Power Agent Cannot Enlarge His Authority To Bind Coparceners Without Proof Of Necessity: Madras High Court Rejects Mortgage Suit Based On Invalid Agency

“A power of attorney must be strictly construed; an agent cannot act beyond the limits set by the principal” –  In a significant ruling concerning the limits of agency authority, the Madras High Court dismissed a mortgage suit filed on the basis of a deed executed by a power agent, holding that the agent had acted beyond the scope of his mandate and that the mortgage was invalid and unenforceable against the defendants. High Court affirmed the trial court’s dismissal of the suit, upholding both the legal sanctity of agency relationships and the protection of coparcenary rights under Hindu law.

The Court, speaking through Dr. Justice A.D. Maria Clete, emphasized that “a power of attorney cannot be used as a carte blanche to justify transactions neither contemplated nor authorised by the principal”, especially when the property in question is ancestral, and the burden of proof lies in demonstrating necessity or benefit to the estate.

Agent Exceeded Mandate – Mortgage Held Invalid

The plaintiffs, Kalaimani and Palanisamy, had filed the mortgage suit seeking recovery of Rs. 16.45 lakhs based on a mortgage deed dated 13.01.1998 executed by the 4th defendant, who was acting as a power agent on behalf of the first three defendants. The said mortgage was secured against an ancestral property and the consideration allegedly adjusted towards pre-existing promissory notes.

However, the Court noted that the power deed dated 06.08.1997 (Ex. A22) “expressly confined the borrowing powers to private financiers or nationalised banks”, and the mortgage was executed in favour of individuals—the plaintiffs themselves—thus breaching the authority conferred.

“The power agent cannot enlarge the scope of authority beyond what is expressly conferred. Borrowing from unauthorised sources and adjusting antecedent debts is clearly beyond the mandate of Ex. A22,” the Court held categorically.

The judgment further highlighted that the power of attorney did not contain any clause permitting the discharge of antecedent debts, which formed the main component of the mortgage consideration. Moreover, substantial amounts were spent towards stamp duty and registration, leaving no evidence of actual consideration reaching the principals.

Debt Not Binding on Coparceners in Absence of Legal Necessity

The High Court reinforced the principle that ancestral property cannot be encumbered through agency unless the debt is shown to be for legal necessity or for the benefit of the estate. Here, no such necessity was established.

“Under Hindu law, a debt incurred by the Karta binds minor coparceners only if it is for family necessity or benefit of the estate. In the present case, the mortgage was executed only for adjustment of antecedent debts and not for any proved family necessity or benefit,” the Court noted.

As such, defendants 2 and 3, who were minor or subsequently added coparceners, could not be bound by the alleged mortgage. The Court found no proof that the proceeds, if any, were used for family purposes or were necessary to preserve the estate.

Part Payment Plea Rejected – Limitation Not Extended

The plaintiffs attempted to invoke Section 19 of the Limitation Act by citing a part payment of Rs. 25,000 allegedly made by the 4th defendant on 05.01.2004, thereby attempting to extend the limitation period for filing the suit. However, the Court rejected this claim, holding that an unauthorised payment by an agent, especially without proof of it being made from the debtor’s funds, does not extend limitation.

“A part payment made by an agent without authority, and not from the debtor’s funds, does not satisfy the requirements of Section 19 of the Limitation Act,” the Court held, declaring Ex. A2 (endorsement of payment) invalid.

It was also noted that the suit mortgage was executed in 1998 and the suit filed in 2015, well beyond the 12-year limitation period. The attempted revival based on a suspicious endorsement failed legal scrutiny.

No Error or Perversity – Trial Court’s Judgment Affirmed

The appellate court found no perversity or legal error in the trial court’s evaluation of evidence. The oral and documentary evidence adduced by the plaintiffs failed to establish either the authority of the agent to borrow in the manner he did or any real flow of consideration to the principals.

The appeal was therefore dismissed with costs, with the Court concluding that “the judgment and decree of the trial court are consistent with the law and do not warrant interference.”

This judgment offers an instructive reaffirmation of core legal doctrines: that agency must be strictly construed; that a power of attorney cannot be stretched beyond its terms; and that ancestral property cannot be encumbered except for legal necessity. It also clarifies the stringent requirements under Sections 18 and 19 of the Limitation Act in cases of part payment or acknowledgment.

The decision protects coparcenary rights while setting a precedent against loosely executed mortgages relying on questionable agency claims.

Date of Decision: 23.01.2026