2025 (3) TMI 114 - SC - Indian Laws

General Power of Attorney with Agreement to Sell creates no ownership rights in attorney holder

M.S. ANANTHAMURTHY & ANR. Versus J. MANJULA ETC

SC held that a General Power of Attorney (GPA) combined with an Agreement to Sell does not confer ownership rights to the attorney. The relationship ... Ownership and possession of suit property - right, title, or interest in the subject matter of the agency of holder of the General Power of Attorney (GPA) along with an Agreement to Sell, to execute the registered sale deed - legality of registered sale deed. Relationship between the Executant and Holder of General Power of Attorney - HELD THAT:- A power of attorney derives its basic principles from Chapter X of the Contract Act which provides for 'Agency' along with Sections 1A and 2 respectively of the Powers of Attorney Act, 1882. Agency is a fiduciary relationship between two persons, where one explicitly or implicitly agrees that the other will act on their behalf to influence their legal relations with third parties, and the other similarly agrees to act in this capacity or does so based on an agreement. The relationship between the executant of a general power of attorney and the holder of the power is one of principal and agent. A principal is bound by the acts done by an agent or the contracts made by him on behalf of the principal. Likewise, power of attorney in the nature of contract of agency authorizes the holder to do acts specified by the executant, or represent the executant in dealings with third persons. In the case of Syed Abdul Khader v. Rami Reddy & Ors., [1978 (11) TMI 158 - SUPREME COURT], this Court held that the relation between the donor of the power and the donee of the power is one of the principal and agent having its genesis in a contract. It further observed that the term 'agency' refers to the relationship in which one person has the authority or ability to establish legal relations between a principal and third parties. This relationship arises when a person, known as the agent, has the authority to act on behalf of another, called the principal, and agrees to do so. In State of Rajasthan v. Basant Nahata, [2005 (9) TMI 620 - SUPREME COURT], while dealing with the challenge to the constitutional validity of Section 22A of the Registration Act, it was held that a deed of power of attorney is a document of convenience empowering the agent to act for the principal or manage the affairs of the principal. From the above exposition of law, it is settled that power of attorney is a creation of an agency by which the grantor/donor/executant authorizes the grantee/donee/holder/attorney to do the acts specified on his behalf, which will be binding on the executant as if the acts were done by him - In the present case, the original owner, executant of the POA, holds the position of a principal. Whereas, the holder of the POA is an agent. There is no gainsaying in the fact that the original owner by executing the POA dated 04.04.1986 in favour of the holder entered into a principal-agent relationship with each other. Independent Reading of the General Power of Attorney and the Agreement to Sell - 'Interest' in Power of Attorney - HELD THAT:- In the present case, it is evident from para 1 of the GPA executed by the original owner in favor of the holder that the POA was to look after, maintain, manage the Scheduled Property. Para 2 states that the attorney can enter into any agreement with any person with respect to the Scheduled Property for any amount, receive advance amount, to execute deeds in favor of such persons, issue proper discharge - Lastly, para 8 states that the attorney is generally entitled to do all acts required in respect of the Suit Property which are not specifically mentioned and that the GPA is irrevocable. Nature of Power of Attorney - HELD THAT:- The import of the word 'general' in a POA refers to the power granted concerning the subject matter. The test to determine the nature of POA is the subject matter for which it has been executed. The nomenclature of the POA does not determine its nature. Even a POA termed as a 'general power of attorney' may confer powers that are special in relation to the subject matter. Likewise, a 'special power of attorney' may confer powers that are general in nature concerning the subject matter. The essence lies in the power and not in the subject-matter. A three-Judge Bench of this Court settled the rules of interpretation applicable to power of attorney in Timblo Irmaos Ltd., Margo v. Jorge Anibal Matos Sequeira, [1976 (12) TMI 193 - SUPREME COURT]. It was held that words used in a POA must be interpreted in the context of the whole; the purpose of the powers conferred must then be examined through the circumstances in which it was executed; and finally, necessary powers must be implied. Further, a mere use of the word 'irrevocable' in a POA does not make the POA irrevocable. If the POA is not coupled with interest, no extraneous expression can make it irrevocable. At the same time, even if there is no expression to the effect that the POA is irrevocable but the reading of the document indicates that it is a POA coupled with interest, it would be irrevocable. Applying the above exposition of law in the facts of the present case, it is evident from the tenor of POA that is not irrevocable as it was not executed to effectuate security or to secure interest of the agent. The holder of POA could not be said to have an interest in the subject-matter of the agency and mere use of the word 'irrevocable' in a POA would not make the POA irrevocable. The High Court was right in holding that the holder did not have any interest in the POA. When the High Court observes that the power of attorney does not explicitly state the reason for its execution, it implies that its nature is general rather than special. From the independent reading of the POA and the agreement to sell, the submissions of the appellants fail on two grounds, first, the POA is general in nature and does not secure agent's right in the subject-matter of the agency, and secondly, an agreement to sell simpliciter does not confer ownership in the immovable property so as to transfer a better title to anyone else. Combined Reading of the General Power of Attorney and the Agreement to Sell - HELD THAT:- Section 17(1)(b) prescribes that any document which purports or intends to create, declare, assign, limit or extinguish any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable property is compulsorily registerable. Whereas, Section 49 prescribes that the documents which are required to be registered under Section 17 will not affect any immovable property unless it has been registered - Even from the combined reading of the POA and the agreement to sell, the submission of the appellants fails as combined reading of the two documents would mean