The Gujarat High Court has held that a power of attorney holder can act only within the authority expressly or necessarily conferred by the instrument, and a power to sell, manage, deal with, or transact affairs does not include a power to execute a gift deed unless such authority is specifically granted. Further, where the principal dies, the agency stands terminated by operation of Section 201 of the Contract Act, and any act done thereafter on behalf of the deceased principal is without authority and legally invalid.
The Court also held that Section 208 of the Contract Act and Section 3 of the Powers-of-Attorney Act cannot save a transaction where the attorney had no authority in the first place to execute a gift deed, and where the act of presenting such deed after the principal’s death is itself void and lacking in bona fides. In such a situation, the transferee acquires no title.
The Division Bench comprising Justice Ilesh J. Vora and Justice R. T. Vachhani framed the core issue as whether an act done by a power of attorney holder, despite there being no such authority in the instrument, and particularly after the death of one of the principals, could be treated as legal and binding. The Court reiterated that a power of attorney creates a principal-agent relationship, and the holder can do only those acts which are specified and authorised by the executant.
The Court found it undisputed that the power of attorney was not coupled with interest, and that defendant No.1 had executed the gift deed in favour of his own son and daughter-in-law after the death of plaintiff No.2. It held that once the principal dies, the agency comes to an end by operation of Section 201 of the Indian Contract Act, 1872. Therefore, defendant No.1 could not continue to act on behalf of plaintiff No.2 after her death.
The Court rejected the respondent’s attempt to take shelter under Section 208 of the Contract Act. It observed that termination by death operates automatically in law, and once the agency comes to an end, the agent has no authority to act further. The Court made it clear that a dead person cannot be represented in a contract through an agent after death, and therefore the plea of ignorance of death could not validate the execution or presentation of the gift deed for registration.
The Court also examined Section 3 of the Powers-of-Attorney Act, 1882, which protects acts done in good faith without knowledge of death. Even then, the Court held that the protection did not help the defendants. It observed that the very presentation of a conveyance deed for registration after the principal’s death, particularly when the attorney claimed to enjoy a family-like relationship with the principal, lacked bona fides. The Court said such conduct reflected a fraudulent act and could not convey title to immovable property.
On the construction of the powers of attorney, the Court held that such instruments must be strictly construed. General words cannot be used to enlarge specifically conferred powers. After extracting the clauses of both powers of attorney, the Court found that neither document contained any authority to make a gift of the property. At best, the powers related to management, sale, purchase, leasing, banking, litigation and general affairs, but not gifting. The Court expressly held that the documents did not authorise making of a gift and that any transfer contemplated under them had to be for consideration.
The High Court was also not persuaded by the defendants’ argument that the gift deed had been communicated to the plaintiffs, noting that no material was produced to prove such communication. It further held that the trial court had travelled beyond the real controversy by resting its findings on assumptions about financial transactions and loan adjustments, even though the real issue was whether there was authority under the powers of attorney to execute a gift deed at all.
Briefly, the appeal challenged the trial court’s judgment, whereby it had dismissed the plaintiffs’ suit which sought cancellation of a registered gift deed dated Jan 05, 2011. The dispute concerned a residential property at Parishram Co-operative Housing Society, Sayajigunj, Vadodara, which the plaintiffs said they had purchased in 1999 and continued to possess. The plaintiffs’ case was that plaintiff No.1, an NRI, had earlier given powers of attorney to defendant No.1 because of his close relationship with the family and because plaintiff No.1 resided outside India. According to the plaintiffs, plaintiff No.2, Ramaben, died on 21.07.2010, and after her death the authority flowing from her power of attorney came to an end. Even so, defendant No.1 later used that power of attorney and executed a registered gift deed on Jan 05, 2011 in favour of defendant Nos.2 and 3, who were his own son and daughter-in-law. The plaintiffs challenged that gift deed as illegal and sought its cancellation.
The defendants opposed the suit by claiming that defendant No.2 had financially assisted the plaintiff by advancing 78,000 pounds when the plaintiff needed funds for business. Their case was that the amount was not returned, disputes later arose, and ultimately the property was gifted to defendant Nos.2 and 3 on the plaintiff’s instructions as an adjustment against the outstanding amount. They denied any illegality in the execution of the gift deed.
The appellants argued that none of the powers of attorney specifically authorised defendant No.1 to execute a gift deed, and that after plaintiff No.2’s death, the power of attorney given by her had automatically ceased to operate. They also argued that the trial court wrongly accepted the theory that the gift deed was executed in lieu of a loan, even though there was no cogent documentary evidence to support that claim.
The respondents argued that the parties had a fiduciary and family-like relationship, that substantial financial transactions had taken place, and that the transfer was made with the plaintiff’s knowledge and instructions. They also tried to rely on Section 3 of the Powers-of-Attorney Act, 1882 and Section 208 of the Contract Act to say that acts done in good faith without knowledge of the donor’s death should be protected.
