RIGHTS OF AGENT: JUDICIAL PRONOUNCEMENT

RIGHTS OF AGENT: JUDICIAL PRONOUNCEMENT


Author: *AAYUSH AKAR

INTRODUCTION

Who Is An Agent?

 An agent is one who is:
 Employed by another (the principal);
 To do any act for that principal; or
 To represent him in dealing with third persons.
An agent is a person employed to do any act for another or to represent another in dealings with third persons.[1] The person for whom such act is done, or who is so represented, is called the ‘principal’.
The Indian Contract Act of 1872 does not make any distinction between different classes of agents.[2] On one hand an agent may be appointed by the principal, it also includes an employment by any authority authorized by law to make the employment.[3]
Agents are distinguished in respect of authority as general or special agents. The former expression includes brokers, factors, partners, and all persons employed in a business of filling a position of a generally recognized character, the extent of authority being apparent from the nature of employment or position; the latter denotes an agent appointed for a particular occasion or purpose, limited by the employment.[4] A special agent has only authority to do some particular act for some special occasion or purpose which is not within the ordinary course of his business or profession.[5] This distinction is made to determine the authority of that agent. It has been stated[6]:
“A general agent has the full apparent authority due to his employment or position and the principal will be bound by his acts within that authority though he may have imposed special restrictive limits which are not known to the other contracting party.
A special agent has no apparent authority beyond the limits of his appointment and the principal is not bound by his acts in excess of those limits whether the other contracting party knows of them or not.”

THE FORMATION OF THE AGENCY RELATIONSHIP

An agency relationship is formed by the mutual, manifested agreement (often by a contract1) between two parties that establishes that one party shall perform one or more acts on behalf of the other. The term “manifested” is used because an objective test is employed to determine the existence of an agency relationship. That is, if the behaviour of the parties and the specific circumstances indicate that the parties have agreed that one of them will act for the other, then an agency relationship will be found by the court. Accordingly, it is immaterial whether the parties have expressly formed such a relationship, know that is exists, or even desire that it exists. Further, the parties even may have stated expressly that such a relationship does NOT exist.
However, once the court has established the existence of an agency relationship, agency law is introduced to determine the rights and obligations of the parties. Some agency relationships arise as a result of other agreements, such as an employment contract and a partnership agreement, marriage, by itself, generally does not create an agency relationship, although husband or wife can act as the agent for the other. Not all duties, obligations, or actions can be delegated through an agency; for example, an agent cannot substitute for a principal when voting in a public election, signing a will, or making a statement under oath. As noted in Chapter 13 (Contracts), a personal services contract cannot be delegated when the performance by
the original (contracting) promisor is crucial to the actual performance of the duty.

DUTIES AND RIGHTS OF AN AGENT

Under the Indian Law, the Agent has certain duties. An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in absence of any such directions, according to the custom which prevails.[7] It is the duty of every agent to carry out the mandate of his principal.[8] An agent is bound to conduct the business of the agency with as much skill as is reasonable.[9] An agent is bound to render proper accounts to his principal on demand.[10] It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.[11] If an agent deals on his own account in the business of the agency, the principal may repudiate the transaction.[12]

The important rights of an agent can be seen as well. In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act.[13] An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business that he has misconducted.[14] An agent may retain all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business.[15] The employer of an agent is bound to indemnify him against the consequences of all lawful acts done within the authority.[16] Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act.[17] Where one person employs another to do an act which is criminal, the employer is not liable to the agent.[18] The principal must make compensation to his agent in respect of injury caused to such agent by the principal’s neglect or want of skill.[19] 
Following are the rights of agent under Indian Contract Act, 1872-
  1. Right of retainer – Section 217
  2. Right to remuneration- Section 219
  3. Right to compensation- Section 225
  4. Right to indemnify- Section 222-223
  5. Right of lien- Sales of Goods Act, 1930

    RIGHT OF RETAINER – SECTION 217

    INTRODUCTION-

    “An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself 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.”[20]
    Any agent has the authority over the principle’s amount over- (1) the amount expected to be paid to the agent which was borned by him in the business and (2) the amount which needs to be paid to agent as his remuneration for his work in the business.

