What is a Power of Attorney ?

A Power of Attorney (PoA) allows one person (the principal) to grant another (the agent) the authority to act on their behalf. While it is useful for legal and financial matters, its misuse in real estate transactions led to a landmark Supreme Court ruling in the Suraj Lamps case (2011). This ruling significantly altered how Power of Attorney is used in property dealings, preventing unauthorized transfers and fraud.

If you’re involved in property transactions, understanding these legal changes is crucial.

What is a Power of Attorney?

A Power of Attorney is a legally binding document that enables an agent to handle specific tasks for the principal. The scope of authority depends on the type of PoA issued.

Types of Power of Attorney

1. General Power of Attorney (GPA): Grants broad authority to the agent, covering multiple responsibilities, including financial and legal matters.
2. Special Power of Attorney (SPA): Limits the agent’s powers to specific tasks, such as executing a lease, handling a legal case, or signing documents for a particular transaction.

When Can Power of Attorney Be Used in Property Matters?

While PoA is no longer a substitute for a sale deed, it is still valid for:
✔ Managing property (e.g., renting, maintenance, or collecting rent).
✔ Executing legal agreements on behalf of the principal.
✔ Mortgage and leasing purposes.
✔ Representing the principal in court matters.

🚫 What a Power of Attorney Cannot Do:

• Be used to sell or purchase property independently.
• Replace a registered sale deed.
• Be an instrument to avoid stamp duty or registration fees.

How to Properly Execute a Power of Attorney?

To ensure that a Power of Attorney is legally valid, follow these steps:

1. Signing and Authentication

• The principal must sign the document before a Notary Public or Judicial Magistrate.
• The notary must confirm that the principal signed the PoA in their presence and was identified properly.

🔹 For PoAs executed abroad, authentication by an Indian Consulate or a Central Government representative is required.

2. Registration and Stamp Duty for Property-Related PoAs

• In Maharashtra, if the PoA is granted to a non-family member for selling property, it must be registered with the Sub-Registrar’s Office.
• Stamp duty: 5% (with cess and LBT )of the market value of the property for property-related PoAs.
• Family PoA (granted to a close relative) requires only a ₹500 stamp paper and notarization.

💡 Note: If a PoA is given to a developer for property redevelopment, it must be stamped as a conveyance deed under the Bombay Stamp Act, based on the property’s market value.

When Does a Power of Attorney Become Invalid?

A Power of Attorney automatically expires or can be revoked in the following cases:
✅ The principal cancels the PoA.
✅ Either the principal or agent passes away.
✅ The principal becomes mentally incapacitated or bankrupt.
✅ The assigned task is completed.
✅ Both parties mutually agree to terminate the PoA.
✅ The agent voluntarily renounces the authority.

Irrevocable Power of Attorney: When Does It Apply?

Most PoAs can be revoked, but some become irrevocable under specific conditions:

• The agent has a legal or financial interest in the subject matter.
• The PoA is granted in exchange for consideration (e.g., a developer receiving PoA to construct and sell apartments).
• The agent has already exercised the powers granted under PoA.

🛑 Example: If a landowner grants irrevocable PoA to a developer for redevelopment, and the developer invests in the project, the PoA remains valid even if the landowner passes away. The developer retains the right to complete the project.

Impact of the Suraj Lamps Case on Property Transactions

Before 2011, many individuals used Power of Attorney to bypass legal property transfers, avoiding stamp duty and registration fees. This practice led to legal disputes and revenue losses for the government.

In the Suraj Lamps & Industries Pvt. Ltd. v. State of Haryana (2011) case, the Supreme Court ruled:
✅ PoA cannot be used to transfer property ownership.
✅ Property sales through PoA, sale agreements, and wills are legally invalid.
✅ A registered sale deed is the only valid document for transferring ownership.
✅ Genuine PoAs for managing property, leasing, or representing someone in legal matters remain valid.

This judgment curbed fraudulent transactions and ensured compliance with proper legal channels.

Conclusion

The Suraj Lamps judgment transformed property transactions, making registered sale deeds the only legal way to transfer ownership. While Power of Attorney remains useful for property management and legal matters, it cannot replace a sale deed.

🔹 If you’re buying or selling property, always follow legal processes to avoid disputes.