Legal Position of Power of Attorney in Sale of Property in India- Varsha Singh
Updated: Nov 29, 2020
Power of Attorney is a delegation of authority by way of writing in which one person known as The Principal appoints another person to act as an agent on his /her behalf by conferring authority on the agent to perform certain acts on his/her behalf. It is granted to allow the agent to take care of the transactions on behalf of the principal like handling of tax, maintaining audit, and executing stock power. Power of attorney goes for a lifetime (if not otherwise specified in the document granting power of attorney) and comes to an end with the death of the person.POA is of two types: one is for property and another is for personal care. These two are required for effective estate planning.
The power of Attorney is classified into two categories-
General Power of Attorney- It is the one in which an instrument is executed by the principal whereby he authorizes the agent to do certain acts of general nature on his behalf. A general power of attorney remains in force unless there is expressed revocation or death of either of the party.
Special Power of Attorney-It is the one in which agent appointed by the principal has the right to do only specified act or acts. In this type of power of attorney, the agent has the power to do a specific act in a single or specific transaction. The special kind of power of attorney will remain in force until the specified act or acts are not completed by the agent.
Before we move further it is important to understand that why such kind of sale in property came into existence? We all know that in India at some places one cannot sell his agricultural land for residential purpose without coverting it into the land for residential purpose.But to avoid the fuss the owner of such land usually sells their agricultural land through the General power of Attorney. Furthermore, since creating POA does not amount to sale it saves the seller from paying sale tax to the government.
So, the reason behind such indirect sale was to avert ban or certain condition which were imposed on such transactions, for example when any conveyance deed is prepared it contains a clause stating that property can be sold only after the expiry 15 years from the date of its construction, and to avoid payment of capital gains, registration charges on deeds of conveyance, to invest black money etc. If we look from the seller’s point of view a general power of Attorney helps to transmit transactions even without having any clear property titles and from a buyer’s point of view these properties are cheaper than the market’s prevailing price. After receiving the agreed amount, the seller of the property transfers the property and executes any or all of the documents which includes
Agreement on sale which contains terms of the sale by the seller in favor of the purchaser of the property.
An agreement of sale in which the seller agrees to sell the property and an affidavit detached with it confirming the receipt of the full price of the property.
An irrevocable POA in favor of the purchase of the property or any nominee appointed by him.
An SPOA in either for selling or managing the property.
However, due to all this evil. After seeing such misuse of the general POA, in the year 2011, the Supreme Court of India in the case of Suraj Lamp & Industries Vs State of Haryana & Another held that transfer of property via general power of attorney is not valid. It further held that any immovable property can be legally transferred by registered deed only. In this case, the apex court further held that because of the indirect sales economy, law and order and civil society get affected and cause a loss in wealth taxes, stamp duty, and such other related charges and encourages the circulation of black money and leads to corruption. However, in the year 2012 Delhi government allowed the registration of the property in favor of spouse, sons, daughters, brother, and sister, or any other person of trust.
The concept of power of attorney is essential in the case of a Non-resident Indian. Since an N.R.I is not able to travel continuously home and abroad. Hence, it is an accepted practice that he would nominate an attorney on his behalf who can see his whole business and matters related to property. But an N.R.I also cannot transfer his property by way of P.O.A. He has to also sell his property by way of sale deed only.
Therefore, any individual cannot sell his property by way of P.O.A. It was an evil practice done to mislead both the government and the general public. By this people save taxes, in some cases, fraudulently kept their property, as well as the buyer, do not have any interest in the property because he is just an attorney.
The Power of Attorney is used to restrict the burden upon an individual and to increase business transactions. Therefore, only use that can be made of the document is to provide authority to sale of the property to an attorney. Which he can do in the name of the real owner of the property. It may seem that getting the authority to the sale may sufficient for ownership of property but a power of attorney cannot grant any other right essential for ownership of property. Therefore, the 2011 judgment of the supreme court must be appreciated, which properly clarified the true meaning and ambit of the power of attorney and how evil use of such document is. Hence, must be restricted.
Hence, the power of attorney can be used only to grant power to someone to transfer the property on behalf of the owner and writer of the document. This document can also be used by both the residents and the Nonresident Indians for granting authority of transfer for their property to an attorney situated in India.