Lease

What are ingredients of Lease? What are the basic distinction between lease and licence? (Asked in UPHJS 2007)

Ingredients of Lease
(1)         two parties- lessor and lessee
(2)         immovable property is subject matter
(3)         transfer of right
(4)         consideration – promised or paid.

Lease cannot be in favour of person incompetent o contract but lease may be made on behalf of incompetent person for 5 years or upto 18 years of his age.
Unregistered lease is not valid. (see Arif Vs Jadunath)
There is a marked distinction between a lease and a licence. Section 105 of the Transfer of Property Act defines a lease of immoveable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under s. 108 of the said Act, the lessee is entitled to be put in possession of the property.
A lease is therefore a transfer of an interest in land. The interest, transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor.
Sec 52 of the Indian Easements Act defines licence as” Where one person grants to another, or to a definite number of other persons, a right to do or continue to do in or upon the immoveable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence."
The definition of licence makes it clear that a licence granted by the owner enables a licensee a right to do or continue to do certain specified things in or upon an immovable property.
“Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose'. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest n the property. There is, therefore, clear distinction between the two concepts. The dividing line is clear though sometimes it becomes very thin or even blurred. At one time it was thought that the test of exclusive possession was infalliable and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee.” (see Associated Hotels Of India Ltd Vs R N Kapoor AIR 1959 SC 1262)
But there was a change and Lord Denning in Errington v. Errington ([1952] 1 All E.R. 149) reviewing the case law on the subject summarizes the result of his discussion as "The result of all these cases is that, although a person who is let into exclusive possession is prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy."
The following propositions was taken as well-established by SUBBA RAO J in  Associated Hotels Of India Ltd Vs R N Kapoor AIR 1959 SC 1262:
“(1) To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form ;
(2) the real test is the intention of the parties-whether they intended to create a lease or a licence;
(3) if the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and
(4) if under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease.”
It was held in this case that a saloon in Hotel is not a licence but a lease as, the only thing that can be said is that a lodger in a hotel building can step into the saloon to have a shave or haircut. So too, he can do so in the case of a saloon in the neighbouring house. The tenant is not bound by the contract to give any preferential treatment to the lodger.

Difference between lease and licence:
1. Lease is a transfer of interest, but licence is not.
2. Revocation of lease can take place in any of the ways provided by the law while licence is revocable at the pleasure.
3. Lease can be assigned, but a licence cannot and it is personal right.
4. An action against the trespasser can be maintained by the lessee but not by licensee.
5. Lessee is required to have exclusive possession of the property for its proper enjoyment. But, a licence is created without transfer of possession.
6. Lease is heritable in nature. Licence is not heritable because the right extinguishes with the death of licensee.
7. Consideration is must in case of lease. But word consideration is absent in licence.

In Mrs M N Clubwala And Anr Vs Fida Hussain Saheb And Ors AIR 1965 SC 610 it was observed that “while it is true that each stall-holder is entitled to the exclusive use of his stall from day to day it is clear that he has no right to use it as and when he chooses to do so or to sleep in the stall during the night after closure of the market or enter the stall during the night after 11-00 P.m. at his pleasure. He can use it only during a stated period every day and subject to several conditions. These circumstances, coupled with the fact that the responsibility for cleaning the stalls, disinfecting them and of closing the Market in which the stalls are situate is placed by the Act, the regulations made thereunder and the licence issued to the landlords, is on the landlords, would indicate that the legal possession of the stalls must also be deemed to have been with the landlords and not with the stall-holders. The right which the stall-holders had was to the exclusive use of the stalls during stated hours and nothing more.”

