A LEGAL ANALYSIS ON WHETHER SALE THROUGH POWER OF ATTORNEY WOULD AMOUNT TO CONVEYANCE
Yogamurugan Chockalingam – Associate, Dispute Resolution Practice
Prior to the amendment[1] of Section 17 of the Registration Act, 1908[2] that requires compulsory registration of power of attorneys pertaining to immovable property in Tamil Nadu, an interest in one’s immovable property would be transferred to another, through the execution of a combination of instruments including that of a general power of attorney and an agreement of sale for a certain specific consideration as agreed upon by the parties.
A general power of attorney when executed for a certain consideration, creates an agency coupled with interest under the Indian Contracts Act, 1872. Such an agency may not be terminated to the prejudice of the interest vested therein, unless and until there exists an express contract to that effect. Therefore, when the consideration or part of the consideration of the sale is received in addition to a general power of attorney, the same creates an interest in such property in the manner as required under Section 202 of the Contracts Act, 1872[3] and therefore the same may not be susceptible to termination, revocation, or cancellation by the principal.
Although, this practice has today, become largely irrelevant, owing to the aforesaid amendment, the transactions that have occurred prior to the amendment continue to hold good under the eyes of the law. These transactions, which occurred prior to the amendment, do not amount to a sale, conveyance or transfer of property, but would still confer an interest in the title to the power agent that prevents the principal from engaging in any act to the detriment of the interest of the power agent. Hence, various pronouncements have also held that, on execution of a power of attorney for a specific consideration, the principal is precluded from creating or executing subsequent encumbrances on such immovable property as the power agent is assumed to have better title although he is not a classical owner under a registered sale deed[4].
On the other hand, when an agreement of sale has not been executed in parlance to a power of attorney, the same may still be executed for a certain specific consideration and in such instances the transfer of possession of 5the immovable property to the power agent along with the original title deeds may therein be construed as evidence of receipt of the entire sale consideration[5]. This further comes to the rescue of the transactions that arose after the insertion of Section 17(1A) of the Registration Act, 1908[6], as the amendment caused all documents serving to be evidence of the transfer of consideration for immovable property to be compulsorily registrable documents. Herein, the receipt of consideration and the transfer of possession occurring simultaneously creates an oral and implied charge under Section 100 of the Transfer of Property Act, 1882[7] and therefore, the same purports to refrain all other subsequent transaction from taking effect against such oral charge as provided for under Section 48 of the Registration Act, 1908[8].
However, the continuance of transfer of interest in one’s property through a power of attorney sales has not only been curbed and curtailed by the aforesaid rigorous legislative amendments but has also been largely condemned by various judicial pronouncements including that of Suraj Lamp & Industries v. State of Haryana[9]. The Apex Court had in the instance of Suraj Lamp’s clarified the position of law and held that the power of attorney sales would not amount to a conveyance or transfer of property. But however, the Apex Court had later while pronouncing its ruling in the case of Maya Devi v. Lalta Parsad[10] had hurried to to rule that the dictum laid down in Suraj Lamps was poignantly prospective as the same had a saving clause for bonafide transactions that occurred prior to the ruling.
Hence, the power of attorney sales that occurred prior to the aforesaid amendment and prior to the aforesaid pronouncements, are therefore very much relevant in adjudicating title disputes especially when a general power of attorney has been executed by the vendor. Herein, it is notable that prior to the aforesaid Tamil Nadu Amendment, one would not be put to notice of the execution of a power of attorney as they would not be reflected in the encumbrance certificates even when registered by the parties as they would be a Book IV entry in the of the Sub-Registration Offices of Tamil Nadu. Therefore, when a power of attorney has been executed, the subsequent purchaser is left to the mercy of his vendor to disclose the prior transfer of interest, failing which the subsequent purchaser would be left to lurch.
On that note, it becomes pertinent to conclude that in the light of the aforesaid practice of transfer of interest through a power of attorney sale, it is imperative in title disputes to prove the facts relating to the prior vendor’s possession of the immovable property prior to the impugned transaction relating to the transfer of such property. Failing which, the subsequent purchaser may fail to prove his title, as his vendor who was not in possession of the immovable property at the time of the transfer of the immovable property would have admittedly been incapable of transferring his title to another without first recovering possession and cancelling such power of attorney coupled with interest.
[1] Tamil Nadu Act No. 29 of 2012
[2] Section 17 of the Registration Act, 1908 – (h) instruments of Power of Attorney relating to immovable property other than those executed outside India
[3] Section 202 of the Contracts Act, 1872 – Termination of agency where agent has an interest in subject-matter—Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
[4] Hardip Kaur vs Kailash & Anr. MANU/DE/2661/2012
[5] S.V. Doraisamy vs T. Dayalan MANU/TN/0238/2002
[6] Registration and Other Related laws (Amendment) Act, 2001 (Act 48 of 2001)
[7] Section 100 of the Transfer of Property Act, 1882 – Charges.—Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.
[8] Section 48 of the Registration Act, 1908 – Registered documents relating to property when to take effect against oral agreements — All non-testamentary documents duly registered under this Act, and relating to any property, whether movable or immovable, shall take effect against any order agreement or declaration relating to such property, unless where the agreement or declaration has been accompanied or followed by delivery of possession and the same constitutes a valid transfer under any law for the time being in force:
[9] Suraj Lamp & Industries v. State of Haryana (2012) 1 SCC 656
[10] Maya Devi v. Lalta Parsad (2015) 5 SCC 588