Precautions To Be Taken While Canceling Power of Attorney (POA) : A Supreme Court Judgment Of 2022

4th March, 2022 - 12:55 pm Categories: Legal Issues 0 Comments

In the Supreme Court of India a recent judgment Power of Attorney for a property on Amar Nath v. Gian Chand and Anr., dated 28-01-2022, of Civil Appeal No. 5797 of 2009, the Division Bench of K.M. Joseph and Pamidighantam Sri Narasimha, JJ., held that mere writing the word “canceled” or “drawing a line” would not render Power of Attorney for property null and void as there must be a cancellation and it must further be brought to the notice of the third party at any rate.

Facts of the Case:

For the sale of the property, the plaintiff had entered into an oral agreement with defendant 1 for Rs.55,000/-. On 28-01-1997, the plaintiff bonafide executed a special power of attorney in favor of defendant 2 for selling the property for the amount of Rs.55,000/-. On 02-02-1987, as defendant 1 could not arrange the money, the negotiation fell through and defendant 2 to whom the power of attorney (POA) was executed, surrendered the original  POA to the plaintiff, and the plaintiff told defendant 1 that the same stood cancelled on the same day.

On 28-04-1987, the plaintiff alleged that defendant 2 applied for the copy of the power of attorney, and fraudulently in collusion with defendant 1 and executed the sale deed for Rs. 30,000 without authority since POA was deemed to have been cancelled in the eye of law on being handed over to the plaintiff. According to the plaintiff, the second defendant could not execute the sale deed in the absence of the original power of attorney, and the sub-registrar was supposed to verify the aspect from the second defendant under Sections 32, 33 and 34 of the Registration Act. Therefore, the plaintiff filed a suit for a declaration by way of permanent injunction that he is the owner in possession of that property and the mutation showing the sale in favor of defendant 1, by defendant 2, was null and void and that the second defendant was not having any authority to sell the land owned by the plaintiff, and hence the defendant be restrained from interfering with the ownership and possession of the plaintiff. It was further prayed that in case it was proved that the second defendant was an agent of the plaintiff then, in that case, the suit for rendition of accounts be decreed.

In the written statement, the defendant 1 admitted that he entered into an agreement orally to purchase the property for Rs.30,000/- and not Rs.55,000/-. It is denied that the defendant 1 could not arrange for the money. The plaintiff received Rs.10,000/- as part price. The remaining Rs.20,000/- was paid at the time of registration. According to defendants, the negotiation of the sale never falled through and he never surrendered the original power of attorney. Accordingly, the sum of Rs.20,000/- was given in the presence of the sub registrar and the defendant 1 was a bonafide purchaser. Therefore, the sale deed was effected in a legal manner and after verification by the sub registrar and the (defendant 2) was competent to execute the sale deed.

The defendant 2 also filed a written statement. He contended that there was an agreement between the plaintiff and defendant 1 independently without the intervention of the defendant 2 for the sum of Rs.30,000/- out of which the plaintiff was himself given Rs.10,000/- as earnest money from defendant 1. The remaining Rs.20,000/- was to be received on the registration of the sale deed as at the time of sale, it could not be effected immediately. The plaintiff had to join his duty and therefore wanted defendant 2 to have a registered special Power of Attorney from him and then, execute the sale deed and get it registered after receiving the remaining amount of consideration of Rs.20,000/. The consideration of the sale deed being Rs.55,000/- is strongly denied. Legally and factually, it is pleaded ‘that no registered deed to cancelled orally.’

Findings of the Courts:

Issues raised by Trail Court –

1. Whether sale in question is without consideration and void as alleged; II. Whether the plaintiff is entitled to the relief of declaration and permanent injunction?
2. Whether the plaintiff is entitled to the rendition of account from defendant 2 in the alternative?
3. Whether the plaintiff is estopped from filing the present suit by his act and conduct?
4. Whether the suit is not properly valued for Court fee and jurisdiction?

Therefore, the Trial Court proceeded to decline the relief of declaration by way of permanent injunction as the plaintiff was not the owner in possession. The Court held that cancellation also required registration and mere writing of a word ‘cancelled’ on the original power of attorney did not mean that the power of attorney had been cancelled, till notice was given to the defendant 2. On the issue that the sale was not affected through original copy of POA, the Court held that as per Section 18A of the Registration Act, 1908, sale deed should accompany true copy of the power of attorney and the original was not required.