In Bharat Petroleum Corp Ltd Vs Chembur Service Station on 2 March, 2011, Hon’ble Supreme Court of India gave several illustrations of licence in para 20, while saying that, “Licences can be of different kinds. Some licences with reference to use of immovable property may be very wide, virtually bordering upon leases. Some licences can be very very narrow, giving a mere right enabling a person to visit a premises - say a museum or a lecture hall or an exhibition. In between are the licences of different hues and degrees. All licences can not be treated on the same footing. We may refer to some illustrations to highlight the difference.
Illustration (A):
An owner of a property enters into a lease thereof, but to avoid the rigours of Rent Control legislation, calls it as a licence agreement. Though such a lease is captioned as a `licence agreement', the terms thereof show that it is in essence, a lease. Such a licence agreement which puts the licensee in exclusive possession of the premises, untrammelled by any control, and free from any directions from the licensor (instead of conferring only a bare personal privilege to use the premises) will be a lease, even if described as licence. For example, if the exclusive possession of an apartment or a flat or a shop is delivered by the owner for a monthly consideration without retaining any manner of control, it will be a lease irrespective of whether the arrangement is called by the owner as a `lease', or `licence'. As far as the person who is let into exclusive possession, the quality and nature of his rights in respect of the premises will be that of a lease or a tenant and not that of a licensee. Obviously such a `licensee' cannot be `evicted' or `dispossessed' or prevented from using the premises without initiating legal action in accordance with law.
Illustration (B):
The owner of a land constructs a shopping mall with hundred shops. The owner of the mall earmarks different shops for different purposes, that is sale of different types of goods/merchandise, that is shops for exclusive clothing for men, shops for exclusive clothing for women, shops for hosieries, shops for watches, shops for cameras, shops for shoes, shops for cosmetics and perfumes, shops for watches, shops for sports goods, shops for electronic goods, shops for books, shops for snacks and drinks etc. The mall owner grants licences in regard to individual shops to licensees to carry on the identified or earmarked business. The licensor controls the hours of business, regulates the maintenance, manner of display, cleanliness in the shops. The ingress and egress to the shop licensed to the licensee is through the corridors in the mall leading from three or four common access points/entrances which are under the control of the licensor. The licensee is however entitled to stock the shop with brands of his choice though he does not have the right to change the earmarked purpose, entertain any clientele or customers of his choice and fix the prices/terms for his goods. He can also lock the shop at the end of the business hours and open it whenever he wants. No one else can trade in that shop. In such a case, in spite of the restrictions, controls and directions of the licensor, and in spite of the grant being described as licence, the transaction will be a lease or tenancy and the licensee cannot be dispossessed or evicted except by recourse of law.
Illustration (C):
In a shopping complex or in a mall the owner gives a licence to a person to use a counter to sell his goods in consideration of a fee. The access is controlled by the licensor and there is no exclusive use of any specific space by the licensee. At the end of the day, the licensee can close the counter. The space around the counter is visited and used by customers to the mall and not exclusively by the customers of the licensee. In such a case, if the licence is terminated, the licensor can effectively prevent the licensee from entering upon his premises and the licensee will have no right to use the counter except to remove his belongings. In such a licence it may not be necessary for the licensor to sue the licensee for `possession' or `eviction'.
Illustration (D):
A much narrower version of a licence is where an exhibitor of cinematograph films, or a theatre owner permits a `customer' or `guest' to visit an entertainment hall to view and enjoy a movie or a show for the price of a ticket. The licensee is permitted to occupy a seat in the theatre exclusively for the period of the show. Or a cloakroom with toilet facilities in a public building permits a visitor to use the toilet/closet facilities on payment of a fee. The licensee is permitted to use the toilet/closet exclusively to relieve himself. In such cases, the licence is for a specific purpose and for a specific period. The licensee has no other right to enter the premises, nor the right to continue to occupy the seat in the theatre or use the toilet/closet continuously. Such a licensee can be forcibly removed by the licensor if the licensee overstays or continues to occupy the seat beyond the show, or refuses to leave the cloakroom. It is not necessary for the licensor to sue the licensee.
Illustration (E):
A reputed manufacturer of textiles owns several retail outlets in different parts of the country. The outlets are housed in premises owned by the manufacturer or premises taken by it on lease. The manufacturer employs a sales manager on salary for each outlet to manage the outlet and sell its products and entrust him with the keys of the premises, so that he can open the outlet for business and close the outlet at the end of the day. Or the manufacturer, instead of engaging a sales manager, appoints an agent who is permitted to sell only the products of the manufacturer in the retail outlet, and receive a commission on the turnover of sales. The manufacturer stipulates the manner of sale, and the terms of sale including the prices at which the goods are sold. The manufacturer also checks the products sold periodically to ensure that only its products (and not fakes) are sold. The manufacturer also reserves the right to terminate the services of the sales manager/agent. In such cases on termination of the services of the employee/agent, the manufacturer can physically prevent the sales manager/agent from entering the retail outlet and make alternative arrangements for running the outlet. There is no need to approach a court to `evict' the sales manager/agent.”
It was also held by Hon’ble R V Raveendran, J in Bharat Petroleum that, “To reiterate, the permission granted to the respondent by the appellant to enter the outlet premises is for the purposes of using the equipments/facilities belonging to the appellant installed in the outlet, to sell the products of the appellant. Under the licence (DPSL) agreement, the respondent cannot enter the premises for any purpose other than for using the facilities or equipment installed by the appellant or for any purpose other than selling the petroleum products of the appellant. Therefore the licence to enter the premises and the licence to use the facilities/equipment is incidental to the licence to sell the products of the appellant as a licensed dealer, distributor or agent. In this case the premises is a land held on leasehold by the appellant wherein it has constructed/erected certain structures and housed certain facilities/ equipment. The premises is known as appellant's `company owned retail outlet'. The goods/products sold belong to the appellant. If the appellant decides to stop the supply of its goods for sale in the said outlet, automatically the licence granted to the respondent to enter premises and use the facilities become redundant, invalid and infructuous. There is no licence in favour of the licensee to use the premises or use the facilities independent of the licence to sell the goods of the appellant.

