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In the recent times, there has been a lot of talks about ‘Power of Attorney’ alternatively called ‘POA’. In my recent blog, I shall discuss in detail about the following topics enumerated below, the insightful description of which shall give the readers a clear-cut idea about the so called ‘difficult task’ I.e. ‘Revocation of a POA’.The topics discussed are listed as follows: -1.    What is a ‘POA’2.    What are the types of ‘POA’?3.    What are the laws governing ‘POA’ in India?4.    Why is a ‘POA’ executed.5.    Can a ‘POA’ be revoked/cancelled.6.    Steps to be followed. 7.    Conclusion.WHAT IS A POALet us first start by clearing out the very basic concept about ‘POA’. What is a Power of Attorney?In the simplest of terms – A ‘POA’ is a ‘legally enforceable’ written document signed by the person who is giving powers to another person to act on his behalf as an agent and take decisions as if it was taken by the person giving such powers to such other person.It must be noted here that1.    A ‘POA’ requires two parties at minimum                          i.         ‘Principal’ – The person who is giving powers to such other person.                        ii.         ‘Agent’ – The person to whom such powers are being given.An important thing to be noted here is that a ‘POA’ can also have more than two parties. I.e. More than one principal/agent [acting jointly or severally] as the case maybe.2.    The ‘POA’ should be signed by all the people who are made to be a part of such document.3.    It is however, not mandatory to register a ‘POA’. A ‘POA’ may be registered or unregistered, this is solely dependent upon the wishes of the parties to such ‘POA’.4.    The powers conferred under such ‘POA’ can be General or Specific.[details of the same will be discussed in the subsequent topic].WHAT ARE THE TYPES OF ‘POA’?To be very honest, the types of a ‘POA’ can go on and on. If we try to bring down a list for which we can actually execute a ‘POA’ they are infinite and therefore quantification of the same is not impossible ‘per se’ but time consuming and boring. So, to keep things simple and crisp for the readers I have segregated ‘POA’s’ into two types.1.    General ‘POA’ – When we see the term ‘General’ there are a few terms which click to our minds ‘In General’, ‘Generally’ ‘Normally’, ‘Natural’, ‘Universal’, ‘Habitual’, ‘Generic’ so on and so forth. By the very term we can understand that such a document confers all the general powers which the ‘Principal’ would give to its ‘Agent’.The word ‘General’ shall mean and include powers relating to the general subject matter and not powers in respect of a subject matter.2.    Special ‘POA’ – When we read the term ‘Special’ we refer to something which is ‘Precise’, ‘Specific’, etc. This type of a ‘POA’ confers certain powers which are special in nature. Say for example – ‘Sale’ of a property etc are some of the rights which can be given away by the ‘Principal’ to its ‘Agent’.The word ‘Special’ shall mean and include powers relating to special subject matter and not powers in respect in respect of a subject matter.This kind of a ‘POA’ is also called ‘Limited POA’, ‘Restricted POA’ as such ‘POA’ confers only certain specified powers beyond which the ‘Agent’ cannot exercise his rights. This ‘POA’ binds and limits the powers of an ‘Agent’ within a definite boundary, the exercise beyond which shall be deemed to be misuse/abuse of authority.As mentioned above – There are a variety of ‘POA’ which can be executed in different fields of interest. I am listing down some of the commonly used ‘POA’s’ below.1.    General ‘POA’2.    Special ‘POA’3.    Health Care ‘POA’4.    Durable ‘POA’5.    Revocable ‘POA’6.    Irrevocable ‘POA’7.    Springing ‘POA’ [Used in USA]WHAT ARE THE LAWS GOVERNING ‘POA’ IN INDIA?After understanding the definition and the types of ‘POA’ let us now understand the laws which govern ‘POA’ in India.As of now there are 4 statutes [Subject to change] governing the law relating to ‘POA’ they are as follows: -1.    The Indian Contract Act, 19722.    The Powers of Attorney Act, 18823.    The Registration Act, 19084.    The Indian Stamp Act, 1899 [along with corresponding State Acts]Section 1A of the ‘Powers of Attorney Act, 1882’ – This defines that a ‘POA’ shall mean and include any instrument which is used for the purpose of empowering a specified person to act for and in the name of the person executing such instrument.Section 2(21) of the ‘Indian Stamp Act, 1899’ – This defines that a ‘POA’ shall mean and include any such instrument [for which a fee is not charged under the ‘Court Fees Act’] which shall empower a specified person to act for and in the name of the person executing such instrument.The term ‘Power of Attorney’ has not been defined or talked about in the Indian Contract Act, 1972. However, Section 182 of this Act defines the term ‘Agent’ and ‘Principal’.  