A Power of Attorney can give someone the authority to deal with property, but it does not make that person the owner. The Delhi High Court has reaffirmed this principle while dealing with a dispute over unpaid property sale proceeds. The Court held that an attorney acting on behalf of property owners remains an agent and cannot claim the owner’s share of the sale money as his own.
The judgment also highlights the legal duty of an agent to properly account for money received on behalf of the principal.
Delhi High Court Clarifies: Power of Attorney Cannot Make an Agent the Owner of Property
The Delhi High Court has reiterated an important principle concerning property transactions carried out through a Power of Attorney. The Court has made it clear that merely holding a General Power of Attorney does not give an agent ownership rights over an immovable property.
The Court also held that when an agent sells property on behalf of the owner, the money received from that transaction belongs to the principal.
The agent is legally required to hand over the amount received on the principal’s behalf.The ruling was delivered by Justice Neena Bansal Krishna in Bhisham Mehta v. Mrs. Gita Vig & Ors., where the Court upheld an order directing the appellant to pay more than ₹1.01 crore, along with interest, to the legal heirs of the property owner.
How the Property Dispute Started
The dispute concerned agricultural land measuring approximately 26 bighas situated in Paprawat village, Najafgarh, New Delhi.The property had been purchased in 1985 by Kusum Mehta along with three other co-owners. Each co-owner held an undivided share in the land, with Kusum Mehta owning one-fourth of the property.Later, Bhisham Mehta was appointed as a registered General Power of Attorney holder for the co-owners. In that capacity, he completed the sale of the entire property in April 2011 in favour of Agile Properties Limited.
The property was sold for approximately ₹6.95 crore. Based on her one-fourth share, Kusum Mehta was entitled to around ₹1.74 crore from the sale.However, only about ₹72 lakh was deposited into her bank account in March 2012. The remaining amount of approximately ₹1.01 crore was not paid to her.After learning about the transaction, Kusum Mehta demanded the balance amount.
The payment was not made, and after her death in 2013, her three daughters continued the claim as her legal heirs. They eventually filed a recovery suit seeking the unpaid sale proceeds.
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Agent Claimed the Amount Was Not Sale Consideration
Bhisham Mehta disputed the claim and put forward several arguments.He contended that the General Power of Attorney documents executed by Kusum Mehta gave him extensive powers over the property. He also argued that the property had effectively been acquired using his and his wife’s funds and that the names of the other women had been included only for convenience.
Another important defence was that the approximately ₹72 lakh transferred to Kusum Mehta was allegedly a friendly loan rather than part of the property sale proceeds.He further challenged the trial court’s decision on procedural grounds and argued that the recovery case had been filed after the limitation period had expired.
High Court Rejects Ownership Claim Based on Power of Attorney
The Delhi High Court did not accept the argument that the Power of Attorney had transferred ownership of the property to the appellant.After examining the registered sale deed, the Court noted that the document itself identified the four women as the owners and vendors of the property. Bhisham Mehta had signed the document in his capacity as their General Attorney.
The Court emphasized that a Power of Attorney creates an agency relationship. It authorizes one person to act for another, but it does not by itself transfer ownership of immovable property.
The Court also relied on the Supreme Court’s decision in Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana, which established that a General Power of Attorney cannot be treated as a document transferring title in immovable property.
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Sale Proceeds Had to Be Given to the Property Owner
The High Court further relied on Section 218 of the Indian Contract Act, 1872.Under this provision, an agent is required to account for and pay to the principal the money received by the agent on the principal’s behalf.
Therefore, once Bhisham Mehta sold the property as the authorized representative of the co-owners, he could not retain the portion of the sale consideration belonging to Kusum Mehta.The Court also found the explanation that the ₹72 lakh payment was a personal loan difficult to accept. There was no supporting loan agreement or contemporaneous documentary evidence establishing such a transaction.
The Court additionally noted that the same amount had been deposited into the accounts of the other co-owners around the same period. Kusum Mehta had also disclosed the amount in her income tax return as part of the proceeds connected with the property transaction.
Limitation Objection Also Rejected
The appellant argued that the recovery case was filed too late because the sale had taken place in 2011, while the suit was filed in 2014.The High Court rejected this argument.According to the Court, the relevant starting point for limitation was when Kusum Mehta became aware of the transaction and the shortfall in the amount payable to her. She became aware of the transaction in April 2012, and the recovery proceedings were instituted in April 2014.
Consequently, the Court held that the action was brought within the applicable three-year limitation period.
Trial Court’s Order Upheld
The Additional District Judge had earlier passed a decree under Order XII Rule 6 of the Code of Civil Procedure, directing payment of ₹1,01,78,074 along with interest at 8% per annum from April 11, 2011, until the amount was recovered.The Delhi High Court found no legal error in that decision.Justice Neena Bansal Krishna therefore dismissed the appeal and allowed the trial court’s decree to stand.
What the Judgment Means
The decision reinforces a significant rule in property law: a Power of Attorney gives authority to act, but it does not automatically give ownership of the property.When an attorney holder sells property for the owner, the sale proceeds attributable to the owner’s share cannot ordinarily be treated as the attorney holder’s personal money.
The agent remains accountable to the principal for amounts received on the principal’s behalf.The ruling also highlights the importance of registered property documents. Courts are unlikely to disregard the clear terms of a registered sale deed merely because a party later makes unsupported claims that contradict the document.
Case Details
Case: Bhisham Mehta v. Mrs. Gita Vig & Ors.Case No.: RFA 645/2022Court: Delhi High CourtBench: Justice Neena Bansal KrishnaDecision: August 31, 2026Amount in dispute: ₹1,01,78,074 plus 8% annual interest