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PETITIONER: SOUTHERN ROADWAYS LTD., MADURAI, BYITS SECRETARY.

       Vs.

RESPONDENT: S.M. KRISHNAN

DATE OF JUDGMENT05/10/1989

BENCH: SHETTY, K.J. (J) BENCH: SHETTY, K.J. (J) AHMADI, A.M. (J)

CITATION:  1990 AIR  673            1989 SCR  Supl. (1) 410  1989 SCC  (4) 603        JT 1989 (4)    89  1989 SCALE  (2)811

ACT:     Indian   Contract  Act  1872:  Sections  202,  205   and 221--Agent receiving property  on behalf of Principal--Bound to   keep   it separate from that of  others--Revocation  of agency by Principal-Right of agent.

HEADNOTE:     The  appellant-company  is engaged in  the  business  of transport  of  goods and parcels in Southern India  and  for that  purpose has appointed agents at various stations.  The respondent  was one such agent appointed at Madras. As  pro- vided  in clause III of the Contract, the respondent was  to arrange a suitable godown and engage employees. The  Company took on lease a godown at No. 10, Srinivasan Road, T. Nagar, Madras and the same was put in possession of the  respondent for  the purpose of carrying on his agency business  of  the Company.     During the course of the Company’s audit, it  transpired that the Respondent not only mismanaged the business but had misappropriated  some  of  the income of  the  company.  The appellant, therefore, terminated his agency with effect from 14.10.1988  in  terms of clause XI of the Contract  and  in- formed  him that the company would be taking  possession  of the Godown-premises for carrying on the business on its own, as  provided in the contract. Thereafter the respondent  was informed  by a letter that the company has taken  possession of  the Godown on 15.10.88 and another agent  R.  Sundarajan had been appointed in his place. But the respondent prevent- ed  R. Sundarajan and also the company from carrying on  the business  at  the godown-premises. The  company,  therefore, filed  a suit for declaration of its right to carry  on  the business  in  the premises and for  a  permanent  injunction restraining  the respondent from interferring with its  pos- session  on  the ground that after the  termination  of  the agency  of the respondent, the company acquired a  right  to carry on the business of the company and further the company had  since  acquired  the  possession  of  the  premises  on 15.10.88. Pending decision of the suit, the appellant prayed for the issuance of a temporary injunction. The Trial  Judge of  the  Madras High Court granted temporary  injuction  re- straining the

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411 respondent  from interfering with the  appellant’s  business but  on appeal by the respondent the Division Bench  of  the Madras  High Court vacated that temporary injunction.  Hence this appeal by the appellant company. Allowing the appeal, this Court,     HELD:  Under law, revocation of agency by the  Principal immediately  terminates the agent’s actual authority to  act for  the Principal unless the agent’s authority  is  coupled with  an  interest  as envisaged under section  202  of  the Indian Contract Act. When agency is revoked, the agent could claim  compensation if his case falls under section  205  or could  exercise  a lien on the  Principal’s  property  under section 221. The agent’s lien on Principal’s property recog- nised  under section 221 could be exercised only when  there is no agreement inconsistent with the lien. [416B-C]     In the present case, the terms of the agreement by which the  respondent was appointed as agent, expressly  authorise the company to occupy the godown upon revocation of  agency. Secondly the lien, in any event, cannot be utilised or taken advantage of to interfere with Principal’s business  activi- ties. [416C-D]     An agent who receives property or money from or for  his Principal  obtains no interest for himself in the  property. When  he receives any such property he is bound to  keep  it separate from his own and that of others. [416E] (See Foley v. Hill, 2 HLC 28--1843-60 All E.R. Reprint 16 at 198;     It  is  not every agent who is in a  fiduciary  position vis-a-vis his principal. For example if ’A’ appoints ’B’  to be  his  agent  merely to sign a memorandum  and  places  no particular trust in ’B’ the doctrine of fiduciary  relations would not apply. Likewise where the Principal authorises  an agent  to do particular and specified acts, the doctrine  of fiduciary relation may not arise. [418C-D]     In  this case, the respondent’s possession of  the  suit premises  was  on behalf of the company and not on  his  own right. It is, therefore, unnecessary for the company to file a  suit  for recovery of possession. The respondent  has  no right  to  remain in possession of the suit  premises  after termination of his agency. He has also no right to interfere with  the Company’s business. The case, therefore,  deserves the grant of temporary injunction. [419F-G] 412     Smt.  Chandrakantaben and Anr. v. Vadilal  Bapalal  Modi and Ors., [1989] 2 SCC 630 at 643; Narayani Amma v.  Bheska- ran  Pillai, AIR 1969 Kerala 214; Abdul Nabi Sahib v.  Bajab Sahib & Anr., AIR 1944 Mad 221 and Jamma v. Reghu, AIR  1977 Orissa 12, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil  Appeal  No. 4  177 of 1989.     From  the  Judgment  and Order dated  28.3.1989  of  the Madras High Court in O.S.A. No. 48 of 1989.     K.K. Venugopal, K. Chandra Mouli, Ms. Meenakshi Sundaram and K.K. Mani for the Appellant.     Dr.  Y.S. Chitale, V.G. Pragasam, Satya Mitra  Garg,  V. Prakash and R. Venkataramani for the Respondent. The Judgment of the Court was delivered by K. JAGANNATHA SHETTY, J. Special Leave granted.     The question raised in this appeal is whether the  agent after  revocation of his authority is entitled to remain  in

