CAN POWER OF ATTORNEY INCLUDE POWER TO GIFT?

One might come across clauses in power of attorneys (POAs) which more or less say that, “I hereby authorize Mr. ABC to sell, transfer, mortgage and/or gift the said property on my behalf.” What if we told you that there is something inherently wrong with the way above clause is worded in respect of power to gift?

Recently, we asked our peers, “Whether power to gift can be included under POA?” to which most of them instantly replied that, “If POA can include power to sell then what could possibly prevent POA from including power to gift?” We’re sure several of our readers must have had the exact same thought looking at the title of this article. Well, the author does not strictly disagree with this narrative but let us just say that there is bit more here than what meets the eye. In this article we shall try to explore the legal position on power to gift under POA by relying on provisions of the Transfer of Property Act, 1882 and relevant judgements in that respect.

According to section 122 of Transfer of Property Act, 1882 ‘Gift’ has been defined as follows:

“Gift is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Acceptance when to be made. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.”

As per above definition we see that it is an essential ingredient that gift should be made voluntarily by the donor. In general parlance the phrase ‘made voluntarily’ would imply that the donor must make the gift out of his freewill. So plainly speaking, one might be inclined to believe that if donor voluntarily authorizes his attorney to gift a property then the same shall be valid. But this is where things get interesting. While determining the scope of the term ‘voluntary’ the High Court of Punjab and Haryana in Gian Kaur v/s. Piara Singh and Ors. (1986)89(1)PLR397 under paragraph No. 9 recorded that:

“Admittedly, the gift was never executed by Devi Chand (donor) himself; it was executed by Karam Singh (attorney), who held the power of Attorney, vide Ex. D4, dated 24th August, 1970 It is also not disputed that in the said Power of Attorney, though general powers of alienation, including sale, gift, mortgage, etc., have been given but no name has been mentioned for the purpose of making the gift…. In order to be a valid gift, as per Section 122 ibid, it must be voluntary. In case the gift deed is executed not by the donor himself but by a third person as his attorney, the power to gift the property must emanate from the donor. The said element is missing in the present case.”

It can be seen that unless name of the donee is specifically mentioned in the POA the resultant gift won’t be considered valid as the donor will not per se get chance to voluntarily choose his donee. Such a right to handpick donee cannot be delegated onto the attorney. The lower court therein also made similar observations while setting aside the gift on the ground that the POA did not specifically mention about attorney being given power to gift the property in favour of the donee. The ratio laid down in the above case added a new dimension to the meaning of phrase ‘made voluntarily’ making it vital that donee be specifically named under POA to effectuate valid gift.

One might argue that when power to sell can be effected without mentioning the name of prospective purchaser then, why not the same be permitted for power to gift? In author’s view the aspect of consideration is what substantially differentiates such power to sell from power to gift. For example even if POA has general power to sell still it will be obligatory on part of the attorney to sell the property in lieu of adequate consideration i.e. the attorney will have to show adequate consideration even if he decides to sell the property to himself. On the other hand if the attorney with general power to gift decides to gift the property to himself then he would be able to do that even if the donor didn’t particularly desire that. Thus allowing the same will lead to grave absurdity whereby attorneys will be free to gift the property at their discretion without any reference to the donor. In Ajmer Singh and Ors. v/s. Atma Singh AIR 1985 P&H 315 under paragraph No.4 it was held by Justice J.V. Gupta that:

“The case of a gift deed is on a different footing than a sale deed or any other document which is executed for consideration. A gift is made by the donor ordinarily without consideration and, therefore, it must be executed voluntarily by the donor.”

Thereafter once again the High Court of Punjab and Haryana in Sheelu Ram & Anr. v/s. Minakshi Manishi was occasioned with ruling on similar issue where it was held that:

“A gift is always voluntary by a donor. This is something special. Even in the power of attorney executed by the respondent-plaintiff in favour of appellant No. 1, there is no mention of the fact that he shall be at liberty to part with the property by way of a gift and that too in favour of his son. It has also been noticed by the court below that even the gift deed also does not mention the fact that appellant No. 1 (attorney) was authorised by the respondent-plaintiff (donor) to gift the property to his son (donee).”

To wrap up we conclude that will of the attorney can not mutatis mutandi be considered as will of the donor and that general power to gift cannot be reckoned as power to gift at all. One must always be careful to check that the donee is specifically named under the POA as it becomes crucial for validity of the subsequent gift. In case donee is not named under POA then the attorney must be required to obtain written consent from the donor confirming the gift in favour of the donee failing which the transaction shall always render itself liable to be declared void at behest of the donor.