The Supreme Court of India has delivered a landmark judgment on the scope and validity of power of attorney (POA) documents. The Court held that a POA cannot be used to transfer immovable property without the principal's express consent and execution of the necessary documents. This judgment has important implications for both principals and POA holders.
Introduction to the Power of Attorney
On June 6, 2023, the Supreme Court of India delivered a landmark judgment in the case of Ghanshyam v. Yogendra Rathi on the scope and validity of power of attorney (POA) documents. The Court held that a POA or a Will cannot be recognized as title documents or documents conferring any right in any immovable property.
The Court also observed that the non-execution of any document by the power of attorney holder consequent to the POA renders the said POA useless. This means that even if a power of attorney authorizes the POA holder to sell or transfer immovable property, the POA holder cannot do so without the principal’s express consent and execution of the necessary documents.
This judgment is significant because it clarifies the legal status of power of attorney documents and their role in the transfer of immovable property. It also puts an end to the common practice of people buying and selling immovable property on the basis of POA documents alone.
Implications of the Supreme Court judgment
The Supreme Court judgment has several implications for both principals and POA holders.
Principals should be more careful when executing power of attorney documents and should ensure that they only grant the POA holder the specific powers that they need. Principals should also monitor the POA holder’s activities closely and revoke the POA if they have any concerns.
POA holders should be aware that they cannot rely on POA documents alone to transfer immovable property. POA holders must obtain the principal’s express consent and execution of the necessary documents before transferring any immovable property.
Conclusion
The Supreme Court judgment on POA is a welcome step towards clarifying the legal status of POA documents and protecting the interests of both principals and POA holders. Principals should be more careful when executing POA documents and POA holders should be aware of their limitations.
Frequently Asked Questions
What are the new rules of power of attorney?
The new rules of Power of Attorney (PoA) emphasise stricter documentation and verification processes to prevent fraud. The regulations require the PoA to be registered, with both the grantor and the agent providing proof of identity and address. Specific powers must be clearly defined, and the document should be notarised.
What are the limitations of a power of attorney?
A Power of Attorney has limitations, including the inability to act beyond the grantor's specified authority. It cannot be used to make decisions after the grantor's death or if the grantor becomes incapacitated unless it is a durable PoA. Legal restrictions also prevent the agent from engaging in transactions that would constitute a conflict of interest.
What is the validity of a power of attorney?
The validity of a Power of Attorney depends on the type specified in the document. A general PoA is typically valid until revoked by the grantor or upon the grantor's death or incapacitation. A durable PoA remains effective even if the grantor becomes incapacitated and continues until the grantor's death or explicit revocation.
Can a property be sold with power of attorney?
A property can be sold with a Power of Attorney if the PoA explicitly grants the agent the authority to conduct such transactions. However, due to potential fraud risks, many jurisdictions require the PoA to be registered and notarised. Additionally, some banks and buyers may still require direct involvement from the property owner.
Can Power of Attorney Be Challenged in Court?
Yes, a Power of Attorney (PoA) can be challenged in court. Grounds for challenging include allegations of fraud, undue influence, lack of mental capacity of the grantor, or improper execution. If proven, the court can revoke or declare the PoA invalid, thereby preventing the agent from acting.
What is the Most Powerful Power of Attorney?
A Durable Power of Attorney (DPOA) is considered the most powerful type. It grants the agent broad authority to manage the grantor's financial, legal, and medical affairs and remains effective even if the grantor becomes incapacitated. This ensures continuous management of the grantor's affairs without interruption.
Which Power of Attorney Cannot Be Revoked?
An irrevocable Power of Attorney cannot be revoked by the grantor once it has been executed, except under specific conditions outlined in the agreement or by court order. This type of PoA is often used in financial and business transactions where stability and assurance are required.
Which Law is Applicable to the Power of Attorney?
The law applicable to Power of Attorney varies by jurisdiction. In India, the Power of Attorney Act, 1882 governs PoA matters.