    CASES FOR EVOLUTION OF ARTICLE 217-

    As per case of Leiboak Syndicate v. Finlay Fleming & Co.,[21] it was held that any agent can retain the amount as retainer and it is assumed that agent is answerable to his master for all the amount he holds in his hands or in his control. Hence, no question of limitation will be arised.
    In the case of Turner Morrison & Co., Ltd v. Commissioner of Income Tax,[22] the issues raised regarding whether in the exercise of right of lien, the agent can become owner of the property of master or not. The Port Said Salt Association Ltd., a company        incorporated in the United Kingdom. The Company had headquarter in Egypt and started its business in India through Turner Morrison and Co. Ltd., (the assesse) for sale in India. It was involved in the business of collecting the proceeds of sale and got commission of 22.5% from the proceedings it collected. On the following facts and circumstances it was identifies as agent under Section 43 of the Indian Income-tax Act. The Calcutta High Court held that assesse which was entrusted with the work of collecting the sale proceeds were agents of the firm and not post office. They received merely income for the firm or association not for their personal account. The Court held that whatever income agent earned in India were treated as income tax under Section 4 of Income Tax Act.
    Any agent can have a possessory lien on the property of his master. No agent can claim equitable lien i.e. priority should be given to him above the creditors for the satisfaction of his lawful claims. In Hammonds v. Barclay,[23] it was held that right to retain goods by person who is in possession of other person goods for the fulfilment of his claims.

    PUCCA ADATIA-

    pucca adatia is person who is authorised to retain profit of constituent made by him. It is generally defined in section 182 of Indian Contract Act 1872. In the case of Shivnarayan Kabra v. The State of Madras,[24] the advertisement was released by appellant representing himself to be pucca adatia so that people could enter into forward contract. He said that he undertook business as per pucca adatia system. The respondent made allegation of false representation made by appellant. He was not part of any association to carry out such business. The issue with Madras High Court was regarding whether appellant was liable under Section 420 of IPC or not. The court held that because of false representation he could carry out the business of forward contract, the appellant would be responsible under Section 420 of IPC.

    RIGHT TO REMUNERATION- SECTION 219

    “In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually complete.”[25]
    An agent is not entitled to remuneration unless he is entitled to the payment, if there is a special contract to that effect. In case of partial sale of goods, agent can retain money or in case of not fully completion of sale.

