‘THE POWER OF A LAWYER LIES IN THE UNCERTAINTY OF LAW’ -JEREMY BENTHAM
The above-mentioned words of Jeremy Bentham pop up the questions related to all the laws and the actual powers lying within them, with which arises another major question, with respect to the title of this research paper, and that question happens to be the basic one.
WHAT ACTUALLY IS THE POWER OF ATTORNEY?
Before dwelling deep into any topic, understanding the basics has always been of utmost importance. Therefore, A Power of Attorney is actually a formal instrument by which one person, the principle or donor of the power, vests power on the donee, to act on behalf of the donor to perform a specified act or classes of act.1
Section 1A of The Powers of Attorney Act, 1882 says that a Power of Attorney includes any document which empowers a person to act for and in the name of the person executing it.
Section 2(21) Indian Stamp Act 1899 Power-of-attorney includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.
In simpler words, the term Power of Attorney means an authority given by a person (donor or principle) empowering any other person called as donee or agent, to do any act or acts on behalf of the donor or principal which formerly, could only be done by the principal or donor himself. It basically means that Power of Attorney is a document which creates an agency in which certain powers are conferred by the principal to his agent to do and execute certain acts or deeds on his behalf.
TYPES OF POWER OF ATTORNEY-
1) GENERAL POWER OF ATTORNEY:
A general power of attorney for property is a legal document that enables a person (“principal” or the “donor”) to appoint a person (called “agent or donee”) to act on his behalf by vesting certain powers in him to perform certain tasks.
A general power of attorney gives the donee, the authority to manage the principal’s properties, including buying or selling real estate for the principal, or developing the properties and obtaining licences and permissions as required.
2) SPECIAL POWER OF ATTORNEY:
A special power of attorney is a legal document that enables a person, called an agent to act on behalf of the principal, under specific, clearly laid-out circumstances.
HOW IS A SALE MADE LEGALLY, WITH RESPECT TO PROPERTY?
A transfer, in case of an immoveable property of value of one hundred rupees and more than one hundred rupees can be made only by a registered document or in other words it is necessary to register such sale of the immovable property having such value. On the other hand, in case of immoveable property of a value less than one hundred rupees, the transfer may be made either by a registered document or by delivery of that property. Delivery of the immoveable property takes place when the seller delivers the possession of that property to the buyer.
The main aim of the registration of the transfer is to have a record that such property has been transferred to the buyer and the buyer will be having the sale deed as an evidence in case any dispute arises in future. Registration also provides the information to people who may deal with a property, regarding the nature and extent of the rights which persons may have, affecting that particular property. Also, the registration of a transfer of property generates revenue to the government which is further used by the government for development of roads and infrastructure.
SCOPE OF POWER OF ATTORNEY:
A power of attorney does not allow to a person to transfer any right, title or interest in an immovable property. The power of attorney is the creation of an agency by which the grantor authorizes the grantor to carry out the acts specified therein on behalf of the grantor, which, when carried out, will be binding on the grantor as if done by him. A grant of power of attorney is essentially governed by Chapter X of the Contract Act. On grounds of a deed of power of attorney, an agent or donee is appointed to act for the principal or donor to manage the affairs by generally conferring necessary powers upon another person. A deed of power of attorney is executed by the principal or the donor in favor of the agent or the donee.2
The agent is given a right to use his name and all acts, deeds and things done by him and subject to the limitations contained in the said deed, all will be read as if it’s done by the donor.
A Three-Judge Bench of The Apex Court comprising of Justices R.V. Raveendran, A. K. Patnaik and H. L. Gokhale in the landmark case3 of SURAJ LAMP & INDUSTRIES PVT. LTD. v. STATE OF HARYANA &ANR4.,had interpreted various provisions of the law relating to property sales, held that the sale of immovable property by means of a sale agreement, will, General Power of Attorney is not valid.
The Bench held that such transactions are not transfers or sales and such transactions cannot be treated as completed transfers or conveyances. However, the Bench said the judgment under the General Power of Attorney will not affect genuine transactions. The Bench ordered the States to reduce the Stamp Duty to encourage the registration of Sale Deeds in order to avoid such transactions.
After receiving the agreed consideration, the seller of the immovable property in those indirect sales provides the possession of the said property and executes some or all of the following documents:
- An Irrevocable General Power of Attorney in favor of the purchaser.
- A special Attorney power to either sell or manage the land
- An understanding of sale containing the terms that would be like terms of sale by the seller in favor of the buyer and undertaking to execute any document in the future as and when necessary. The Hon’ble Supreme Court noted that such Indirect Sales affected the economy, civil society and the law and order in a bad way.
WHAT SUCH INDIRECT SALES LEADS TO:
Evasion of Income Tax, Wealth Tax, Stamp duty and registration fees in a very large scale. The benefit of revenue to the public and loss to the Government are the major effects of this ill-practice.
These type transactions tend to allow individuals who have undisclosed wealth or income to speculate their black money and also generate profit or income. This gives rise to circulation of black money and corruption in the country.
We could see from the above mentioned cases and facts that there are two types of Power of Attorney, General and Special Power of Attorney. The General Power of Attorney is a wide term as it gives the agent or the done wide powers but on the other hand, the Special Power of Attorney is limited to a special cause and only limited powers are vested upon the agent. A sale of an immovable property having value of 100 Rupees and more should be registered as it generates revenue to the Government and acts as an evidence for the transferee in any future disputes. A sale by a Power of Attorney is an illegal sale as it doesn’t show any legal transfer between the seller and the buyer and hence, no registration, which leads to evasion of taxes which eventually is illegal.
1 Halsbury’s Laws of England
2State of Rajasthan Vs Basant Nehata, 2005 (12) SCC 77
4 Special Leave Petition No 13917 of 2009
This article is authored by Rishab Bhalla, Third-Year, B.A. LL.B. Student at JEMTEC School of Law, GGSIP University.
Also Read – How To Cancel A Power Of Attorney?