The Delhi High Court has held that a General Power of Attorney is an instrument of agency and does not transfer any right, title or interest in an immovable property to the person holding the power of attorney. The Court clarified that even an irrevocable General Power of Attorney does not by itself have the effect of transferring ownership of the property to the attorney holder. The Court made the observation while dismissing an appeal against a decree directing the appellant to pay ₹1,01,78,074 to the legal heirs of his sister-in-law, representing the amount that remained payable to her from her share of the sale consideration of a property sold through the appellant in his capacity as her General Power of Attorney holder.
The dispute related to agricultural land that had been jointly purchased in 1985 by Kusum Mehta along with three other persons. Kusum Mehta had acquired an undivided one-fourth share in the property. The appellant subsequently acted as her General Power of Attorney holder in relation to the property. The dispute arose from the sale of the property and the manner in which the sale proceeds attributable to Kusum's one-fourth share were dealt with by the appellant after the transaction.
The property was sold in 2011 for a total consideration of ₹6,95,11,500. The sale deed was executed by the appellant in his capacity as the General Power of Attorney holder of Kusum Mehta and two other co-owners. On the basis of Kusum's one-fourth undivided share in the property, her corresponding share in the total sale consideration amounted to ₹1,73,77,875. The appellant, however, transferred only ₹71,99,801 to Kusum and retained the remaining ₹1,01,78,074.
After Kusum Mehta died, her daughters initiated proceedings seeking recovery of the balance amount that had not been paid to their mother from the sale proceeds. Their claim was based on the position that the appellant had received the sale consideration while acting as Kusum's agent and was therefore required to account for and remit the amount that belonged to her. The proceedings ultimately resulted in a decree directing the appellant to pay ₹1,01,78,074 to Kusum's legal heirs.
The appellant challenged the decree before the Delhi High Court. His principal contention was that the property had actually been acquired by him and his wife and that the General Powers of Attorney executed by Kusum had irrevocably conferred rights upon him. On this basis, he sought to dispute the claim of Kusum's legal heirs to the remaining amount from the sale consideration. The appellant's case essentially sought to treat the powers of attorney as creating rights in his favour over the property and its sale proceeds.
The High Court rejected this contention. Justice Neena Bansal Krishna held that a General Power of Attorney is fundamentally an instrument of agency. It authorises the attorney holder to act on behalf of the person who grants the power, but it does not itself transfer ownership of an immovable property. The Court specifically held that an irrevocable Power of Attorney also does not have the effect of transferring title to the attorney holder.
The Court examined the actual terms of the two General Powers of Attorney relied upon by the appellant. It found that the documents authorised the appellant to look after, manage and supervise Kusum Mehta's undivided share in the property. They also authorised him to sell, transfer or gift that share on her behalf. According to the Court, these provisions demonstrated that the appellant had been authorised to act as Kusum's agent in relation to her share and did not establish that ownership of the property had been transferred to him.
The Court further noted that the two General Powers of Attorney had not been executed for consideration. They were also not coupled with any interest of the appellant in the property. This was relevant to the appellant's contention that the powers were irrevocable and had conferred substantive rights upon him. The High Court held that the documents merely empowered him to act on Kusum's behalf and did not give him ownership or an independent proprietary interest in her share of the property.
The Court therefore treated the appellant's role in the sale as that of an agent acting for the principal. Since the appellant had executed the sale deed as Kusum's General Power of Attorney holder, he had received the consideration attributable to her share in that capacity. The legal consequence was that the amount received by him on her account could not be retained by him as his own merely because he was the person who had executed the transaction.
The High Court referred to Section 218 of the Indian Contract Act, 1872. Under this provision, an agent is required to pay to the principal sums received on the principal's account, subject to the agent's lawful deductions. Applying this principle, the Court held that after receiving Kusum's share of the sale consideration as her agent, the appellant was bound to remit the amount received on her account to her.
The total sale consideration was ₹6,95,11,500 and Kusum's one-fourth share was ₹1,73,77,875. The appellant had transferred ₹71,99,801 to her account but retained ₹1,01,78,074. The High Court found that the remaining amount represented the unpaid portion of Kusum's share in the sale consideration. Since the appellant had received the money in his capacity as her agent, he was liable to account for and pay the balance to her legal heirs.
