Power of attorney
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This article is written by Rangita Chowdhury of Symbiosis Law School, Noida. It talks about the different legal aspects of the power of attorney and the Specific Relief Act. 

Introduction

Unfortunate incidents happen, accidents happen, illness happens and we as human beings have only so much control over them even if we have the right resources. This is why having a power of attorney is important and helpful. One can be at peace if they know that they have someone who will take care of their legal and financial matters when they might not be capable anymore. The power of attorneys helps protect us and our loved ones. 

The Specific Relief Act similarly is very helpful when there has been a breach of contract and merely giving monetary compensation won’t suffice. Specific Relief helps the party to gain damages in the form of the specific duty the breaching party had to perform.

Objective of the Specific Relief Act,1963

The Specific Relief Act, 1963 ( hereafter referred to as the ‘Act’) enacted by the government of India came into force on 1st March 1964. It repealed its earlier version, Specific Relief Act, 1887 on the recommendation of the Law Commission in its ninth report. The Act was also recently amended in 2018. The Act deals with civil and contractual remedies when there has been a breach of contract between parties. It deals with specific remedies. Specific Relief means ‘relief in specie’ which means ‘in the actual specified form’. So, the Act is basically about fulfilling the exact particular obligation or that specific performance which the breaching party was supposed to do. The Act sets forth the types of remedies available to a person when there has been a breach of contract. 

The Act was enacted to take care of situations where damages or compensation cannot be determined or are adequate and only specific performance of the act could be considered sufficient. The Indian Contract Act, 1872 only provides remedies for breach in the form of compensation or damages. The Specific Relief Act is somewhat an extension of it. 

Types of remedies under the Act- 

  • Recovery of possession of the property
  • Specific performance of contracts
  • Rectification of instruments
  • Rescission of contracts
  • Cancellation of Instruments
  • Declaratory decrees
  • Injunction

Difference between power of attorney and durable power of attorney

The power of attorney is a written authorized document that gives one the right to appoint another person to represent him in his private, business, or legal matters on his behalf. The person who is appointed is known as the ‘agent’ and the person appointing him/her is chiefly known as the ‘principal’ but can also be referred to as the ‘grantor or donor’. The appointed person is also known as ‘attorney-in-fact’ in some jurisdictions. The agent can be a regular layperson and not someone with a legal background or knowledge. 

There are two types of powers of attorney-

  1. The general power of attorney 
  2. Limited power of attorney 

A general power of attorney has very broad legal authority and covers a wide range of transactions. This expires when the principal dies, becomes mentally unfit, or revoked the power of attorney in writing. 

Illustration: A gives power of attorney to B to operate his bank accounts and make any transactions on his behalf. B now has the power to transfer or withdraw money from A’s bank account. Soon, A becomes mentally unfit and now the power of attorney has been revoked.

In the above illustration, I only mentioned two types of authorizations but in the general power of attorney or simply power of attorney, the agent is entitled to carry out any legal or personal transaction till the power is revoked for any of the above-mentioned reasons. 

In limited power of attorney, the agent can only act on behalf of the principal in certain specific matters as specified by the principal in the document. It can also be limited for a specific time. 

Illustration: Z gives X the authority to sign contracts for his company regarding the appointment of new employees. Therefore, X only has a limited authority to sign employment contracts on behalf of X and nothing else. 

Sometimes when the parties want to avoid a situation where the mental state of the principal might deteriorate later, and there might be a risk that the power of attorney will cease to exist because of the mental state of the principal, they can sign a durable power of attorney. 

In a durable power of attorney, the agent’s authority continues in all the species mentioned matters even if the principal becomes incapacitated. This is explicitly mentioned in the document. They also cannot make decisions regarding the health of the principal, the maximum they can do in this regard is to pay their medical bills. They can continue with their authorization until the principal dies or revokes the power of attorney in writing. 

Illustration: D gives C the durable power of attorney. D gets diagnosed with dementia. C still has the power to act on behalf of D unlike a general power of attorney.

