LEGAL PROVISIONS

According to section 21 of the companies act 2013, key managerial personnel, or any
officer of the company authorized by the board can sign

(a) Any document or proceeding requiring authentication of the company or

(b) Contracts made by or on behalf of the company

As per Section 2(59) of Companies Act ,2013 “officer” includes any director, manager
or KMP or any person in accordance with whose directions or instructions the Board
of Directors or any one or more of the directors is or are accustomed to act.

WHO CAN BE AUTHORIZED?

1. Directors

2. Manager

3. Chief Executive Officer

4. Chief Financial Officer

5. Company Secretary

6. Any officer reporting to a whole-time director being designated as KMP

7. Any employee duly authorized by the Board.

Hence, it can be said that Directors and KMPs are deemed signatories for signing or

executing documents and contracts in the name of a company without any further

authorization by the Board. Whereas if an “officer” other than a director or KMP were

to sign or execute a document or a contract, then express authorization to that effect is

required by the Board to enable that “officer” to be an “Authorized Signatory”.  

DOCUMENTS REQUIRED

Letter of Authority

A letter of authority is not an authenticated document.  A letter of authority is a

document under which one person authorises another person to do a particular act.
Hence, it is used for very specific purpose. It can be, for instance, used for collecting
or submitting documents on your behalf.

Power of Attorney

A power of attorney is a notarised document. The Power of Attorney gives someone

total power to act, speak or make decisions on their behalf. The person or entity that
creates the letter of authorization is called the principal and the person or entity
holding the power to act for the principal is called the agent.

Responsibility of Holder

The holder of a letter of authority or power of attorney should be careful not to act
beyond the authority granted under the document.  The Supreme Court has said that
the holder can act beyond his authority only in cases of emergency, and if it is
beneficial to the donor. in cases other than an emergency, if the holder acts beyond his
authority, the aggrieved party, that is, either the donor or another affected party, can
file a suit in a court of law.
POWERS OF THE HOLDER OF LOA

1. To file or defend any Petition, Affidavit, plaint, Applications, Appeals, Revisions,

Reviews, Caveat Petition, Written Statements, Objections, Reply statements and to
sign and submit any Application, Interim Applications, Petition, Statement of
Claim, Affidavit, counter statement, Written Statements, Counter / reply
statements, Rejoinders, replications and all other related documents thereto
before the appropriate Courts having jurisdiction, and To add, modify, amend or
withdraw any of the aforesaid Application, Petition, Affidavit, counter statement,
Written Statements, Counter/reply statements, Rejoinders etc., and to file any
Caveats, Appeals against any orders therefrom in all legal proceedings by the
Company or against the Company in respect of the said Legal proceedings;

2. To represent the Company in the Legal proceedings and to pursue the same and
also to represent the Company in further appeals/petitions before appropriate
Courts, if any preferred by filing necessary appeals, complaints, petitions, interim
applications, etc., for any directions, injunctions, and to sign and verify,
complaints, pleadings, written statements, swear to affidavits before the Court and
other Courts of competent jurisdiction before which further proceedings may be
filed against any judgment passed by the Courts of competent jurisdiction against
the Company;

3. To appoint Arbitrators, Advocates, Pleaders, Solicitors and to sign Vakalatnama,

Letter of Authority etc., and to represent the Company in the said Legal
Proceedings and any appeal proceedings.

4. To Swear on Oath, state on Affidavits, adduce evidence, to cause any oral or

documentary evidence to be adduced before the Appropriate Courts and to cause
discovery / inspection of documents.
5. And generally, to do all lawful acts, deeds and things, which they may deem
necessary and proper in connection with the said matter.

POWERS RESERVED WITH THE BOARD OF DIRECTORS

1. Budgets and accounts

2. Enforcement
3. Borrowings
4. Personnel
5. Administration
6. Write offs

Delegation powers of Directors

Before the 1956 Act, the board of directors could not delegate without the authority
from the stockholders. But with the recent changes and amendments, the position of
the board of directors has been considerably changed as they now have all the powers
of the company, except those which were reserved for the general meetings or for the
corporate enactments. Although, there had been no judicial pronouncement or
otherwise as to the non-functionality of the maxim “delegatus non- potest delegare”
against the Directors in India, however, it is submitted that it is no more warranted.

Can directors dispose off the property of the company?

Section 293 states that, "the Board of Directors shall not, except in a general meeting,
sell, lease or otherwise dispose of the whole or substantially the whole undertaking of
the company". Sec 293 mandates that for sale of company undertaking, the prior
consent in a general body meeting is mandatory and passing of an ordinary resolution
in the general meeting is necessary. 

Hence the Board of Directors do not have authority to pass a resolution for sale of
company property without taking the consent of the general body as mandated under
section 293(1)(a), for which it will have to be shown that the company property that
has been sold falls within the meaning of the term "undertaking" as mentioned above.

