Section 208 Contracts Act Can't Validate Acts Done By Power Of Attorney Holder After Principal's Death: Gujarat High Court

The Gujarat High Court has held that the authority of a power of attorney holder gets terminated the moment the principal dies, irrespective of whether the holder was aware of the Principal's death or not. [2026 LiveLaw (Guj) 200]In doing so the court emphasized that PoA holder's authority automatically gets terminated as soon as the Principal/drawer of the PoA passes away and PoA holder cannot rely on Section 208 Contracts Act to claim that his authority has not ended as he was unaware of the Principal's death. As per the provision, the termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.Rejecting the defendant power of attorney holder's reliance on Section 208 Contracts Act that he was unaware of the plaintiff-Principal's death, a division bench of Justice Ilesh J Vora and Justice RT Vachhani said:"the submissions advanced by the learned advocate for the respondent that in view of Section 208 of the Contract Act, the termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him or, as regards the third person, is subject to the above exception in the event of the death of the principal, do not find much force as on account of the death of the principal the power of attorney holder had no authority to act on behalf of the principal.In nutshell, the contract of agency gets automatically terminated by death of either of the parties. Once the agency is terminated on account of the operation of law or by the act of the principal, the agent cannot act on the basis of the power conferred upon him under the deed of power of attorney. As a consequential effect, on the demise of principal, the power automatically stands terminated."The plaintiff No.1 was is an NRI. A property was purchased by him and his wife, from Smt. Maniben Chimanbhai Desai, on 16/09/1999 by registered Sale Deed and payment was made through Cheque and since then the property has been in the occupation and possession of the plaintiff. The plaintiffs executed a Power of Attorney in favour of defendant 1 to conduct business in partnership. The plaintiff's wife died on 21.07.2010 at London and therefore, due to shock of the death of his wife, the plaintiff could not ask for the power of attorney and it remained with defendant No.1. However the plaintiff claimed that the power vested through Power of Attorney came to a stand still and no such power of attorney can be utilized for any further purpose. It was the plaintiff's case that the defendant No.1 without having any right over suit property by using said power of attorney and in collusion with other defendant/s executed a Gift Deed dated 05-01-2011 in favour of defendant No.2 and 3 (son and daughter-in-law). Defendants argued that since plaintiff was required to start a business and was in need of money, he requested the defendant No.2 to provide for financial help while assuring of return thereof, defendant No.2 gave 78,000 Pound which was not returned by the plaintiff. It was argued by the defendant that plaintiff has also transferred certain amount from the company account to his personal account and legal notice was issued by defendant no.2 to the plaintiff wherein the plaintiff suggested transfer of property in lieu of the loan amount. Therefore defendant no.1 gifted the suit property to defendant no.2 and 3 as per the instructions of the plaintiff and no illegality has been committed by the defendants. The trial court dismissed the suit, against which plaintiff moved high court. The high court said that while the plaintiffs executed a general power of attorney in favour of the defendant no.1 but on demise of the plaintiff No.2, the power of attorney executed by her in favour of defendant No.1 ceases to an end. "No such transaction can be entered into on the basis thereof post the death of the principal of the power of attorney even while pleading ignorance of death of the principal and therefore, in absence of any clause / recital or any specific power to execute a Gift Deed, the act done by the defendant No.1 in the capacity of the power of attorney holder of defendant No.2 (since deceased) can be said to be an illegal act and does not have any leg to stand in the eye of law.the learned Civil Court, seems to have been traveled beyond the entire gamut of the case, rather rested its findings / conclusions, solely on the assumptions and presumptions, while equating the financial presumptions with the authority assigned to set off all the sum against the considerations, etc. The case of the plaintiff solely rests challenge as to the on the execution of the gift deed, without there being assumptions of power into power of attorney and therefore, the question of financial transactions or the payment, etc. does not arise," the court said. The court thus ...

Section 208 Contracts Act Can't Validate Acts Done By Power Of Attorney Holder After Principal's Death: Gujarat High Court

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On demise of principal, power automatically stands terminated, Court said.

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Section 208 Contracts Act Can't Validate Acts Done By Power Of Attorney Holder After Principal's Death: Gujarat High Court

LIVELAW NEWS NETWORK

On demise of principal, power automatically stands terminated, Court said.

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