In a landmark ruling, the Supreme Court has solidified the position of agents, asserting that the demise of a principal contractor does not terminate agency contracts if the agent holds a vested interest in the subject matter of the agreement. This pivotal decision overturns a previous High Court ruling and sets a new precedent in contractual law.
Justices BR Gavai and BV Nagarathna, presiding over the bench, emphasized that when an agent possesses a stake in the property explicitly outlined within the contract, the termination of the agency under Section 201 of the Indian Contract Act, 1872, upon the principal’s death, is not automatic.
Section 201 of the Act delineates circumstances leading to the termination of agency contracts, including the death of the principal contractor. However, Section 202 provides provisions for cases where an agent has a vested interest in the subject matter, safeguarding against termination to the detriment of such interest in the absence of an explicit agreement.
The Court underscored the interconnectedness of Sections 201 and 202, cautioning against interpreting them in isolation. The appellant, acting under a power of attorney from the principal contractor, successfully argued for the continuation of the agency post the contractor’s demise, citing their vested interest in the contract’s subject matter.
In the case at hand, the appellant, as the power of attorney holder, asserted their entitlement to continue the agency despite the respondent’s plea for termination following the principal contractor’s death. Relying on Section 202, the appellant contended that their interest in the property prevented unilateral termination of the agency, absent an explicit contractual provision.
The Court concurred, rebuffing the earlier judgment for failing to consider the implications of Section 202 and recognizing the appellant’s accrued interest in the contract. Consequently, the appeal was upheld, allowing the appellant to maintain their agency status under the power of attorney.
The ruling in the case of P. SESHAREDDY (D) REP. BY HIS LR. CUM IRREVOCABLE GPA HOLDER AND ASSIGNEE KOTAMREDDY KODANDARAMI v. STATE OF KARNATAKA & ORS marks a significant milestone in contractual jurisprudence, affirming the protection of agents’ interests in property contracts beyond the principal’s lifetime.
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