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Friday, July 25 1997

Delegating authority via power of attorney

Shelley Singh

Very often, you may feel the need to delegate responsibility to a friend or relation with regard to property, a bank account or any official dealings with the government. In such circumstances, it is prudent to legally delegate your authority so that it is acceptable to any third party. Such an authority -- given by one person to another to act on his behalf -- is called a Power of Attorney (PoA). Although there are no limitations as to the circumstances in which such authority is handed over, it is most common in property transactions.

Says Hemant Batra, partner, corporate and documentation, Kesar Dass B & Associates, ``It is governed by the Power of Attorney Act, 1882. This Act also defines PoA as an instrument empowering a specified person or persons to act for and in the name of the person executing it. If the appointment is made for a specified act or acts, it is called a special PoA. If it is made generally for certain acts, it is called a general PoA.''

A special PoA authorises a person to do specific acts as enumerated in the document, while a general PoA is executed to carry out connected formalities (it takes care of any additions, deletions or amendments). To be valid, the PoA has to be stamped under the Indian Stamp Act.

A PoA is not very expensive, but it's important to note that the scope of the PoA and its duration should be clearly mentioned. The costs may vary as given below:

* Rs 5 when executed for the sole purpose of procuring the registration of one or more documents in relation to a single transaction or for admitting execution of one or more such documents;

* Rs 5 when authorising one person or more to act in a single transaction other than the case mentioned above;

* Rs 25 when authorising not more than five persons to act jointly and severally in more than one transaction or generally;

* Rs 50 when authorising more than five, but not more than 10, persons to act jointly and severally in more than one transaction or generally;

* Rs 5 for each person authorised in any other case.

Says Batra, ``The duration of the PoA may be specifically mentioned, say two years, or it can be mentioned that the PoA will cease to exist on the completion of the task or that the duration comes to an end if the PoA is revoked.''

To execute the PoA, the individual and the person to whom powers are to be delegated have to be physically present before the authorising person. This is to prevent misuse of the PoA. The courts presume that every document purporting to be a PoA and to have been executed before and authenticated by a Notary Public or any court, judge, magistrate, Indian consul or vice-consul or representative of the Central government was so executed and authenticated. A PoA can be executed in India and even outside.

In Delhi, 90 per cent of the property transactions are on PoA; on the other hand, Mumbai does not recognise PoAs. It insists that you must register the property. Says G P Khungar, former director, corporate affairs, Ansals Ltd, ``The PoA will not entitle you to register the property in your name, but allow you to let it out and receive rent, to carry out any modifications or renovations. In certain cases, the powers may even include disposal of property.''

Interestingly, Batra points out that ``in Delhi, the main consideration for going in for a PoA is to avoid stamp duty on property transactions''. Adds Khungar, ``In Delhi, most of the land is leasehold from the Delhi Development Authority or the Land and Development Organisation. If the property is registered, the buyer will have to pay Stamp Duty and the seller will have to shell out duties levied for the unearned increase in the price of property (the difference in price at the time of buying and selling the property). So a PoA is undertaken as a mutual understanding between the buyer and the seller, though in effect it is a violation of the Stamp Act and the Transfer of Property Act. The Delhi government is planning to ease the Stamp Duty to make registration of property more acceptable.''

Nonetheless, PoA is an important legal instrument to take care of your official transactions. Batra stresses that it is important to indicate the scope of a PoA clearly lest it be open to different interpretations. He adds, ``It is important to conclude a PoA with: `I agree to stand by and accept all the acts done by my attorney and I shall ratify any action taken by him if required'.''

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.

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