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Hostile witness

To ensure that criminal justice does not suffer because of witnesses turning hostile so frequently in criminal trial, Courts must critically analyse testimony of such hostile witness and then see as to what extent and how far it supports prosecution case

Manjeet vs state 19.03.14 DB 

spes successions and feeding the empty grant with estoppel

What is the spes suuessionis and whether it is transferable? A Hindu Owning seprate property died leaving widow B and brother C. Brother C has only a bare chance of succession in case he survived. Can C transfer this chance of succession? (Asked in UPHJS 2007)

As per section 6 of TPA property of any kind may be transferred. Only test to see whether a property is transferable or not, is to see whether such a transfer is prohibited or not. There are 14 exceptions of the general rule of transferability in the section itself.

(1) Spes successionis or the chance of an heir-apparent - clause 6 (a)

(2) Mere right of re-entry except to owner - clause 6 (b)

(3) Mere easement without dominant heritage - clause 6 (b)

(4) Personal right of enjoyment - sec 6 (d)

(5) Future maintenance - sec 6 (dd)

(6) Mere right to sue - sec 6 (e)

(7) Public office or salary - sec 6 (f)

(8) Stipends - sec 6 (g)

(9) If transfer is opposed to the nature of interest - sec 6 (h)

(10) If transfer is for an unlawful object or consideration- sec 6 (h)

(11) If transfer is to a person legally disqualified to be transferee - sec 6 (h)

(12) Non-transferable tenancy right - sec 6 (i)

(13) Farmer who made default in paying rent revenue - sec 6 (i)

(14) Lessee under the management of a Court of Wards - sec 6 (i)

Spes successionis is a person who has a chance of succeeding to an estate or legacy or any other mere possibility of a like nature and it cannot be transferred. It is mere a mere hope or anticipation. It was held in Ananda Mohan Vs Gour Mohan that a reversionary heir in Hindu Law cannot transfer the property as it is a mere chance of getting the property. Thus a transfer in contravention of sec 6 is not valid and C in given question cannot transfer property which is merely an expectation or spes successionis but there is another doctrine which some times works as an exception to the exceptions of sec 6, that is feeding the empty grant by estoppel though it is not a real exception and both work on different fields and under different conditions This doctrine is provided in sec 43 of TPA and sec 115 of Indian Evidence Act.

Sec 43 provides validity of transfer by unauthorised person who subsequently acquires interest in property transferred and that unauthorized person may be a spes successionis. For application of sec 43 there should be fraudulently or erroneously representation about authority to transfer and transfer is for consideration. Thus for application of sec 43 transferee should not Sec 43 has no effect on the right of third person or transferees in good faith for consideration without notice.

Illustration of sec 43-

A, a Hindu who has separated from his father B, sells to C three fields, X, Y and Z, representing that A is authorised to transfer the same. Of these fields Z does not belong to A, it having been retained by B on the partition; but on B's dying A as heir obtains Z. C, not having rescinded the contract of sale, may require A to deliver Z to him.

