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Revocation of power of attorney

Revocation of power of attorney - analysis of the judicial trend

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Written By : Monika Saroha - final year student at national Law institute university Bhopal

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Introduction
This paper critically analyzes the legal provisions and case laws pertaining to revocation of a power of attorney. revocation of power of attorney. It aims at finding out what are the conditions that decide whether a power of attorney is revocable or irrevocable.

Revocation of power is as important as delegation of power itself otherwise it might be to the prejudice of the parties themselves. In deciding whether the agency can be revoked or not two conflicting interests are to be reconciled and a suitable middle way is to be formed so that none of the parties suffer unjustly. The interest of the one who has delegated power is in conflict with that to whom the power is given.

But before we start our search for an answer to the problem that we have chosen it is mandatory to have a brief idea about the fundamentals of a power of attorney.

Defining A Power Of Attorney
Power of Attorney is a document of agency whereby the principal appoints an agent to do and execute certain acts or deeds on his behalf. Various can be found in different enactments like according to the Bombay Stamp Act it is defined as "any instrument empowering a person to act for and in the name of the person executing it and includes an instrument by which a person a not being a legal practitioner is authorized to appear on behalf of any party in proceedings before any court tribunal or authority"

The Indian Stamps Act defines it "any instrument empowering any specified person to act for and in the name of the person executing it"

Though there is a specific act pertaining to Power of attorney but it is a very precise and brief one , the basic principles of these document are governed by the law of agency as provided for in the Indian Contract Act. A power of attorney may be of two types-
1) General 2) Specific-
The test to determine under which category a given document falls is as to what is the subject matter in respect of which power is given and if it is restricted to some specific matter it is specific else it is general.

Construction of a power of attorney- There are two main rules in construing a power of attorney
.1) The operative part of the deed is controlled by the recitals wherever there is any ambiguity
2) Where authority is given to do particular acts followed by general words the general words are restricted to what is necessary for the performance of the particular acts

Situations Where Law Permits Revocation Of Power Of Attorney- A Case Study Approach
The statutes are silent as to when a power of attorney can be revoked and therefore we have to r3ely on case laws to determine in what circumstances a power of attorney be revoked.

Therefore in the following pages various cases decided by the Hon'ble Supreme Court and High Courts of various states have been analyzed to determine what is the test laid down to decide whether a power of attorney can be revoked or not. After this case analysis only we would be a position to arrive at an answer to this issue regarding revocation of power of attorney.

Loon Karan
v.
Iva John

Material Facts- The appellants was indebted to the bank . he executed a power of attorney in favor of the bank authorizing the bank to execute a decree obtained by the debtor against a third person and credit the realizations to the debtors account. The power of attorney inter alia recited as follows " I am heavily indebted to the bank of Jaipur Ltd. and my liability is partly secured by the pledge of my goods and where a major part of my liability is unsecured and I have agreed to appoint Jaipur Bank to be my true and lawful attorney to execute the deed which may be passed in my favor and do things on my behalf and credit to my account the sum which may be realized in execution of the said decree. I irrevocably nominate and constitute bank of Jaipur to represent me, to proceed in execution of the decree of the Agra Suit and to realize and recover the decreetal amount.. To withdraw any amount deposited in court with regard to the said decree".

The decree was passed in favor of the appellants . Thereafter the bank levied execution of the decree The execution application was signed by the bank manger though it was in the name of the appellant as his attorney6 holder. The appellants objected to it saying that the power of attorney relied by the defendants have been obtained by false representation and assurances. The assurances were alleged to be promises by the bank to lend the appellants certain sum of money which the did not eventually lend. Therefore no sum is payable to the bank The objection was overruled by the trial court.

Issue Involved- The only question in appeal was whether the power of attorney executed in favor of the bank was a power coupled with interest and therefore irrovacble u/s 202 of the Indian Contract Act. And whether in view of the said power the bank can be held to be an assignee of the interest in the decree.The trial court as well as the High Court decided in favor of the defendant

Judgment- It was decided that the power given was one coupled with intrest and therefore cannot be withdrawn. moreover the transaction entered into under that document amounted to be an equitable assignment of decree in favor of the bank to the extent necessary to discharge the appellants debt to the bank.