    CASES FOR THE EVOLUTION OF ARTICLE 219-

    Depending upon terms and conditions, the question always arises whether agent is entitled to remuneration or not. When the agency is gratuitous, the question of remuneration arises.
    Every agent has right to get agreed remuneration or any reasonable remuneration. In the case of Khursheed Alam v. Asa Ram,[26] the issue arises regarding reasonable amount needed to be given to agent by the principal. Here the plaintiff as a broker was appointed by defendant. He was asked to sale property located in Lahore to anyone and was promised commission for the same. The defendant asked him to find out another customer for the sale of another land. The plaintiff sold his land to his brother. The defendant denied to give commission to plaintiff as he thought plaintiff would purchase land for himself. The court held that if second customer was plaintiff’s sibling it doesn’t implies that plaintiff was entitled to compensation and in case of not having written contract he would get reasonable amount of compensation. Similarly in the case of Vasanji Modiji v. Karsondas Tejpal,[27] same issue of reasonable remuneration arises. The plaintiff was employed by defendant as a broker for the mortgage of three properties of defendant. Inspite of negotiating by bank for the forty percent of the value of property, the plaintiff failed to negotiate with defendant. About three months later, the defendant borrowed through another broker, Rs. 110000 from the same bank on a mortgage of one of his properties. Similarly in the case of Hindustan Antibiotics Ltd v. Kohli Medical Stores,[28] defendant entered into contract plaintiff for the supply of products produced by the defendant. The plaintiff was entitled of commission as per terms and conditions. Later on out of full commission, Rs 38,073 was not paid to plaintiff by defendant. The court held that due to absence of any agreement of interest, the plaintiff to be paid reasonable interest of 6%.
    There are two questions which arises under section 219-
    1. When will be act completed?
    2. Is the act result of agent services?
      These questions depend on particular terms of particular contract. In Sellers v. London Counties Newspapers Ltd,[29] the plaintiff was employed with defendant’s company where he was required to sell advertisement space in newspaper. The remuneration which he was expected to get commission on sale. Over the period of time the advertisement which he got were to be placed on running basis. Later on he was dismissed by the defendant. It was held by county judge that he was entitle of commission of sale for the advertisements which were appeared on newspaper. Similarly in the case of Ayyanah Chetty v. Subramania Iyer,[30] it was held that agent would not entitle of commission of 5% till the negotiation for the purchase of house is complete.
      Everything depends on the nature of service undertaken by the agent. In the case of Sheikh Farid Baksh v. Hargulal Singh,[31] in 1932 plaintiff was the agent of the defendant and was asked by him to find out the buyer for the sale of defendant’s shop. He introduced one buyer to the defendant and later on earnest amount was paid to defendant. Unfortunately, due to some issue with the payment the transaction remains unsettled. The court held that Where the remuneration of an agent is payable upon the performance by him of a definite undertaking, he is entitled to be paid that remuneration as soon as he has substantially done all that he undertook to do, even if the transaction in respect of which the remuneration is claimed falls through provided that it does not fall through in consequence of any act or default of the agent.
      The bargain in the sale process must be the direct result of the agent’s service. In the case of Green v. Barlett,[32] the question arises regarding the plaintiff’s action whether he was authorised the commission even though he was absent during the sale negotiation. The defendant had authorised the plaintiff to find out buyer for the sale of his property. He organised auction but that auction remained fruitless and later on when one of the person attending the auction approached to obtain details of the defendant. Later on the sale happened with that person and defendant. As a result, plaintiff sought commission form the defendant as the agreement allowed for commission arising from the private sale. The court held that he would get commission on the account of his efforts which result in the direct negotiation of the sale of the house. Similarly, in the case of Vasanji Moolji v. Karsondas Tejpal,[33] the defendant had appointed plaintiff as it’s agent to obtain loan on the account of mortgage of one of its three properties. The plaintiff found out one bank which was ready to mortgage its property at 40% of its value at 9% p.a. but the negotiation was unsuccessful. Later on the defendant got loan from the other financial institution. The Bombay High Court held that he would get commission as the main office of a loan broker is to bring together the borrower and the lender who is willing to open negotiations on a reasonable basis and when he has done that, he has done all that is necessary for him to do and earn his commission.
      When the agent will not get remuneration because of his services are only remotely connected. In the case of Tribe v. Taylor,[34] the defendant asked the plaintiff to find out buyer for the sale of his building. The plaintiff found out one customer for the sale of the building and the building was sold. Later on the customer entered into partnership with defendant. The defendant had already paid commission to plaintiff but plaintiff was denied commission for the partnership which was entered between customer and defendant. The issue which was raised before the court that whether subsequent partnership between defendant and customer is associated with any of the acts of the plaintiff. The court said that the plaintiff is bound to show that later partnership is the result of any of the act of him. Since he was failed to prove, he would not get any commission.
      The agent is fully free to earn commission as principal cannot avert agent to earn commission. In the case of Luxor (Eastbourne) v Cooper,[35] the issue arose before the court whether the agent is entitle to remuneration when he does work on the behalf of principal and the terms of contract are silent on his remuneration. Whether there is implied term in any contract that principal is bound to pay commission to the a
      gent for the work he has done as per the terms of the agreement. The law of restitution was stated in this case which said that principle should not derive unjust benefit on the account of agent’s salary which is not paid. The facts are as follows that agent was appointed for the sale of defendant’s cinema. The agent found out two customer but the defendant refused to sell the cinema. The agent approached the court of law for his share of commission which was promised by the defendant as per the terms and conditions. The court held that the principle would not dispose of his property to prevent the agent from earning his share of commission. The House of Lords concluded that there could be no implied term on the basis that it imposed a negative commitment, in which it would not be possible to define precise terms.
      In the case of Continental and Eastern Agencies v. Coal India Limited,[36] it was decided that though the full contract of installation did not happen and the payment of commission was contingent to the installation of machinery then also agent was authorised to get his due commission and could not be hold responsible for not the installation of machinery. Since one of the parties in the case was agent of foreign company, it was held by Delhi High Court that jurisdiction of the case was in National Capital as the course of action was arisen here.

      RIGHT TO COMPENSATION- SECTION 225

      INTRODUCTION-

      “The principal must make compensation to his agent in respect of injury1 caused to such agent by the principal’s neglect or want of skill. The Illustration A employs B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskillfully put up, and B is in consequence hurt. A must make compensation to B.”[37]

      CASES OF EVOLUTION OF SECTION 219-

      In the case of Federal Insurance Co v. Nalkano Singapore (P) Ltd,[38] it was held that every principal has the duty to not to have its agent to get unreasonable risks.