On the same line sec 115 provides that when one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and  to act  upon such belief, neither he nor his representative shall  be allowed,  in any  suit or  proceeding between himself and  such person  or his  representative, to deny the truth of that thing.

Hon'ble Supreme Court of India observed in The Jumma Masjid, Mercara Vs Kodimaniandra Deviah AIR 1962 SC 847, “Whenever a person transfers property to which he has no title on a representation that he has a present and transferable interest therein, and acting on that representation, the transferee takes a transfer for consideration. When these conditions are satisfied, the section enacts that if the transferor subsequently acquires the property, the transferee becomes entitled to it, if the transfer has not meantime been thrown up or cancelled and is subsisting. There is an exception in favour of transferees for consideration in good faith and without notice of the rights under the prior transfer. But apart from that, the section is absolute and unqualified in its operation. It applies to all transfers which fulfill the conditions prescribed therein, and it makes no difference in its application, whether the defect of title in the transferor arises by reason of his having no interest whatsoever in the property, or of his interest therein being that of an expectant heir….

Section 43 deals with representations as to title made by a transferor who had no title at the time of transfer, and provides that the transfer shall fasten itself on the title which the transferor subsequently acquires. Section 6(a) enacts a rule of substantive law, while s. 43 enacts a rule of estoppel, which is one of evidence. The two provisions operate on different fields, and under different conditions, and we see no ground for reading a conflict between them or for cutting down the ambit of the one by reference to the other. In out opinion, both of them can be given full effect on their own terms, in their respective spheres. To hold that transfers by persons who have only a spes successionis at the date of transfer are not within the protection afforded by s. 43 would destroy its utility to a large extent….

When a person transfers property representing that he has a present interest therein, whereas he has, in fact, only a spes successionis, the transferee is entitled to the benefit of s. 43, if he has taken the transfer on the faith of that representation and for consideration.”

Thus as per this case transferee should be mislead by representation of transferor and sec 43 has no applicability if transferee had knowledge of the defect in title. It was also held in some cases that a valid relinquishment of share might be done despite the fact that there is no fraud or misrepresentation and estoppel will apply specifically in case of relinquishment with consideration.

See Shehammal vs Hasan Khani Rawther & Ors on 2 August, 2011 where it was held by Hon’ble Supreme Court of India that “There is little doubt that ordinarily there cannot be a transfer of spes successionis, but in the exceptions pointed out by this Court in Gulam Abbas's case, the same can be avoided either by the execution of a family settlement or by accepting consideration for a future share. It could then operate as estoppel against the expectant heir to claim any share in the estate of the deceased on account of the doctrine of spes successionis. a testamentary disposition by a Mohammedan is binding upon the heirs if the heirs consent to the disposition of the entire property and such consent could either be express or implied. Thus, a Mohammedan may also make a disposition of his entire property if all the heirs signified their consent to the same. In other words, the general principle that a Mohammedan cannot by Will dispose of more than a third of his estate after payment of funeral expenses and debts is capable of being avoided by the consent of all the heirs. In effect, the same also amounts to a right of relinquishment of future inheritance, which is on the one hand forbidden and on the other accepted in the case of testamentary disposition. Having accepted the consideration for having relinquished a future claim or share in the estate of the deceased, it would be against public policy if such a claimant be allowed the benefit of the doctrine of spes successionis. In such cases, we have no doubt in our mind that the principle of estoppel would be attracted.”

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effect of non-registration of a partnership firm

Q. (a) Discuss the effect of non-registration of a partnership firm. Whether the effect of non-registration of firm can be removed during pendency of the suit by getting the firm registered? (No)

(b) A, B, C and D are partners in a firm, which has not been registered. A is wrongfully expelled from the firm by the other partners. Can he successfully bring a suit against other partners for damages for wrongful expression and declaration that he continues to be a member of the firm? What remedies, if any, are open to A? (Both question were asked in UPHJS 2007)

Chapter VII of the Act deals with ‘Registration of Firms’ of which sections 56 to 65 deals with the procedure for registration. The purpose of these provisions is to protect the interest of those who deal with partnership firms in various commercial transactions. Effect of non-registration of partnership firm is given in Sec 69 of Partnership Act. This section neither declared that registration is must not provide any penalty for non-registration. But simply provides some disqualification to firm and its members. The matter of registration and maintainability of the suit should be decided as a preliminary matter and not at later stage.

