Revocation of Power of Attorney in India

Revocation of Power of Attorney in India: A Legal Analysis

I. Introduction

A Power of Attorney (PoA) is a formal instrument by which one person, the principal (or donor), confers authority upon another person, the agent (or donee or attorney), to act on their behalf in certain specified matters or in all matters of a particular nature. The legal framework governing PoAs in India is primarily rooted in the Indian Contract Act, 1872, and the Powers of Attorney Act, 1882. A fundamental characteristic of an agency relationship, including one created by a PoA, is its general revocability by the principal. However, this principle is subject to certain exceptions, most notably where the PoA is "coupled with an interest" in favour of the agent. This article undertakes a comprehensive analysis of the legal principles governing the revocation of a Power of Attorney in India, examining statutory provisions and key judicial pronouncements. It delves into the modes of revocation, the concept of an irrevocable PoA, the conditions for such irrevocability, and the effect of revocation on the agent and third parties.

II. The General Principle of Revocability

The relationship created by a Power of Attorney is essentially one of agency. Chapter X of the Indian Contract Act, 1872, deals with agency. Section 201 of the Act enumerates various circumstances under which an agency is terminated, including revocation by the principal. Section 203 further clarifies that the principal may, save as otherwise provided by Section 202, revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal.

The Supreme Court of India in Suraj Lamp And Industries Private Limited (2) Through Director v. State Of Haryana And Another (2012 SCC 1 656) observed that a Power of Attorney is a creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of the grantor. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law. The Court also noted that even an irrevocable attorney does not have the effect of transferring title to the grantee. This was reiterated by the Karnataka High Court in SEENAPPA M S/O LATE MASTRI MUNISWAMAPPA v. A KANTHARAJ S/O LATE AKKALAPPA (2015 SCC ONLINE KAR 7343), which cited Suraj Lamp and State Of Rajasthan v. Basant Nahata (2005 SCC 12 77) to emphasize that a grant of PoA is essentially governed by Chapter X of the Contract Act and is revocable.

III. Modes of Revocation

Revocation of a Power of Attorney can be effected either expressly or impliedly by the principal, or it may occur by operation of law.

A. Express Revocation

Express revocation occurs when the principal clearly and directly communicates their intention to terminate the agent's authority. This can be done through a written notice to the agent, a public notice, or by executing a deed of revocation. The Supreme Court in THANKAMMA GEORGE v. LILLY THOMAS (Supreme Court Of India, 2024, C.A. No. 001011 / 2024) noted that if revocation is expressed, such as by publication in newspapers, public notice or advertisement, or communication to the agent, parties dealing with the agent have a reasonable opportunity to know of the revocation.

A significant aspect of express revocation concerns registered Powers of Attorney, particularly those relating to immovable property. The Allahabad High Court in Chandrama Singh & Ors. v. Mirza Anis Ahmed (2011 SCC OnLine All 2430) held that a registered Power of Attorney, which created rights in immovable property including that of alienation and was compulsorily registrable, could only be revoked by a registered document of revocation. A mere communication, even if served on the attorney, would be insufficient if not registered. This underscores the sanctity attached to registered documents, a principle also highlighted by the Supreme Court in Shanti Budhiya Vesta Patel and Ors. v. Nirmala Jayprakash Tiwari and Ors. ((2010) 5 SCC 104), cited in DR MRS VALENSHA SURONG v. STATE OF MEGHALAYA (Uttarakhand High Court, 2016, AO No. 443 of 2013), where it was held that registered documents cannot be revoked merely by filing police complaints. The Madras High Court in Nagalingam v. The Inspector General of Reg (2024, W.P.(MD)No.29584 of 2024) dealt with a situation where registration of a revocation deed was refused due to objections from the power holder, emphasizing that the principal generally has the right to revoke.

