Power of Attorney

Introduction:

Power of attorney is an instrument by virtue of which a person authorizes another person to act on his/her behalf. The term instrument includes any written document, as defined by section 2(b) of the Notaries Act, 1952, “instrument includes every document by which any right or liability is, or purports to be created, transferred, modified, limited, extended, suspended, extinguished or recorded.”[1] The person vesting the power to the other person is called the “donor” and the one receiving the power to act on his behalf is called the “donee”.

The “donor and “donee” relationship is similar to the principal-agent relationship, where the donor is the principal and donee is the agent. According to Section 2 of the Power of Attorney Act, 1882 the donee can execute or do any instrument or thing under his own name, signature and seal, on behalf of the donor.[2] And every such instrument so executed will have the effect as if it had been executed by the donee but under the signature and seal of the donor.

This legislation was enacted by the Parliament in pursuance to the addition of Section 46 in the English act, Conveyancing and Law of Property Act, 1881 which states, “The donee of a power of attorney may, if he thinks fit execute or do any assurance, instrument, or thing in and with his own name and signature and his own seal, where sealing is required, by the authority of the donor of the power; and every assurance, instrument, and thing so executed and done shall be as effectual in law, to all intents, as if it had been executed or done by the donee of the power in the name and with the signature and seal of the donor thereof.”[3] The object of this section is to effectuate instruments executed by an agent but not in accordance with the rule of the common law and the enactment is more procedural than substantive. It does not confer on a person a right to act through agents. It presupposes that the agent has the authority to act on behalf of the principal, and protects acts done by him in the exercise of that authority but in his own name.[4]

Classification of Power of Attorney

Power of Attorney is generally classified into 2 categories –

1. General Power of Attorney: General power of attorney doesn’t mention a specific act or transaction that is being carried out by the agent. In general power of attorney, the agent has the authority to make financial, medical and legal decisions on the behalf of the principal. The scope of authority is very vided in GPoA and so is the scope of risks. GPoA can be easily misused and due precautions should be taken while authorizing a person with the general power of attorney.
2. Special Power of Attorney: Special power of attorney holder is authorized to do certain specific tasks. In this, the person has conferred the power to do a specific act in a manner specified by the principal.
3. Durable Power of Attorney: Generally the agent’s power of attorney ends when the principal dies or becomes mentally unsound. But sometimes PoA may say that the power of attorney shall remain with the agent in event of the future incapacity of the principal. This type of PoA is called a durable power of attorney.

Why the Power of Attorney is Required?

Sometimes it would be more convenient or even necessary to authorize someone else to act on one’s behalf. When a person is not capable of acting on his own due to some kind of health problems, then it is necessary for him to have someone else who can take decisions and act on his behalf. Sometimes when a person has a property in one state/city but he himself resides in another state/city then he can give the power of attorney to a trusted person who is residing in the same city where the property is situated to carry out the transactions related to the property. Or in case of proprietorship firm or companies, where a company cannot sue or be sued, it can authorize a person to make the complaint on its behalf.

• Need of PoA w.r.t to Proprietorship Firm and Companies

To file a complaint in the court of law, it is required that the complaint be made by a corporeal person who can be physically present at the time of the hearing. A proprietorship firm and a company is a legal person who cannot approach the court on its own, in that case, it becomes a compulsion for the company to authorize a person to file a complaint on its behalf. In Associated Cement Company Ltd. v. Keshavanand[5] the court held that it is open to the de jure complainant company to seek the permission of the court to send any other person to represent the company in the court.

In Gopalkrishna Trading Company v. Baskaran[6] it was held, “A company is a legal entity and has to be represented by some human agency in preferring a complaint before the court. There is no express or explicit provision in the Act as to the manner in which the company is to be represented in preferring a complaint before the court for violation of the provisions under section 138 of the Act. The person connected with the affairs of the company in the normal run of things, who may be either its manager, partner, managing partner or director or any other person authorized by the company, can represent it during the course of legal proceedings before the court.”

Power of Attorney and Negotiable Instruments Act, 1881

Section 138 of the Act deals with the question of dishonour of cheque. The Act provides that the payee or the holder in due course can make the complaint of dishonour of cheque, here the holder in due course could be power of attorney authorized by the Proprietorship Firm.

 In Shankar Finance Investments v. the State of A.P.[7] the Supreme Court observed, “where a proprietary concern carries on business through attorney holder, then the attorney holder is the agent of the grantor. Wen the grantor authorizes the attorney to initiate legal proceedings and the attorney holder accordingly initiates legal proceeding, he does so as the agent of the grantor and the initiation is by the grantor represented by the attorney holder, and not by the attorney holder in his personal capacity.” The court further explained that when the payee is a proprietary concern then the complaint could be filed by –

1. The proprietor of the proprietary concern describing himself as the sole proprietor of the payee.
2. The proprietary concern describing itself as a proprietary concern, represented by the sole proprietor.
3. The proprietary concern represented by an attorney holder.[8]

In A.C Narayanan v. State of Maharashtra[9], the court held that “In view of the discussion, we are of the opinion that the attorney holder cannot file a complaint in his own name as if he was the complainant, but he can initiate criminal proceedings on behalf of his principal.”

Can Attorney Holder Become a Witness in a Case Filed by Him?

