Power of Attorney in legal proceedings: Legal provisions ensuring foreign companies hold equal standing without physical presence

Power of Attorney in legal proceedings: Legal provisions ensuring foreign companies hold equal standing without physical presence

by rfknin Lawon Posted on
– Nazmeen Ahmed 

Foreign companies no longer need to concern themselves with the challenges of navigating geographical distances when managing business or legal affairs in India. The process has become seamless, requiring only the completion of a few formalities through the execution of a legal document- the Power of Attorney (herein referred to as ‘PoA’). This powerful instrument enables foreign entities to appoint a representative in India, ensuring that their interests are duly protected and represented in legal proceedings or transactions, all without the necessity of being physically present.

In India, the concept of PoA is regulated by various statutes, including the Power of Attorney Act, 1888, the Civil Procedure Code, 1908, the Indian Companies Act, 2013, the Indian Contract Act, 1872 and the Indian Stamp Act, 1899. This legal instrument outlines the powers that an individual grants to the POA holder, authorizing them to act on their behalf in designated matters. It is a contract of agency as ‘Power of Attorney’ is defined as any instrument empowering a specified person to act for and in the name of the person executing it[1]. 

In a Power of Attorney arrangement, there are two key players: the person giving the authority, known as the principal, grantor, or donor, and the one receiving it, who’s called the PoA holder, donee, attorney, or recognized agent[2]. Essentially, one hands over the power, and the other takes the reins to act on their behalf. Thus, at the discretion of the principal, the holder of a PoA may execute any document or perform any act under their own name, signature, and seal. These actions carry the same legal weight and validity as if they had been carried out by the principal themselves, with their own signature and seal[3].

Appointing a Power of Attorney in India: A guide for foreign companies

When a foreign company intends to appoint a PoA for legal representation in India, the process begins with a formal decision by the company’s board of directors through a board resolution. The board, vested with statutory authority, passes resolutions at its meetings, thereby conferring the necessary powers on the PoA holder[4]. Since a company, as a corporate entity or juristic person, must act through an authorized individual, such authorization must come explicitly from either the Articles of Association or a Board Resolution for signing, filing, and verifying legal proceedings[5].

The foreign company has to carefully select a trusted individual in India to serve as the PoA holder. It is imperative that the appointed person i.e., the PoA holder is legally competent to contract, meaning they must be of the age of majority, of sound mind, and not disqualified by any law in force[6]. Beyond fulfilling these legal requirements, it is equally essential that the PoA holder is capable of managing the assigned responsibilities with proficiency. Ideally, the PoA holder should possess a strong understanding of Indian legal systems and procedures to ensure smooth execution of duties.

The next crucial step involves drafting the PoA document, which must meticulously delineate the legal powers conferred upon the PoA holder, in relation to court proceedings. The document should expressly authorize the PoA holder to undertake appearances, submit applications, and perform all necessary acts on behalf of the principal[7]. It is imperative that the PoA is carefully tailored to meet the specific requirements of the principal, ensuring that the scope of authority granted aligns with the unique needs of the principal and complies with relevant legal frameworks. 

A deed executed by an attorney on behalf of the company, sealed under their authority, binds the company to its terms[8]. Such an instrument must be accompanied by an affidavit, which, once certified, may be deposited with the High Court or District Court[9] as valid evidence of its authenticity. The same rules extend to the continuity of the PoA holder’s role in related proceedings, such as appeals or reviews. The PoA holder’s authority continues until terminated in writing, the case concludes, or the client or PoA holder dies[10]. If the principal, at the time of execution of PoA, does not reside in India, a PoA executed before and authenticated by a Notary Public, any Court, Judge, Magistrate, Indian Consul or Vice-Consul, or a representative of the Central Government shall be considered valid[11]. 

Further, a PoA executed in favour of a particular person generally requires notarization, which serves as a procedural formality, raising a presumption of the PoA holder’s authority under Section 85 of the Indian Evidence Act, 1872[12]. However, notarization only establishes a presumption of authentication; it does not imply that a PoA, if not duly notarized, fails to confer authority to institute a suit. Furthermore, as the PoA is classified as an “instrument”[13] under the Indian Stamp Act, 1899, it must be properly stamped at the time of execution[14]. If  the document is unstamped, it cannot be admitted as evidence, even for collateral purposes, unless the required stamp duty and penalty are paid[15]. 

It is important to note that a PoA holder acting in good faith will not be held liable for any payment made or act performed if, prior to such actions, the principal had passed away, become of unsound mind, been declared insolvent, or revoked the authority- provided the PoA holder was unaware of these circumstances at the time, their actions will be protected under the law, ensuring that their obligations are fulfilled without undue personal liability.

Lastly, when legal documents are delivered to a party’s POA holder, they are considered as delivered directly to the party themselves[16]. This ensures that the documents are deemed properly communicated to the party, facilitating the efficient progress of legal proceedings without the necessity of the party’s personal appearance[17], thus ensuring foreign companies hold equal standing without physical presence.

