In this busy world, you cannot do your work all by yourself. Sometimes, you have to seek the assistance of another person who can act on your behalf. In such a situation, a power of attorney comes into the picture. In this article, we will discuss what is a power of attorney, its importance, who can execute a power of attorney, its duration, revocation, types, who is eligible to be an attorney is, how to draft a power of attorney, how can NRI use POA, what is the duty of an attorney, can an attorney sell property on your behalf, limits of Power of Attorney.
What is the Power of Attorney?
A Power of Attorney is a legal document that enables a person to give authority or power to another person to act on their behalf.
A person who gives power or authority is called ‘principal,’ and the person to whom the authority is given is called ‘attorney’ or ‘agent’.
What is the importance of POA and Why do we need it?
Power of Attorney in India is administered by the Power of Attorney Act, 1882. A Power of Attorney is needed when a person (principal) cannot perform their work on their own. Then in such a case, authority is given to another person (attorney or agent) to act on their behalf. This authority could be relating to property matters, finances, tax payments, other legal procedures, etc.
A power of attorney can either come into effect once the principal signs it or on the occurrence of a particular event in the future.
A power of attorney gives the agent the authority to:
- Execute all contracts, bonds, mortgages, bonds, drafts, money orders, deeds;
- Manage, settle, and compromise all matters relating to real estate;
- Collect rent, lease, grant, sell, bargain, borrow, or mortgage;
- Sell shares of bonds, stocks, or other securities;
- File sign all insurance forms, income tax returns, or other documents,
- File a case on behalf of the principal;
- Make decisions for minor’s health;
- Enter into an agreement, perform any agreement, contract, sign, execute or deliver, acknowledge any agreement or contract.
All these activities cannot be performed by the attorney in one go. Different activities require another type of power of attorney.
What are the 4 types of Power of Attorney?
There are four types of power of attorney, namely;
- General Power of Attorney: A general power of attorney gives the agent or attorney very broad power. In other words, the agent is given full authority to act on behalf of the principal in matters relating to the management of property, taxation, finance, etc. This power of attorney is mainly used for buying and selling properties when the principal cannot be physically present and needs an agent to perform on his behalf.
Example: If the principal has appointed an attorney for selling all his properties and has property in 3 different states. Then the attorney can sell the principal’s property in all the 3 states.
- Special Power of Attorney: In special power of attorney, the agent or attorney has the power to perform or handle a specific act or transaction. A power of attorney ends when the specific act is complete. It is also called a limited power of attorney.
Example: Principal has property situated in 3 different states and authorizes the power of attorney to sell property located in Delhi. Then the attorney’s power is limited to sell the property in Delhi only and not the other 2 states.
- Durable Power of Attorney: This type of power of attorney last even after the death of the principal and ends when the purpose of a power of attorney is attained. This type of POA continues even when the principal is incapacitated (which means losing decision-making powers). In such a case, the attorney is given the power to make investments manage financial, real estate, legal affairs, business, banking activities, contractual obligations, bill payments, claims, litigations, etc., on behalf of the principal.
- Medical Power of Attorney: In this power of attorney, the attorney has to perform the act only when the principal is in a state of unconsciousness or of unsound mind. This kind of power of attorney is executed when the person is going to undergo medical treatment and gives authority to the attorney to consent for any medical treatment that is beneficial for the principal on his behalf.
In India, the most commonly used power of attorney is General and Specific power of attorney. Now that you know the meaning of the power of attorney and its types let us now discuss who can execute a power of attorney.
Who can execute a POA?
A person competent to enter into a contract can execute a power of attorney. However, a married woman who is a minor can also execute a power of attorney.
The person executing a power of attorney should be the property’s lawful owner and free from encumbrances.
Suppose a company wishes to execute a power of attorney. In that case, its Articles of Association should specify the same along with the company’s common seal.
How long is POA valid in India?
Duration of power of attorney depends on the type of power of attorney granted. A general power of attorney is valid until it is expressly revoked by the principal or on the death of either principal or attorney.
A special power of attorney is valid till the specific act stated in a power of attorney is performed. However, the principal can also specify the duration of power of attorney in the document.
How to revoke a POA?
A principal can revoke a power of attorney at any time by giving a notice in writing to the attorney stating his/her intention to revoke a power of attorney. However, a power of attorney can get automatically revoked on the occurrence of the following events:
- Death of the principal (unless a power of attorney specifies its continuity even after the principal’s death);
- Death of the agent or attorney;
- If either principal or agent becomes insane,
- Bankruptcy of the principal;
- Business for which the agent was appointed is over;
- Divorce, if the attorney is the spouse
- Termination or separation of partnership if the attorney is the partner.
Revocation of Power of attorney has to be done before the Sub-registrar’s office registers a power of attorney. If many people’s interests are involved, the principal should publish a notification in the newspaper about the revocation of a power of attorney. Moreover, the notice of revocation of power of attorney should also be posted on the property where the attorney was involved.
