Use of Power of Attorney in NRI Commercial Transactions: Legal Limits

Power of Attorney (PoA) is a commonly used legal instrument in NRI commercial transactions. Since NRIs often reside outside India, they rely on trusted individuals to manage property, banking, contractual, and business affairs on their behalf. While PoA enables convenience and continuity, its legal scope is strictly regulated, and misuse frequently becomes the source of complex litigation.

Understanding the legal limits of a Power of Attorney is essential to appreciating how Indian courts evaluate commercial disputes involving NRIs.

What Is a Power of Attorney?

A Power of Attorney is a legal authorization by which one person (the principal) grants authority to another (the agent or attorney-holder) to act on their behalf. The authority may be:

• General, covering a wide range of acts

• Special or specific, limited to defined transactions

The scope of authority depends entirely on the language of the document.

Authority Is Defined by the Document, Not Assumptions

Indian courts consistently hold that a PoA holder can act only within the authority expressly granted. Acts performed beyond the stated powers are legally invalid and do not bind the principal.

Courts do not presume authority merely because a person holds a PoA. Every commercial action is tested against the exact wording of the document.

Power of Attorney Does Not Transfer Ownership

A critical legal principle is that a PoA:

• Does not create ownership

• Does not transfer title

• Does not grant proprietary rights

It merely authorizes representation. In commercial disputes, confusion between authority to act and ownership rights often leads to invalid transactions and prolonged litigation.

Commercial Contracts Executed Through PoA Holders

Contracts executed by PoA holders are legally valid only if:

• The PoA expressly authorizes execution of such contracts

• The transaction falls within the commercial scope defined

• The PoA is valid and subsisting at the time of execution

Courts examine whether the agent acted as a representative or attempted to substitute themselves for the principal.

Registration and Attestation Requirements

For NRIs, PoA documents executed abroad usually require:

• Attestation by Indian consular authorities or authorized officials

• Proper stamping and, where required, registration in India

Failure to comply with these formalities can affect the admissibility and enforceability of the PoA in commercial disputes.

Misuse and Abuse of Power of Attorney

Misuse of PoA is a recurring issue in NRI litigation. Common patterns include:

• Unauthorized sale or transfer of assets

• Acting beyond commercial authority

• Self-dealing or conflict of interest

• Suppression of material facts

Courts scrutinize such actions closely and distinguish between legitimate representation and abuse of trust.

Revocation and Its Legal Effect

A Power of Attorney is generally revocable unless coupled with interest. Revocation becomes legally significant when:

• Transactions occur after revocation

• Third parties claim protection based on lack of notice

• Disputes arise over timing and communication of revocation

In commercial matters, courts examine whether revocation was properly communicated and whether reliance by third parties was bona fide.

Liability of the Principal and the Attorney Holder

Acts done within authority bind the principal. Acts done beyond authority may:

• Expose the attorney holder to personal liability

• Render transactions unenforceable

• Lead to restitution or damages claims

This distinction is central to commercial disputes involving NRI principals.

Power of Attorney vs Delegation of Business Control

A PoA does not convert an agent into a business owner or decision-maker beyond delegated authority. Courts reject attempts to use PoA as a substitute for:

• Partnership rights

• Shareholding authority

• Corporate governance powers

Commercial control must flow from proper legal instruments, not implied authority.

Judicial Approach to Interpretation

Courts interpret PoA documents strictly. Ambiguities are not resolved in favor of expanded authority. Instead, courts:

• Read the document as a whole

• Limit powers to what is clearly expressed

• Protect the principal from unintended consequences

This conservative approach reflects the fiduciary nature of PoA relationships.

Conclusion

Power of Attorney is a practical necessity in NRI commercial transactions, but it operates within narrow legal limits. Authority flows strictly from the document, ownership is never transferred, and misuse invites judicial scrutiny. Indian courts consistently emphasize that PoA is an instrument of representation—not a vehicle for acquiring independent commercial rights. Understanding these limits is essential to appreciating how cross-border commercial disputes involving NRIs are legally assessed.