All You Need to Know About Power of Attorney (POA) in India

Imagine you are living in America. For every task related to property or finances back in India, it’s not always feasible to be physically present. In such a moment, Power of Attorney is a lifesaver.

POA is not just a legal document; it’s a tool that grants authority to a trusted individual to act on your behalf in situations where you’re unable to do so yourself. It is commonly used to manage real estate, healthcare decisions, or handling financial matters during temporary absences. Enabling smooth financial transactions to critical decision-making, it simplifies life’s complexities.

In this blog, you will learn about the Power of Attorney, its types, the steps to create a POA, its legal responsibilities, and its importance and limitations.

What is the Power of Attorney? 

Power of Attorney or POA is a legal document that enables an individual (the agent or attorney-in-fact) to act on behalf of another person (the principal).   

Parties involved in Power of Attorney   The parties involved in Power of Attorney are: 

1. Principal: The principal is the person who grants authority to another person to act on his/her behalf.
2. Agent (Attorney-in-fact): The agency or attorney-in-fact is the person who is authorized to act on behalf of the other person.
3. Witnesses: The witnesses are people who are required to be present at the time when the principal signs the POA. The number of required witnesses can vary. 

Types of Power of Attorney

There are four types of Power of Attorney. They are explained below:

1. General Power of Attorney

In general power of attorney, the principal grants the agent rights to act on his/her behalf. These decisions include financial decisions, legal and property affairs.   

2. Special or Limited Power of Attorney

The special power of attorney has a specific scope. The authority is given to the agent to perform only specific tasks. These tasks include selling property or managing bank accounts. 

3. Durable Power of Attorney

The durable power of attorney continues even after the principal becomes incapacitated. It stays for a lifetime, taking care of all the legal matters for the principal. This power entails managing finances, making legal decisions, and managing the estate of the principal. 

4. Springing Power of Attorney

When the principal becomes incapacitated, the agent can invoke the power of attorney under specific predetermined circumstances. During these unforeseen circumstances, the agent takes care of the legal matters for the principal. 

Pre-Requisites for Power of Attorney 

The pre-requisites for Power of Attorney are: 

1. Passport size photo of the Attorney and Principal 
2. Identity proof of Attorney and Principal 
3. Two witnesses for signing the document of Power of Attorney 
4. Notarization of document by a notary person or a lawyer

Steps of How to Create a Power of Attorney 

 The steps to create a Power of Attorney are mentioned below:

1. Understand the Requirements: Understanding what the requirements are for creating power of attorney is crucial. The POA serves various purposes such as managing finances, real estate, and making business decisions. 
2. Choosing the Right Agent: Choosing the right agent plays a vital role in creating power of attorney. The agent-in-fact should be chosen carefully as they will be making important decisions on your behalf. The agent should be reliable and trustworthy.
3. Drafting the Power of Attorney Document: The Power of Attorney should be drafted carefully. This document should have all the powers clearly stated. POA draft should also include the name and address of the principal, the name and address of the agent, the powers granted to the agent, the effective date of the power of attorney, and the signature of the principal.
4. Witnessing and Notarizing: The power of attorney document should be signed by two witnesses who are not related to either the principal or the agent.  The document should be notarized by Notary Public. It certifies the authenticity of the document.
5. Registration: The power of attorney document should be registered with the sub registrar's office to safeguard the parties from any future probable legal dispute. 

Legal Responsibility of the Agent

The legal responsibility of the agent in case of Power of Attorney are:  

1. In the Best Interest of the Principal: The legal responsibility of the agent is to act in the best interest of the principal. The actions of the agent should align with the goals, objectives and requirements of the principal.   
2. Fiduciary Duty: The agent has fiduciary duties. This fiduciary duty includes all the action taken by the agent with complete honesty and loyalty. The agent should avoid any conflict of interest and should not use the principal’s property for personal or wrongful gain.
3. Maintaining Accurate Records: The agent should maintain all the records of decisions made on behalf of the principal accurately.  
4. Communicate with the Principal: Agent should always share and communicate about all the actions taken by him on behalf of the principal.
5. Stay within the Authorized Limits: The agent must stay within the specified limit mentioned on the POA and not exceed their authorized limits.

Importance of Power of Attorney in India  

The importance of Power of Attorney in India is:

1. Facilitation of Transactions

A Power of Attorney (POA) allows someone to delegate authority to another person to handle transactions on their behalf. This is particularly useful when the principal is unavailable due to travel, illness, or other reasons. It ensures continuity in managing financial, legal, or property-related matters without physical presence.  

2. Legal, Financial, and Medical Representation

An agent with legal, financial, and medical representation authority can act on behalf of the principal in various critical areas. This includes handling lawsuits, signing financial documents, managing assets, or making medical decisions when the principal is unable to do so. Such powers are typically granted through a Power of Attorney or similar legal document.   

3. Make Business Decisions

A Power of Attorney (POA) empowers business partners to make decisions and oversee operations on behalf of the principal. This includes signing contracts, managing finances, and handling day-to-day business activities. It ensures smooth functioning and decision-making, even in the absence of the principal.

Limitations of Power of Attorney in India  

The limitations of Power of Attorney in India are:  

1. Scope of Authority

The scope of how much authority the agent has is mentioned in the POA. The agent cannot act out of the limitations he/she has. Thus, any important matter that needs to be taken care of urgently, that is beyond the scope of authority of the agent, cannot be managed by him/her in the absence of the principal, if not given permission.  

2. Legal Consideration

The agents are bound to act in legal and ethical considerations. If the agent acts outside legal obligation and does something which is beyond their scope of authority, he/she can be held accountable for the same. 

3. Misuse of POA

There is a potential for the agent to abuse the power of attorney if not taken care of properly. The agent may use the POA for personal gains. Therefore, it is crucial to choose a trustworthy agent.

POA for NRIs  

For NRIs not being present in the country makes it challenging for them to participate in any type of transaction or decision making in India. In such situations, Power of Attorney comes in as a huge help for the NRIs to keep track of their affairs, be it financial, legal, or property related.  

Dealing with these complexities from abroad can be overwhelming for them. Thus, POA is helpful in such situations where urgent actions are required to avoid falling into any form of legal or financial or any other problems in their absence in the country.

Revocation of POA

Revocation of Power of Attorney refers to an act of canceling/terminating/revocation of authority of an agent by the principal.

According to Section 201 of the Indian Contract Act, 1872, the conditions of revocation are:   

1. If the principal revokes the power of attorney granted to the agent  
2. If the principal or POA holder or both becomes of unsound mind or dies  
3. If the attorney-in-fact renounces his/her power  
4. If the specific business of attorney-in-fact gets completed

Conclusion

The Power of Attorney is a symbol of trust and a helping hand in times of need. Whether it’s assisting a loved one with property matters, managing finances when life gets hectic, or ensuring someone is there to make crucial decisions in your absence, a POA provides security and peace of mind.

It’s about empowering someone you trust to step in when you need them most. By choosing the right person and setting clear boundaries, you can navigate life’s challenges with confidence, knowing your interests are well-protected. Use it wisely to simplify your journey.

DigiLawyer can be your trusted friend to help you in the way of understanding everything related to the Power of Attorney.