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SUPREME COURT OF INDIA
K. JAGANNATHA SHETTY AND A.M. AHMADI, JJ.
Southern Roadways Ltd., Madurai, Appellant
Versus
S. M. Krishnan, Respondent
Civil Appeal No. 4177 of 1989 (Arising out of SLP (Civil) No. 5206 of 1989), D/- 5-10-1989.
Indian Contract Act – Section 202 and 221 – Business - Suit granted temporary injunction - Question raised in this appeal is whether the agent after revocation of his authority is entitled to remain in possession of premises of principal and interfere with business – Learned single Judge of Madras High Court in Original Suit granted temporary injunction restraining respondent from interfering with appellants transport business – Division Bench by judgment delivered vacated that temporary injunction present appeal is directed against judgment of Division Bench – Appellant-company Southern Roadways engaged in business of transport of goods and parcels to different places in Southern India appointed commission agents at various stations for purpose of carrying on its business respondent was one such agent appointed at Madras City. Cl. III of agreement by which he was appointed provides that respondent should arrange a suitable godown and engage employees – Held, Respondents possession of suit premises was on behalf of company and not on his own right – It is unnecessary for company to file a suit for recovery of possession respondent has no right to remain in possession of suit premises after termination of his agency has also no right to interfere with companys business – Case deserves grant of temporary injunction learned single Judge of High Court in our judgment was justified in issuing injunction – Learned counsel for respondent cited in this context two decisions former case of Madras High Court suit was for a permanent injunction restraining defendant from interfering with plaintiffs peaceful possession and enjoyment of suit properties and performance of religious services defendant admitted that he was agent of plaintiff but set up title to property in himself as done – What we want to emphasise is in all cases of general agency relation may be generally fiduciary, but in other kinds of agencies relation may vary with confidence which principal chooses to repose in agent – It may also depend upon power which agent exercises over subject matter under terms of contract of agency or by virtue of incident of law and usage of business which relationship implies fiduciary element in agency though key to much of law governing this relation is not essential element in relation – Appeal allowed.
The legal document addresses the issue of an agent’s rights and obligations following the revocation of their authority, specifically concerning possession of premises and interference with the principal’s business. The key points are as follows:
Agent’s Authority and Revocation: When an agency is revoked by the principal, the agent's actual authority to act on behalf of the principal terminates immediately, unless the agency is coupled with an interest (!) . The agent does not retain any inherent right to remain in possession of the premises or interfere with the principal’s business activities once the agency is terminated (!) .
Possession of Property: An agent holds possession of the principal’s property solely on behalf of the principal. Such possession is not independent but is considered the possession of the principal. The agent cannot deny the principal’s title or convert the property for personal use (!) (!) (!) (!) . The possession of the agent is fiduciary in nature, akin to that of a trustee, and is not personal interest but held for the principal’s benefit (!) .
Legal Rights Post-Agency: After the termination of agency, the agent has no legal right to remain in the premises or to interfere with the business operations of the principal. The principal has the right to assert possession and carry on business activities without interference from the former agent (!) (!) .
Fiduciary and Legal Principles: The relation of agency may be fiduciary, but it varies depending on the nature of the agency and the confidence reposed by the principal. In general agency, the agent’s possession is regarded as the possession of the principal, and the agent cannot set up adverse claims or title against the principal (!) (!) .
Implication of Agency Terms: The agreement between the principal and agent typically defines the extent of the agent’s rights, including provisions for revocation and occupation of premises. Unless explicitly stated, the agent does not have the right to remain after agency termination or to interfere with the principal’s business activities (!) (!) .
Injunctions and Interference: Courts generally favor the principal’s right to carry on business after the agency is revoked, and they are reluctant to imply terms that would restrict this freedom unless explicitly agreed upon. An agent’s possession or interference after revocation can be restrained through appropriate legal remedies such as temporary injunctions (!) (!) (!) .
Legal Consequences of Termination: Revocation of agency results in the immediate loss of the agent’s authority and rights to possess or interfere with the property or business. The principal can lawfully take possession of the premises and continue their business activities, and the agent’s possession is deemed to be on behalf of the principal (!) (!) .
In summary, once an agency is revoked, the agent loses all rights to possess or interfere with the principal’s premises or business, and their possession is considered to be on behalf of the principal. The law supports the principal’s right to exclusive possession and operation of their business following termination of the agency relationship.
Judgment
K. JAGANNATHA SHETTY, J.:- Special Leave granted.
2. The question raised in this appeal is whether the agent after revocation of his authority is entitled to remain in possession of the premises of the principal and interfere with the business thereof. The learned single Judge of the Madras High Court in Original Suit C. S. No. 1317 of 1988 has granted temporary injunction restraining the respondent from interfering with the appellants transport business. But the Division Bench by judgment delivered on March 28, 1989, vacated that temporary injunction. The present appeal is directed against the judgment of the Division Bench.
3. The facts are substantially undisputed. The appellant-company under the name as Southern Roadways Ltd. is engaged in the business of transport of goods and parcels to different places in Southern India. It has appointed commission agents at various stations for the purpose of carrying on its business. S. M. Krishnan-respondent was one such agent appointed at Madras City. Cl. III of the agreement by which he was appointed provides that the respondent should arrange a suitable godown and engage employees. Clause XI provides for his removal from service at any time without notice. It also provides that upon removal of the agent the company could occupy the godown. The company could also utilise the services of employees engaged by the respondent. As per the agreement perhaps at the suggestion of the respondent, the Company took on lease a godown at No. 10, Srinivasan Road, T. Nagar, Madras. The godown was put in possession of the respondent for the purpose of carrying on his agency business of the company.
4. In the course of the companys audit, it was discovered that the respondent had mismanaged the business and misappropriated the income of the company. By letter dated October 13, 1988, the company terminated his agency with effect from October 14, 1988. He was informed that the company would be taking possession of the godown and carrying on the business on its own. By subsequent letter, he was also intimated that the company has taken possession of the godown on October 15, 1988 and another agent called R. Sundarajan was appointed in his place. The respondent however, prevented R. Sundarajan and also the company from carrying on business at the godown premises. The company, therefore, had to institute a suit for declaration of its right to carry on business in the said premises. Permanent injunction restraining the respondent from interfering was also sought for. The suit was based on two separate grounds. The first related to legal right of the company to carry on its business after termination of agency of the respondent; the second concerned the factum of taking actual possession of the premises on October 15, 1988.
5. Pending suit, the company moved the High Court for temporary injunction. The temporary injunction restraining the respondent from interfering with the possession of the premises and the business thereof. The learned single Judge (M. Srinivasan, J.) acceded to that request. The judge said :
"As pointed out already, in this case, there is no denial of the lease arrangement between the owner of the premises and the plaintiff. The defendant does not claim to be the owner of the premises nor does he put forward any rival title as against the plaintiff. The only claim of the defendant is that he is in possession and that he has been paying the rent to the owner. He does not claim that he took possession as a lessee from the owner. Though there is a specific averment in the plaint and the affidavit of the plaintiff that there is a lease arrangement between the plaintiff and the owner, there is no denial of the same by the defendant. In these circumstances, the defendant cannot claim that he is in possession pursuant to any right enured in him."
As to the possession of the premises, he said :
"The claim made by the plaintiff that it took possession on 15-10-1988 is acceptable in view of th
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