From the bare reading of the definition we can come to the following conclusion: The person who holds the ‘Power of Attorney’ is nothing less than an ‘Agent’ as described and defined in Section 182 of the Indian Contract Act. The relationship between an ‘Agent’ and a ‘Principal’ shall be legal by way of a consensual agreement. The relationship between the parties of a ‘POA’ shall be the same as that of a ‘Principal’ and ‘Agent’ as per the Indian Contract Act. WHY IS A ‘POA’ EXECUTED Generally, a ‘POA’ is executed to give some powers to another person who shall thereafter act as an ‘Agent’ of the executor. The reasons to execute a ‘POA’ can vary from person to person or from time to time. I am in my blog listing certain obvious and recurring situation whereby ‘POA’s’ are executed. 1.    When the ‘Principal’ lives outside the limits or is a foreign national. 2.    When the ‘Principal’ is not in a position to look after a particular thing for which he creates a ‘POA’ 3.    When the ‘Principal’ is a minor. 4.    When there is an ‘executor’ appointed for the execution of certain instruments like ‘will’, ‘property’, etc. 5.    When the health of the ‘Principal’ does not support him as a result of which he has to confer certain or all powers to such other person who can act on his behalf. 6.    When the ‘Principal’ is of an unsound mind or is incapable of contracting. 7.    When the ‘Principal’ out of his own wish executes a ‘POA’ in favor of such other person. This list is however not exhaustive and shall continue to flow according to situations. I have listed some of the many situations where a ‘POA’ is executed. The main aim here is to give an idea to the readers about the reasons to execute a ‘POA’. This list is subject to addition. CAN A ‘POA’ BE REVOKED/CANCELLED? The most debatable question is about ‘revocation of a POA’. The general and most obvious answer to that is ‘YES’. However, there are many people who still carry the myth that an ‘Irrevocable POA’ cannot be revoked. This however is not a fact. Both revocable and irrevocable ‘POA’ are subject to cancellation. A ‘POA’ can be termed as ‘Revocable POA’ and ‘Irrevocable POA’ depending upon the terms and conditions of such ‘POA’. A ‘Revocable POA’ is the one which can be revoked at the whims and wishes of the ‘Principal’ whereas an ‘Irrevocable POA’ is the complete opposite. I shall talk about revocation of both such ‘POA’s’ as mentioned above. Revocation of ‘Revocable POA’As has been described by me that in case of a ‘Revocable POA’ the ‘Principal’ is at will to revoke such instrument according to his own wishes. Section 201 of the Indian Contract Act, 1872 provide with certain conditions for revocation. They are discussed here-under: - 1.    The ‘Principal’ wants to revoke the ‘POA’ granted to the ‘Agent’. 2.    Either of the ‘Principal’ or ‘Agent’ become unsound. 3.    Either of the ‘Principal’ or ‘Agent’ are declared to be insolvent by a competent court of law having jurisdiction. 4.    The holder of the ‘POA’ wants to renounce or give away his powers. 5.    The purpose for the execution of such ‘POA’ is completed. 6.    Situations where there is ‘Implied Revocation’ mentioned in the terms of such ‘POA’ executed between the parties. Revocation of an ‘Irrevocable POA’A ‘POA’ is said to be irrevocable wherein it consists a clause stating that ‘such power of attorney is irrevocable’. However, it is a well settled rule of law that the mere fact of mention of a ‘POA’ to be irrevocable in the terms of the ‘POA’ shall not affect it to be irrevocable in itself. The revocation of such ‘POA’ shall be done according to the rules and procedures established b the law of the land.Exceptions to revocation of ‘POA’ There are certain situations where the ‘POA’ cannot be revoked. 1.    Where the holder of such ‘POA’ has an interest in the subject matter of the ‘POA’ Under this situation where the ‘POA’ holder has certain interest in the subject matter of the ‘POA’, the ‘Principal’ needs to have consent of the ‘POA Holder’ to revoke such instrument. In other words, the consent of the ‘Agent’ is mandatory and cannot be skipped. Such a ‘POA’ will not be revoked until and unless the ‘POA Holder’ consents for the same.2.    