B. Implied Revocation

Section 207 of the Indian Contract Act, 1872, states that revocation may be express or may be implied in the conduct of the principal. The Supreme Court in THANKAMMA GEORGE v. LILLY THOMAS (Supreme Court Of India, 2024) elaborated on implied revocation. It observed that if the principal engages in conduct inconsistent with the continuation of the agency, it may amount to implied revocation. For instance, if the principal, after granting a PoA, personally executes a sale deed for the same property, this act can be construed as an implied revocation of the PoA. The Court cited with approval the Madras High Court's decision in N. Shivkumar & Anr. v. R. Peter Pereira where the execution of a settlement deed by the principal was held to be an implied revocation of a prior PoA. The principal is not bound to consult the attorney before acting independently.

C. Revocation by Operation of Law

Section 201 of the Indian Contract Act, 1872, also lists circumstances where an agency terminates automatically by operation of law. These include:

  • By the death of either the principal or agent.
  • By the principal being adjudicated an insolvent under the provisions of any Act for the relief of insolvent debtors.
  • By the expiration of the period (if any) fixed for the agency.
  • By the completion of the business of the agency.
  • By the agent renouncing the business of the agency.
  • By the principal revoking his authority (subject to Section 202).

It is important to note that these grounds of termination are also subject to the exception carved out in Section 202 regarding an agency coupled with interest.

IV. The Irrevocable Power of Attorney: Section 202 of the Indian Contract Act, 1872

The primary exception to the principal's power to revoke an agency is contained in Section 202 of the Indian Contract Act, 1872. It provides: "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." The proviso to Section 202 states that such an agency cannot be terminated by the insanity or death of the principal either.

1. Defining "Interest"

The "interest" referred to in Section 202 is a crucial concept. It must be an interest in the subject-matter of the agency itself, not merely an interest in the remuneration or commission arising from the exercise of the power. The Delhi High Court in Shri Harbans Singh v. Smt. Shanti Devi (1977 SCC ONLINE DEL 102) emphasized that "interest" encompasses a wide range of advantages or benefits and is not limited to ownership or title. Citing Loonkaran Sethiya v. State Bank of Jaipur (AIR 1969 SC 73), the Court held that when agency is created for valuable consideration to secure the agent's interest, the authority becomes irrevocable. It distinguished cases like Palani Vannan v. Krishnaswami Konar (AIR 1946 Mad 127) and Dalchand v. Seth Hazarimal (AIR 1932 Nag 34), where mere incidental benefits or retention of remuneration did not invoke Section 202.

The Gujarat High Court in Her Highness Maharani Shantadevi v. Savjibhai H. Patel And Others (1998 (1) GLH 755) and Manubhai Prabhudas Patel & 4 Petitioner(S) v. Jayantilal Vadilal Shah & 5 (S) (2011 SCC OnLine Guj 6350) held that mere use of the word "irrevocable" in a PoA will not make it so unless the terms disclose that it created or recognized an agency coupled with interest in favour of the agent. The interest must be created simultaneously with the creation of the power, as noted by the Madras High Court in Bommisetti Vasundhara v. Pachipulusu Subrahmanyam & Others (1992 (1) LW 425), relying on Seth Loon Karan Sethiya. The Calcutta High Court in Ashok Kumar Jaiswal v. Ashim Kumar Kar (2014 SCC OnLine Cal 10081) discussed the developer's interest in a development agreement, noting that while such a PoA often gives the developer an interest, it does not automatically mean the agency cannot be terminated, depending on the specific facts and whether specific performance is warranted.

2. Key Judicial Pronouncements on Irrevocability

Several landmark judgments have shaped the understanding of Section 202:

  • Seth Loon Karan Sethiya v. Ivan E. John And Others (AIR 1969 SC 73): The Supreme Court held that a PoA executed by a debtor in favour of a bank, authorizing the bank to execute a decree in the debtor's favour and recover dues, was a power coupled with interest and thus irrevocable. The Court also found it to be an equitable assignment of the decree.
  • Shri Harbans Singh v. Smt. Shanti Devi (1977 SCC ONLINE DEL 102): The Delhi High Court found a PoA executed to facilitate the sale of a property, where the agent (husband of the purchaser) had an interest in ensuring the sale went through, to be irrevocable under Section 202. The PoA was granted for the specific purpose of facilitating the sale and securing the respondent's interest.
  • The Orissa High Court in Birat Chandra Dagara v. M/S. Taurian Exim Pvt. Ltd. And Another (2005 SCC ONLINE ORI 12) dealt with a dispute over the revocation of an "Irrevocable Power of Attorney" granted to operate a mine against a substantial financial advance, indicating an interest of the agent.