Sec 69(1) provides disqualification to partners to sue other partner and 69(2) provides disqualification to partners and firm to sue third party. This disqualification is not to third party an a third party may file suit against unregistered firm. 69(3) clarify that sub-sections (1) & (2) shall apply also to a claim of set-off or other proceeding to. Other proceeding includes arbitration and arbitrator cannot be appointed. (see Jagdish Chander Gupta Vs Kajaria Traders (India) Ltd AIR 1964 SC 1882 and M/S Sunrise Industries & Ors Vs M/S Roshan Lal Aggarwal & Anr on 8 February, 2012). Though interim protection u/s 9 of Arbitration Act was given in Firm Ashok Traders And Anr. Etc vs Gurumukh Das Saluja And Ors. Etc on 9 January, 2004 But that is not a right judgment in view opinion of Hon’ble Supreme Court of India in BALCO Vs Kaiser Ammonium where it was held that protection of sec 9 cannot be given without a valid suit.

Both the sub-sec (1) & (2) together provide that –

No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any court by

(1) partner against other partner or

(2) partner or firm against any third party

unless

(1) the firm is registered and

(2) the persons suing are or have been shown in the register of firms as partners in the firm

If partnership is registered then non-registration of partnership deed does not have any effect and suit is maintainable. (see JK Finance And Chit Funds Vs R Surya Kumar And Anr, AIR 2004 AP 190)

It was observed by Hon’ble M H Kania, J in Shreeram Finance Corporation vs Yasin Khan And Others 1989 AIR 1769 that “the suit filed by the appellants is clearly hit by the provisions of sub-section (2) of section 69 of the said Partnership Act, as on the date when the suit was filed, two of the partners shown as partners as per the relevant entries in the Register of Firms were not, in fact, partners… Although the plaint was amended on a later date that cannot save the suit.” Thus registration or giving partners name after filing suit does not save the suit. The question as to whether the subsequent registration of the firm would cure the initial defect in the filing of the suit arose for consideration in DDA Vs Kochhar Construction Work and Anr (1998) 8 SCC 559. Hon’ble Court held that in view of the clear provision of the Act it was not possible to subscribe to the view that subsequent registration of the firm may cure the initial defect, because the proceedings were ab initio defective as they could not have been instituted since the firm in whose name the proceedings were instituted was not a registered firm on the date of the institution of the proceedings. (See Purushottam & Anr vs Shivraj Fine Art Litho Works & Ors on 7 November, 2006 and Ess Vee Traders And Ors Vs Ambuja Cement Rajasthan Limited, 131 (2006) DLT 341)

Exception to this disqualification

(1) Only apply for enforcement of right arises from contract (sec 69 sub clause 1 & 2). Thus it is very much clear by section itself that disqualification does not apply to enforcement of those rights, which do not arise from contract or arises from Tort, Criminal Law or any statutory provision. Filing a suit for possession against tenant who remains on lane after lease is  right under TPA and not a right arising from contract (see Raptakos Brett And Co Ltd Vs Ganesh Property on 8 September, 1998). Suit to prevent infringement of trademark is not barred by the section whether the firm is registered firm or not (see Haldiram Bhujiawala And Anr vs Anand Kumar Deepak Kumar And Anr on 28 February, 2000 and M/s Virendra Dresses Vs M/s Varinder Garments AIR (1982) Delhi 482)

(2) Does not apply enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realize the property of a dissolved firm (sec 69 (3) (a)). Right to realize the property of firm include enforcing a claim arising from contract prior to dissolution. It was held by Hon;ble Gujrat High court on 20.02.13 that, “Even if the partnership was not registered, once the partnership firm is proved or is believed to be dissolved, the suit for accounts of dissolved firm even if unregistered is maintainable” (see Vinubhai Najibhai Chavda vs Maheshkumar Ramchandra)

(3) No effect to the powers of an official assignee, receiver or court to realize the property of an insolvent partner (sec 69 (3) (b))

(4) Not apply to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories, are situated in areas to which, by notification under section 56, this Chapter does not apply (sec 69 (4)).

