Supreme Court Clarifies: Mere Mention of ‘Irrevocable’ Does Not Make a Power of Attorney Irrevocable

A bench comprising Justices J.B. Pardiwala and R. Mahadevan emphasized that the legal effect of a Power of Attorney must be assessed based on the authority granted within the document and not its label. The court observed, “The term ‘general’ in a PoA refers to the scope of power granted concerning the subject matter. Even if a Power of Attorney is labeled as ‘general,’ it may still contain specific powers related to the subject matter. Similarly, a ‘special’ Power of Attorney may include broader powers.”

Court’s Interpretation of a Power of Attorney

The Supreme Court clarified that to understand a document’s true nature, one must examine its contents rather than rely on its title. The responsibility lies with the court to analyze the language used by the parties and the circumstances under which the document was executed.

Addressing the key question of whether using the word ‘irrevocable’ in a PoA makes it legally binding without the possibility of revocation, the bench referred to past judgments, including Timblo Irmaos Ltd., Margo v. Jorge Anibal Matos Sequeira, (1977) 3 SCC 474. The court stated that words in a Power of Attorney must be understood in the context of the entire document. It held, “The mere use of the word ‘irrevocable’ does not make a PoA legally irrevocable. If a Power of Attorney is not coupled with an interest, no external terminology can make it so. However, even if a PoA does not explicitly state that it is irrevocable, but its contents indicate that it is coupled with an interest, it would be legally irrevocable.”

Background of the Case

The case before the Supreme Court arose from a property dispute in which the appellants argued that an original property owner had executed an irrevocable General Power of Attorney (GPA) and an unregistered agreement to sell in favor of a PoA holder. The holder, in turn, transferred the property to her son, the second appellant.

On the other hand, the respondents contended that after the original owner’s death, his heirs sold the property to one of the present respondents, who later transferred it to another individual, C. Roopavathi. The property was eventually gifted to respondent no. 1.

Subsequently, the respondent filed a suit for a permanent injunction against the second appellant, seeking to prevent interference with the property’s possession. The trial court ruled in favor of the respondent, and the High Court upheld the decision, leading to the present appeal before the Supreme Court.

Relationship Between Principal and Agent in a Power of Attorney

The Supreme Court reiterated that the relationship between a person granting a Power of Attorney (the principal) and the PoA holder (the agent) is one of principal-agent. It referred to past cases, including State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77, stating that a PoA authorizes the agent to act on behalf of the principal, and such acts bind the principal as if they were performed by them directly.

However, the appellants argued that in this case, the attorney-holder had an interest in the property, making the PoA irrevocable under Section 202 of the Indian Contract Act, 1872.

Understanding Section 202 of the Indian Contract Act

Under Section 202, an agency cannot be terminated if the agent has an interest in the subject matter of the agency unless a contrary stipulation exists. The appellants contended that the PoA in question was coupled with an interest in the property, making it irrevocable.

However, the Supreme Court clarified that an agent’s entitlement to remuneration does not constitute an interest in the subject matter. To support this, the court cited Dalchand v. Seth Hazarimal & Ors., 1931 SCC OnLine MP 57, which held that an agent does not acquire an interest in the property being sold or its proceeds until the sale is completed.

Supreme Court’s Findings and Conclusion

After analyzing the contents of the Power of Attorney, the Supreme Court found that despite the document being labeled as “irrevocable,” it was not executed to secure the agent’s interest. It held:

“Applying the above principles, it is evident that the PoA in this case is not irrevocable as it was not created to provide security or protect the agent’s interest. The mere use of the word ‘irrevocable’ in a PoA does not make it legally binding in an irreversible manner. The High Court was correct in concluding that the attorney-holder did not possess an interest in the subject matter of the agency.”

The Court also reaffirmed the ruling in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana, (2012) 1 SCC 656, which stated that an immovable property’s sale can only be effected through a valid deed of conveyance. The court further explained that an agreement to sell does not amount to a conveyance and does not confer ownership or a title deed.

Key Takeaways from the Judgment

1. The nature of a Power of Attorney is determined by its content, not its title.

2. Merely labeling a PoA as ‘irrevocable’ does not make it so unless it is coupled with an interest.

3. An agent’s right to remuneration does not constitute an interest in the property.

4. A sale of immovable property must be executed through a valid conveyance deed, not just a PoA or an agreement to sell.

5. A Power of Attorney automatically stands revoked upon the principal’s death if it is not coupled with an interest.

Final Verdict

Given these legal principles, the Supreme Court upheld the High Court’s ruling and dismissed the appeal. The judgment reinforces the importance of analyzing the substance of a Power of Attorney rather than relying solely on its wording.

This ruling will have significant implications for property transactions, particularly cases where individuals rely on PoAs as instruments for property transfers. The judgment underscores the necessity of executing proper legal documents to ensure clear and enforceable property rights.

Case Details:

Case Name: M. S. Ananthamurthy & Anr v. J. Manjula & Ors.

Bench: Justices J.B. Pardiwala and R. Mahadevan

Key Statutes Discussed:

• Indian Contract Act, 1872 – Section 202

• Indian Registration Act, 1908

• Transfer of Property Act, 1882