Power of attorney and property ownership | India Business Law Journal – Law.asia


The Supreme Court in a recent ruling has held that when an agent under a power of attorney is in possession of an immovable property, the possession is that of the principal owner. However, if an unauthorised sale is made by the agent, and possession is parted with contrary to the power of attorney, it will not be tantamount to the principal having parted with the property.
In the dispute, the suit property was inherited by the plaintiff and her sister from their father. The plaintiff had executed a registered power of attorney in favour of her sister for granting lease of the property, and to execute necessary documents for that purpose as well as registration for the same. The power of attorney did not grant the power of sale of the property upon the constituted attorney. The power of attorney was granted in 1971, and subsequently cancelled in 1985.
Prior to cancellation of the power of attorney, between 1981 and 1982, the plaintiff’s sister assigned and/or released her rights under the power of attorney to certain third parties. The third parties, by virtue of the assignment of the rights under the power of attorney, sold the property to the defendant, i.e., the ultimate transferee.
In 1989, the plaintiff filed a suit against the ultimate transferee of the property for partition, claiming equal right in the suit property. The plaintiff had, however, not challenged the earlier alienations. The trial court passed a preliminary decree of partition holding that as the power of attorney did not contain any power to sell the property of the plaintiff, the transfer to the extent of the share of the plaintiff was not valid on the basis of her power of attorney.
The preliminary decree of the trial court was challenged by the defendant before the high court. The high court confirmed the findings of the trial court, that as the power of attorney did not confer a specific power to sell the property, the alienations made on the basis of such power of attorney were null and void. However, despite confirming the findings of the trial court, the high court reversed the preliminary decree of partition, holding that the possession of the suit property had been parted with, and the plaintiff had constructive notice of the earlier alienations and she had failed to seek cancellation of such alienations.
The findings of the high court are summarised as follows: (1) the failure of the plaintiff to seek relief for setting aside the documents of transfer and recovery of possession of the property was fatal to her case; (2) the plaintiff must have had constructive notice of the alienations made by her sister in view of section 3 of the Transfer of Property Act; and (3) once constructive notice is attributed to the plaintiff, any relief for cancellation of documents of alienation would have already become barred by the time the power of attorney had been cancelled.
The judgment of the high court was then challenged by the plaintiff before the Supreme Court. The Supreme Court set aside the high court’s judgment and restored the preliminary decree passed by the trial court. While doing so, the Supreme Court reached the conclusion that the reasoning given by the high court for holding that the plaintiff ought to have challenged the alienations was that the plaintiff had parted with the possession. Here, the high court failed to appreciate that the possession of an agent under a power of attorney is also the possession of the principal, and that any unauthorised sale made by the agent will not be tantamount to the principal parting with possession.
The Supreme Court further held that it was not always necessary for the plaintiff in a suit for partition to seek cancellation of alienations. There are several reasons behind this principle. One is that the alienee, as well as the co-sharer, are still entitled to sustain the alienation to the extent of the share of the co-sharer. It may also be open for the alienee in the final decree in the proceedings to seek allotment of the transferred property to the share of the transferor, so that the equities are worked out in a fair manner. The Supreme Court therefore held that the high court was wrong in faulting the plaintiff over her failure to challenge the alienations.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
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