Supreme Court: Mere Usage Of The Word 'Irrevocable' In A Power Of Attorney Will Not Make The Power Of Attorney Irrevocable In Nature

The Supreme Court of India (“Supreme Court”) in its judgement passed on February 27, 2025 in the matter between M.S. Ananthamurthy v J. Manjula, Civil Appeal Nos.3266-3267 OF 2025 inter alia held that an agreement to sell along with a general power of attorney (notarized) (“POA”) would not transfer title or ownership in the property and the POA would be revoked on the passing away of the principal even if the POA explicitly states that the POA was for consideration and also was irrevocable in nature. The Supreme Court further held that under such a POA, it cannot be said that the holder of the POA had an interest in the subject matter of the agency and would be covered under the exception provided under Section 202 of the Contract Act, 1872 (“Contract Act”). 

Facts of the Case

1. Muniyappa @ Ruttapa (“Original Owner”) was the owner of the property situated at Bangalore who developed the same in the form of individual plots and sold those plots for consideration to various persons. The suit property is one of those plots (“Suit Property”).
2. It is the case of the appellants that on April 4, 1986, the Original Owner sold the Suit Property to one A Saraswathi (“Saraswathi”) for consideration by executing a notarized irrevocable general power of attorney, and an unregistered agreement to sell in favour of Saraswathi.
3. The said unregistered agreement to sell in favour of Saraswathi inter alia recorded that (i) the entire consideration as payable by Saraswathi was paid to the Original Owner, (ii) the vacant possession was handed over to Saraswathi to hold the same as its absolute owner, (iii) since there was a prohibition of selling the revenue sites by the Government of Karnataka, the Original Owner could not execute the sale deed and as and when the government revoked the fragmentation act, the Original Owner would execute the sale deed.
4. Simultaneously with the execution of the agreement to sell, the Original Owner also executed a POA and conferred upon Saraswathi, the power to enter into any type of agreements, deeds, to receive full consideration, to apply permission from the authority in respect of the Suit Property. The POA also recorded that the POA was irrevocable in nature.
5. On January 30, 1997, the Original Owner passed away.
6. On April 1, 1998, Saraswathi as the holder of the POA executed a registered Sale Deed with respect to the Suit Property in favour of her son, A Manohar (Appellant No.2) for consideration.
7. On the other hand, several years after the passing away of the Original Owner, his legal heirs (Respondent Nos.1 to 6) vide a registered Sale Deed dated March 21, 2003, sold the Suit Property to S. Sreenivasulu (Respondent No.7) for consideration. Thereafter, S. Sreenivasulu (Respondent No.7) sold the Suit Property to C. Roopavathi (Respondent No.8) vide another Sale Deed dated March 29, 2003. Vide a registered Gift Deed dated December 6, 2004, C. Roopavathi (Respondent No.8) gifted the Suit Property in favour of her daughter, J. Manjula (Respondent No. 9, the Answering Respondent).
8. In light of the above circumstances, the Answering Respondent filed O.S. No.133 of 2007 for permanent injunction against the Appellant No.2 or anyone else acting under him from interfering with her peaceful possession and enjoyment of the Suit Property.
9. Following the above, the Appellant No.2 also filed O.S. No.4045 of 2008 against the legal heirs of the Original Owner, the subsequent purchasers, and the Answering Respondent respectively for declaration of absolute ownership with a direction to handover vacant physical possession of the Suit Property.
10. Both the above suits were consolidated and tried together by way of recording common evidence.
11. The Trial Court vide its Judgement and order dated June 21, 2014, decreed the suit no. O.S. No.133 of 2007 in favour of the Answering Respondent by granting a decree of permanent injunction in her favour and dismissed the Suit filed by the Appellant No.2.
12. Being aggrieved by the same, the Appellants challenged the Trial Court's Judgment and order by way of filing the filing a First Appeal before the High Court of Karnataka whereby the High Court dismissed the appeals and affirmed the common judgment passed by the Trial Court vide its judgment and order dated October 16, 2019 (“Impugned Judgment”).
13. Therefore, the Appellants challenged the Impugned Judgement before the Supreme Court.

Judgment and Order passed by High Court of Karnataka

1. The High Court affirmed the Trial Court's Judgment inter alia on the following grounds:
   1. Firstly, that the Appellants had not denied or disputed the existence of the two registered Sale Deeds and the Gift Deed in favour of the Answering Respondent.
   2. Secondly, the Sale Deed executed in favour of the Appellant was executed after the passing away of the Original Owner. In this regard, the Appellants submitted that since Saraswathi had an interest in the POA, it should be read along with the Agreement to Sell and therefore by virtue of a subsisting interest created by the Original Owner in favour of Saraswathi, Saraswathi even after the passing away of the Principal had the power to execute the sale deed in favour of her son. The High Court held that though the POA and the Agreement to Sell were executed on the same day in favour of the same holder, they could not be considered forming part of the same transaction because the POA did not refer to the execution of the Agreement to sell and vice versa, the Agreement to sell did not mention about the execution of the POA.
   3. Thirdly, the Court held that by executing a POA including an irrevocable one or an agreement to sell did not automatically transfer any right or interest to the beneficiary or the holder. In this regard, it was submitted by the Appellants that Sarawathi had an interest in the Suit Property which was the subject matter of POA and that the POA would not come to an end on the death of the principal by virtue of Section 202 of the Contract Act. It was observed by High Court that Saraswathi did not enforce the agreement to sell against the legal representatives of the Original Owner after his passing away and therefore the case of the Appellants would not be covered by Section 202 of the Contract Act.