A power of attorney holder is allowed to execute only those transactions and acts that have been authorized by the principal. The PoA holder can file a complaint on behalf of the principal, which has been already established by virtue of the above judgments. But the power to be a witness in the case filed by him on behalf of the principal is not explicitly mentioned.

The court dealt with this issue in the case of Man Kaur (Dead) by LRs. Vs. Hartaj Singh Sangha[10], “guidelines pertaining who can give witness in the matter involving personal knowledge-

(a) An attorney holder who has signed the plaint and instituted the suit, but has no personal knowledge of the transaction can only give formal evidence about the validity of the power of attorney and the filing of the suit.

(b) If the attorney holder has done any act or handled any transactions, in pursuance of the power of attorney granted by the principal, he may be examined as a witness to prove those acts or transactions. If the attorney holder alone has personal knowledge of such acts and transactions and not the principal, the attorney holder shall be examined, if those acts and transactions have to be proved.

(c) The attorney holder cannot depose or give evidence in place of his principal for the acts done by the principal or transactions or dealings of the principal, of which principal alone has personal knowledge.

(d) Where the principal at no point of time had personally handled or dealt with or participated in the transaction and has no personal knowledge of the transaction, and where the entire transaction has been handled by an attorney holder, necessarily the attorney holder alone can give evidence in regard to the transaction. This frequently happens in case of principals carrying on business through authorized managers/attorney holders or persons residing abroad managing their affairs through their attorney holders.

(e) Where the entire transaction has been conducted through a particular attorney holder, the principal has to examine that attorney holder to prove the transaction, and not a different or subsequent attorney holder.

(f) Where different attorney holders had dealt with the matter at different stages of the transaction, if evidence has to be led as to what transpired at those different stages, all the attorney holders will have to be examined.”

Power of Attorney Holder and Authorised Representative

Authorized Representative is similar to special power of attorney holder.

• Purpose- An authorized representative is authorized by issuing a letter of authority, which is meant for a specific purpose, where one person authorizes another to perform a particular task.[11] A letter of authority is used to carry on small routine tasks, such as to submit a document on one’s behalf etc. On the other hand, a power of attorney is used to carry out bigger transactions; the power can be transferred through the power of attorney.
• Expiry- The letter of authority expires as soon as the specified task is completed, but the power of attorney is open-ended unless the principal revokes it or dies or if it reaches its expiration time.
• An Authenticated Document- PoA is a notarized document, which means that it is verified under the Notaries Act 1952. It has more authenticity than that of Letter of Authority. Letter of Authority is not an authenticated document, which is the reason it is best for small specific tasks.
• Registration- PoA can be registered or unregistered but in the case of immovable property, PoA needs compulsory registration. On the other hand, letter of Authority does not need any registration.
• Relationship Created- The power of attorney creates a relationship that is of a principal and agent, and a letter of authority creates a master-servant relationship. In Lakshmi Narayan Ram Gopal and Son v. Government of Hyderabad[12] the court held that “The difference between the relations of master and servant and of principal and agent may be said to be this: a principal has the right to direct what work the agent has to do: but a master has the further right to direct how the work is to be done.”
• Filing a Complaint- When it comes to filing a complaint on behalf of the proprietorship firm or a company, an authorized representative does not have the authority to file the complaint. In U. C. Saxena, Managing Director, Meltra Machines & Equipments Pvt. Ltd., Noida v. Shri Madan Mohan[13], the court held that, “a person who has not been legally and validly authorised by means of a general power of attorney or special power of attorney cannot be held to be a properly instituted complaint in law.” This judgment was reiterated in the case of O.P Mehra v. Raj Kumari Bhalla[14].

Conclusion

Authorizing another person to act on behalf of us is a good alternative when we can’t be physically available for a particular transaction due to whatever reason. But one should always be careful while authorizing another person with certain powers, as there is a great chance those powers can be misused by the agents. One should be careful in choosing their power of attorney holder and only authorize a person whom he considers to be very faithful and loyal to him. Care should be taken by the principal because any act that the agent does the principal is held responsible for that. In case the holder commits an illegal act, the principal will also be held liable for such act with no fault of his own. The scope of powers of the holder should always be made clear by the principal regarding the type of acts he would have the power to carry on, on behalf of the principal.

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References:

[1] https://advocatetanmoy.com/law-of-power-of-attorney/.

[2] Ibid.

[3] 1881 c. 41, (Ch. XI. of Conveyancing and Law of Property Act, 1881), https://www.legislation.gov.uk/ukpga/Vict/44-45/41/enacted.

[4] Ravula Subba Rao v. The Commissioner of Income Tax, 1956 SCR 577

[5] (1998) 1 SCC 687.

[6] 1992 SCC OnLine MAD 140.

[7] (2008) 8 SCC 536.

[8] Ibid.

[9] (2014) 11 SCC 790.

[10] (2010) 10 SCC 512.

[11] The Economic Times, Power of attorney & Letter of authority: Points of distinction, (Aug. 11, 2020, 11:42 am), https://economictimes.indiatimes.com/consumer-legal/power-of-attorney-letter-of-authority-points-of-distinction/power-of-attorney-letter-of-authority/slideshow/10625692.cms.

[12] (1955) 1 SCR 393.

[13] (1992) SCC OnLine P&H 1262.

[14] (2006) SCC OnLine P&H 1074.