      RIGHT TO INDEMNIFY- SECTION 222-223

      The employer is bound to indemnify the lawful act done by his agent in exercise of the authority conferred upon him. The agent should act according to the principal as the agent is representative of principal and act wholly on his behalf. [39]
      ILLUSTRATION-
      • A at Delhi; under instruction from B of Chennai, contract with C to deliver goods to him. B does not send the goods to A and C sues A for the breach of contract, A informs B about the suit, B authorizes him to defend the suit. A defended the suit and he is liable to pay damages, therefore B is liable for damages as A was appointed as an agent by B so B is liable for any lawful act done by his agent as per Section 222
      • John a broker at Europe under the instruction of Jayant, contract with Saloni for the books but afterward John refuses to receive the books, Saloni sues John, John inform Jayant about suit, both of them refuses to receive the books, John is liable for the Damages incurred to Saloni, therefore Jayant is liable for the damages and expenses incurred to Saloni as John was broker and came into contract because of Jayant so employer (Jayant) is liable for the lawful act done by his agent (John) as per Section 222.
        In the relevant case of Kishan Lal v. Bhanwar Lal[40], the plaintiff was an agent both at Jodhpur and Indore in the name of “Kanmal Surajwal and Kanmal Kishwnmal” respectively and the defendant entered into several contracts for the purchase and sale through the plaintiff firm at Indore. The transaction proved unprofitable to the defendant and except a small profit of Rs 103 annas and every one of the rest transaction ended in loss and loss aggregated to sum of Rs 21423, plaintiff paid the amount to third party on behalf of defendant and plaintiff receive in all sum of Rs 11457 which defendant paid from time to time in the plaintiff firm in jodhpur and the defendant had to pay Rs 9861. This suit was not related to the sale and purchase of bullion, It was suited by an agent claiming for losses and expenses incurred by him on behalf of the defendant.
        In this case, Justice Mukherjee said “the agent is entitled to recover from the principal in all losses and expenses incurred by him on behalf of principal in the conduct of business or an act authorized by the principal.”[41]

        ACT WITHIN THE SCOPE OF AUTHORITY-

        An agent needs to get reimbursed for the act done by him on behalf of the principal, the agent should act according to the principal, under the scope of the authority. An agent is entitled to be indemnified for all losses and liabilities incurred on behalf principal, principal is bound to compensate the agent in lawful act done by agent and agent should work under the instruction of principal, if  agent is not working according to the instruction in this situation principal is not liable to indemnify the agent .
        In a relevant case of Hichens, Harrison, Woolston & co v. Jackson & sons[42], the agent was stockbroker working under solicitor [principal] as the principal instructed agent to sell the shares of the client L, the stockbroker according to his principal sold the share, but L denied the transfer of share, and the liability was incurred on stockbroker as stockbroker was working according to his principal. In this case, it was held that the principal was liable to compensate the agent. The principal needed to indemnify his agent as he was working under the scope of authority.
        Similarly in the case of Hazarimal Kochanji v. Khemchand Maggaji[43], the plaintiff had advanced money on account and at the instance of the defendant to certain persons for being in the former position as a member of the caste, on payment of certain sum, the plaintiff asked for repayment of amount from the defendant. In this plaintiff acted as agent in paying the amount to Sabha. It was held that the plaintiff was entitled to recover money from the defendant, as the defendant had taken benefit of money, so the defendant was liable to repay the amount to the plaintiff.

        LAWFUL ACTS DONE-

        It is an essential condition that the agent should work according to the principal, it is not sufficient that the agent performed the act in good faith or the act of the agent is innocent. An agent should legally perform the act then only he/she can be indemnified by the principal. However, an agent could claim the indemnification if he/she is not aware of the unlawfulness of the act.
        In the relevant case of Kantilal v. Ranchhoddass[44], the Bombay Securities Contract Control Act does not prohibit to enter into a contract but the contract should be according to the rules, the provision of the Bombay Securities act bring 2 consequences, (1) Contract not according to with the rules of Bombay Securities is void (2) No claim for broker shall be allowed. Even a contract is held lawful the agent could not claim commission under section 6 of Stock Broker Association. The agent could only be indemnified by the principal if the contract is void not when the contract is unlawful. Hence, in this case, the broker was authorized by the principal to enter into a transaction for the purchase of a share as per the act in behalf of the principal, an agent is entitled to be indemnified even if the contract becomes void.

        THE REMEDY OF THE AGENT-

        If the principal fails to compensate (indemnify) the losses or damages incurred by an agent on behalf of him, in this situation agent would repeal the contract.

