Topic: What is a Power of Attorney?
(1) According to S. 1A of the Powers of Attorney Act, 1882 (POA Act) a power of attorney includes any instrument empowering a specified person to act for and in the name of the person executing it.
(2) Power of Attorney is also defined under S. 2(21) the Indian Stamp Act, 1899 (Indian Stamp Act) according to which Power of attorney includes any instrument (not chargeable with a fee under the law relating to the Court fees for the time being in force) empowering a specified person to act for and in the name of the person executing it.
(b) Power of Attorney as an Agency :
(1) A power of attorney is a delegation of authority in writing by which one person is empowered to do an act in the name of the other. The person who acts on behalf of another person (the principal) by his authority, express or implied, is called an agent and the relation between him and his principal is called agency.
(2) A power of attorney holder is nothing but an agent as defined in S. 182 of the Indian Contract Act, 1872 (Contract Act). The authority of an agent is his power to affect his principal position by doing acts on his behalf. Actual authority is the legal relationship between the principal and agent created by a consensual agreement to which they alone are parties.
(3) A power of attorney is a document of convenience. Where circumstances require appointing an agent formally to act for the principal in a particular transaction, or a series of transactions, or to manage the affairs of the principal generally, the necessary authority is conferred by a power of attorney.
(4) In typical commercial transactions, a power of attorney may also purport to act as security to enable the security holder to exercise the powers conferred on him, which would be difficult for the donor to perform at a subsequent time. This subsequent nature of a power of attorney is dealt with herein. II.
Termination of a Power of Attorney :
(a) Generally speaking, a power of attorney can be terminated or cancelled by the principal by revoking his authority or by the power of attorney holder renouncing his authority.
(b) According to S. 201 of the Contract Act, an agency can be terminated by the principal by revoking his authority or by the agent renouncing his authority, unless such revocation is prohibited under S. 202 of the Contract Act (quoted herein-below). S. 201 of the Contract Act also states that an agency terminates, inter alia, by death of principal or agent.
(c) Now, the questions that arise are whether a power of attorney can be irrevocable in nature, and, whether an irrevocable power of attorney granted would terminate on death of a donor ? In such an event, would the security holder under a power of attorney, cease to hold such security in the event the donor dies ? III. When does a power of attorney become irrevocable ?
(a) Legal provisions :
(1) The POA Act does not state when a power of attorney is irrevocable. However, in various commercial transactions, a donor gives an irrevocable power of attorney, on contractual basis, to secure the interest of the donee of the power.
(2) Under S. 4 of the (English) Powers of Attorney Act, 1971 a power of attorney is irrevocable if it is expressed to be so and is given to secure :
(i) a proprietary interest of the donee of the power; or
(ii) the performance of an obligation owed to the donee. Then, so long as the donee has the interest or the obligation remaining undischarged, the power cannot be revoked by the donor without the consent of the donee, or by death, incapacity, insolvency, winding up or dissolution of the donor.