3. Consequences of Irrevocability

If a PoA is found to be coupled with an interest under Section 202:

  • The principal cannot unilaterally revoke it to the prejudice of such interest, in the absence of an express contract allowing revocation.
  • The agency is not terminated by the death or insanity of the principal (Proviso to Section 202).

V. Notice and Effect of Revocation

A. When Revocation Takes Effect

Section 208 of the Indian Contract Act, 1872, is crucial. It stipulates that the termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

Thus, communication of revocation is vital. In Chandrama Singh & Ors. v. Mirza Anis Ahmed, the notice of cancellation was duly served and received by the attorney prior to the execution of the sale deed by him. However, the court ultimately found the revocation ineffective due to non-registration. The Supreme Court in THANKAMMA GEORGE v. LILLY THOMAS also highlighted the two stages of revocation: one dealing with the agent, and secondly, one which applies to third parties, both requiring knowledge. The Jammu and Kashmir High Court in SHAKEEL AHMAD KUCHAY v. MANMOHAN LAL (2023 SCC OnLine J&K 806) considered the plea of the date of knowledge of revocation as a triable issue for determining the cause of action.

B. Protection to Agent and Third Parties

Section 208 protects both the agent and third parties who deal with the agent in good faith without knowledge of the termination of authority. Acts done by the agent before such knowledge binds the principal. Furthermore, Section 204 of the Act provides that the principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency. This applies even to revocable PoAs.

C. Challenges in Revocation

The process of revocation is not always straightforward and can lead to disputes.

In Bhivji v. Rajesh (2008 MPRN 362), the Madhya Pradesh High Court considered a claim where a PoA was allegedly revoked by a registered letter before the agent executed a sale deed.

VI. Power of Attorney in Specific Contexts

A. PoA for Sale of Immovable Property

The Supreme Court's judgment in Suraj Lamp And Industries Private Limited has significantly impacted the use of PoAs in property transactions. The Court deprecated the practice of SA/GPA/Will sales for transferring property, emphasizing that a PoA is not an instrument of transfer in regard to any right, title, or interest in immovable property. Only a registered deed of conveyance can transfer title. This context is important when considering the revocation of a PoA intended for property sale; while the PoA itself can be revoked (unless coupled with interest), the underlying agreement for sale might still have legal consequences. The ruling in Chandrama Singh regarding the need for registered revocation of a registered PoA for immovable property is particularly pertinent here.

B. Development Agreements

Development agreements often involve the landowner executing a PoA in favour of the developer. The Calcutta High Court in Ashok Kumar Jaiswal v. Ashim Kumar Kar discussed whether such a PoA, which usually gives the developer an interest in the property, can be revoked. The Court observed that ordinarily, such a PoA gives the developer an interest, but this does not mean it is absolutely irrevocable. The possibility of specific performance of the development agreement might exist even if the PoA is revoked, depending on the facts.

VII. Conclusion

The law governing the revocation of a Power of Attorney in India strikes a balance between the principal's autonomy to withdraw authority and the protection of an agent who has acquired an interest in the subject matter of the agency. The general rule permits revocation by the principal at any time before the authority is exercised to bind the principal, through express or implied means. However, Section 202 of the Indian Contract Act, 1872, carves out a critical exception for agencies coupled with interest, rendering such PoAs irrevocable to the prejudice of the agent's interest, and not terminable even by the principal's death or insanity.

Judicial interpretation has clarified that the "interest" must be genuine, substantial, and co-extensive with the power, not merely a commission or incidental benefit. The procedural aspects of revocation, particularly the necessity of a registered deed of revocation for a registered PoA concerning immovable property, and the timing of notice to the agent and third parties, are vital for effective termination. The courts continue to play a significant role in scrutinizing the nature of the agent's interest and the circumstances surrounding revocation to ensure that the principles of equity and statutory mandates are upheld.