Relying on the rule that the agent could not act against the interest of the principal, the Trial Court concluded that the plaintiff was entitled to the rendition of the account from the defendant 2 and directed the defendant 2 to pay Rs.55,000/-. The Findings of the Trial Court were affirmed by the First Appellate Court.

First Appellate Court –

The plaintiff authorized defendant 2 by power of attorney dated 28.01.1997 to sell the property for Rs.55,000/-. The Court found that the case of the plaintiff, that the power of attorney was cancelled was unsustainable, having regard to the evidence, wherein he has deposed that he has received DX-letter also. The plaintiff has admitted sending DX. The Court proceeded to find that there was a valid sale deed and endorsement. It was found that the sale deed was executed.

The High Court –

The following questions of law were framed:

1. Whether in view of the admitted position that defendant No.2 who was the petition writer, and in whose favor power of attorney had been executed by the appellant for executing the sale deed for a consideration of Rs. 55,000/- to the knowledge of respondent No.1, it had to be assumed that the sale deed was fraudulently executed for Rs. 30,000/- when the Power of attorney had been cancelled and revoked and returned by the appellant and the document Ex.PW-5/A was duly proved?
2. Whether the court below has misconstrued the basic document of title and wrong inference have been drawn from facts proved on record?
3. Whether on the material on record it was established that there was non-compliance of mandatory provisions of section 18A, 59, and 61of Registration Act and the findings that registered power of attorney could only be executed by the registered document is sustainable in law?
4. Whether the sale deed conferred any valid title on defendant No.1 and the plaintiff was entitled to the relief of injunction and declaration?
5. Whether in the facts and circumstances of the case, the presumption raised stood rebutted and the plaintiff was entitled to the relief of injunction and declaration instead of the alternative relief of rendition of accounts as held by the court below?

On 02-02-1987, the High Court opined that POA was being cancelled and on 28-04-1987, defendant 2 was not competent to execute the sale deed. According to the Section 18 of the Registration Act, the High Court held that it was necessary for the Registering Authority to see the true copy of the special POA since, in view of the cancellation of the original power of attorney, the same could not be relied upon by the Registering Authority for the purpose of execution of the sale deed. Hence, the High Court set aside the findings of the courts below and decreed the suit by declaring the plaintiff as the owner in possession of the land, and the mutation showing the sale in favor of Defendant 1 was declared null and void.

Analysis:

According to Section 18 of the Registration Act, the Court analyzed and concluded that as the section did not require the production of the original copy, the production of the certified copy of the power of attorney along with the original of the sale deed was fully justified. Therefore, the plaintiff’s claim that non-production of original POA was fatal to valid registration was summarily rejected and the understanding of Section 18A by the previous court was held erroneous. Therefore, in such circumstances, the conclusion is inevitable that the case of the plaintiff that power of attorney stood cancelled, in the manner done on 02.02.1987, cannot be accepted. At any rate, we find it difficult to accept the case of the plaintiff that defendant 1, who is the third party, could be attributed any knowledge of the surrender or the alleged cancellation on 02.02.1987, even assuming for a moment that we could lend credence to the plaintiff’s version in this regard that defendant 2 surrendered the power of attorney. The Bench opined that under the Registration Act, the inquiry is contemplated and could not extend to question as to whether the person who executed the document in his capacity of the power of attorney was indeed having a valid power of attorney or not to execute the document or not as the document which was sought to be registered was sale deed and not the POA in question. Therefore, in the absence of a registered cancellation of the power of attorney, there must be a cancellation and it must further be brought to the notice of the third party at any rate as already noticed. Such cancellation is not made out.

The Bench noticed that in favor of the first defendant, there was an agreement to sell the property was agreed to be sold for Rs.55,000/- and undoubtedly, the POA was registered. Further, the plaintiff wrote to defendant 2 on 02-06-1987 about the proposed sale and the POA, which showed his claim that the POA stood cancelled four months early on 02-02-1987. The Bench observed that the plaintiff admitted that POA was not cancelled at the Sub-Registrar Office, and even admitted not having sent any notice of cancellation neither to defendant 2 nor to defendant 1. Additionally, noticing that there was no expressed restriction on price in the POA, the Bench held that at best defendant 2 could be held guilty of breach of duty for acting against the interest of principal however, defendant 2 having sold the property for Rs.30,000/- instead Rs.55,000/- could not invalidate the sale or render it null and void. Accordingly, the appeal is allowed and the impugned judgment was set aside.

Author: Poonam Nahar – a student from Marathwada Mitra Mandal’s Shankarrao Chavan Law College (Pune), currently an intern at Khurana & Khurana, Advocates and IP Attorney., in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com.