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possession  of the premises of the principal  and  interfere with  the business thereof. The learned single Judge of  the Madras High Court in Original Suit C.S. No. 1317 of 1988 has granted temporary injunction restraining the respondent from interfering with the appellant’s transport business. But the Division  Bench  by judgment delivered on  March  28,  1989, vacated  that  temporary injunction. The present  appeal  is directed against the judgment of the Division Bench.     The  facts are substantially undisputed. The  appellant- company under the name as Southern Roadways Ltd. is  engaged in the business of transport of goods and parcels to differ- ent  places in Southern India. It has  appointed  commission agents  at various stations for the purpose of  carrying  on its  business. S.M. Krishnan-respondent was one  such  agent appointed  at  Madras city. Clause III of the  agreement  by which  he was appointed provides that the respondent  should arrange  a suitable godown and engage employees.  Clause  XI provides  for his removal from service at any  time  without notice. It also provides that upon removal of the agent  the company  could  occupy the godown. The  company  could  also utilise the services of employees engaged by the respondent. As per the agreement perhaps at the 413 suggestion  of the respondent, the Company took on  lease  a godown  at  No. 10, Srinivasan Road, T. Nagar,  Madras.  The godown  was  put  in possession of the  respondent  for  the purpose of carrying on his agency business of the company.     In the course of the company’s audit, it was  discovered that  the respondent had mismanaged the business and  misap- propriated the income of the company. By letter dated  Octo- ber 13, 1988, the company terminated his agency with  effect from  October  14, 1988. He was informed  that  the  company would be taking possession of the godown and carrying on the business  on  its  own. By subsequent letter,  he  was  also intimated  that  the  company has taken  possession  of  the godown  on  October  15, 1988 and another  agent  called  R. Sundarajan,  was  appointed  in his  place.  The  respondent however,  prevented R. Sundarajan and also the company  from carrying  on business at the godown premises.  The  company, therefore,  had to institute a suit for declaration  of  its right  to carry on business in the said premises.  Permanent injuction  restraining the respondent from  interfering  was also sought for. The suit was based on two separate grounds. The first related to legal right of the company to carry  on its business after termination of agency of the  respondent; the second concerned the factum of taking actual  possession of the premises on October 15, 1988.     Pending  suit,  the  company moved the  High  Court  for temporary  injunction. The temporary injunction  restraining the  respondent from interfering with the possession of  the premises and the business thereof. The learned single  Judge (M. Srinivasan, J.) acceded to that request. The judge said:               "As  pointed out already, in this case,  there               is no denial of the lease arrangement  between               the  owner of the premises and the  plaintiff.               The  defendant does not claim to be the  owner               of  the premises nor does he put  forward  any               rival title as against the plaintiff. The only               claim  of the defendant is that he is in  pos-               session  and that he has been paying the  rent               to  the owner. He does not claim that he  took               possession as a lessee from the owner.  Though               there is a specific averment in the plaint and               the affidavit of the plaintiff that there is a               lease  arrangement between the  plaintiff  and