        LIMITS OF INDEMNITY-

        If an agent has incurred losses or damages not because of his fault in that condition the principal has to compensate the agent for the losses and damages incurred, the agent is not entitled to all losses incurred by him, the principal will compensate the agent only when the losses and damages are natural and immediate. Thus agent is not entitled to claim indemnification from the principal if the losses and damages occur on his default or if the agent perform any transaction which is beyond the scope of authority in this situation also the principal is not liable to compensate the agent because he was working outside the jurisdiction of the principal. In the relevant case of Duncan v. Hill[45], there was no implied promise by a buying principal to his broker that he will indemnify him from the consequences of his own wrong such as insolvency or having sold at a loss in breach of his agreement with the principal.

        SECTION 223 – AGENT TO BE INDEMNIFIED AGAINST CONSEQUENCE OF ACTS DONE IN GOOD FAITH

        When the principal employs an agent to do an act and agent does that act in good faith in this situation the principal has to indemnify the agent against the consequences of that act though it causes an injury to the rights of third
        person.
        [46]

        ILLUSTRATION-

        1. Saloni was a decree-holder entitled to execution of B’s goods, require the officers of the court to seize certain good representing them to the goods of B. The officer seized the good as per the instruction of the Saloni. Ashwin the real owner of the goods sued the officer in this situation Saloni had to indemnify the officer for the sum which he was compelled to pay to Ashwin as officer was obeying the instructions of Saloni.
        2. A appoints B as the agent to sell the property which is under the possession him, the real owner of the property is not A and the agent is not aware of this. B sold the property. The real owner of the property sues the agent for the value property was sold in this situation principal (A) is liable to indemnify agent (B).

          UNLAWFUL ACTS DONE IN GOOD FAITH-

          Previous section deals with indemnity against the consequences of lawful acts and this section deals with the consequences of the act done in good faith. It is clear that an agent cannot claim indemnification for the unlawful act done by him or when he is not acting in the manner authorized by the principal. There is no claim if the agent is knowing commits an unlawful act.
          In the relevant case of Bhowrilal Mahesri vs State of Assam[47], a judgment creditor who required an officer of the law to take specified goods, pointing them out as the goods of the debtor, made that officer his agent and must indemnify him if, acting in good faith, he committed trespass in obeying the instructions. Where working charges were reasonably incurred by a person for another of dealing with other’s property, he was entitled to such expenses when his bona fides are established by proved facts. Therefore, a person felling and cutting trees for the owner of the forest was entitled to be paid those expenses

          RIGHT TO LIEN

          WHAT IS LIEN?

          Lien in its primary sense is a right in one man to retain that which is rightfully and continuously in his possession belonging to another until the present and accrued claims of the person in possession are satisfied. In this primary sense is given by law and not by contract. The possession of the goods by the person claiming the right of lien is anterior to its exercise. If the said person is not in possession then the exercise of the right is not possible. The lien never arises unless the bailee has a right to continuing possession of the goods, so that if the bailor has the right to remove the goods from time-to-time, there is no lien, in the absence of an express agreement that the goods shall remain ‘in pawn’ despite temporary removal by the bailor.

