Conditional power of attorney

1. Yes we do see such 'conditional PoA from time to time, but it is called as Special PoA which is different from General PoA and it should be duly Registered with concerned SRO to make it legit in eyes of Law. 

2. In placed facts before me, the moment you put your 'conditional' clauses the borrower is also within his rights to put his 'conditions'in such Special PoA by way of few addendum clauses and may also add another rightful clause in his favour that is to 'get the initial payments paid back to him out of the total borrowings with or without interest in case he is not able to mobilize the balance funds', the reason he is going to add such clause is  that he will have doubt that you may sell the property at higher premium which is obvious once time lapses any property appreciates its initial value! Also note in such event of default once you execute a Transfer Deed of the property in your favour and take under your control the borrower is liable to pay Capital Gains Tax which also needs to be pre-discussed or embedded as one of the clause of this Special PoA. 

3. In 2011 Apex Court ruled that no transfer of property can take place through a Power of Attorney. 

4. Based on your brief I feel at some later stage in the event the borrower is not able to meet borrowed sum back to you, you may have to clear bar (in case of some unfortunate legal dispute you and he lands up in) of   Ss. 2(b), (h), 10 13 and 14 of India Contract Act r/w Ss. 64, 65 and 68 of India Evidence Act while attempting to transfer the property in question based on 'conditional PoA' is also my firm view.

5. However, since you are competent person here, hence refer your self these case laws in point on PoA;

- Suraj Lamp & Industries (P) Ltd. Vs. State Of Haryana & Anr. of Supreme Court of India [2011 case law]

- Pace Developers and Promoters Private Limited Vs. Government of NCT and Others of Delhi HC which re-visited Suraj Lamp case of SC [2013 case law].

[Last reply]

TajobsIndiaji, Thank you for your response. I am aware of the teachings of Suraj Lamp case but the facts of my situation are different. I would be actually executing a sale deed based upon the power of attorney in the event of a default. I only want to know if such a special POA would be valid in the eyes of law. In reality, I expect to use it as a threat to recover my monies and not actually follow through. I want to help but I want to help this person strictly as a loan as the amount is non-trivial and he will be motivated to pay back if he knows that I have an option, however painful, to liquidate his property.

I think that the Suraj Lamp case deals with people who want to avoid paying stamp duty on actual sale transactions and resort to POAs. The APex Court there prohibited the use of an irrevocable POA as a cheap substitute for a Sale Deed. My situation is different. I am trying to use it as a substitute for a deed of mortgage.  

Thank you anyway. Your comments are certainly helpful on other issues which did not come to my mind.

Though, as you rightly observed that the referred settled law will not suit you, in my opinion, the intended POA with the clauses as per your proposals also need to be registered with respective stamp duties paid accordingly.  The unregistered POA will render invalid in the eyes of law.  Why don't you try for an equitable mortgage deed?  However, transfer of property to the power agent by himself as a vendor on the basis of power of attorney deed to the purchaser (himself) through a registered POA Deed is valid.

Thank you for your advice, Adv. Kalaiselvan. I am going ahead with the registering of all the POAs. Mortgage Deed registration comes with a hefty stamp duty and that is the only reason I am avoiding it as I do not want to burden the borrower who is already in bad shape. Its not exactly a pure business situation. Just wanted to help someone out but at the same time do not want to be taken for granted at a later time when it comes to repayment of the loan.