The mandate and power attorney are the rights cast upon a third person to act on behalf of the principal person/s. The rights of mandate and power of attorney holders are very similar in the operation of bank accounts but they are issued for different reasons and purposes. How the Mandates and Power of attorneys empower a third party to act on behalf of the principal person is explained below.
Mandate : A mandate, is a simple letter of authority, signed by a constituent authorising the bank to permit a certain named person (agent) to operate the account on his/her behalf. A mandate to operate an account does not extend to overdrawing the account unless the mandate letter specifically provides the authority to overdraw the account. In the case of Joint accounts, all the depositors to the account must sign the mandate letter. In the case of partnership firms, all the partners of the firm must sign the mandate letter. One of the joint account holders or any partner of the firm as the case may be can revoke this authority by writing to the bank.In the case of H.U.F, the mandate must be signed by the Karta and all the major co-parceners. In case the mandate is to be issued in favour of a third party an Indemnity has to be executed by the Karta and major co-parceners of the H.U.F.
Power of Attorney : A Power of attorney (POA) is a written instruction by which one person is empowered to act on behalf of another. That is to say, to do any lawful act or series of lawful acts on behalf of the principal person by his agent. The Power of Attorney can be made in two types, special and general. Special power of attorney is given for the special purpose and general power of attorney is given for general purpose being intended to operate for a length of time. A Power of attorney is to be stamped in accordance with the provisions of the Indian Stamp Act and also according to various amendments effected by States. It must be duly notarised and not necessarily be registered with the Registrar of Assurances. A Power of attorney executed outside India for use in India should be executed before the Indian Embassy/High Commission in the country in which it is executed and it must be stamped according to the Indian Stamp act within three months of its receipt in India.The Power of attorney shall not contain provisional or conditional clauses like during my absence; during my illness etc. and such clauses are not acceptable to banks. The Power of attorney must contain definite conditions.
In all cases, where accounts are opened with Power of Attorney, the principal should give an undertaking in writing that he shall, in addition to the public notice, notify the bank about cancellation/revocation of power of attorney.