          RIGHT OF LIEN-

          The word lien means to “retain the possession of” according to section 47(1) the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases namely:
          • Where the goods have been sold without any stipulation as to credit
          • Where the goods have been sold on credit but the term of credit has expired
          • Where the buyer becomes insolvent
            The right of lien is one of the unpaid sellers right against the goods the property in which is transferred to the buyer. It is the unpaid sellers right to retain the goods until the whole of the price is paid or tendered. Lien can be exercised only for non-payment of the price and not for any other charges due against the buyer. The right can only be exercised on the fulfilment of two conditions:
            • The unpaid seller must be in actual possession of goods
            • The unpaid seller can retain the goods only for the payment of the price of goods
              The right of lien is not linked to the title of the goods but is concerned with the possession of the goods, hence the goods have to be in actual possession of the seller in order to exercise this right, which can even be done if he possesses the goods as a Bailee or an agent and should not necessarily be the owner. Thus the seller where he has transferred the documents to the buyer his lien is not defeated as long as he remains in the possession of the goods. But if the buyer has transferred the documents of title to a bona fide purchaser, the seller’s lien is defeated, as the seller is not all
              owed to exercise right of lien when the goods were in the hands of the carrier. Where the goods are sold on credit the right of lien is suspended during the term of credit. But on expiry of that term, if the goods are still in the possession of the seller his lien revives.
              The right of lien exists only for the price of goods as expressly put in Section 46(1) (a) as held in the case of Transport & General Credit Corp. v. Morgan[48], the right wholly depends upon the statutory provisions and not upon any equitable considerations. The seller is thus not entitled to lien for any other charges i.e. charges for storage or the like. In the case of Somes v. British Empire Shipping Co.[49] that where the price has been tendered the seller cannot claim to return the goods further for the expenses incurred by him on storage during the period that he was holding the goods in the exercise of his lien.
              Now, since the right of lien is based only on possession, as soon as the possession of goods is lost the right of lien is also lost. The unpaid seller loses the lien thereon:
              When he delivers the goods to a carrier or other Bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods:
              • When the buyer or his agent lawfully obtains possession of the goods ;
              • By waiver thereof
                The unpaid seller of goods having a lien thereon does not lose his lien by reason only that he has obtained a decree for the price of the goods. Section 47 also provides for the loss of lien by the unpaid seller in the following cases:
                • When he delivers the goods to the carrier or other Bailee for the purpose of transmission to the buyer without reserving right of disposal of the goods;
                • When the buyer or his agent lawfully obtains possession of the goods;
                • By wavier of the lien.
                  The basis of the right is the non-payment of the price and therefore if the buyer is willing to pay the price there is no question of exercise of the right of lien, if the buyer pays the price the right of lien which might have existed earlier is terminated. It is given under section 47(1) that the unpaid seller is entitled to exercise his right of lien until payment or tender of the price in respect of certain goods, the payment of price thus terminates the sellers right to retain the goods.
                  The seller also loses the right of lien when he delivers the goods to a carrier other than a Bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. The right of lien continues so long as the unpaid seller delivers the goods is not made and the seller has the possession of the goods.
                  According to section 48 if the seller has delivered a part of the goods he can exercise his right of lien on the remaining part of the goods unless and until the part delivery was made under such circumstances as to show the right of lien had been waived because sometimes delivery of part may operate as delivery of whole. Such a waiver may be presumed when the seller allows a period of credit to the buyer or delivers a part of the goods to the buyer or his agent.

                  BANKER’S LIEN-

                  A banker’s lien, when it is not excluded by special contract, express or implied, extends to all bills, cheques, and money entrusted or paid to him, and all securities deposited with him, in his character as banker. Strictly, it is confined to securities and properties in the custody of the banker; and in respect of things which belongs to customer, and held by the bank as security; whether they are in the same or different branches. If thing is in possession of the bank, but owned by the customer, has no right of lien over it. A deposit of valuables with a banker is subject to the banker’s lien for the customer’s general debts to him, unless can prove agreement to give up his general lien. Thus, if a certain sum is due to a bank in one account, it may retain as security or other movable that came into it hand in another account; including repayment of subsequent advances. A banker’s lien would also apply to negotiable instruments remitted by customer for collection. Unless, otherwise directed, the proceeds of such collection may be used by the bank for reducing the customer’s debit balance.

                  EXTENT OF THE RIGHT OF LIEN-

                  The extent of bailee’s lien is in respect of services involving the exercise of labour or skill rendered by him in respect of the goods bailed. The services rendered for the purpose of l
                  ien must be limited to the labour or skill expended by the bailor over the goods bailed; the lien has nothing to do with any other kind of service. Such labour and skill must have been spent, and thirdly, the lien applies only to such goods over which the bailee has bestowed his labour and expenses, and not to other goods. Nor does any lien attach to goods bailed to a person for the purpose of his working with it, and not upon it. Mere making arrangement for storage of goods in a godown for payment would not attract his provisions since no improvement in the goods takes place, nor is any labour or skill exercised in respect of such goods.

                  LOSS OF RIGHT OF LIEN

                  A bailee’s right of lien is lost with the loss possession. It is lost if he surrenders possessions of the goods, even though he subsequently regains possession. Thus, in EC Eduljee v. Café John Bros[50], E sold a second hand refrigerator to P, and agreed to put it in order for further sum. P took delivery. Later, E agreed to make further repairs as an act of grace, and was given possession. E claimed a lien, as the original fixed for repairs had not been fully paid. It was held that the lien was lost by the original delivery to P.
                  The lien is also lost if the bailee has sold the goods. The bailee’s assertion of right to retain the chattel otherwise than by way of lie may operate as a waiver of the lien; or by an act or agreement of the bailee amounting to waiver.