Reasoning - It was decided so by the Supreme Court on the following grounds-
It was clear from the tenor of the document as well as the terms that was a power coupled with interests. According to section 202 of the Indian Contracts Act if the agent ahs an interest in the property that forms the subject matter of the agency sought to be created via the power of attorney in dispute the agency cannot be terminated to the prejudice of such an interest. Moreover where an agency is created for valuable and authority is given to effectuate a security the authority cannot be revoked.

Palaani Vanan
v.
Krishna Swamai Konar

Material Facts- There was a preliminary decree in a mortgage suit in favor of one Sethu Madhav Rao against amongst others the present appellants. There was a decree a final in August Next year the decree was assigned by Sethu Mdahav Rao to one Govinda Kanan on 19th july1939. Govind Kanan executed a Power Of Attorney to one Vedayascahar authorizing him to execute the decree .On 3rd February Govind Kanan assigned the decree to Krishna swami the present respondents. Later Govind Kanan sent a notice to the judgment debtor and to Vedyasachar revoking the Power Of Attorney. The execution petition before the lower court was to recognize the assignment dated 3rd February.

Issue Involved-The issue to decided was whether the notice served on Vedayshar was a valid and has the effect of revoking the Power Of Attorney?

Judgment - The court recorded that it was argued that the Power Of Attorney is irrevocable it being a power of attorney creating an agency coupled with interest under section 202 . This section recites what the English courts have to say on this point Kouch CJ, in 1896 said " where an authority/power is coupled with interest it is irrevocable unless there is an express stipulation to the contrary ; but the right of the agent to renumeration. Although stipulated for in the form of the part of a property to be produced by the exercise of power is not an interest in this sense"

Again in 1848 Wilde CJ, "But it is said a factor for sale has an authority as such to sell and when after wards comes under advances he thereby acquires an interest may thus have an authority and an interest , the authority thereby becomes irrevocable. The doctrine here implied that wherever there vests in the same person an authority and an interest the authority is irrevocable, is not to admitted without question" The learned judge also cited from the book by Bowstead on law of agency the relevant parts where it is said "where the authority of an agent is given for the purpose of effectuating any security or of protecting any interest of the agent it is irrevocable during the subsistence of such security" this court said was the test to determine whether an authority is irrevocable or not.. Court also refereed to the wordings of the power of attorney " I shall not for whatever reason cancel without paying the amount expanded by you" The primacy of the object the court decided was to recover on behalf of the principal the fruits of his decree. It contained incidentally a provision for the employment of the agent in order to realize that decree. It provides that his remuneration shall be of the proceeds recovered by him. But the object is not to secure any interest of the agent . The document itself shows that it can be revoked under the two circumstances
1) By consent of both the parties
2) By payment of that amount out of pocket.
There fore this not an agency coupled with interest.

M. John Kotiah
v.
A Divakar

Material Facts-This suit was originally filed for the grant of an injunction restraining the defendants from interfering with the plaintiffs possession and management of the properties and from demolishing one of these properties The two properties are a double storied building and a vacant premises. in Hyderabad. Pending the suit the petitioner prayed for the issue of a temporary injunction . The trial court denied the injunction but thought it fit to appoint an advocate receiver. The appeal was made and it was upheld for the reason that the power of attorney was created an interest in the immovable property in favor of the petitioner. The court came to the conclusion that the power of attorney was not an irrevocable one An appeal was preferred against this order and it was contended that the attorney is an irrevocable one since it recited that the power cannot be revoked for a period of ten years.. It was also argued that the document created an interest in favor of the petitioner which was different from an interest in immovable property therefore no registration was required.

Issue Involved- whether the power of attorney creates an interest coupled with power and is therefore irrevocable?