Judicial Interpretations of the legal authority of Power of Attorney in legal proceedings:

The Supreme Court has clarified who should provide evidence in matters involving personal knowledge. A PoA holder who signs the plaint and initiates the suit without personal knowledge of the transaction can offer formal evidence regarding the PoA holder validity and the suit’s filing. However, if the PoA holder performed acts or managed transactions under the PoA, they may testify to prove those actions. The PoA holder cannot, however, testify about the principal’s actions or transactions that the principal alone has personal knowledge of. If the principal never personally handled the transaction and it was entirely managed by the PoA holder, then the PoA holder must provide evidence. This often occurs when principals conduct business through managers or live abroad and rely on PoA holders. In cases where proof of a principal’s “state of mind” or “conduct” is required, only the concerned principal can typically give evidence. However, there are exceptions, such as when a close family member, managing all affairs, can testify on behalf of the principal, especially in cases involving bona fide needs or readiness and willingness. Examples include spouses, children managing the affairs of elderly parents, or parents handling the matters of children living abroad[18].

In another significant case, the Court reaffirmed the legal standing of a PoA holder, emphasizing that when properly executed, it authorizes the PoA holder to act on behalf of the principal with full authority. The decision outlined several principles notably stating that a complaint under Section 138 of the Negotiable Instruments Act can be filed by a PoA holder if they possess knowledge of the transaction; they may also testify if they witnessed the transaction. The complaint must affirm the PoA holder’s awareness of the transaction, and functions under a general PoA cannot be delegated unless explicitly allowed. Additionally, affidavits by the principal or PoA holder are sufficient for cognizance, and complaints filed on behalf of the original complainant are permissible[19].

Referring to another important judgment, it’s essential to shed light on a critical practice often misunderstood: that advocates cannot act both as lawyers and as PoA holders for the same client. Under the Advocates Act, 1961, an advocate must stick to their role in legal proceedings and cannot simultaneously act as a PoA holder to verify documents, file applications, or give evidence for their clients. This rule has been affirmed in several decisions of the court[20].

In essence, the PoA emerges as a pivotal instrument for foreign companies navigating legal landscapes in India. By appointing a PoA, companies can seamlessly manage their legal affairs without the need for their physical presence, ensuring their interests are effectively represented. The legal framework provides robust support, guaranteeing that actions taken by the PoA holder carry the same weight as those performed by the principal, and at the same time safeguards the PoA holder from undue liability under specific circumstances. The definitive judicial guidelines emphasize the importance of a well-executed PoA, highlighting its capacity to facilitate smooth legal proceedings and uphold the principal’s rights and obligations. For foreign entities seeking to streamline their operations and ensure compliance with Indian laws, the PoA is not merely a procedural formality but a strategic advantage that provides both flexibility and legal certainty.

  1.  Section 1A of the Power of Attorney Act, 1888
  2.  Order III Rule 2 (a) of Civil Procedure Code, 1908
  3. Section 2 of the Power of Attorney Act, 1888
  4. Section 179 (3) (k) of the Indian Companies Act, 2013; Nibro Ltd. v. National Insurance Co. Ltd., 1990 SCC OnLine Del 65; State Bank    of Travancore v. Kingston Computers (I) (P) Ltd., (2011) 11 SCC 524
  5. Order 6 Rule 14 of Civil Procedure Code, 1908; Lucas Indian Services Ltd. v. Sanjay Kumar Agarwal, 2010 SCC OnLine Del 2888
  6.  Section 11 of the Indian Contract Act, 2013
  7. Order III Rule 2 (a) of Civil Procedure Code, 1908
  8. Section 22 (3) of the Companies Act, 2013
  9. Order III Rule 4 CPC, 1908 and Section 4 of Power of Attorney Act, 1888
  10. Order III Rule 4 CPC, 1908 and Section 4 of Power of Attorney Act, 1888
  11.  Manik Majumder v. Dipak Kumar Saha, (2023) 8 SCC 410; Section 33 (1) (C ) of the Registration Act, 1908. 
  12. Manik Majumder v. Dipak Kumar Saha, (2023) 8 SCC 410; Grafitek International v. K.K. Kaura, 2002 SCC OnLine Del 3
  13. Section 3 of the Indian Stamp Act, 1899
  14. Section 33  of the Indian Stamp Act, 1899
  15. 1981 SCC OnLine AP 4; Avinash Kumar Chauhan v. Vijay Krishna Mishra (2009) 2 SCC 532
  16. Order III Rule 4 CPC, 1908 and Section 4 of Power of Attorney Act, 1888
  17.  Order III Rule 5 CPC, 1908  and Section 4 of Power of Attorney Act, 1888
  18. Rajesh Kumar v. Anand Kumar, 2024 SCC OnLine SC 981 (para 18)
  19.  Mita India (P) Ltd. v. Mahendra Jain, 2023 SCC OnLine SC 163 (para 7, 13); A.C. Narayanan v. State of Maharashtra 2013 SCC OnLine SC 239. 
  20.  Anil Kumar and Anr Amit Kumar C.R.P. 75/2020 & CM APPL. 29472/2020 (DHC) (para 7)