“A Power of Attorney is a legal instrument that provides ease of carrying out business to individuals who may otherwise not able to do so”

There may be many circumstances in a person’s life who owns assets, properties, bank accounts, etc. but who at that moment may not be in the right condition to appropriately execute his/ her duties due to unforeseen circumstances like being ill, being abroad (in case of an NRI) or even when the person is too old to perform his/ her duties etc.

As a result, during circumstances where a financial transaction has to be carried out mandates the attendance of the person who is unable to appear personally, then the only solution towards this is to delegate his own powers i.e. to act on behalf of the person to another individual.

This procedure of delegation of power is called Power of Attorney (PoA) and during such an unforeseen situation where the rightful owner cannot utilize his power is when a Power of Attorney deed is executed. This practice is highly popular to give one’s powers to a dependable and honourable person to conduct operations like sale, renting out, registrations, etc. provided that person is busy or unable to do those things personally.

However, in 2011, the Supreme Court of India in a landmark judgment observed that transferring property title through a General Power of Attorney (GPA) is illegal. But before learning the legality of the Supreme Court order let us understand the concept of Power of Attorney.

Power of Attorney (PoA)

A Power of Attorney is a legal document where 1 person grants the right to execute i.e. power to transact in matters regarding property, legal and judicial proceedings, banking, payment of tax, etc, to another person due to any of the reasons explained above earlier.

A Power of Attorney is an authorisation granted by a written formal instrument whereby an individual termed as the principal/ donor authorises another individual termed as the attorney/ agent/ donee to act on his/ her behalf.

Principal/ Grantor/ Donor is the person who gives his power/ responsibility/ authority to another person to act on his behalf

Attorney/ Agent/ Donee is the person to whom the power/ responsibility/ authority is given.

Who should utilize the option of a Power of Attorney?

Ordinarily a Power of Attorney is executed by someone who cannot perform his transactions himself or herself (in person) due to numerous reasons. The following are the numerous reasons that make an individual delegate his powers to perform a duty to some other individual:

If the Principal resides in a foreign country and due to that he is unable to be present for the responsibility the Principal is ill and is bedridden because of that the Principal is a senior citizen who is suffering from health problems or any other valid reason on the part of the Principal for being unable to perform his duties on his own

What are the different types of Power of Attorney in India?

A Power of Attorney (PoA) can be of 2 types:

General Power of Attorney (GPA)

When a person is authorised with absolute general right or power to act legally with respect to the property or bank accounts or tax payments, or registration work or to file a case against 3rd party etc by another person is termed as a GPA.

An individual can either give a GPA for all his properties, banking transactions, tax affairs, registration, legal disputes as well as court matters etc. or can simply grant a general power pertaining to just one category from above. For instance, power relating to property matters only. This transfer of general power is extremely broad and therefore, has lot of risk involved in case the Agent/ Attorney is not a dependable individual.

Special Power of Attorney (SPA)

An SPA is transfer of special power which is only granted for a specific assignment and once the specific assignment is completed the SPA automatically comes to an end.

A typical example of an SPA is when people rent out their property or when the agent appears for the registration of the principal’s property or when the agent appears in a court or before the Tax authorities on behalf of the Principal etc.

What is the difference between a GPA and an SPA?

A GPA is a lot different from an SPA since a GPA always grants a general power to perform while the special power grants only a specific power to perform a particular duty or assignment.

A GPA encloses a broad range of powers and is not restricted to any particular/ specific responsibility. Therefore, it requires to be given only to a very dependable person. An SPA on the contrary expires as soon as the specific responsibility/ assignment is over

An SPA is always specific in nature, however, under a GPA there is unrestrictive authority to buy, sell, rent out, recovering debts, opening of bank accounts, close of bank accounts, attending/ appearing the courts, appearing on the direction of the principal in legal disputes or filing tax returns etc. In an SPA, only 1 of the above mentioned duties is to be performed by the agent. An SPA cannot be created for every assignment and therefore, the provision for GPA is allowed.

What are the essential clauses in a Power of Attorney?

While instituting a Power of Attorney, it is essential to cover specific compulsory clauses depending upon the kind of power of attorney that is being created. The following are the essential clauses that must be included in a Power of Attorney deed:

Entire details of the Principal/ donor creating the Power of Attorney like his name, age, address as well as his current occupation. Relevant information of the agent/ attorney/ done i.e. the person who is getting the authority. The reason to grant the power to another person must be explained and be valid. The time, date as well as the place of creating the Power of Attorney deed and its execution date as well (date from which the Power of Attorney comes into force).In case the Power of Attorney is time bound, then, the prospective date of termination of the Power of Attorney and in case there is no mention of the time limit of the same then it is to be mentioned whether the Power of Attorney durable or non- durable. In case of a general power that is being granted then the deed must clearly mention the entire details of all the acts as well as the areas of granting the said power. For instance, if a general power pertaining to property is granted, then the Principal can grant the power to rent or buy any property while not being authorised to sell any of the properties. In case of a special power the grant of the specific responsibility/ assignment that needs to be performed by the agent/ attorney must be clearly stipulated in the deed. The deed must also specify the time limit of the special power within which the responsibility has to be completed.