Issues for consideration before the Supreme Court

1. Whether Saraswathi under the POA and the Agreement to Sell both dated April 4, 1986, had any right, title and interest over the Suit Property to execute a registered Sale Deed dated April 1, 1998, in favour of her son, after the death of the Original Owner, i.e. the principal on January 30, 1997?
2. Whether it was obligatory for the Answering Respondent to challenge the execution and validity of the POA and the Agreement to Sell both dated April 4, 1986, and a further prayer to declare the Sale Deed executed in favour of the Appellant No.2 by Saraswathi was non-est or illegal in O.S. No.133 of 2007?

Court's Analysis

1. By placing reliance on various judgments, the Supreme Court discussed as to when an agency can fall within the purview of Section 202 of the Contract Act and therefore irrevocable to be terminated unilaterally by the principal.
2. It held that the essentials of Section 202 of the Contract Act are (i) authority to agent for valuable consideration and (ii) such valuable consideration was given for the purpose of effectuating a security or protecting or securing the interest of the agent. If both the conditions are fulfilled, then the agency becomes irrevocable and cannot be terminated unilaterally at the behest of the principal. To explain when an agent can be said to have an interest in the subject matter of the agency, Illustration (a) of Section 202 of the Contract Act was referred to which states as:  “A (Principal) has given authority to B (agent) to sell A's land and to pay himself, i.e. the agent from the proceeds the debt which is due to him”.
3. Applying the expositions of law with respect the POA and on examining the contents of the POA, the Supreme Court held that mere use of the word ‘irrevocable' in a POA would not make the POA irrevocable, in fact, the POA was not irrevocable as it was not executed to effectuate security or was granted to secure the interest of the agent. The Supreme Court further observed that the High Court was correct in stating that the Saraswathi did not have any interest in the subject matter of the POA. It further affirmed with the view of the High Court that when the POA does not explicitly state the reason for its execution, it implies that its nature is general rather than special.
4. The Supreme Court placed reliance on Suraj Lamp & Industries Private Limited. v. State of Haryana, (2012) 1 SCC 656, and stated that it is a settled position of law that a transfer of an immovable property by way of sale can only be by a registered document being a deed of transfer or a conveyance deed. The Agreement to Sell executed by the Original Owner in favour of Saraswathi cannot be held to be a document of title or a deed and does not confer ownership right or title in favour of Saraswathi.
5. As regards the execution of the Agreement to Sell and the POA being executed on the same day and in favour of the same person, the Appellants submitted both documents ought to be read together and construed harmoniously to mean that Saraswathi had an interest in the Suit Property and therefore the legal heirs of the Original Owner could not have executed the Sale Deed dated March 21, 2003 in favour of S. Sreenivasulu (Respondent No.7). In this regard the Supreme Court held that even from the combined reading of both the documents, the Appellants had failed on the reasoning that if under these documents, i.e. the POA and the Agreement to Sell, if any interest had been transferred then in absence of the said documents being registered, the transfer of an interest as claimed by the Appellants did not take effect. It further held that the law recognizes two modes of transfer by sale, first through a registered instrument and second by delivery of property if its value is less than INR 100/-. The Supreme Court further affirmed the view taken by the High Court that even though the POA and the agreement to sell were contemporaneous documents executed by the Original Owner in favour of Saraswathi, the same cannot be a factor to reach the conclusion that Saraswathi had an interest in the subject matter of the agency, i.e. the Suit Property and was subsequently revoked on the passing away of the Original Owner.
6. Lastly, the as regards the effect of the Answering Respondent (in physical possession of the Suit Property) simply filing a suit for injunction, the Supreme Court placed reliance in the case of Sajjadanashin Sayed MD. B.E. EDR. (Dead) by LRS. v. Musa Dadabhai Ummer, (2000) 3 SCC 350, wherein the Supreme Court laid down the test when a case would fall in ‘directly and substantially in issue' or ‘collaterally or incidentally in issue'. As regards this issue, it held that where the question of title is “directly and substantially” in issue in a suit for injunction, and where a finding on an issue of title is necessary for granting the injunction, with a specific issue on title raised and framed, a specific prayer for a declaration of title is not necessary and as a result a separate suit would be barred. Further it held that in the case at hand, the findings on possession rested solely on the findings of title.

Conclusion

The courts have time and again discouraged the practice of sale/transfer of an immovable property by way of executing a general power of attorney and an unregistered agreement to sell. It holds that if right, title and interest is sought to be transferred by way of a written document, it has to be compulsorily registered as per Section 17(1)(b) of the Registration Act. By placing reliance in the case of Suraj Lamp (supra), the Supreme Court emphasised the importance of registration of documents of title transferring interest / ownership in the property.The Supreme Court also discussed and clarified the position that merely because the word ‘irrevocable' is used/mentioned in a POA or the same has been given for consideration, it will not make the POA irrevocable. It is only when the principal grants the POA to effectuate security or to secure the interest of the agent coupled with consideration is when it could be concluded that the POA is irrevocable.

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