                  LIEN AN IMPLIED PLEDGE-

                  Banker’s lien is a general lien recognized by law. The general lien on the banker is regarded as something more than an ordinary lien; it is an implied pledge. This right coupled with rights u/s 43 of the Negotiable Instruments Act, 1881[51] permits bills, notes and cheques, of the banker, being regarded as a holder for value to the extent of the sum in respect of which the lien exists can realize them when due; but in the case of the other negotiable instruments e.g. bearer bonds, coupons, and share warrants to bearer, coming into the banker’s hands and thus becoming liable to the lien, the character of a pledge enables the banker to sell them on default, if a time is fixed for the payment of the advance, or, where no time is fixed ,after request for repayment and reasonable notice of intention to sell and apply the proceeds in liquidation of the amount due to him .The right of sale extends to all properties and securities belonging to a customer in the hands of a banker ,except title deeds of immovable property which obviously cannot be sold.
                  The law gives inter alia, a general lien to the bankers – Lloyds Bank v. Administrator General of Burma[52], to claim a lien, the banker must be functioning qua banker under Section 6 of the Banking Regulation Act- State Bank of Travancore v. Bhargavan.[53] It is now well settled that the Banker lien confers upon a banker the right to retain the security, in respect of general balance account. The term general balance refers to all sums presently due and payable by the customer, whether on loan or overdraft or other credit facilities. In other words, the lien extends to all forms of securities deposited, which are not specifically entrusted or to be appropriated.

                  CASE LAWS AND ILLUSTRATIONS

                  • State Bank of India v. Javed Akhtar Hussain[54]

                    It was held by the Court that the action of the bank in keeping lien over the TDR and RD accounts was unilateral and high handed and even it is not befitting the authorities of the State Bank of India. The court relied on the ruling Union Bank of India v.  K.V. Venugopalan[55] where it was held by the court that the fixed deposit money lodged with the bank is strictly a loan to the bank. The banker in connection with the FD is a debtor .The depositor would accordingly cease to be the owner of the money in fixed deposit. The said money becomes money of the bank, enabling the bank to do as it likes, that however, with the obligation to repay the debt on maturity. In the same ruling it was further held that the bank being a debtor in respect of the money in FD, had no right to pass into service the doctrine of banker’s lien and the money in Fixed Deposit.

                    • Valpy v. Gibson[56]

                      Goods were sold and sent by the sellers at the request of the buyer to the shipping agents of the buyer, and were put on board a ship by those agents. Subsequently, they were re-landed and sent back to the sellers for the purpose of re-packing. While they were still in the possession of the sellers for that purpose, the buyer became insolvent. Thereupon the sellers refused to deliver them to the buyer’s trustee in bankruptcy except upon payment of the price. Held, that the sellers had lost their lien by delivering the goods to the shipping agents, and their refusal to deliver the goods to the trustee was wrongful.

                      • Gurr Cuthbert case[57]

                        Sale of stack of hay for 86 dollars, to be paid for as it is taken away, the whole to be removed by a certain date. Part, but only part, was paid for and removed by the buyer before that date, and two months after that date the seller cut up and used the remainder. In doing so, the seller waived his line, and the buyer successfully maintained an action against him.

                        • Grice Richardson case[58]

                          The appellants, who traded in Australia, imported three parcels of tea which they sold to the respondents, who gave their acceptance or promissory notes for the price. The appellants were also warehousemen, having a bonded warehouse in which they had stored the tea on its importation. On selling the tea to the respondents, the appellants handed them delivery orders, which stated that the tea to which it referred was warehoused by the appellants. The delivery orders were subsequently endorsed by the respondents to w & Co. And entries were made at the warehouse that the tea had been transferred to the company. Subsequently, W & Co became insolvent and their acceptance and notes were dishonoured, by which time part of the tea had been delivered to W & Co and part remained in the warehouse, for which the appellants had not been paid. Held that the appellants as vendors retained their lien in respect of the tea which remained in the warehouse.

                          CONCLUSION

                          A contract of agency is a species of the general contract. As such, an agency may terminate in the same way as a contract is discharged except where the agency is irrevocable. The relation of principal and agent can only be terminated by the act or agreement of the parties to the agency or by operation of law. An agency, when shown to have existed, will be presumed to have continued, in the absence of anything to show its termination, unless such a length of time has elapsed as destroys the presumption agency may be brought to an end either by the act of the parties, or by operation of law. Agency may be terminated by subsequent events. These may be physical, as where, for example, the subject matter is destroyed, or the principal or agent dies, or becomes insane. Alternatively, they may be legal, as where the principal or agent becomes, bankrupt, or the relationship becomes illegal (for example, if the principal becomes an enemy alien).
                          The effects of termination are that as far as principal and agent are concerned, rights vested at the time of the termination will subsist, but no new rights can be created, at least once the agent has notice of the termination. Where the agency was created by agreement, it will be determinable in the same way. A continuing agency may also be determined by giving such period of notice as is specified in any agreement, or failing that, reasonable notice. Finally, if either party acts in a way which is inconsistent with the continuation of the agency then it will be terminated though of course this may well give rise to rights of action for breach of contract. As regards termination by operation of law, if an agency is for a particular transaction, the relationship will terminate when that transaction is completed. If it is for a specified period, it will cease at the end of that period.
                          Under the Indian Law, the Agent has certain duties. An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in absence of any such directions, according to the custom which prevails. It is the duty of every agent to carry out the mandate of his principal. In order to entitle the agent to receive his remuneration, he must have carried out all that he had agreed to do under the agency, and all conditions, imposed by the contract must have been fulfilled.