Where the agent has partly exercised the act for which Power of Attorney was grantedAlso, Section 202 of the Indian Contract Act, 1872 states that – “Where the agent has himself an interest in the property which forms the subject matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.”In the light of the above we can also say that – Such a ‘POA’ is not subject to revocation even after the ‘Death or Insanity’ of the ‘Principal’.STEPS TO BE FOLLOWEDComing to the fag end of the blog it is now time to discuss about the most important part. Now that we know that that a ‘POA’ can be revoked and there are legal provisions for the same, let us now know the process following which such revocation is possible. The general thumb rule is that for the revocation of a “POA” which is ‘registered’ it can be revoked only by way of a ‘registered’ instrument executed in the favor of such cancellation and vice – versa. The necessary steps involved are as follows: - 1.    Firstly, the revoking party needs to draft a document [Revocation of “POA” Deed] 2.    Secondly, this document should be [Registered or Unregistered] as the case maybe.IF THE DEED IS REGISTERED1.    The registration of such deed shall be done in the same ‘ADSR’ where the “POA” was executed. 2.    After such registration, a notice of the same should be sent to all the relevant authorities / parties / people / persons etc., annexing such registered [Revocation of “POA” Deed]. 3.    Thereafter, the person who is executing such [Revocation of “POA” Deed] should publish the same in the paper [two Regional, two Local, two English newspapers] for such information to be known to the General Public. IF THE DEED IS UNREGISTERED1.    The unregistered deed should be notarized and duly stamped by the relevant authority. 2.    a notice of the same should be sent to all the relevant authorities / parties / people / persons etc., annexing such registered [Revocation of “POA” Deed]. 3.    Thereafter, the person who is executing such [Revocation of “POA” Deed] should publish the same in the paper [two Regional, two Local, two English newspapers] for such information to be known to the General Public. The list of relevant authorities is very exhaustive. However, I am here providing a small list of people and entities who need to be covered for the security of the person revoking such "POA"Beneficiaries Trusts Banks Insurance Companies NBFC'sCompany, Firm or Business EnterpriseAny other person or institution who can be affected either directly or indirectly by way of revocation of such "POA" either directly or indirectly and gain profit or losses out of such event. CONCLUSIONFrom the above in-depth discussion, we can find that revocation of a “POA” is possible and there are guidelines to be followed for the same. There are various legal provisions which can set aside a “POA” and ‘non revocation of an irrevocable POA’ is just a myth with certain exceptional situations as have been elaborately discussed in the “Exception” section under the heading “Can a POA be revoked/cancelled”Usually these are the process which is followed for the revocation of a “POA” however there are still some grey areas left which I would like to explain and explore. Firstly, I do not see the above-mentioned steps to be conclusive proof of revocation. Secondly, the question to ponder here is – “What is a conclusive proof”? Is mere paper publication, notarizing a document, registering a document, sending notices a good proof to uphold my rights ‘beyond reasonable doubt’? In my honest opinion, I do not think so. As such documents or notices or paper publication can eventually be challenged, called null and void by following the very similar fashion as has been described above. The question now arises, how does one end this ‘vicious circle of litigation’ and enjoy his rights? If I ask myself, I do arrive at two conclusions. [Obviously subject to corrections] as the very matter in itself has not been decided and is very subjective and open to healthy brain storming. After following the above process, I find two possible closures. 1.    Affidavit by a first-class Executive Magistrate by way of an affidavit2.    By filing a declaration suit and obtaining a decree which in itself is said to be conclusive evidence and cannot be adduced in any court of law. There can still be ‘grey areas’ by way of affidavit and first-class Executive Magistrates affidavit. The obvious reason being is that the signature on the affidavit shall be ‘attested as produced’. Falsification and discrepancy cannot be nullified. However, when we do file a declaration suit, it provides equal opportunity to the opposite side to put forward his points, adduce evidence, counter the same and fight for his rights. The concept of justice and equity is upheld and a fair court room process is conducted giving equal opportunity to both sides to present their case. The decree henceforth shall be a ‘conclusive evidence’ and strong proof in future.

