Irrevocable power of attorney can't be cancelled without public notice

Brothers Bhavesh and Hardik Sheth had booked a flat in the Kandivali area of Mumbai, in a building being constructed by Ravi Foundation in a joint venture with Sawant. The entire transaction was carried out through Mangesh Tukaram Sawant, who was appointed by the Ravi Foundation as their Constituted Attorney through an irrevocable Power of Attorney (PoA) executed on April 10, 2002.

According to the registered agreement for sale, the 1,690 sq ft (carpet area) flat was to be sold for Rs 25 lakh. The entire amount was paid prior to execution of the agreement, partly through account payee cheques and partly through bearer cheques in favour of Ravi Foundation. Subsequently, the agreement was executed on July 19, 2002, and a possession letter simultaneously issued, but the builder avoided giving physical possession.

Fed up with the evasive attitude of the builders, the Seth brothers sent a letter demanding possession. They received a rude shock when the builder replied, refusing to acknowledge the transaction as hang taken place through their Constituted Attorney. Through the Consumers Welfare Association, the Seth brothers filed a complaint before the Maharashtra State Commission. An identical complaint was filed by brothers Pradeep and Sandeep Agarwal, with whom the builder adopted a similar ploy.

While Ravi Foundation and its partners contested the complaint, the Constituted Attorney did not file his reply or appear before the Commission. Ravi Foundations claimed the irrevocable power of attorney granted to Sawant had been terminated on June 17, 2002, by sending an intimation to Sawant under certificate of posting. The builder argued the flat purchasers had done so in 2002 after the power of attorney (PoA) had been revoked and terminated. Also, no payment had been received towards the flat since the amount had been collected by Sawant, no longer their Constituted Attorney.

The State Commission directed the flat purchasers and the builder to produce the cheque details and the bank statements. It was found the account payee cheques in favour of Ravi Foundation had been credited to the firm's bank account, belying their contention that they had not received any payment. Confronted with this, the builders argued their bank account was being fraudulently operated by Sawant and that he had misappropriated the money. The flat purchasers also produced a Deed of Confirmation executed in July 2009 for the sale of a flat in the same project to one Haresh and Veena Sanghavi, where Ravi Foundation had accepted the transaction conducted by Sawant on their behalf.

The Commission observed that the payments made by the flat purchasers were not being disputed but the contention was that the receipts were issued by Sawant as the Constituted Attorney of Ravi Foundation, which would not be binding as the PoA had been terminated.

The Commission ruled that an irrevocable PoA cannot be cancelled without a public notice through newspaper publication. Since due process for termination of the PoA was not followed, Ravi Foundation would be liable for the acts of their Constituted Attorney performed within the scope of the power granted to him. Under the PoA, Sawant had been authorised to sell flats and execute agreements and to open and operate a bank account as well as deposit or withdraw monies on behalf of Ravi Foundation. The flat purchasers had paid the entire consideration to Ravi Foundation through cheques acknowledged by Sawant.

The Commission held the purchasers were entitled to get possession of their house. Accordingly, Ravi Foundation and its Constituted Attorney were jointly and severally directed to obtain the Occupation Certificate and hand over possession. For the delay, the Commission awarded Rs 50,000 as compensation and Rs 25,000 towards costs.

Though the flat purchasers have succeeded, the compensation of Rs 50,000 is very meagre considering the delay of 11 years, with a huge amount of Rs 25 lakh remaining blocked.

The writer is a consumer activist