                          CLICK HERE TO JOIN LAW COLUMN’S TELEGRAM AND WHATSAPP GROPUS





                          [1]* Student at National Law University Odisha.

                           Section 182 of the Indian Contract Act, 1872.

                          [2] Kalyanji Kuwarji v. Tirkaram Sheolal AIR 1938 Nag 254.

                          [3] Sukumari Gupta v. Dhirendra Nath Roy Chowdhury AIR 1941 Cal 643.

                          [4] Leake, Page 323, 6th Edition.

                          [5] Amrit Lal C Shah v. Ram Kumar AIR 1962 Punj 325.

                          [6] Jacob v. Morris [1902] 1 Ch 816.

                          [7] Section 211 of the Indian Contract Act, 1872.

                          [8] Singh, Avtar Law of Contract and Specific Relief Page 745 (Tenth Edition).

                          [9] Section 212 of the Indian Contract Act, 1872.

                          [10] Section 213 of the Indian Contract Act, 1872.

                          [11] Section 214 of the Indian Contract Act, 1872.

                          [12] Section 215 of the Indian Contract Act, 1872.

                          [13] Section 219 of the Indian Contract Act, 1872.

                          [14] Section 220 of the Indian Contract Act, 1872.

                          [15] Section 217 of the Indian Contract Act, 1872.

                          [16] Section 222 of the Indian Contract Act, 1
                          872.

                          [17] Section 223 of the Indian Contract Act, 1872.

                          [18] Section 224 of the Indian Contract Act, 1872.

                          [19] Section 225 of the Indian Contract Act, 1872.

                          [20] Section 217 of the Indian Contract Act, 1872.

                          [21] AIR 1923 Ran 84.

                          [22] AIR 1953 SC 140.

                          [23] 2 East, 227.

                          [24] 1967 AIR 986.

                          [25] Section 219 of the Indian Contract Act, 1872.

                          [26] AIR 1933 Lah 784.

                          [27] AIR 1928 Bom 270.

                          [28] AIHC 2630 (MP).

                          [29] (1951) 1 KB 784 (CA).

                          [30] (1923) 45 MLJ 409.

                          [31] AIR 1937 All 46.

                          [32] 14 CBNS 681.

                          [33] (1928) 30 BOMLR 486.

                          [34] (1876) LR 1 CPD 505.

                          [35] [1941] A.C. 108.

                          [36] 2004 IAD Delhi 294.

                          [37] Section 225 of the Indian Contract Act, 1872.

                          [38] (1992) 1 Curr Lj 539.

                          [39] Indian Contract Act 1872, S 222.

                          [40] (1954) AIR 500.



                          [41] (1954) AIR 500.

                          [42] [1943] AC 266.

                          [43] AIR 1962 Raj 86.


                          [44]AIR 1953 Bom 98.

                          [45] Duncan v. Hill, (1873) LR 8 Ex 242.

                          [46] Section 223 of the Indian Contract Act, 1872.

                          [47] AIR 1961 Ass 64.

                          [48] (1939) 1 Ch 531.

                          [49] 1860 8 HLC 338.

                          [50] AIR (1943) Nag 249.

                          [51] Section 43 Negotiable Instruments Act, 1881.

                          [52] AIR (1934) Rangoon 66.

                          [53] AIR (1969) Kerala, 572.

                          [54] AIR (1992) 94 BOM 585.

                          [55] AIR 1990 Ker 223.


                          [56] (1847) 4 CB 837, 72RR 740.

                          [57] (1843) 12 LJ Ex 309, 61 RR 787.

                          [58] (1877) 3 App Cas 319 (PC).
                          READ  TOWARDS AN INDIAN LEGAL EDUCATION MODEL WITHOUT ANY DISCRIMINATION

                          Leave a Comment