Posted By

Shreyash Mohta

4 months ago

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IT Contracts and Sweep Clauses

Sweep Clauses are called so, because they, like a broom, sweep in more responsibilities for a service provider. More than what they actually intend to deliver. Sweep clauses are like icebergs. What we see in the SOW and Schedules are just the tip of the iceberg and while actual delivery the real matters come out.   As with an iceberg so with the sweep clauses too, the Service provider meets with an eminent danger of delivering more than it can thus causing financial losses and sinks the revenue ship for that deal.  One has to really be cautious while preparing the SOW and Schedules for Service Agreement or else will end up with a sinking ship. What role does a Sweep clause play? Certainly, it does not play a positive role in regard to a service contract that we have in place. Initially it does bring all those items to our plate which we did not agree to deliver. And in the process of delivering the agreed and not agreed deliverables we start straining our relationship with the client. This leads to disagreements and disputes and subsequently puts a big question mark on the credibility of the service provider.   Apart from creating those earlier mentioned issues Sweep clause negatively affects the deal revenue by lowering the margin and profitability. Delivery quality, many a times, goes down as more delivery needs to happen in the short span of time. Overall Sweep clause is a blunder committed, while drafting the agreement, that puts a heavy burden on the Delivery team.   In the next lesson, we shall talk about the Origin of the Sweep Clauses but before that let us understand a vicious cycle that goes around related to Sweep Clauses. A badly drafted Statement of Work full of Sweep Clauses, leads to overstretched scope of delivery. This puts a constrain on the timelines and employment of extra resources to deliver the new items without any additional pay. Due to the income leakage, the margins starts falling down and subsequently results into a RED Account. Since there is less profit hence there would be less bonus or salary increment for the employees creating more dissatisfied employees, who may not be working so diligently. So, it makes all the sense to have a robust statement of work without any sweep clause. Sweep clauses originated in the early days of data centre outsourcing where the customers started handing over the “glass house” to the vendors. The expectation was that the vendor would deal with the glass house as mother would deal with a baby, meaning doing anything and everything for the Customer. The other origin which we find even today is the expectation by the customer and affirmation by the vendor on performing the lesser, incidental and related functions to the main contract, especially the functions performed by the earlier staff. Some of the inappropriate cases for sweep clauses are as follow; One, Where the customer is willing to outsource some selective functions, typically selected by them. Two, Standard branded manged services of the Customer without the due diligence done by the vendor. Three, New IT offering like Cloud wherein the industry is yet to mature and understand all. And Four, the second generation outsourcing form the third party. This one is undeniably the dead trap.  

Posted By

Abhimanyu Shandilya

1 year ago

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