Property transactions involving a Power of Attorney (PoA) have long been a common practice in India, especially when the owner is unable to be physically present to complete a transaction due to reasons such as living abroad, illness, or physical incapacity. However, courts have repeatedly clarified that a PoA is not, by itself, a substitute for a registered sale deed. This has led to frequent questions about the legal status of such transactions and the associated risks.
What is a Power of Attorney?
A Power of Attorney (PoA) is a legal document through which a person, known as the principal, authorises another individual, referred to as the attorney or agent, to act on their behalf in specified matters. It is commonly used when the principal is living abroad, unable to manage affairs due to illness, age-related health issues, or physical incapacity, or cannot be present to complete important transactions. The scope of a PoA can range from property transactions and banking operations to tax filings and other financial or legal matters. Governed under the Contract Act of 1872 and read with the Power of Attorney Act, 1882, a PoA is a formal delegation of authority.
Risks of Attorney Property Deals
In India, buying a property through a PoA, especially a General Power of Attorney (GPA), exposes the buyer to significant risks of fraud and criminal liabilities that may lead to prolonged court battles. The Supreme Court has not recognised property transactions through a GPA as a valid transfer of property. If you purchase a property using a PoA, there is a high chance of fraud, as the original owner can reclaim the property easily, and you have no legal proof of ownership. PoAs can also be used to conceal the real ownership of an individual, potentially inviting illegal or criminal burdens regarding ownership and use of the premises. For sellers, there is a risk that a PoA might have been revoked but not properly recorded, allowing the agent to exploit the situation.
Supreme Court on the Legality of Property Transfers through PoA
The Supreme Court has repeatedly clarified that a Power of Attorney is an authority document and not, by itself, a document that transfers ownership of immovable property. In the landmark case of Ghanshyam v. Yogendra Rathi (2023), the court observed that an agreement to sell is not a document of title or a deed of transfer of property by sale and therefore may not confer absolute title over a property. The court further noted that an agreement to sell or a power of attorney are not documents of transfer, and ownership rights in immovable property do not pass merely through their execution.
The judgment reiterated that legal title ordinarily passes through a duly executed and registered conveyance deed. Referring to its earlier ruling in Suraj Lamp & Industries v. State of Haryana, the court reaffirmed that a sale agreement, General Power of Attorney, and will cannot substitute a registered sale deed for transferring ownership. However, the court also drew a distinction between ownership and possession. It noted that a prospective purchaser who has performed their part of the contract and has been lawfully placed in possession may acquire certain possessory rights protected under Section 53A of the Transfer of Property Act. The court observed that such possessory rights of the prospective purchaser cannot be invaded by the transferer or any person claiming under them.
In conclusion, while a Power of Attorney can be a useful tool for authorising someone to act on your behalf, it is not a substitute for a registered sale deed in property transactions. Buyers and sellers must be aware of the legal risks and ensure that they follow proper procedures to avoid fraud and legal disputes.