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             the  owner, there is no denial of the same  by               the  defendant.  In these  circumstances,  the               defendant  cannot claim that he is in  posses-               sion pursuant to any right enured in him."               414               As to the possession of the premises, he said:               "The claim made by the plaintiff that it  took               possession on 15.10.1988 is acceptable in view               of  the fact that the defendant was never  the               lessee  under the owner of the  premises.  The               defendant was only looking after the  business               as  an agent of the plaintiff and as  such  he               was  permitted  to enter the premises  and  he               cannot claim independent possession."               Finally, he concluded:               "In  the circumstances of the case, there  can               be  no  doubt that the plaintiff has  been  in               legal and actual possession of the premises on               the  date of suit. The fact that the  business               has been temporarily shifted to another  place               in view of the threat meted out to the  plain-               tiff’s agent will not disentitle the plaintiff               to get injunction. The plaintiff is  certainly               entitled  to carry on its business at No.  10,               Srinivasan  Road,  T.  Nagar,   Madras-600017,               having  taken the premises on lease. It is  ot               open to the defendant to prevent the plaintiff               from carrying on such business."     The respondent was thus restrained by means of temporary injunction  from  interfering with the  company’s  transport business in goods and parcels at the suit premises.     The  respondent took up the matter in appeal before  the Division  Bench of the High Court. The Division  Bench  con- sisting of Sathidev and Padmini Jesudurai, JJ., accepted the appeal  and vacated the temporary injuction. The  conclusion of learned Judges is largely based on the actual  possession of  the premises claimed by the Company. They found it  hard to accept that claim and observed:               "The  plaintiff  will not be entitled  to  the               relief  sought for unless it establishes  that               its claim that possession of the property  was               handed  over to it on 15.10.1984 is true.  The               defendant  has  consistently  been  contending               that  possession  was not handed over  to  the               plaintiff on 15.10.1984 and that he  continues               to be in actual and physical possession of the               property even now. No material has been placed               before the Court to substantiate the claim  of               the  plaintiff that possession was taken  over               on 15.10.1984."               415               They continued:               "In  the  face of these documents and  in  the               absence  of any material to show that  posses-               sion  of  the suit property was taken  by  the               plaintiff on 15.10.1988, it would be  impossi-               ble for this Court to grant the plaintiff, the               relief of injuction."                   As  to  the company’s right to  treat  the               respondent  as trespasser, the Division  Bench               observed:               "Before  the defendant could be  characterised               as a trespasser, the validity of the  termina-               tion  of  the  agency and the  rights  of  the               parties,  following  that,  have  also  to  be

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             determined and this could be done only  during               trial."     At  the  outset, we may state that we are  not  so  much concerned  with the rival claims relating to actual  posses- sion of the suit premises. Indeed, that is quite  irrelevant for the purpose of determining the rights of the company  to carry  on its business. Mr. Venugopal, learned  counsel  for the appellant also discreetly did not advert to that contro- versy.  He, however, rested his case on certain facts  which are proved or agreed. They may be stated as follows:     The  company was and is the tenant of the suit  premises and has been paying rent to the owner. The lease in  respect of the premises has been renewed up to November 22, 1983. It was  the  company which has executed the lease and  not  the respondent. The respondent as agent was allowed to remain in possession  of the premises. It was only for the purpose  of carrying  on company’s business. His agency has been  termi- nated and his authority to act for the company has been  put an  end  to. These facts are indeed not disputed.  On  these facts the contention of counsel is that when the agency  has been terminated, the respondent has no legal right to remain in the premises or to interfere with the business activities of the company.     The force of this argument cannot be gainsaid.  Counsel, in our opinion, appears to be on terra firma. The  principal has right to carry on business as usual after the removal of his  agent.  The Courts are rarely willing to imply  a  term lettering such freedom of the principal unless there is some agreement to the contrary. The agreement between the parties in  this  case does not confer right on  the  respondent  to continue  in  possession  of the suit  premises  even  after termination of agency. Nor does it preserve right for him to interfere with the com- 416 pany’s  business.  On  the contrary, it  provides  that  the respondent  could be removed at any time without notice  and after  removal  the company could carry on its  business  as usual.  The  company under the terms of  the  agreement  is, therefore,  entitled to assert and exercise its right  which cannot be disputed or denied by the respondent.     Even  otherwise, under law revocation of agency  by  the principal immediately terminates the agent’s actual authori- ty to act for the principal unless the agent’s authority  is coupled  with an interest as envisaged under section 202  of the  Indian Contract Act. When agency is revoked, the  agent could claim compensation if his case falls under section 205 or  could exercise a lien on the principal’s property  under section  22  1.  The agent’s lien  on  principal’s  property recognised  under section 22 1 could be exercised only  when there  is  no agreement inconsistent with the lien.  In  the present  case  the terms of the agreement by which  the  re- spondent  was appointed as agent, expressly  authorises  the company  to  occupy the godown upon  revocation  of  agency. Secondly,  the lien in any event, in our opinion, cannot  be utilised or taken advantage of to interfere with principal’s business activities.     There  is yet another significant factor to be borne  in mind when we deaf with the rights of an agent. An agent  who receives property or money from or for his principal obtains to  interest for himself in the property. When  he  receives any  such property he is bound to keep it separate from  his own  and  that  of others. Long ago,  Lord  Cottenham,  L.C. (Foley v. Hill, 2 HLC 28-- 1843-60 All E.R. (Reprint) 16  at 198) said:               "... So it is with regard to an agent  dealing

