A General Power of Attorney grants all the powers to the person wherein he/she will be answerable as well as accountable to all the acts done/decided by him on behalf of the principal person. In India, it is not quite uncommon in the real estate sector to use a general power of attorney for all kind of property matters and transactions i.e. buying, selling, mortgaging, leasing etc. The most significant thing to consider is choosing the right and reliable person while handing him over your general power of attorney. Here, the key emphasis is on the use of General Power of Attorney for buying of property and how effectively appropriate it is in the eyes of law as well as in reality for the principal.

A General Power of Attorney can be used to

• To enter into contacts,
• Perform any contract, agreement, writing, or thing
• To make, sign, execute, and deliver, acknowledge any contract, agreement,
• To sell, exchange, lease, collect rents, grant, bargain,  or borrow and mortgage .
• To execute all deeds, bonds, contracts,  mortgages, notes, checks, drafts, money orders;
• To manage, compromise, settle, and adjust all matters relating to real estate;
• To add to or withdraw any amounts from any of my bank accounts, Certificates of Deposit, Money Market Accounts, etc.
• To make, execute, endorse, accept and deliver any and all cheques and drafts
• Execute or release deeds of trust or other security agreements as may be necessary
• Deposit and withdraw funds.
• Acquire and redeem certificates of deposit, in banks, savings and loan
• To file, sign all tax returns, insurance forms and any other documents
• To represent in all matters concerning the foregoing.
• To sell any and all shares of stocks, bonds, or other securities
• To make, execute, and deliver any assignment, or assignments, of any such shares of stock, bonds, or other securities
  
  

What are the advantages of buying a property through a General Power of Attorney in India?

General Power of Attorney, is used by buyers and sellers only to avoid stamp duty, capital gains, taxes, etc. and especially, in cases, where the principal owner is out of town or country and thus, issue a general power of attorney to a trustworthy person to do certain acts relating to purchase of property on behalf of him.

Another benefit is that General Power of Attorney is revocable or terminated at the grantor’s desire at any apt time he/she thinks right unless it is made otherwise. In other words, it is only for the convenience of buyer, but in any way does not convey ownership of any purchased property to the attorney/principal person.

Here, the important thing to note is that power of attorney should not be considered as a transfer instrument of any title, right or interest in any property.

What are the Disadvantages of buying property through a General Power of Attorney?

There are more cons to the use of General Power of Attorney than pros as its issuance involves significant risks and uncertainties.

The attorney may turn out to be unreliable and can abuse the powers granted to him.

The drafting of General Power of Attorney has to be made with great care and precision, where valid reasons for issuing the powers have to be stated. Any wrong use of words can jeopardize your position and can cause greater harm.

General Power of Attorney is not a valid document for transfer or purchase of immovable property in the eyes of law.

What is the process involved for property acquisition?

A brief glimpse at the process involved for property acquisition in India:-

First, examine the relevant details of property-to purchase, i.e. area of property, its freehold status, details of the past owner(s) etc. and compare it with details prescribed in the title deed to verify the examination.

In case, the construction of property is to take place, then evaluate given property designs, layouts and builder plans and the given approvals for the same by the respective authorities.

Perform a thorough title search of the property.

Get the encumbrance certificate from the previous owner to assure the clear title of the property.

Ensure the payment of all past taxes and bills by the previous owners

Hire the services of real estate lawyer/expert and get a rightfully drafted sale agreement and conveyance deed on the stamp paper of the prescribed amount.

The final agreement to be signed by both the parties to purchase and by minimum 2 witnesses.

Finally get the property and conveyance deed registered in the name of the buyer after paying the requisite stamp duty.

What happens if the property is to be acquired by a Non Resident Indian?

A Non Resident Indian can buy any number of immovable properties in India except agricultural land/farm house/plantation property and its purchase payment has to be made via prescribed channels.

A Non Resident Indian can issue a General Power of Attorney to a person in India which has to be adequately signed on each page and has to be attested by the Indian embassy situated in its residing country. Send the original attested General Power of Attorney by courier to his Indian attorney. The said document has to be presented before the District Collector for stamping and then it is to be registered, as per the respective State Act, where the Non Resident Indian desires to purchase immovable property.

Is property acquisition through General Power of Attorney valid under Indian Law?

The Apex Court of India has clearly pronounced that sale of immovable property via General Power of Attorney is not valid as it does not convey any ownership right in respect of the purchased property in favor of the buyer. It can be made only by way of stamped and registered conveyance deed as applicable under the respective State Act. Hence, Property Acquisition via GPA is not valid under Indian Law. GPA just authorizes the grantee to do some specific acts on behalf of the grantor and does not complete any transaction relating to sale/ transfer of immovable property.

In a nutshell, the General Power of Attorney is just a authority document issued by the Guarantor to Grantee to perform certain acts on his behalf and is also required to be registered as per respective state provisions but convey any ownership right or title of the property to the guarantor.

Principles to Remember while drafting a General Power of Attorney:

• The main rule of power of attorney is that it should be strictly construed.
• An agent cannot through his acts bind the principal to a larger extent than he is empowered to do under the power of attorney.
• Fraud by the agent holding the power of attorney does not bind the principal. He cannot be sued or otherwise held responsible for fraud by the agent
• If the power does not authorize the agent to carry on a business except with limitations any act done by him in excess of such power will not bind the principal. Example - power to dispose off property does not confer the power to mortgage the property.
• Power to manage immoveable property cannot permit principal's ornaments which are a moveable property.
  
  

Rules to Construct a General Power of Attorney

• The operative part of the deed is controlled by the recitals
• 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.
• General words do not confer general powers, but are limited to the purpose for which the authority is given, and are construed as enlarging the special powers only when necessary for that purpose
• The deed must be construed so as to include all powers necessary for its execution.
  
  

Registration of Power Of Attorney

• Registration of power of attorney is not compulsory. it is optional
• In India, where the Registration Act, 1908, is in force, the Power of Attorney should be authenticated by a Sub Registrar only, (Whenever a person signs the document and his attorney presents/ admits execution).
• In other areas, attestation should be by a Notary or diplomatic agents
• In case an attorney under a valid Power of Attorney himself signs a document, he may, as an executing (signing) party present/admit execution of a document though it is attested by a Notary, unless the text of the power specifically excludes such powers
• Foreign Power of Attorney should be got stamped by the Collector after its receipt in India within prescribed time of 3 months
• Registration of power of attorney authenticates the deed of power of attorney
• Power of Attorney shall be attested by two or more adult independent witnesses who are of sound mind
• If a power of attorney is in respect of an immovable property of value more than Rs100 it must be registered.
  
  

Revocation of General Power of Attorney

• If the power given to the attorney is coupled with an interest it is irrevocable.
• To decide whether a given power is coupled with interest or not regards are to be given to the facts of each case and the wordings of the instrument itself.
• The right of an agent to remuneration though stipulated in the form of property to be produced by exercise of power is not an interest in the required sense.
• If the power is irrevocable as per the test laid down the parties are nevertheless free to make it revocable by an express stipulation to the contrary.
• If the power is revocable than the parties cannot make it irrevocable merely by writing that the instrument is irrevocable.
• A power of attorney is automatically terminated if- One of the parties to the instrument dies or becomes insane, the principal becomes insolvent or bankrupt, any specific condition in the instrument is breached, and the business comes to an end.
  
  

February 02, 2021