Power Of Attorney Impliedly Revoked When Principal Acts Independent Of Agency With Knowledge To Agent & Third Parties : Supreme Court

The Supreme Court on Tuesday (July 9) observed that there would be an implied revocation of Power of Attorney (“POA”) granted to the agent if the act of Principal choosing to act for himself is known to an agent and third person.

"In a case where the principal chooses to act for himself, particularly to the agent's knowledge and a person to be affected, then it can be held that Section 207 of the Indian Contract Act is attracted," the Court observed. Section 207 provides for the revocation of agency.

The Court said that the conduct of the Principal and knowledge of the Principal's conduct to the Agent are the determinative factors while deciding the issue of whether the Principal has revoked the POA granted to the Agent.

Reversing the findings of the High Court, the bench comprising Justices CT Ravikumar and SVN Bhatti stated that in an event when the Principal and Agent holds a joint property, wherein POA was granted to the Agent to execute sale deed of Principal's share in a property, then the conduct of the Principal in deciding an execution of sale deed of his share in property without adverting to the agent's opinion amounts to implied revocation of Power of Attorney executed in favor of the agent.

In the present case, the Principal (Appellant) and Agent (Respondent no.1) were sisters, wherein the Principal had executed a POA in favor of Agent owing to her practical difficulties in not managing the sale of part of her property jointly owned by Appellant and Respondent No.1. However, before the share of the Principal's property could be sole out by her Sister/Agent, the Principal herself decided to sale some part of her property in contradiction to the POA.

Later on, despite knowing the fact that the Principal had sold her part of the property, the Agent executed the sale deed of the remaining part of the principal's property in favor of her Husband.

Thus, the question felt for the Court's consideration was whether an act of an Agent to sell the remaining part of the Principal's property despite knowing the fact that the Principal had sold her part of the property amounts to implied revocation of POA.

Answering positively, the Court held that there the Principal's act of selling her part of the property without adverting to the POA amounts to implied revocation of POA.

The Court said the act of the Principal to sell her part of the property implies that the principal has withdrawn the authority to act on his or her behalf by the agent.

“From the record, it can be noted that from 2007 onwards, the Appellant was not entirely absent from India or residing exclusively in the U.S.A. Therefore, the Appellant and Respondent No. 1 executed the sale deed dated 18.01.2008 (Ex. A-3). Respondent No. 2 is one of the witnesses to Ex. A-3. The execution of sale deed dated 16.04.2008 (Ex. A-5) is inconsistent with and contradictory to the power granted to Respondent No. 1 in Ex. A-4. This is an explicit conduct of the Appellant to act for herself on the share she holds in the property purchased in 1991.”, the Judgment authored by Justice Bhatti said.

Revocation under Section 208 of the Contract Act

Explaining the concept of revocation of the contract, the Court said that giving effect to the revocation requires fulfillment to twin conditions enshrined under Section 208 of the Indian Contract Act, 1872.

“From a plain reading, Section 208 infers and gives effect to revocation upon the twin conditions being satisfied, (i) communication to the agent and (ii) knowledge to a third party i.e., one who deals with or is likely to deal with the agent. Then, the revocation of authority becomes known to the agent and the said third parties. In other words, an idea in the mind of the principal to revoke cannot be construed as implied revocation or renunciation of agency. There ought to be an act or conduct of the principal which implies that the agency is revoked or withdrawn.”, the Court observed.

According to the Court, to attract the consequence of revocation, the revocation of the agent's authority should be made by the principal in a manner that implies that the principal has withdrawn the authority to act on his or her behalf by the agent, followed by knowledge to the third party.

Reference was made to a judgment of the Madras High Court in N. Shivkumar & Anr. v. R. Peter Pereira which observed :

A con-joint reading of Sections 201 and 207 of the Contract Act and especially the illustrations appended to these Sections, I am of the view that the principal viz., Thelma Cecelia Pereira was well within her right and authority to deal with the suit property, dehors the Power of Attorney and during its subsistence and the moment the settlement deed was executed by the principal herself, it resulted in an automatic implied termination of the Power of Attorney given to the power agent.

After applying the aforesaid test in the present case, the court found that both the conditions i.e., knowledge of revocation to the Agent and knowledge of revocation to the third person (Agent's Husband who purchased Principal's property) were fulfilled. The Court held the sale of Principal's share in the property by her Agent as void ab initio.

“We have no doubt in holding that the Appellant, in terms of Section 207, impliedly revoked the authority of Respondent No. 1, and as required by Section 208, Respondent No. 2 had the knowledge of the independent dealing with the property by the Appellant. Therefore, the revocation takes effect on 18.01.2008. Ex. A-5 was executed on 16.04.2008. Thus, with the operation of implied revocation of authority, Respondent No. 1 cannot act as an agent of the Appellant and, hence, the sale deed insofar as the Appellant's share in the suit schedule is held void ab initio.”, the court held.

Accordingly, the appeal was allowed.

Counsels For Appellant(s) Mr. V. Chitambaresh, Sr. Adv. Mr. Vipin Nair, AOR Mr. Arindam Ghosh, Adv. Mr. Karthik Jayashankar, Adv. Ms. M.B.ramya, Adv. Mr. Mohd Aman Alam, Adv. Mr. P.b.sashaankh, Adv. Mr. Govind Venugopal, Adv.

Counsels For Respondent(s) Mr. Haris Beeran, Adv. Mr. Azhar Assees, Adv. Mr. Radha Shyam Jena, AOR

Case Title: THANKAMMA GEORGE VERSUS LILLY THOMAS AND ANOTHER

Citation : 2024 LiveLaw (SC) 893

Click here to read/download the Judgment