Legal aspect of power of attorney

Inasmuch as human beings become busier, it becomes more necessary for him to depend on others for getting his things done. Owing to this reason, the power of attorney is now playing vital role.”

We know that the Power of Attorney is a document where one person (the principal) appoints another (the agent) to perform certain acts or deeds on his behalf.

  1. The Blacks dictionary defines it as an instrument that helps a person, so authorized, to act as an agent of granting it. 
  2. In Stroud’s judicial dictionary “power of attorney is defined extensively as an authority whereby one is set in the stead or place of another to act for him”.

The Powers of Attorneys Act, 1882 defines the Power of Attorney as an instrument empowering a specified person to act for and in the name of the person executing it.

Perhaps the most precise meaning of Power of Attorney is found in the Indian Contract Act of 1872. The law of Agency governs the principles of Power of Attorney. Section 182 elaborates on the definition of agent and principal. 

  1. An agent under this act is a person who is employed by another to act on his behalf or to represent him in any dealing with a third party. 
  2. Thus the appointee is called the ‘principal’ and the person appointed is known as the ‘agent’. 
  3. However, a person authorized by law may also appoint any personas agent, he may or may not be the ‘principal’ Thus the law does not make any distinction between different classes of agents.
  4. Agents may either be General or Special. brokers, factors, partners, and all persons employed in a business of occupying a position of a generally recognized character are general agents. Special agents, on the other hand, are appointed for a specific occasion or purpose. Here the function of the agent is limited to his appointment.

The act further defines and explains the duties and rights of an agent and its authority, including the various types of authority.

The Indian Stamps Act, 1889 defines it “any instrument empowering any specified person to act for and in the name of the person executing it.”

Other legal aspects of power of attorney

  1. The Power of Attorney can enter into or sign, execute, deliver, and acknowledge contracts and agreements.
  2. He is empowered to perform the assigned duties in the Real Estate Sector, concerning bank accounts, certificates of deposits, and money market accounts.
  3. He can file tax returns, insurance forms, and related documents.
  4. He has similar powers concerning stocks, bonds, and securities.

Basic principles of power of attorney

  1. The power must be strictly construed.
  2. The agent cannot execute any function in addition to what he has been empowered for.
  3. The principal cannot be held accountable for any fraud committed by the agent.
  4. Any act committed more than the power granted will not bind the principal (e.g. power to dispose of property does not allow mortgaging of the property).
  5. Power to manage immovable property does not confer the right to manage immovable property like ornaments etc).

Some rules governing power of attorney

  1. The operative part of the deed is controlled by the recitals.
  2. The general words following the authority for a particular act will be limited to the purpose for which the authority is given and the deed must be so construed that it has all powers necessary for execution.
  3. Where authority is given to do a particular act, followed by general words, the general words are restricted to do what is necessary for the proper performance of the particular acts.

Registration of power of attorney

  1. It is optional, not compulsory, though, in India, the Power of Attorney should be authenticated by a Sub Registrar under the Registration Act, 1908.
  2. In other areas, attestation should be by a Notary or diplomatic agents.
  3. An attorney under a valid Power of Attorney is empowered to sign documents.
  4. Foreign Power of Attorney needs attestation by a Collector after its receipt in India within 3 months.     
  5. Registration of power of attorney authenticates the deed of power of attorney.
  6. Power of Attorney needs to be attested by two or more adult independent witnesses who are not unsound.
  7. If the value of the immovable property is more than Rs 100 it must be registered.

Power of attorney can be revoked in the following cases

  1. Revocation by the Principal. 
  2. Death, insanity or bankruptcy of the principal.
  3. The business for which the agent was appointed is over.
  4. By mutual agreement between the two.
  5. If the agent renounces his right.

Validity of sale of property through the power of attorney

Despite being in practice, the power of attorney is not a valid instrument to conduct a valid sale deed. 