Is Registration of POA mandatory?
Registration of Power of Attorney is not mandatory, but it is always advisable to register a power of attorney, as an unregistered document is not admissible in evidence. As per Indian law, a POA is a written legal document that should clearly state what authority is given to the attorney or agent to act on behalf of the principal. This document should be signed and notarized by a certified notary or a magistrate. So that the notary or magistrate can declare the principal as competent to execute a power of attorney. A power of attorney can be registered before the registrar or sub-registrar of assurance as per the Registration Act, 1908.
Can a POA sell a property?
Yes, a power of attorney can sell the property on behalf of the principal. If a power of attorney specifically authorizes the attorney to sell, execute, and register the documents, then such a sale would be valid and binding on the principal. It will convey the title to the buyer of the property. The principal is bound by transactions made by the attorney on behalf of the principal if the agent or attorney has acted within the scope and limitations of such power of attorney.
Who is eligible to be an agent/attorney in a POA?
An attorney or an agent should be a trustworthy and responsible person competent to enter into a contract.
What are the duties of an attorney?
It is the duty of the attorney to:
- act in good faith;
- maintain confidentiality;
- be impartial in imparting his duty;
- work within limits specified by the principal and should not do any task beyond his authority;
- perform the act only as specified, if specifically stated in a power of attorney;
- not to breach any conditions stated in a power of attorney;
- work hard towards fulfilling his obligations or authority provided;
- inform the principal if there is any conflict of interest with the attorney;
- not to delegate his power to another person, except with the principal’s permission.
Failure to perform his duty, the attorney would be liable to the principal for breach except if the act is done reasonably in good faith.
Limits of power of attorney
Power of attorney gives the attorney immense power to manage the principal’s affairs and carry out the act on the principal’s behalf. Still, there are also limitations to these powers that one should be aware of. These limitations help regulate the attorney’s role.
An attorney cannot:
- act beyond the authority given by the principal;
- use principal’s money or assets as their own;
- delegate without the principal’s permission;
- change or violate the terms of any document without the authority of the principal;
- transfer assets or distribute inheritance after the death of the principal, unless authorized by the principal;
- take compensation beyond what is agreed by them.
Suppose the attorney acts beyond the limits set out in a power of attorney. In that case, the principal or his family member can take action against the attorney.
Can a power of attorney transfer money to themselves?
Yes, a power of attorney can transfer money to themselves if clearly stated in a power of attorney. Provided the attorney is acting in the principal’s interest.
How can NRI use POA/POA for NRI?
Non-Resident Indians (NRI) who have settled abroad, having their assets in India, can use power of attorney to manage their finances and investments sell or purchase property on their behalf. Registration of NRI’s power of attorney is mandatory. There are two ways of executing a power of attorney by NRI:
- Legislation: a power of attorney should be notarized by a duly authorized representative of the Indian Embassy or Consulate. This power of attorney should be stamped within three months once received in India.
- Apostallisation: a power of attorney executed abroad must be verified and confirmed through the apostallisation process. The signature or seal of the person authenticating the power of attorney is verified and confirmed by a certificate. The Hague Convention, 1961, governs the apostallisation process. It is also called super legislation. The power of attorney of an NRI should also comply with the Indian Registration Act, 1908, and the Power of Attorney Act, 1882. This power of attorney should also be stamped.
An NRI cannot be held responsible or sued for the attorney’s acts; however, if the act is done on the instruction of the NRI, then the principal would be liable.
POA format/ Important rules for construction of POA
A power of attorney should be drafted, keeping in mind the reason for which the attorney is needed. Following are the components of power of attorney:
- Name, age, address of residence of the principal along with the proof
- Name, age, address of residence of the agent along with the proof
- Appointment clause: Stating why the attorney is appointed and the activity they will be responsible for performing.
- Term: Duration of Power of attorney should be stated.
- Scope of Work: Clearly specify the extent of authority given to the agent. Suppose the attorney is appointed to manage legal proceedings. In that case, a power of attorney should state what activities the attorney can undertake. Such as; appointing counsel, negotiating fees, signing legal correspondence on behalf of the principal, attending court proceedings, registering FIR, filing a suit, giving evidence, reporting to the principal if any penalty is being imposed, etc.
- Revocation: This clause should contain how and under what circumstances the principal can revoke a power of attorney.
- Name of two witnesses
- Signature of both parties and witnesses
A power of attorney is a legal document that authorizes the agent to perform an act on behalf of the principal. Power of attorney is an excellent tool for people who have widespread assets. It is tough to manage their assets by themselves or where the person cannot be physically present. The attorney should be a trustworthy person who should act in good faith. The duration of power of attorney depends on the type of power of attorney. Registration of power of attorney is not mandatory except in the case of NRI. Power of attorney can be registered before a magistrate, notary or sub-registrar on the concerned state. The power of attorney should clearly state the authority given to the person.