Decision- To arrive at the judgment the court discussed the power of attorney in question in great detail clause by clause. To mention briefly - clause one states that the plaintiff is to manage control and supervise the development of the property. Clause 2 says that he can rent or lease any part of the property. The most relevant clause here is clause 10 which reads as follows " The principal hereby undertakes not to revoke this power of attorney till all the disputes are pending in his name for and on behalf of the principal and until all his dues and the renumeration of 5% of the total value of the property is fully discharged and paid to the attorney and further undertake not to revoke this power of attorney for the next ten years"
After this the court analyzed the statement given in this regarding Bowstead On agency where the author clearly points out that the mere fact that a power is declared in the instrument granting it to be irrevocable does not make it so. Irrevocability requires something further. Next the learned judge had quoted from " CORPUS JURIS SECUNDUNM" " The interest to which an gent gets in the estate or property must be simultaneous with the power given to him in order to give him a power coupled with an interest and nor .this reason an interest in the result of the exercise of the power as distinguished from an interest in the subject matter of the power itself, is insufficient for if the agents interest exists only in the proceeds arising from an execution of power the power an the interest cannot be simultaneous in point of time since the power in order to produce the interest must be exercised and by its exercise it is extinguished"

Thus it will be seen that if the interest created in the agent in the result or proceeds arising after the exercise of the power then the agency is revocable and cannot be said to be an irrevocable agency.

They also said that if o a construction of the document and in the light of the facts the document does not prima facie satisfy the condition for the creation of a power coupled with interest than merely because the document itself describes the agency to be an irrevocable one it does not become so. The provision of the Indian contract act were cited where in other remedies are provided where the agency is revoked within a period for which it was said to be irrevocable but that does nor make these documents irrevocable. They said that incases in where a document creates a power coupled with interest it is irrevocable in law still the parities can by agreement make it revocable but in cases where it is revocable it cannot be irrevocable merely by writing the same in the agreement .In light of all these reasoning the court decided that the document was a revocable power of agency.

Smt. Nagari Nayak
v.
D.C. Tumkur

Material Facts- The plaintiff is a hotel owner at tumkur. She had applied for loan to the Cannara Bank local Branch. She had done so against the security of the properties which were mentioned the power of attorney in question. The bank required an irrevocable power of attorney in addition to any other security which might have been taken from
The plaintiff. When the document was given for registration it was impounded for reasons of being improperly stamped. under section 34 of the stamps act. The sub registrar treated this document as a deed of mortgage. And keeping that in mind he levied a fees of Rs. 8305 and laos a penalty of Rs. 6,805.An appeal was made and it was found that this document was a owner of attorney and that too an irrevocable and therefore it required to be stamped as per the requirements under entry 4.this is an appeal against that decision.

Issue Involved- The nature of the document( whether it created an interest and was therefore irrevocable or not) had to be determined in order to decide what was the prescribed fees for that document?

Judgment- The court decided that it was an irrevocable power of attorney.
It was argued that the loan was advanced against other security offered by the plaintiff. The power of attorney was issued only at the instance of the bank and hence it cannot be called as irrevocable. The court quoted the relevant passage from the disputed document which is being reproduced ere "and whereas the principal has sought a loan of Rs15000 from the attorney against the security of the scheduled properties to construct an office and shops etc. ad whereas the attorney has required the principal to execute an irrevocable power of attorney in favour of the attorney.- to sell, alienate and mortgage or otherwise deal with the property at a price deemed fit and reasonable by the attorney at his sole discretion and appropriate the same proceeds first towards the interest costs and than reduction of the liability". The court then cited section 202 of the Indian Contract Act and decided that as per that section no agency can be terminated where the agent has an interest in the property which forms the matter of agency in this case they decided that an interest is definitely created in favor of the bank Therefore it cannot be unilaterally revoked. Hence this document falls in the category of the document which are to be stamped as per the provisions of entry 4 of the Indian Stamps Act.

