How Power of Attorney Affects Property Title for NRIs
Distance can make managing real estate assets in one’s home country quite difficult for Non-Resident Indians (NRIs). Thus, to conduct property-related transactions, most NRIs use a Power of Attorney (PoA). PoA can result in a loss of ownership and can lead to a range of complex disputes. An Indian lawyer will often clarify that a Power of Attorney does not transfer ownership by itself; it only authorises another person to act on behalf of the owner. Understanding the legal effect of a PoA is essential to avoid invalid transactions and future litigation.
The loss of ownership is a central consequence
of the issuance of a PoA and is, ostensibly, the most visible consequence of a
PoA. It is critical, therefore, for NRIs to fully understand the fundamental
implications of the issuance of the Indian PoA and the associated legal
consequences of agency formation in order to avoid future disputes over the
Power of Attorney.
What Constitutes Power of
Attorney in India?
The following constitutes the primary body of
the Power of Attorney Act in India:
●
The Powers of Attorney Act, 1882
●
Indian Contract Act, 1872
●
Registration Act, 1908
In basic terms, a Power of Attorney is a legal
document (instrument) wherein the principal assigns the authority to act on his
or her behalf to the agent for the performance of a specific task. For NRIs,
this typically consists of:
●
Managing the Property
●
Finalisation of the Sale Contract
●
Acting on behalf of the principal
in front of the registration authorities
Power of Attorney, however, does not result in
the ownership and transfer of title of the property
Does a Power of Attorney
Transfer Property Title?
No. Indian Courts have emphatically stated
that:
●
A Power of Attorney does not
confer ownership rights
●
It cannot be relied upon instead
of a registered sale deed
●
Title transfers only via a
registered conveyance deed[1] [2]
In the case of Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana,
the Supreme Court determined that property transactions based on Power of
Attorney, agreements to sell, or affidavits do not constitute legal title
transfer. Because it ended the longstanding abuse of transferring property via
Power of Attorney, this case is often referenced in many famous Indian
lawyers' forums.
Power of Attorney Types and
Their Implications
●
General Power of Attorney (GPA)
Encompasses the authority of the agent to
administrate or transact on the property in general. However, broad authority
heightens the potential for abuse.
●
Special Power of Attorney (SPA)
Restricts authority to certain functions, such
as the execution of a specific sale deed. In property transactions, the courts
prefer SPAs because of this.
Lawyer
firms in India often recommend including
specificity in Power of Attorney documents, and that they should be registered
and duly attested, to reduce the chances of conflicts over authority.
The Legitimacy Of Poas
Executed Abroad By NRIs
An NRI must have their PoA executed abroad:
●
Attested by the Indian Embassy /
Consulate
●
Attested under the Indian Stamp
Act, 1899
●
Registered in the case of
sale/transfer of immovable property
Not meeting any of these requirements can make
the PoA invalid for registration.
Power of Attorney risks in
property transactions
● Misuse of Authority
If the agent sells property beyond the scope
of authority, the transaction can be contested/reversed.
●
Fraud and Evidence Fabrication
Fraudulent activities done by the PoA, PoA
misused without the knowledge of the grantor, often face conflict.
●
Consideration Conflict
NRIs often face problems when the
consideration (money) for the sale is not sent properly.
●
Revocation of Power of Attorney
A Power of Attorney can be revoked, but for
the revocation to be effective, it must be communicated and documented.
The courts have affirmed this multiple times
that actions taken after a Power of Attorney is revoked are void.
Judicial Approach to PoA and
Property Title
The Indian judiciary considers legally valid
PoA transactions only if:
●
The PoA is authentic and legally
enforceable
●
The power and scope of the PoA are
delineated
●
All the applicable stamp duty and
registration requirements are satisfied
●
There is no non-disclosure,
misrepresentation, or fraud
Respected law firms in India supporting the
case cited the relevant rulings, which demonstrate how the courts have dealt
with the PoA transactions with due regard to possible misuse of such
provisions.
The PoA and Title Verification:
Relationship
If a purchaser buys a property from a holder
of PoA, the following must be satisfied:
●
All chains of title must be
delineated and verified
●
The POA must be reviewed regarding
its scope and validity
●
There must be legal proof of the
consent of the true owner
In the case of a defective POA, the entire
sale transaction is invalidated, even if the sale deed is executed.
Conclusion
Using a Power of Attorney for managing your
property in India is handy for NRIs for property management in India. However,
it does not affect ownership unless there is a registered conveyance deed. A
PoA does not transfer title; it only empowers action. The courts continue to
emphasise concerns regarding registration, jurisdictional stamp duty, and the
scope of authority. Lawyer firms in India
report that PoA disputes usually stem from vague drafting and attestation, as
well as overstepping the PoA's authority. Knowing the limits of a PoA can avert
property management disputes.
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