CASE LAW

K.S. Mothilal vs K.S. Kasimaris Ceramique P. Ltd. ... on 4 December, 2006

The petitioner claimed in excess of 10 per cent. of the issued capital of M/s. K. S.
Kasimaris Ceramique P. Ltd., ("the company") and aggrieved on account of certain
alleged acts of oppression and mismanagement in the affairs of the company namely,

(a) non-holding of annual general or board meetings;

(b) non-filing of annual accounts or annual returns with the Registrar of Companies;

(c) non-transmission of shares of the deceased father of the petitioner in favour of his
legal heirs;

(d) illegal lease and sale of the properties of the company for meagre amount and
siphoning off of the rentals as well as sale proceeds of the property, has invoked in the
present petition, the provisions of section 397 and section 398 of the Companies Act,
1956 ("the Act").
In exercise of the powers under Section 402 and with a view to bring to an end the
matters complained of in the affairs of the company, the court ordered as under:

(a) The company shall deposit forthwith the entire available sale proceeds realized
from the purchaser-respondents with any nationalized bank;

(b) The company shall not deal any part of the principal amount of the deposit kept in
terms of this order for any purpose, until determination of the shareholding of the
members.

(c) The company shall divide, every quarter commencing from April 1, 2007, the
interest amount accrued on the deposit placed with the bank among its members as per
their shareholding as reflected in the register of members of the company.

(d) The third respondent shall render accounts in respect of the entire advance moneys
and sale proceeds collected from the purchaser-respondents. All the expenses incurred
and payments made from and out of the sale proceeds shall be verified by an
independent chartered accountant.

(e) The parties are at liberty to apply in the event of any difficulty in implementation
of this order.

NEW BILL BY TAMILNADU GOVERNMENT IN RESPECT OF POWER OF

ATTORNEY

To prevent the misuse of these documents, the Government passed a Bill in May
2012, for amending certain provisions of the Registration Act, 1908. The President of
India gave assent to the above amendment and the same has been enacted as Tamil
Nadu Act 29 of 2012.

As per the amendments made, it has been made “compulsory” to register the
documents relating to power of attorney, sale agreement, agreement relating to deposit
of title deeds and construction agreement as provided under Article 5(i) of the Indian
Stamp Act, 1899. “The documents of Power of Attorney have to be registered either
with the jurisdictional Sub-Registrar or where the principal resides,” the release said

LIVE CERTIFICATE

Under the new rules, a power of attorney holder seeking to carry out a land transaction
will have to provide documentary evidence to the sub-registrar to prove that the
principal, the person who issued the power of attorney, is alive. The principal has to
obtain a “live” certificate with his photograph affixed to it from a registered medical
practitioner or a gazetted officer. These certificates are valid for 30 days.

As per the new order of the inspector general of registration, the new rules were
applicable to all POAs registered from February 4, 2013. By law POA is not valid
once the principal dies. Section 34 of the TamilNadu Registration Act says it is the
duty of the sub-registrar to ascertain whether the POA holder has the right to execute a
transaction on behalf of the principal. But the sub-registrars register property
documents without bothering to verify whether the principals were alive.

There have been instances of people impersonating land owners and executing
fraudulent POAs. In one case, land worth 9 crores were sold to a business group based
on a POA, reportedly executed by the landowner in the year 2008. Legal heirs of the
land owner subsequently filed a case of forgery against the business group, brokers
and others involved in the deal as the land owner died 28 years earlier. When police
refused to take prompt action, the owners moved the court.

As per law, the principal also has the right to rescind a POA “If there is a mention of
consideration in the POA, the holder can claim that money through legal means. But
he cannot claim rights over the property once the POA is rescinded or the principal
dies.”
 Stamp Duty

 A power of attorney is chargeable under Section: 48 of Schedule 1 of the ‘Indian

Stamp Act, 1899’. A stamp duty has to be paid compulsorily by the principal or donor
in the jurisdictional registrar’s office.

POWER OF ATTORNEY BY COMPANY/ PARTNERSHIP/ LLP

Authorising a person to execute and present a document on behalf of a

Company/Partnership Firm/LLP by the Partners/Directors cannot be
considered as a Power of Attorney. Since, all the Partners/Directors of the
Company/Partnership Firm/LLP cannot execute a document, it becomes
necessary for them to identify a suitable person to execute the document on
behalf of Company/Partnership Firm/LLP through a resolution/ authorisation.
This resolution/authorisation should be enclosed as part of the document.

A company/partnership firm/LLP can be appointed as POA.

 Legal Powers Which Can Be Granted to The Attorney

Broadly speaking a power of attorney provides an agent “all powers that the principal
has” to manage the principal’s financial affairs or make health care decisions may be
enough for many purposes. An agent may be authorised to:

i. To execute all contracts, deeds, bonds, mortgages, notes, checks, drafts, money
orders.

ii. To manage, compromise, settle, and adjust all matters pertaining to real estate.

iii. To lease, collect rents, grant, bargain, sell, or borrow and mortgage.
iv. To sell any and all shares of stocks, bonds, or other securities.

v. To file, sign all tax returns, insurance forms and any other documents.

vi. To enter into contacts, and to perform any contract, agreement, writing, or thing to
make, sign, execute, and deliver, acknowledge any contract, agreement.

vii. To make health-care decisions for the donor or his minor children.

viii. To sue on behalf of the principal.

Who is an Agent?

Sec 182

An ‘agent’ is a person employed to do any act for another, or to represent another in

dealings with third person. The person for whom such act is done, or who is so
represented, is called the ‘principal’. —An ‘agent’ is a person employed to do any act
for another, or to represent another in dealings with third person. The person for
whom such act is done, or who is so represented, is called the ‘principal’."

When a company authorizes another personnel to act on behalf of the company,

creates agency as the Person represents the company in dealings with the third person.