The appellant attempted to explain the amount transferred to Kusum by contending that the ₹72 lakh deposited into her account was not sale consideration but an interest-free friendly loan. The High Court rejected this explanation. The Court noted that identical amounts had also been deposited into the accounts of the other two co-owners. This circumstance was inconsistent with the appellant's claim that the payment made to Kusum represented a separate friendly loan.
The Court characterised the loan explanation as a “moonshine defence”. It found that the appellant's own admissions were clear and unequivocal regarding the transaction and the amounts involved. In view of those admissions, the Court held that the decree could properly be passed under Order XII Rule 6 of the Code of Civil Procedure. The provision permits judgment on admissions where the relevant facts have been admitted by a party.
The High Court accordingly found no basis to interfere with the decree directing payment of ₹1,01,78,074 to Kusum Mehta's legal heirs. The appellant's assertion that the General Powers of Attorney had transferred rights in the property to him was not accepted. The Court's examination of the documents showed that they were authorisations enabling him to act for Kusum rather than instruments transferring ownership of her share to him.
The Court's reasoning also addressed the distinction between authority to sell property and ownership of property. The appellant had been authorised to sell Kusum's share, and he exercised that authority by executing the sale deed. However, the authority to conduct the transaction did not make him the owner of the share that he was authorised to sell. His role remained that of an agent acting on behalf of the person who had granted the power.
Consequently, the proceeds generated from the sale continued to belong to the respective owners according to their shares. The appellant's receipt of the money did not change its character. The amount received by him on behalf of Kusum remained payable to her, and after her death, her legal heirs were entitled to seek recovery of the amount that had not been remitted to her.
The High Court also found that the appellant's claim concerning the nature of the payment made to Kusum could not overcome the documentary and admitted circumstances of the transaction. The fact that corresponding amounts had been deposited into the accounts of the other co-owners further weakened the assertion that the payment to Kusum represented an independent loan. The Court therefore treated the amount as part of the sale consideration payable against her share in the property.
The judgment thus distinguished the powers granted under the General Powers of Attorney from the proprietary rights in the underlying immovable property. The appellant had authority to manage and deal with Kusum's undivided share, including the authority to sell it on her behalf. But that authority did not confer title upon him. The Court held that the legal character of the documents remained that of agency and that no transfer of ownership could be inferred merely from the fact that the powers were described as irrevocable.
The Court's conclusion was also based on the absence of consideration and the absence of any interest of the appellant in Kusum's share. The two powers of attorney were not shown to have been executed as instruments through which Kusum transferred her proprietary interest to the appellant. Instead, their terms demonstrated that she had authorised him to act in relation to her property. The appellant therefore could not rely upon those documents to claim the sale proceeds as his own.
The Delhi High Court consequently dismissed the appeal and upheld the decree in favour of Kusum Mehta's legal heirs. The appellant remained liable to pay ₹1,01,78,074, representing the balance of Kusum's share in the sale consideration that had been retained after the property was sold. The Court's decision rested on the finding that the appellant had received the money as an agent and was legally bound to account for and remit the amount belonging to his principal.
The case was titled Bhisham Mehta v. Mrs. Gita Vig & Ors. and was registered as RFA 645/2022. The matter was decided by Justice Neena Bansal Krishna. The proceedings concerned the recovery of the unpaid portion of the sale consideration arising from the sale of the jointly owned agricultural property.
The judgment therefore made clear that possession of a General Power of Attorney does not, by itself, convert an agent into an owner of the property covered by the document. An attorney holder may be authorised to manage, supervise, sell, transfer or otherwise deal with property on behalf of the principal, but the authority to undertake those acts does not transfer the principal's title to the attorney holder. Where the attorney holder receives consideration from a transaction conducted on behalf of the principal, the amount received on the principal's account must be remitted to the principal in accordance with the obligations governing agency.
In the present case, the High Court found that the appellant's actions were undertaken pursuant to the authority granted by Kusum Mehta and that the sale proceeds attributable to her share were consequently required to be accounted for. The appellant's retention of ₹1,01,78,074 was not justified by the General Powers of Attorney or by his claim that the amount transferred to Kusum represented a friendly loan. The Court therefore upheld the decree requiring him to pay the outstanding amount to her legal heirs and dismissed the appeal.
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