Mere Use Of Word 'Irrevocable' Doesn't Make Power Of Attorney Irrevocable; PoA's Nature Determined By Its Subject Matter : Supreme Court

The Supreme Court today (February 27) observed that the nature of a power of attorney is determined by its subject matter and not its title. Whether a power of attorney is labeled as general or special, its nomenclature does not determine its nature.“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.,” observed a Bench of Justices J. B. Pardiwala and R. Mahadevan.Explaining, the Court said that in order to understand a document, a reader should not go by its title. It is the Court's responsibility to examine the document's contents and the intention of the parties. The same can be gathered from the circumstances under which the document was entered and the language used by the parties.With respect to the issue of whether the mention of the word 'irrevocable' in a power of attorney would make the same irrevocable, the Court referred to several cases, including Timblo Irmaos Ltd., Margo v. Jorge Anibal Matos Sequeira, (1977) 3 SCC 474. In this, it was held that words used in a power of attorney must be interpreted in the context of the whole. Based on this, the Court added:“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.”For context, as per the appellants, an original owner of the concerned property executed an irrevocable general power of attorney (GPA) along with an unregistered agreement to sell in favour of a holder. In turn, the holder sold the property to her son (appellant no. 2). On the contrary, it is the respondents' case that after the death of the original owner, his heirs sold the property to one of the present respondents. Consequently, the property was sold to one C. Roopavathi, who gifted the same to respondent no. 1.Later, the present respondent filed a suit for a permanent injunction against the appellant no. 2 from interfering with the property's possession. The same suit was decreed. Upon challenge, the High Court also affirmed the same. Hence the present appeal.At the outset, the Court said that the relationship between the executant of a general power of attorney and the holder of the power is one of principal and agent. To support, the Court referred to several cases, including State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77, and observed:“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.”Having established this, the Court examined the appellant's contention that the attorney holder (agent) had an interest in the subject matter, which makes the agency irrevocable as per Section 202 of the Contract Act.Essentially, this provision is an exception to a general rule that a principal can terminate a contract of agency. As per Section 202, where an agent has an interest in the property which forms the subject matter of the agency, the agency cannot be terminated unless the contrary is stipulated. However, the Court clarified that an agent's right to remuneration is not an interest in the subject matter of the agency.To bolster, a case of Dalchand v. Seth Hazarimal & Ors., 1931 SCC OnLine MP 57, was cited. Therein, it was held that the agent had no interest in the property being sold or in the proceeds of the sale until that sale was complete.After perusing the present GPA and based on the above-mentioned observations, the Court said that though it is mentioned that GPA is irrevocable, it was not executed to give effect to the agent's interest.“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.”While referring to its decision in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana, (2012) 1 SCC 656, the Court...

Mere Use Of Word 'Irrevocable' Doesn't Make Power Of Attorney Irrevocable; PoA's Nature Determined By Its Subject Matter : Supreme Court

Gyanvi Khanna

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