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             with property; he obtains no interest  himself               in the subject-matter beyond his remuneration;               he  is  dealing throughout  for  another,  and               though  he is not a trustee according  to  the               strict  technical meaning of the word,  he  is               quasi  a trustee for that particular  transac-               tion for which he is engaged."     Out of this practice there has emerged a rule, which  is a  normal  incident  of agency, that an  agent  cannot  deny principal’s  title  to property nor he can convert  it  into other kind or use. Fridman’s Law of Agency (5th Edition page 150) also supports this view:               "Respect of Principal’s title:               "The agent cannot deny the title of the  prin-               cipal to goods,               417               money,  or  land  possessed by  the  agent  on               behalf of the principal. The possession of the               agent  is the possession of the principal  for               all  purposes,  including the  acquisition  of               title under statutes of limitation, even where               in fact the agent, though in ignorance of  his               claim,  is  entitled to the land,  unless  the               agent  possesses not as agent but on  his  own               behalf, in which event his possession will  be               personal and not for his principal."     As  to  the nature of agent’s possession in  respect  of principal’s  property, this Court in a recent judgment  ren- dered  in Smt. Chandrakantaben and Anr. v.  Vadilal  Bapalal Modi and Ors., [1989] 2 SCC 630 said at 643:               "It is well settled that the possession of the               agent  is the possession of the principal  and               in view of the fiduciary relationship  defend-               ant  1  cannot be permitted to claim  his  own               possession. This aspect was well emphasised in               David Lyell v. John Lawson Kennedy, [1889]  14               HL (E) 437 where the agent who was  collecting               the  rent  from the tenants on behalf  of  the               owner  and  depositing it in a  separate  ear-               marked  account continued to do so even  after               the  death  of the owner. After more  than  12               years of the owner’s death his heir’s assignee               brought  the  action  against  the  agent  for               possession  and  the agent  defendant  pleaded               adverse possession and limitation. The  plain-               tiff  succeeded  in the first court.  But  the               action  was dismissed by the Court of  Appeal.               The  House of Lords reversed the  decision  of               the  Court of Appeal and remarked: "For  whom,               and on whose behalf, were those rents received               after Ann Duncan’s death? Not by the  respond-               ent  for  himself, or on his own  behalf,  any               more  than during her  lifetime."  Emphasising               the  fiduciary  character  of  the  agent  his               possession  was likened to that of trustee,  a               solicitor or an agent receiving the rent under               a  power of attorney. Another English case  of               Williams  v. Pott, LR 12 Eq Cas  149,  arising               out  of  the  circumstances  similar  to  the.               present  case was more interesting. The  agent               in that case was the real owner of the  estate               but he collected the rents for a  considerably               long period as the agent of his principal  who               was  his mother. After the agent’s  death  his               heir  claimed  the  estate.  The  mother  (the

