Power Of Attorney With Agreement To Sell Won't Create Agent's Interest In Property; Such GPA Gets Revoked On Principals' Death : Supreme Court

The Supreme Court ruled that a General Power of Attorney (“POA”) without an interest in favor of the agent becomes revocable upon the principal's death, terminating the agency. Additionally, even if an unregistered agreement to sell was executed alongside the POA, the agent cannot claim ownership, as an agreement to sell does not transfer title or ownership unless it is followed by a registered sale deed.

The Court clarified that a Power of Attorney (POA) becomes irrevocable only if it is coupled with a proprietary interest in favor of the agent. In essence, if after the death of the principal (POA Maker), certain interest are created in favor of the agent (POA Holder), then only the POA becomes irrevocable and not otherwise.

Merely labelling a POA as "irrevocable" does not make it so, it must confer an actual proprietary interest for irrevocability to apply, the court said.

“a mere use of the word 'irrevocable' in a POA does not make the POA irrevocable. If the POA is not coupled with interest, no extraneous expression can make it irrevocable. At the same time, even if there is no expression to the effect that the POA is irrevocable but the reading of the document indicates that it is a POA coupled with interest, it would be irrevocable.”, the court observed.

The Case

A bench comprising Justices JB Pardiwala and R Mahadevan heard the case where the dispute pertained to the primacy of ownership over the suit property. The case examined whether the general power of attorney coupled with an agreement to sell in favor of the agent prevailed over the sale made by the legal heirs of the original property owner i.e., the POA maker.

Briefly put, Muniyappa, the original owner of the suit property, executed an "irrevocable" GPA and an unregistered Agreement to Sell in favor of A. Saraswathi on April 4, 1986, for ₹10,250. The GPA authorized her to manage and sell the property. After Muniyappa's death on January 30, 1997, Saraswathi sold the property to her son, M.S. Ananthamurthy (Appellant No. 2), on April 1, 1998, for ₹84,000.

Meanwhile, Muniyappa's legal heirs (Respondents 1-6) sold the same property to S. Sreenivasulu on March 21, 2003, for ₹76,000. He later sold it to C. Roopavathi on September 29, 2003, for ₹90,000, who then gifted it to her daughter, J. Manjula (Respondent No. 9), on December 6, 2004.

In 2007, J. Manjula filed a suit for a permanent injunction against Ananthamurthy, claiming possession of the property.

The Trial Court ruled in favor of J. Manjula, granting her a permanent injunction and dismissing Ananthamurthy's suit.

The High Court upheld the Trial Court's decision, leading to the present appeal before the Supreme Court.

Issue

Now, the question appeared before the Supreme Court was whether A. Saraswathi, as a GPA holder with an Agreement to Sell, had any right, title, or interest to execute the sale deed (01.04.1998) in favor of her son after the principal's death (30.01.1997)?

Decision

The judgment authored by Justice Pardiwala ruled against Saraswathi, stating that since the POA lacked any proprietary interest, it terminated upon Muniyappa's death. As a result, the sale of the property to her son after the agency's termination was invalid.

The Court reasoned that for a POA to be irrevocable under Section 202 of the Indian Contract Act, 1872 the agent must have an interest in the subject matter of the agency. Since, the POA in this case authorized Saraswathi to manage and sell the property, but it did not explicitly state that it was executed for securing any interest of Saraswathi, thus the POA was revocable and terminated upon the death of the original owner-Muniyappa.

“in the facts of the present case, it is evident from the tenor of POA that it is not irrevocable as it was not executed to effectuate security or to secure interest of the agent. The holder of POA could not be said to have an interest in the subject-matter of the agency and mere use of the word 'irrevocable' in a POA would not make the POA irrevocable. The High Court was right in holding that the holder did not have any interest in the POA. When the High Court observes that the power of attorney does not explicitly state the reason for its execution, it implies that its nature is general rather than special.”, the court observed.

The Court rejected the Appellant's claim that the unregistered agreement to sell gave him ownership rights, as the property was sold by his mother for valid consideration. Citing Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2012), the Court held that a GPA or agreement to sell does not transfer title without a registered sale deed. Since the POA terminated upon Muniyappa's death, Saraswathi had no authority to transfer ownership, rendering the sale invalid.

“It is a settled law that a transfer of immovable property by way of sale can only be by a deed of conveyance. An agreement to sell is not a conveyance. It is not a document of title or a deed of transfer of deed of transfer of property and does not confer ownership right or title. In Suraj Lamp (supra) this Court had reiterated that an agreement to sell does not meet the requirements of Sections 54 and 55 of the TPA to effectuate a 'transfer'.”, the court said.

“From the independent reading of the POA and the agreement to sell, the submissions of the appellants fail on two grounds, first, the POA is general in nature and does not secure agent's right in the subject-matter of the agency, and secondly, an agreement to sell simpliciter does not confer ownership in the immovable property so as to transfer a better title to anyone else.”, the court added.

Even Combined Reading Of POA And Agreement To Sell Would Not Grant Interest In POA Holder's Favor

Further, the Court rejected the argument that the GPA and Agreement to Sell should be read together to confer an interest on Saraswathi. Even if the two documents were read together, the transfer of interest would require registration under Section 17(1)(b) of the Registration Act, which was not done in this case, the court said.

“The High Court rightly held that even though the GPA and the agreement to sell were contemporaneous documents executed by the original owner in favour of the holder, this alone cannot be a factor to reach the conclusion that she had an interest in the POA. Thus, even though the GPA and the agreement to sell were contemporaneous documents executed by the original owner in favour of the same beneficiary, this cannot be the sole factor to conclude that she had an interest in the subject-matter. Even if such an argument were to persuade this Court, the document must have been registered as per Section 17(1)(b) of the Registration Act. In the absence of such registration, it would not be open for the holder of the POA to content that she had a valid right, title and interest in the immovable property to execute the registered sale deed in favour of appellant no. 2.”, the court observed.

In terms of the aforesaid, the Court dismissed the appeal holding that no error was committed by the High Court in upholding the trial court's order granting injunction in the respondent's favor.

Case Title: M. S. ANANTHAMURTHY & ANR. VERSUS J. MANJULA ETC 

Citation : 2025 LiveLaw (SC) 257

Click here to read/download the judgment

Appearance:

For Petitioner(s) Ms. Farhat Jahan Rehmani, AOR

For Respondent(s) Mr. Mahesh Thakur, AOR Mr. Ranvijay Singh Chandel, Adv. Mrs. Geetanjali Bedi, Adv.