that by executing the POA along with agreement to sell, the holder had an interest in the immovable property. If interest had been transferred by way of a written document, it had to be compulsorily registered as per Section 17(1)(b) of the Registration Act. The law recognizes two modes of transfer by sale, first, through a registered instrument, and second, by delivery of property if its value is less than Rs. 100/-. The High Court rightly held that even though the GPA and the agreement to sell were contemporaneous documents executed by the original owner in favour of the holder, this alone cannot be a factor to reach the conclusion that she had an interest in the POA - even though the GPA and the agreement to sell were contemporaneous documents executed by the original owner in favour of the same beneficiary, this cannot be the sole factor to conclude that she had an interest in the subject-matter. Even if such an argument were to persuade this Court, the document must have been registered as per Section 17(1)(b) of the Registration Act. In the absence of such registration, it would not be open for the holder of the POA to content that she had a valid right, title and interest in the immovable property to execute the registered sale deed in favour of appellant no. 2. Effect of Suit for Injunction simpliciter - HELD THAT:- Where the question of title is 'directly and substantially' in issue in a suit for injunction, and where a finding on an issue of title is necessary for granting the injunction, with a specific issue on title raised and framed, a specific prayer for a declaration of title is not necessary. As a result, a second suit would be barred when facts regarding title have been pleaded and decided by the Trial Court. In the present suit, the findings on possession rest solely on the findings on title. The Trial Court framed a categorical issue on the ownership of the appellants herein. To summarize, where a finding on title is necessary for granting an injunction and has been substantially dealt with by the Trial Court in a suit for injunction, a direct and specific prayer for a declaration of title is not a necessity. Conclusion - The GPA and the agreement to sell were contemporaneous documents executed by the original owner in favor of the holder, but this alone cannot be a factor to conclude that she had an interest in the POA. Even if such an argument were to persuade the Court, the document must have been registered as per Section 17(1)(b) of the Registration Act. The practice of transferring an immovable property via a GPA and agreement to sell has been discouraged. It is concluded that no error not to speak of any error of law could be said to have been committed by the High Court in passing the impugned judgment - appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:a. Whether the agent, A. Saraswathi, by virtue of being a holder of the General Power of Attorney (GPA) along with an Agreement to Sell, had any right, title, or interest in the subject matter of the agency, to execute the registered sale deed dated 01.04.1998 in favor of her son, appellant no. 2, after the death of the principal, on 30.01.1997.b. Whether it was obligatory for the answering respondent to challenge the execution and validity of the General Power of Attorney and the Agreement to Sell dated 04.04.1986 and further declare that the registered sale deed dated 01.04.1998 is invalid, non-est, or illegal in O.S. 133/2007.2. ISSUE-WISE DETAILED ANALYSISi. Relationship between the Executant and Holder of General Power of AttorneyThe relationship between the executant of a general power of attorney and the holder is one of principal and agent. The principal is bound by the acts done by an agent or the contracts made by him on behalf of the principal. The power of attorney in the nature of a contract of agency authorizes the holder to do acts specified by the executant, or represent the executant in dealings with third persons.In this case, the original owner, as the executant of the POA, holds the position of a principal, while the holder of the POA is an agent. The original owner by executing the POA dated 04.04.1986 in favor of the holder entered into a principal-agent relationship.ii. Independent Reading of the General Power of Attorney and the Agreement to Sella. 'Interest' in Power of AttorneySection 202 of the Contract Act prescribes that where an agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot be terminated to the prejudice of such interest unless there is an express stipulation to the contrary. The essentials of Section 202 are that there shall be a relationship in the capacity of 'principal and agent' and that the agent must have an interest in the subject-matter of the agency. In the present case, the GPA does not secure the agent's right in the subject-matter of the agency, and an agreement to sell does not confer ownership in the immovable property.b. Nature of Power of AttorneyThe nature of the GPA is general rather than special. The High Court observed that the power of attorney does not explicitly state the reason for its execution, implying that its nature is general. The POA is not irrevocable as it was not executed to effectuate security or to secure the interest of the agent.iii. Combined Reading of the General Power of Attorney and the Agreement to SellThe combined reading of the POA and the agreement to sell would mean that if interest had been transferred by way of a written document, it had to be compulsorily registered as per Section 17(1)(b) of the Registration Act. The law recognizes two modes of transfer by sale, first, through a registered instrument, and second, by delivery of property if its value is less than Rs. 100/-. The High Court rightly held that the holder did not have any interest in the POA.iv. Effect of Suit for Injunction simpliciterThe absence of a separate suit for declaration or even a specific prayer to that effect does not alter the legal position of either party. Where the question of title is 'directly and substantially' in issue in a suit for injunction, and where a finding on an issue of title is necessary for granting the injunction, a specific prayer for a declaration of title is not necessary.3. SIGNIFICANT HOLDINGSThe Court held that the GPA and the agreement to sell were contemporaneous documents executed by the original owner in favor of the holder, but this alone cannot be a factor to conclude that she had an interest in the POA. Even if such an argument were to persuade the Court, the document must have been registered as per Section 17(1)(b) of the Registration Act. The practice of transferring an immovable property via a GPA and agreement to sell has been discouraged.The Court concluded that no error of law was committed by the High Court in passing the impugned judgment. The appeals were dismissed, and parties were ordered to bear their own costs.