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             principal)  had also by then died  after  pur-               porting  by  her will to devise  the  disputed               lands to the defendants upon certain               418               trusts.  The claim of the plaintiff  was  dis-               missed on the plea of adverse possession. Lord               Romilly,  M.R., in his judgment observed  that               since  the  possession of the  agent  was  the               possession  of the principal, the agent  could               not  have made an entry as long as he  was  in               the position of the agent for his mother,  and               that he could not get into possession  without               first  resigning  his position  as  her  agent               which  he  could  have done  by  saying:  "The               property  is  mine; I claim the rents,  and  I               shall  apply the rents for my  own  purposes."               The agent had thus lost his title by reason of               his own possession as agent of the principal."     We  wish to add that it is not every agent who is  in  a fiduciary position vis-a-vis his principal. For example is A appoints  B to be his agent merely to sign a memorandum  and places  no particular trust in B, the doctrine of  fiduciary relations  would not apply. Like wise, where  the  principal authorises an agent to do particular or specified acts,  the doctrine  of fiduciary relation may not arise. What we  want to  emphasise is, in all cases of general agency, the  rela- tion  may  be  generally fiduciary, but in  other  kinds  of agencies,  the relation may vary with the  confidence  which the  principal chooses to repose in the agent. It  may  also depend  upon  the power which the agent exercises  over  the subject matter under the terms of the contract of agency  or by  virtue of the incident of law and usage of the  business which  the relationship implies. Thus the fiduciary  element in agency, though the key to much of the law governing  this relation, is not the essential element in the relation. (See Modern Law Review, Vol. 17 pp. 31-32).     The crux of the matter is that an agent holds the  prin- cipal’s  property  only on behalf of the principal.  He  ac- quires  no interest for himself in such property. He  cannot deny  principal’s title to property. Nor he can  convert  it into any other kind or use. His possession is the possession of the principal for all purposes. As the Kerala High  Court in  Narayani Amma v. Bhaskaran Pillai, AIR 1969 Kerala  214, observed at 217:               "The agent has no possession of his own.  What               is  called  a caretaker’s  possession  is  the               possession of the agent."     So much is, we think, established law as regards agent’s right  to property belonging to the principal. Dr.  Chitale, learned  counsel for the respondent, however, cited in  this context, two decisions: (i) Abdul Nabi Sahib v. Bajab  Sahib and Anr., AIR 1944 Mad 221 and (ii) 419 Jemma  v. Raghu, AIR 1977 Orissa 12. In the former  case  of the Madras High Court, the suit was for a permanent  injunc- tion  restraining  the defendant from interfering  with  the plaintiff’s  peaceful possession and enjoyment of  the  suit properties  and performance of the religious  services.  The defendant  admitted that he was agent of the  plaintiff  but set  up  title to the property in himself as donee.  He  has also  set up title by adverse possession. On  these  claims, Kunhi Raman, J., observed:               "Since the plaintiff had not got possession of               the  property, it would not be  sufficient  to               show  that he was in  constructive  possession

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             and  the theory of constructive possession  as               between  the  principal and agent,  cannot  be               relief  upon by the principal for the  purpose               of  meeting the contention of the  description               raised on behalf of the defendant, who is  the               agent."     If the defendant in the above case, has admitted that he was  the agent of the plaintiff and yet set up title to  the property of his principal, the above observation may not  be consistent  with the settled principle of law. We  have  al- ready  stated  that the agent acquires  no  interest  in-the property of the principal and he cannot, therefore, non-suit the principal on the possessory title as agent.     The second case in Jemma v. Raghu, referred to us is the decision of the Orissa High Court. That case dealt with  the general  principle that the plaintiff who is not in  posses- sion  of  the  suit premises is not entitled  to  relief  of injunction.  The plaintiff must ask for recovery of  posses- sion.  But this principle has no application with regard  to dispute between the principal and agent in respect of  prin- cipal’s property.     In  this case, the respondent’s possession of  the  suit premises  was  on behalf of the company and not on  his  own right. It is, therefore, unnecessary for the company to file a  suit  for recovery of possession. The respondent  has  no right  to  remain in possession of the suit  premises  after termination of his agency. He has also no right to interfere with  the company’s business. The case, therefore,  deserves the grant of temporary injunction. The learned single  Judge of the High Court in our judgment, was justified in  issuing the  injunction.  The Division Bench of the High  Court  was clearly in error in vacating it.     In the result, we allow the appeal with costs. In rever- sal  of  the  order of the Division Bench,  we  restore  the temporary injunction granted by learned single Judge of  the High Court. Y. Lal                                    Appeal allowed. 420