How NRIS can use the Power of Attorney to manage their assets

Aditya Pratap is a lawyer practicing in the Bombay High Court. He can be reached at aditya@adityapratap.com

Introduction

Malveeka is living in a remote destination in a small town of United States. She is worried as to how her affairs in India would be handled in her absence from India. She wants to appoint her mother to act for and on her behalf, during her absence from India and ensure the smooth running of the day-to-day affairs in connection with her assets and liabilities in India.

What does Malveeka need to do? Especially in the Covid times, where travelling frequently is not an option. Malveeka has to execute a ‘power of attorney’ in favour of her mother authorising her to act on her behalf. The obvious question, which comes to her mind is as to the meaning and implications of a ‘power of attorney’ and the process for its execution. Here is what Malveeka needs to know.
What is a Power of Attorney?

A power of attorney is an instrument in writing empowering a specified person to act for and in the name of a person executing it. In other words, a power of attorney (POA) is an authorisation to act on someone else’s behalf in a legal or business matter. The person authorising the other to act is the grantor/principal of the power and the one authorised to act is the attorney/agent. It is a unilateral document signed and executed only by the grantor or principal. A power of attorney may be revoked at the instance of the grantor or due to his death or incapacity. A power of attorney is usually construed very strictly.

How is a Power of Attorney used?

Travelling frequently was not an option for many NRIs, because of their jobs, busy schedules and affordability, even before the COVID-19 crisis. To overcome this situation, a majority of them used the power of attorney (PoA) instrument, to manage various businesses and assets in the country of their origin. Under this legal arrangement, one can entrust anyone to represent them, in order to conduct specific businesses on their behalf. Even if the NRI is able to come back to India to make the purchase, at some point they have to hire a legal representative, for asset management purposes. Using the PoA instrument, an NRI can conduct various real estate-related businesses in India, including sale, purchase, renting, leasing, mortgaging, dispute management, etc. Also, if a property is jointly held, it might be difficult for all the co-owners to present themselves and complete a transaction. By way of granting a PoA to one person, the joint owners can get past any hassles.

Are there various types of PoA?

The answer is yes. There are three different types of Power of Attorney;

  • General Power of Attorney (GPA)

Under a GPA, your representative is given general rights to make decisions on your behalf. A GPA can be revoked by the executor as and when he wants.

  • Special Power of Attorney (SPA)

The SPA is granted to conduct specific businesses, like it is generally used for property transactions, as it grants rights for a specific task. The SPA loses its legal validity as soon as the task is performed.

  • Durable Power of Attorney (DPA)

A DPA, remains valid for the entire lifetime of the executor.

How to draft a power of attorney deed?

You could make the draft of the content for the PoA on your own, but hiring a legal expert with specialisation in sale/purchase of properties involving NRIs, is preferable. Irrespective of who is doing it, be certain to include these details in the draft:

  1. Your details: Name, age, overseas address, Indian address and occupation.
  2. Your signature: The principal has to sign on each page of the PoA draft.
  3. Your representative’s details: Name, age, address and occupation.
  4. Purpose of the POA: State the specific purpose for which the PoA is being created.
  5. Validity period: The time when the POA comes into force and when it is terminated.
  6. Validated by local authorities: To give it a legal validity, the draft will now have to be authenticated by the local authorities.

How to execute a power of attorney?

Depending on your availability, you could get the PoA executed in India or in the country of your current residence.

  1. PoA execution in India

Step 1: Draft the POA on a non-judicial stamp paper of Rs 100.

Step 2: Visit the sub-registrar’s office in the area concerned, along with the legal representative and two witnesses. Each party must carry their ID proofs and photographs.

Step 3: The sub-registrar’s office will collect the PoA document, photos and fingerprints of each party, along with other papers and the stamp duty for PoA registration.

Step 4: The registered POA could be collected on the due date. This could typically take a week.

Note here that the Indian Registration Act, 1908, doesn’t make it compulsory for a PoA to be registered. However, the Supreme Court, in 2011, ruled that registration of PoA is mandatory if it is executed for the sale of a property.

  1. PoA execution outside India

In case you are in another country where you are a resident, you could get the PoA legalised though the Indian embassy in that country. There are two ways to do this.

  1. Apostillisation: Under the provisions of the Hague Convention, 1961, the PoA draft must be verified by the local authorities in the country where you are currently living to give it legal authenticity. This process, known as apostillisation, would also ensure nothing prescribed in the draft is in conflict with the local laws. An apostille, also known as super legalisation, is a legal certificate, which confirms and verifies the signature/seal of the person who authenticated the document. The deed must also comply with Indian laws, such as the Indian Registration Act, 1908 and the Power of Attorney Act, 1882. A stamp duty must also be paid to complete the apostillisation.
  2. Legalisation: In this process, one has to get the deed notarised by a local judge or such authority and then get that judge’s signature authorised by the Indian embassy. This is important, because the notary would get a legal validity only after it is authenticated by an authorised officer of the Indian embassy. This is prescribed under Section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948. This PoA must be stamped and registered in India within three months of its execution. A stamp duty would be payable, according to Section 2(17) read with Schedule-I of the Indian Stamp Act, 1899, when the deed is presented for registration in India. The deed should be sent by a registered post to an Indian address.

 Revocation of Power of Attorney

As and when the executor thinks he must revoke the PoA, a due process has to be followed to perform that task. If the PoA was registered at the sub-registrar’s office, for instance, it has to be cancelled from there. A PoA is also revoked, when the grantor dies, becomes insane, or is declared insolvent.

Before revoking the PoA, the executor must inform all parties concerned and do the cancellation as per the terms and conditions specified in the document. This information must also be published in the local media, depending on the size of the property and impact of the decision. A notice in this regard should also be posted on the said premises, for informational purposes.

 Conclusion

  • You have to be mentally stable to execute a PoA.
  • A notarised PoA does not have legal validity as a registered PoA.
  • The PoA loses validity after the death of the executor.
  • A PoA executed outside India should be registered in India, to have legal validity.
  • Any errors in the draft would render it null and void.
  • You cannot transfer ownership of the property through a PoA.
  • You have to provide an address in the country of your current residence in the PoA draft.
  • Any misuse of the PoA by the attorney might land you in trouble.
  • NRIs can ask their attorney to accept payment on his behalf. However, the attorney cannot receive the payment in his account.

About the Author – Aditya Pratap

Aditya Pratap is a lawyer practising in Mumbai. He argues cases in the Bombay High Court, Sessions and Magistrate Courts, along with appearances before RERA, NCLT and the Family Court. For further information one may visit his website adityapratap.in or view his YouTube Channel to see his interviews. Questions can be emailed to him at aditya@adityapratap.com.

Cases argued by Aditya Pratap can be viewed here.

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