Tagline: Payment wording can determine whether the principal must recover the money or challenge the sale.
A property owner living away from Chennai gave a trusted person Power of Attorney to sell his land. The agent found a buyer, received the entire sale consideration and registered the sale deed. But the money never reached the owner’s bank account. Calls went unanswered, and the trusted agent disappeared with the payment.
The owner here was left with a difficult question: could he cancel the sale, or could he only recover the money from the POA agent? The answer largely depends on one crucial part of the Power of Attorney—the payment clause.
Payment Clause 1: Agent Can Receive and Deposit the Money
The POA may authorise the agent to receive the sale consideration and later deposit it into the principal’s bank account.
If the purchaser pays the authorised agent but the agent keeps the money, the sale will not automatically become invalid. Since the agent was authorised to receive payment, the purchaser may be considered to have properly discharged the payment obligation.
The principal may then have to:
- Issue a legal notice demanding the money and accounts
- File a civil case for recovery with interest
- Seek attachment or injunction against the agent’s assets
- File a criminal complaint if dishonest misappropriation can be established
Sections 213 and 218 of the Indian Contract Act require an agent to provide accounts and pay the principal the amounts received on the principal’s behalf.
Section 214: If the agent faces any difficulty, they must make reasonable efforts to contact the principal and obtain instructions before acting.
Section 213: The POA agent must provide proper accounts of all transactions and money handled whenever the principal demands them.How can this clause be framed?
Illustrative clause:
“The Attorney is authorised to receive the sale consideration on behalf of the Principal only through an account-payee cheque, demand draft or bank transfer. The Attorney shall deposit or transfer the entire amount received, without unauthorised deductions, into the Principal’s designated bank account bearing Account No. ________ with ________ Bank within ___ working days. The Attorney shall issue receipts, preserve the payment records and provide a complete account of the transaction to the Principal. No sale consideration shall be received in cash.”
Payment Clause 2: Purchaser Must Pay the Principal Directly
A safer POA can state that the agent has no authority to receive or acknowledge the sale consideration. The purchaser must transfer the entire amount directly into the principal’s designated bank account.
It should also specify that the agent can execute and register the sale deed only after receiving written confirmation from the principal that the full amount has been credited.
If the agent completes the sale without satisfying this condition, the principal may have stronger grounds to argue that:
- The agent exceeded the authority provided under the POA
- The condition for executing the sale was not fulfilled
- The purchaser failed to follow the payment instructions
- The transaction involved fraud or collusion
Even if the agent must receive a small amount for unavoidable reasons, the POA should specify a strict maximum limit, prohibit cash and require immediate deposit into the principal’s account
However, even in this situation, the sale does not automatically disappear. The principal may have to approach the civil court to have the sale deed declared invalid or not binding.
How can this safer clause be framed?
Illustrative clause:
“The Attorney shall have no authority to receive, collect, retain or acknowledge any part of the sale consideration. The purchaser shall pay the entire consideration directly into the Principal’s designated bank account bearing Account No. ________ with ________ Bank through an account-payee cheque, demand draft or bank transfer. The Attorney shall execute and register the sale deed only after receiving written confirmation from the Principal that the full consideration has been credited. Payment of any amount to the Attorney shall not be treated as valid payment to the Principal.”
Can the Registrar Cancel the Sale Deed?
The Registrar cannot ordinarily cancel a registered sale deed merely because the POA agent violated a payment condition.
Tamil Nadu introduced Section 77-A of the Registration Act to permit cancellation of certain fraudulent registrations. However, the Madras High Court declared the provision unconstitutional in 2024, holding that Registration Department officials cannot decide complicated disputes involving title, fraud and civil rights.
Therefore, when payment, authority or purchaser involvement is disputed, the principal will generally have to approach the competent civil court. A police complaint may be filed separately when the evidence discloses criminal breach of trust, cheating, forgery or another criminal offence.
Does Non-Payment Automatically Invalidate a Sale?
Not necessarily. Section 54 of the Transfer of Property Act defines a sale as a transfer of ownership for a price paid, promised, part-paid or part-promised.
Therefore, merely proving that the principal did not receive the money may not be sufficient. The POA, sale deed, payment records, purchaser’s conduct and intention of the parties must all be examined.
How Can Property Owners Prevent This Risk?
The POA should clearly provide that:
- The agent cannot receive the sale consideration
- The buyer must pay the principal directly through banking channels
- Cash payments are prohibited
- The sale price cannot be changed without written approval
- Registration can happen only after the principal confirms payment
- Payment reference numbers must appear in the sale deed
- The agent cannot sell to themselves, relatives or connected parties
- The POA will expire after the specific transaction or fixed period
✅ A property lawyer should tailor the final clause to the particular transaction before the POA is executed.
The sale deed should clearly state:
“The entire sale consideration has been paid directly to the Principal through the banking transactions specified below. No amount has been paid to or received by the Power of Attorney holder.”
✅ For additional protection, high-value transactions can be completed through a properly structured escrow arrangement.
✅ Verified.RealEstate’s legal due-diligence and escrow support can help the parties verify the POA, document the payment conditions and release the money through a transparent process.
An escrow arrangement is a system where a trusted independent third party holds the buyer’s money and releases it to the seller only after the agreed conditions are fulfilled.Final Takeaway
Allowing a POA agent to receive money and asking them to deposit it later creates a major risk. The safer arrangement is to prohibit the agent from receiving the consideration and require the purchaser to pay the principal directly.
A carefully drafted POA agreement with a shielded payment clause cannot prevent every fraud, but it can greatly improve the principal’s legal position if something goes wrong.
Disclaimer: This article provides general information and does not constitute legal advice. The validity of a POA sale depends on the wording of the POA, sale deed, payment records and individual circumstances. Parties should obtain an independent legal opinion before executing or challenging a property transaction.