(5) Not apply to any suit or claim of set-off not exceeding one hundred rupees in value which (sec 69 (4)).

It was held in The Oriental Fire & General Vs The Union Of India on 19 April, 1990 AIR 1991 Pat 250 that claim in insurance policy is a claim for a right arising from contract and not by statute of Insurance.

In response to question no (b) it can be said that A can not ask for declaration that he is a partner as same would be a right arising from contract between partners of unregistered firm but A can file a suit for accounts as his expulsion means dissolution of firm.

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Law of Agency

“Agency in law connotes an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties.” Critically discuss the concept of agency. Explain the duties of an agent to principal” Asked in UPHJS 2007

As per sec 182 of Indian Contract Act, An “agent” is (1)

a person employed to do any act for another, or (2) to represent another in dealing with third persons.

Ramaswami, J, gave the most comprehensive definition of agency. He held that “every person who acts for another is not an agent. A domestic servant renders to his master a personal service; a person may till another's field or tend his Hocks or work in his shop or factory or mine or may be employed upon his roads or ways; one may act for another in aiding in the performance of his legal or contractual obligations to third persons, as when he serves a public carrier, warehouse-man or innkeeper in performance of the latter's duties to the public. In none of these capacities he is an "agent" within the above meaning as he is not acting for another in dealings with third persons. It is only when he acts as representative of the other in business negotiations, that is to say, in the creation, modification, or termination of contractual obligations between that other and the third persons, that he is an "agent." Representation of another in business negotiations with third persons so as to bind such other by his own acts as if they were done by the former, is of the essence of the relation of agency and the distinguishing feature between art "agent" and other persons who act for another. Looked at from this point of view, an agency is a contract of employment for the purpose of bringing another-in legal relation with a third party or in other words, the contract between the principal and agent is primarily a contract of employment..” see P. Krishna Bhatta And Ors. vs Mundila Ganapathi Bhatta (Died) ... on 15 July, 1954

Creation of agency is also a contract between agent and principal but no consideration is necessary for same. Agency is based on principle that Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting, marriage, singing, etc. The test of agency is whether the person is purporting to enter into the transaction on behalf of the principal or not. Power of Attorney holder is also an agent.

In Lakshminarayana Ramgopal Vs Government (AIR 1954 SC 364), Lordships observed, “A principal has the right to direct what work the agent has to do, but a master has the further right to direct how the work is to be done.”

Who may be principal (sec 183)

Any person who is of

(1) Major and

(2) Sound mind

Creation of agency

(i) by expressed authority (sec 186).

(ii) by implied authority (sec 187).

(iii) by ratification by principal (sec 197).

(iv) by estoppel (sec 237)

(v) by holding out (sec 189).

(vi) by necessity (sec 189).

It was held in DESU Vs Basanti Devi AIR 2000 SC 43 that Delhi Electric Supply undertaking who deducts insurance premium from employee salary to deposit the same in LIC may not be insurance agent as define under insurance regulation but he is agent as per sec 182 of Contract Act and LIC is liable for his act.

 The ratification also may be implied but with an intention to ratify. Ratification should be for whole act and not a part of the act (sec 196 to 199). Ratification of unauthorised act should not be in manner that it injured third person. (sec 200)

Any person even minor and sound mind can become an agent but they cannot be responsible to the principal. (sec 184)

An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss and would be done by a person or ordinary prudence, in his own case, under similar circumstances. (sec 189) notice given to agent is deemed given to or obtained by the principal (sec 229).

Generally an agent cannot sub delegate, unless by the ordinary custom of trade a sub-agent may, or, from the nature or agency, a sub-agent must, be employed. (sec 190) Agent liable u/s 193 for sub-agent appointed without authority.