Govindkoss Krishna Koss
v.
Gopesjhwar lalaji Maharaj

Material Facts-This case has come as a second appeal to the high court. n the year 1896 one Ganga Bai widow of the plaintiffs paternal grandfathers brother built a temple for a local deity in Madras .In the year 1900 she executed a Bhot ptara in which she mentioned the facts of her having built the temple and also getting the idols of the deity that were to be worshipped in that temple getting them installed therein and setting aside a fund of Rs 40000 for their Sva puja and other festivals of the temple and for the salaries of the temple servants. The sum was left with the plaintiffs father Krishnadas and he was to a pay monthly Rs 200 for the expenses she then added a sum of 5000 to the original fund. She then mentioned that all the property was worth Rs 45000. these were delivered to the family deity Guru shri Krishanvati. She also provided that the successors of the gurus shall perform the seva and the ceremonies of the temple and the property was not to be used for any other purpose besides that of the templ.In 1904 the said Krishnaavati created a power of attorney to Krishanads giving him certain powers to manage the property since he had to be constantly absent from Madras where the temple was located. In 1906 the attorney holder died and the agency was terminated. The said lady Krishna vati then executed a power of attorney in favor of the deceased son who stepped into his fathers shoes and continued to mage the property In 1914 the principal died , her son then executed afresh power of attorney in favor of the plaintiff. This power of attorney ahd scheduled which said that the original fund had now been reduced to 39000.Then the same principal executed another power of attorney in favor of the plaintiff giving him more powers than earlier. After some time a dispute arose between these two and the power of attorney was sought to be revoked. he suit was therefore filed by the plaintiff.

Issue Involved- Can the defendants revoke this power of attorney unilaterally

Decision- The court decided that this power of attorney was a revocable one.
The court said that looking at the wordings of the instrument which were as follows "that a power of attorney though irrevocably granted shall b revocable on strong proof of gross mismanagement on the part of the said attorney" it is clear that the document is not an irrevocable power of attorney but it was a power of attorney irrevocable on certain grounds only but not on all other grounds. This means that it is merely an instrument coupled with a condition that it will no be revoked except on certain grounds. Such a promise is not an enforceable one. Therefore it does not become irrevocable merely by that being written on the power of attorney. The second contention of the plaintiff was that this agency was a n irrevocable one also because the contract of agency was coupled with some interest of the agent. That the fact that the temple itself was built for the benefit of plaintiff's family was also alleged. But this was not accepted as it could not be shown by any evidence that he formed a joint family with the builder of the temple or that the sum of money used was in any way joint property of these two. All the properties that were used were exclusively in her name. The argument put forward was that the temple was made for the spiritual and other worldly benefit of her family members as she had orally recited on many occasions. The court rejected this argument and said that if it was so the spiritual benefit does not amount to an interest within the definition of interest under section 202 of the Indian Contract Act. The object of the agency was not to enable the agent to realize any of his interests.

Observations On The Basis Of Case Analysis
After discussing the view of the courts on the question of revocability of power of attorney which is unanimously same irrespective of the court or the judge we are now in a position to summaries the basic premise and the legal principle that is involved in this concept. Following common conclusions can be derived from all these cases-
# If the power given to the attorney is coupled with an interest it is irrevocable
# To decide whether a given power is coupled with interest or not regards are to be given to the facts of each case and the wordings of the instrument itself.
# The following have been considered to be 'power coupled with interest' in the above discussed cases.
# The right of an agent to remuneration though stipulated in the form of property to be produced by exercise of power is not an interest in the required sense.
# If the power is irrevocable as per the test laid down the parties are nevertheless free to make it revocable by an express stipulation to the contrary.
# If the power is revocable than the parties cannot make it irrevocable merely by writing that the instrument is irrevocable.
# The position in our country is the same as that in England.
# A power of attorney is automatically terminated if- One of the parties to the instrument dies or becomes insane, The principal becomes insolvent or bankrupt, any specific condition in the instrument is breached, the business comes to an end.
" Courts refer to Indian Contract Act provisions to determine this question

Conclusion
The conclusion that can be arrived at the end of the paper is that the position with regard to the revocability of power of attorney is well settled in our country. The test laid down here seems to be a well-established principle in common law as various English jurist have also expressed the similar opinion on this point. Not only this the test laid down also seems to be very just and fair. None of the parties are wrongly prejudiced if the test is applied objectively. Such well- settled principles lend certainty to business transactions and day to affair. Now since the position is so well settled the masses on an advice from their legal advisors shall know in an instant how to frame their instrument in such a manner and the objectives ( whatever they may be behind creating a power of attorney) are attained and they do not suffer later on account of uncertainty in law.

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