A sale deed executed between a buyer and the seller involves payment of Registration Fees and Stamp Duty by the buyer and Capital Gains Tax by the seller. However, if the transaction is done through power of attorney, these charges can be avoided as the transaction is legally not completed and the seller is still considered as the buyer. This is the reason why this practice is very much in vogue all over India as it offers the monetary benefits to both the buyer and the seller. Though officially there is no transfer of title, both parties agree to such a practice for this monetary gain.

Taking exception to this practice, the Supreme Court in Suraj Lamp & Industries Pvt. Ltd. Vs State of Haryana & Anr (2011) held that power of attorney is not a legal instrument of transfer of immovable property concerning its right, title, and interest as any sale deed executed through a power of attorney i is an incomplete transfer where the rights of the property would still belong to the original owner. 

The Supreme Court also ordered the municipal authorities not to register and mutate properties based on such documents. However genuine transactions through general Power OF Attorney were kept out of the purview of the judgement.

This is the legal position but needless to say the practice is still very much in vogue all over the country.

When is the Specific Relief Act attracted?

The Act provides wide discretionary authority on the courts to award damages as a general rule and grant specific performance as an exception. It is thus a codification in relation to grant of relief for specific non-performance.

This means that the provisions of the act are attracted when a contract has not been performed. The aggrieved party is liberty under this act to seek judicial intervention, compelling the performance of a contract. This is known as specific performance. However, instead of performance, the party can also ask for monetary compensation.

Thus, the provisions of the act entitle a person in the recovery of property, specific performance of a contract, the rectification of instruments, rescinding of contracts, and cancellation of instruments. All these issues attract the provisions of the act, whenever there is a failure in the performance of the act.

Before the 2018 amendment, the remedy of specific performance was not available to the aggrieved party as a matter of right. The Court applied its discretion. Now, the courts are bound to enforce performance as promised or specified in the contract as a rule, with limited exceptions.

How does the Act safeguard individual rights over the property?

Chapter I of the Act deals with recovering possession of the property. Any person dispossessed of his movable or immovable property may seek relief for possession of the same under the provisions of this act.

(A) Immovable property

  • Section 5 of the act entitles to the possession of a specific immovable property in the manner as provided in the Code of Civil Procedure, 1908
  • Under Section 6 of the Act, any person dispossessed of his immovable property may file a suit for recovery of the same provided that he had not given any consent for such dispossession and also provided that it was done under an existing provision of law.
  • The act also bars preferring any appeal or review against any order of decree passed under this act.

However, there are 2 limitations – the appeal has to be made within 6 months of dispossession and no suit can be preferred against the Government.

(B) Specific movable property

  • Section 7 of the act entitles to the possession of a specific movable property in the manner as provided in the Code of Civil Procedure, 1908. Trustees are also allowed to sue, claiming possession.

(C) Liability of a person not being the owner

  • Section 8 compels a person in possession or control of a particular article of movable property, not being the owner to deliver it to the person entitled for his immediate possession, provided that the defendant is the agent or trustee of the plaintiff, when monetary compensation would not provide adequate compensation when the actual damage caused is difficult to find out and when the article has been wrongfully transferred from the plaintiff.

Conclusion

As discussed, the Power of Attorney is a legal instrument that empowers an individual (agent, attorney, or donee) to act for and in the name of another person (principal or doner) who executes the instrument. The mechanism helps people, who are unable to execute legal acts or proceedings on account of their physical unavailability, to get such jobs done through another person. The provisions relating to the Power of Attorney need to be governed by the Power of Attorney Act, 1882. 

If the agent/attorney/donee fails to perform the duties assigned to him by the principal or doner he is said to have breached the contract of Power of Attorney. The Principal can then sue the agent under the Specific Relief Act, 1963 for the performance of the specific duty which the second party has failed to perform. Thus by providing a remedy, the Specific Relief Act, 1963, complements the Power of Attorney Act, 1882, and comes to the aid of the Principal, when the agent fails to execute his duties and responsibilities as stipulated in the Power of Attorney. 

References


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