Where a sub-agent is properly appointed, the principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent originally appointed by the principal. Agent is responsible to the principal for the acts of the sub-agent. The sub-agent is responsible for his acts to the agent, but not to the principal, except in cases of fraud, or willful wrong. (sec 192)

In selecting other agent (not a sub agent) for his principal, an agent is bound to exercise the same amount of discretion as a man or ordinary prudence would exercise in his own case; and, if he does this, he is not responsible to the principal for the acts of negligence of the agent so selected. (sec 195)

REVOCATION OF AUTHORITY (sec 201)

An agency is terminated by the principal

(i) revoking his authority, or

(ii) by the agent renouncing the business of the agency; or

(iii) by the business of the agency being completed; or

(iv) by either the principal or agent dying or becoming of unsound mind; or

(v) by the principal being adjudicated an insolvent

Hon’ble High Court of Allahabad held that a person is “committing an immoral and an unethical act by acting on a power of attorney of a principal whom he knows is mentally unsound, weak, suffers from mental infirmity and has no legal capacity to authorise. This is like continuing to act on a power of attorney of a dead man.” See Mahendra Pratap Singh (Deceased) Vs Smt Padam Kumari Devi on 22 May, 1992.

But as per sec 202 if agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. if there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.

as per sec 230, in the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

Presumption of contract to the contrary: Such a contract shall be presumed to exit in the

following cases-

(1) Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;

(2) Where agent does not disclose the name of his principal;

(3) Where the principal, though disclosed, cannot be sued.

Agent’s duty

(i) to take all reasonable steps for the protection and reservation of the interests after the death  ir insanity of principal (sec 209)

(ii) to conduct the business of his principal according to the directions given by the principal, or in the absence of any such directions according to the customs (sec 211)

(iii) to conduct the business of the agency with as much skill as is generally possessed by person engaged in similar business unless the principal has notice of his want of skill (sec 212)

(iv) to render proper accounts on demand (sec 213)

(v) to communicate any difficulty to principal and in seeking to obtain his instructions (sec 214)

(vi) to give benefit gained by agent dealing on his own account in business of agency without the knowledge of his principal (sec 216)

(vii) to pay sums received for principal after making lawful deductions (sec 218)

(vii) Agent cannot personally enforce, nor be bound by, contracts on behalf of principal

(viii) Agent not entitled to remuneration for business misconducted (sec 220)

Agent’s right

(i) to retain sums received on principal’s account (sec 217) in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.

(ii) Agent’s lien on principal’s property (sec 221).  In the absence of any contract to the contrary, an agent is entitled to retain goods, papers, and other property, whether movable or immovable of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for to him.

Hon’ble Delhi High Court held in Kavita Trehan And Ors Vs Balsara Hygiene Products Limited on 28 May, 1991that, “under Section 221 of the Contract Act the lien of an agent extends only to the retention of the property till his dues are paid Section 221 of the Contract Act does not provide for sale of property for satisfaction of the agents dues. Lien over the principal's property is of a very limited nature and is confined to mere right of retainer, which may be used as a defense to any action for the recovery of the property brought- against him by the principal. Lien in the ordinary sense means a right to keep possession of moveable and immoveable properties belonging to a person in debt until the same has been paid off. Lien cannot give any right interest or title in the goods or immoveable property. The holder of the lien cannot sell the property. Even at common law a legal lien merely confers on the holder of the articles in respect of which it was claimed, a passive right to detain the articles until the debts was paid. Such a lien cannot be enforced by sale of the goods. Sometimes only in rare cases sale could be effect by the order of the court

Q (Asked in UPHJS 2007) X, a wholesale cloth dealer appoints Y his as his agent for the sale of cloth on the basis of five percent commission on the sale made by him. Y had an agreement that he could retain part of the some amount of goods to adjust the commission due to him. X terminates the agency of Y. Y refuses to handover the cloth in his possession to X, and claims that he is rested with authority coupled with interest and that agency cannot be terminated. Decide.

Ans. Y cannot claim that he had interest or right in agency to such an extent that it cannot be terminated. Y has an interest or right on commission only after selling the goods and no right in subsistence of agency.

PRINCIPAL’S DUTY TO AGENT

(i) Agent to be indemnified against consequences of lawful acts (sec 222 & 223) but not for criminal act (sec 224)

(ii) Compensation to agent for injury caused by principal’s neglect (sec 225)

(iii) Principal  bound when agent exceeds authority if exceed part is separable (sec 227 & 228)

(iv) Principal liable even for misrepresentation made or fraud committed, by agent acting in the course of their business for their principals (sec 238)

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