which the principal authorises someone to make medical and healthcare decisions on their behalf if they are unable to do so.

Legal Requirements and Execution

The legal formalities for creating a Power of Attorney may vary between jurisdictions, but the general requirements include:

• Written Form: The Power of Attorney must be in writing.
• Signature and Witnessing: The principal must sign the document, and it should generally be witnessed by at least one or two individuals.
• Stamp Duty and Registration:
  • In India, under the Indian Stamp Act, 1899, the document must be stamped according to the nature of the powers granted.
  • Registration under the Registration Act, 1908, is mandatory if the POA involves the transfer of immovable property or rights relating to it.
• Authentication: If executed abroad for use in India, it must be authenticated by an Indian Consulate or Embassy.

Rights and Duties of the Agent

The agent has a fiduciary duty to act in the best interests of the principal. Key responsibilities include:

• Acting honestly and loyally, within the authority granted.
• Keeping accurate records of all transactions performed.
• Avoiding conflicts of interest.
• Not exceeding the powers specified in the document.

If the agent acts negligently or dishonestly, they may be held legally liable for losses suffered by the principal.

Termination or Revocation of Power of Attorney

A Power of Attorney may be terminated in the following circumstances:

1. Revocation by the Principal – The principal can revoke the POA at any time, provided they are of sound mind and issue a written notice of revocation.
2. Completion of Purpose – In the case of a Special Power of Attorney, the authority ends automatically once the specified task is completed.
3. Expiry of Time – If the POA is time-bound, it ceases after the stipulated period.
4. Death or Insanity – The death or legal incapacity of the principal (and sometimes the agent) terminates the POA unless it is durable in nature.
5. Mutual Agreement – Both parties may agree to terminate it.
6. Court Order – In cases of misuse or fraud, the POA may be invalidated by a competent court.

Legal Position in India

In India, the Power of Attorney is governed primarily by:

• The Powers-of-Attorney Act, 1882
• The Indian Contract Act, 1872 (for principles of agency)
• The Registration Act, 1908 (for property-related POAs)

According to the Powers-of-Attorney Act, 1882, a lawful POA confers on the agent the same legal effect as if the principal had personally performed the act, provided it falls within the scope of the authority granted.
Courts have consistently held that:

• A POA does not convey ownership; it merely authorises action.
• Transactions executed under a POA must be explicitly authorised within the document.
• A registered Power of Attorney is required when transferring or leasing immovable property.

The Supreme Court of India, in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2011), clarified that a GPA sale of property is not a valid mode of property transfer, reaffirming that ownership can pass only through a registered sale deed.

Advantages and Importance

• Enables efficient management of affairs when the principal is unavailable.
• Provides legal recognition to delegated authority.
• Useful for elderly or incapacitated persons to ensure continuity of decision-making.
• Facilitates cross-border and business transactions where personal presence is impractical.

Limitations and Risks

• Risk of misuse or fraud by the agent if powers are too broad.
• Can lead to legal disputes if the scope of authority is ambiguous.
• Ineffective upon death or incapacity (unless durable).