1. A Power of Attorney (PoA) granted to operate a bank account stands automatically revoked in which of the following scenarios? I. Death of the Principal (Account Holder). II. Insanity of the Principal. III. Death of the Agent (Attorney).
Only I and II
Only I and III
Only I
All I, II, and III
Explanation:
A Power of Attorney is an agency relationship. It is terminated automatically upon the death, insanity, or insolvency of either the Principal or the Agent. Therefore, in all three cases, the PoA ceases to be valid.
2. A customer gives a Mandate to his agent. Later, the customer becomes insane. The bank is aware of this. What should the bank do with a cheque signed by the agent presented after the insanity?
Pay up to a limited amount.
Dishonor the cheque.
Ask the agent to re-sign.
Pay the cheque as the agent is sane.
Explanation:
The insanity of the Principal (customer) automatically terminates the agency/mandate. The agent's authority ceases immediately. Therefore, the bank must stop operations and dishonor the cheque to protect the principal's funds.
3. What is the primary difference between a Mandate and a Power of Attorney (PoA) regarding bank accounts?
Mandate is a simple letter of authority for bank operations, while PoA is a formal legal document for broader acts.
Mandate is revocable, PoA is irrevocable.
Mandate is for companies, PoA is for individuals.
PoA needs to be stamped, Mandate does not.
Explanation:
A Mandate is usually specific to a bank account and given on the bank's standard form. A PoA is a general legal document drafted on stamp paper that can cover various acts, including property and legal representation, beyond just banking.
4. A Power of Attorney holder generally CANNOT do which of the following acts on behalf of the Principal unless specifically empowered?
Sign cheques.
Overdraw the account (borrow).
Operate the account.
Stop payment of cheques.
Explanation:
A general mandate to operate an account does not imply the authority to borrow money or overdraw the account, which creates a debt liability for the principal. This power must be explicitly stated.
5. If a Principal grants a "Special Power of Attorney" to an agent, the agent's authority is:
Valid even after the death of the Principal.
Transferable to another person.
Unlimited across all banking operations.
Limited to a specific act or a specific transaction mentioned in the deed.
Explanation:
A Special PoA is restricted to the specific act mentioned (e.g., selling a specific property or operating a specific account). It contrasts with a General PoA, which gives broader powers. The bank must verify the specific limits.
6. Can a resident Indian holding a Power of Attorney for an NRE account holder repatriate funds outside India from that account?
Yes, if the PoA holder is a relative.
No, generally not allowed.
Yes, up to USD 250,000.
Yes, freely.
Explanation:
A resident PoA holder in an NRE account can operate it for local payments in India. However, they are generally NOT allowed to repatriate funds abroad, except in very specific cases like remitting to the account holder himself.