The Supreme Court ruled that a principal’s decision to act independently, known to both the agent and third parties, effectively revokes the Power of Attorney in favor of the agent. This clarification arose from a property dispute case involving two sisters, highlighting key principles under the Indian Contract Act.
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NEW DELHI: The Supreme Court delivered a significant judgment regarding the revocation of Power of Attorney (PoA) within principal-agent relationships. The Court stated that if a principal chooses to act independently and both the agent and the third party are aware of this decision, it would imply a revocation of the PoA favoring the agent.
A Bench comprising Justice CT Ravikumar and Justice SVN Bhatti made these observations while adjudicating a property dispute between two sisters, one of whom had executed a PoA in favor of the other. This case provided a crucial context for the Court to elaborate on the principles governing the revocation of an agent’s authority under the Indian Contract Act.
The Court clarified that revocation or renunciation of authority can be explicit or implied through the principal’s words and conduct.
“If the principal decides to take action independently, especially when the agent and affected parties are aware, Section 207 of the Indian Contract Act regarding revocation applies.”
-the Court stated.
This implies that the principal’s decision to act independently, once known to the agent and the affected third party, serves as a valid ground for the revocation of the agent’s authority.
Furthermore, the Court emphasized the need for clear communication in the revocation process.
“If there is no specified method for revoking an agent’s authority, the principal must clearly and unequivocally communicate the revocation to all affected parties.”
-the judgment read.
This highlights the necessity for unambiguous actions or statements by the principal to ensure all parties are adequately informed about the revocation.
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The Court also shed light on Sections 207 and 208 of the Indian Contract Act, which outline the procedures and implications of revocation.
“Under Sections 207 and 208 of the Act, the authority of an agent can be revoked or renounced explicitly through words or implicitly through actions and statements that are inconsistent with the agent’s continued authority. This constitutes a form of renunciation or revocation of the agent’s authority.”
-the Court elaborated.
Additionally, the ruling discussed the timing and effectiveness of such revocations as stipulated in Section 208.
“Section 208 of the Act clarifies that revocation takes effect upon meeting two conditions: communication to the agent and knowledge by third parties who deal or are likely to deal with the agent. This ensures that the agent and relevant parties are informed of the revocation. Mere contemplation by the principal without corresponding actions or conduct does not constitute implied revocation or renunciation of agency; there must be explicit acts or conduct indicating the agency’s revocation or withdrawal.”
-the Court explained.
This detailed judgment by the Supreme Court provides a comprehensive understanding of how the revocation of PoA should be handled, ensuring that all involved parties are clearly and effectively informed. It underscores the importance of clear communication and explicit actions in the legal processes governing principal-agent relationships, particularly in scenarios where the principal decides to act independently.
The Supreme Court has issued a landmark judgment on the revocation of Power of Attorney (PoA) in principal-agent relationships, particularly focusing on the implied revocation aspect. This ruling came during a property dispute between two sisters, Thankamma George (the principal) and Lilly Thomas (the agent), who had purchased 11.50 ares of land together in 1991.
In 2003, Thankamma, working abroad, executed a PoA in favor of Lilly concerning the property. However, in January 2008, contrary to the PoA, Thankamma and Lilly jointly executed a sale deed for a portion of the land to a third party. Following this sale, 8.47 ares remained. The dispute arose later in 2008 when Lilly transferred the remaining land to her husband, PM Thomas.
Thankamma argued that the joint execution of the sale deed in January 2008 implied the revocation of the PoA. She sought a declaration from the trial court that she was the sole titleholder of the remaining property and requested the recovery of possession from her sister and brother-in-law.
The trial court rejected her claim of sole ownership but accepted her alternative prayer for partition, decreeing the suit accordingly and agreeing that the PoA favoring Lilly stood revoked. The case then reached the Kerala High Court, which in 2022 ruled that Lilly joining Thankamma in executing the sale deed did not amount to implied revocation. Following this, Thankamma appealed to the Supreme Court.
The Supreme Court faced the critical question of whether the implied revocation of the PoA was valid in this case. The Court noted that Lilly’s husband was a witness to the sale deed executed by the sisters in January 2008, which deviated from the power granted to Lilly under the PoA by Thankamma. The Court highlighted that Thankamma’s actions indicated an intention to act for herself regarding her share in the property.
“In the case of Deb Ratan Biswas …, this Court ruled that defendants signing a compromise would imply revocation of power of attorney. Similarly, if a principal decides to act independently, especially known to the agent and affected parties, Section 207 of the Act would apply.”
-the Court stated.
The Supreme Court concluded that there was no doubt that Thankamma had revoked Lilly’s authority, who was aware of this revocation.
“Hence, since the revocation took effect on 18.01.2008 and Ex. A-5 was executed on 16.04.2008, Respondent No. 1 cannot legally act as the Appellant’s agent. Therefore, the sale deed concerning the Appellant’s share in the suit schedule is considered void ab initio.”
-the Court ruled.
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The Court deemed the High Court judgment unsustainable and allowed Thankamma’s appeal, confirming the trial court’s decision. Considering the relationship between the parties and the fact that a house had been constructed on the land, the Supreme Court directed the trial court to determine the market value of Thankamma’s half share in the property. The Court suggested that, subject to her sister and brother-in-law paying this value, a final decree should be passed.
“If the parties fail to agree on the current market value, the judgment and decree of the Trial Court’s operative portion could proceed to final decree proceedings and execution as per the law. In this scenario, the Appellant would compensate the Respondents for their possession of the constructed area, along with her half share in the property schedule.”
-the Court ordered.
Senior Advocate V Chitambaresh, along with advocates Vipin Nair, Arindam Ghosh, Karthik Jayashankar, MB Ramya, Mohd Aman Alam, PB Sashaankh, and Govind Venugopal, represented the appellant. Advocates Haris Beeran, Azhar Assees, and Radha Shyam Jena appeared for the respondent.
