1996 (7) TMI 585 - HC - Indian Laws

Power of attorney holder authorized only to 'negotiate' sales cannot create binding property agreements

The HC set aside an interim order restraining property owners from disposing of their property. The court held that a power of attorney holder authorized ... Specific performance of an agreement of sale - Authority of power of attorney holder - Interpretation of clause 17 of the power of attorney - meaning and import of the expression 'to negotiate' or 'negotiation' - HELD THAT:- Here, the attorney Mr. Patil was authorised to negotiate for the sale of the properties of Mr. Patil. This authority was conferred on him with a view to removing doubt, because the power of attorney was basically for the management of the properties, and in the absence of such an authority, it would not have been permissible for Mr. Patil to negotiate for the sale of the properties. Otherwise also, nobody would have liked to negotiate the sale or purchase of a property belonging to somebody else with a person who has no authority, express or implied, to do so. Obviously, it was only with a view to enabling the attorney Mr. Patil to find out the best available price and terms and conditions for the sale of the properties in question that it was made clear in clause 17 of the power of attorney that in addition to the authority to manage the properties and to take all steps necessary or incidental thereto, he had also the authority to negotiate with the intending purchasers for the sale of the same. Such an authority cannot be construed as meaning authority to dispose of the properties or to enter into an agreement for the sale of the same. We are, therefore, of the clear opinion that Mr. Patil had had no authority to enter into an agreement for the sale of the properties of Mr. Warli on the basis of which he could confer on the respondent No. 1 a agreement and to compel the owner to execute deed of sale of the property in their favour. There can be no dispute about the fact that a person competent to transfer can only transfer interest in the property. Section 7 of the Transfer of Property Act clearly provides that every person competent to contract and entitled to transferable property or 'authorised to dispose of transferable property not his own' is competent to transfer such property. In the instant case. Mr. Patil had no authority to transfer the property of Mr. Warli nor to enter into an agreement for sale thereof. The agreement for sale entered into by the respondent No. 1 with Mr. Patil, therefore, cannot confer any right on them to claim the execution of the sale of the property of Mr. Warli on the basis of such an agreement of sale. Thus, we are of the clear opinion that the learned single Judge was not justified in refusing to set aside the interim order passed by him restraining the appellants from disposing of, transferring or alienating the property in question. In the result, this appeal is allowed. The impugned order of the learned single Judge is set aside. Issues Involved:1. Authority of Power of Attorney Holder2. Interpretation of Clause 17 of the Power of Attorney3. Specific Performance of Agreement of Sale4. Interim Order of InjunctionDetailed Analysis:1. Authority of Power of Attorney Holder:The appellants, successors of the original defendant No. 2, contested that Mr. Patil, the power of attorney holder, lacked the authority to enter into any agreement for the sale of the Warli property. The appellants argued that Mr. Patil was only authorized to manage the property and negotiate for its sale, but not to sell it or enter into a sale agreement. The court noted that the power of attorney explicitly stated that Mr. Patil was authorized 'to negotiate for the sale of the property,' but this did not extend to selling or entering into a sale agreement.2. Interpretation of Clause 17 of the Power of Attorney:The court examined Clause 17 of the power of attorney to determine its true meaning and import. The clause stated that Mr. Patil had the power to 'negotiate for the sale of the lands to the prospective purchasers or customers for the best available price.' The court clarified that the term 'negotiate' is a technical word, implying the process of discussing or arranging the terms of a sale, but not completing the sale itself. The court cited legal definitions and precedents to support the interpretation that negotiation does not equate to the authority to finalize a sale.3. Specific Performance of Agreement of Sale:The respondent No. 1 filed a suit for specific performance of an agreement of sale dated 10th June 1983, executed by Mr. Patil. The court held that since Mr. Patil did not have the authority to enter into a sale agreement, the agreement could not confer any title or rights to respondent No. 1. The court emphasized that only a person competent to transfer property can do so, and Mr. Patil lacked this competence.4. Interim Order of Injunction:The interim order of injunction, passed on 19-6-1984, restrained the defendants from selling, transferring, or otherwise dealing with the Warli property. The appellants sought to set aside this order, arguing that it was passed without proper notice to Mr. Warli, the original defendant No. 2. The court found that Mr. Warli had no notice of the Notice of Motion as it was served only on Mr. Patil. The court concluded that the learned single Judge erred in refusing to set aside the interim order, as Mr. Patil had no authority to enter into the sale agreement.Conclusion:The appeal was allowed, and the impugned order of the learned single Judge was set aside. The interim order restraining the appellants from dealing with the Warli property was vacated. The court clarified that Mr. Patil's authority under the power of attorney was limited to negotiating the sale terms, not completing the sale or entering into a sale agreement. The appellants agreed not to transfer, alienate, or dispose of the property for a period of 8 weeks from the date of the order. No order as to costs was made.