Section 202 Contract Act: Termination of agency, where agent has an interest in subject-matter

Section 202 of Indian Contract Act: Termination of agency, where agent has an interest in subject-matter

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Contract Sec 2(h) Agency Sec 182

Legal Commentary & Landmark Judgments: Section 202

Where the agent has themselves an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest. This provision codifies the equitable doctrine of an agency coupled with an interest, establishing the absolute irrevocability of the agent's authority.

Statutory Powers & Jurisdiction: In commercial lending, project finance, and structured credit, powers of attorney executed in favor of lenders, debenture trustees, or security agents to sell mortgaged property or recover receivables constitute classic agencies coupled with an interest.
Core Legal Standard: As affirmed by the Supreme Court in Seth Loon Karan Sethiya v. Ivan E.

John, such an agency cannot be revoked by the principal, nor is it terminated by the death, mental incapacity, or insolvency of the principal; the authority survives to ensure the complete satisfaction of the agent's underlying financial claim.

Key Landmark Precedents:

Seth Loon Karan Sethiya v. Ivan E. John (AIR 1969 SC 73): The Supreme Court held that where a debtor executed an irrevocable power of attorney in favor of a creditor bank authorizing it to execute a decree and satisfy outstanding loans, the bank had an interest in the subject matter under Section 202, making the power of attorney irrevocable.
Suraj Lamp & Industries Pvt Ltd v. State of Haryana (2012) 1 SCC 656: The Supreme Court clarified that an agency coupled with an interest under Section 202 protects the agent's financial security, but does not operate as a substitute for a registered conveyance deed under property law.

Legal Commentary:

Lenders who obtain irrevocable powers of attorney as loan security rely on Section 202. The instrument must explicitly recite the loan liability and convey a security interest in the underlying assets, thereby preventing the borrower or their legal heirs from revoking the attorney's powers.

Section 202: Termination of agency, where agent has an interest in subject-matter

Section 202 of Indian Contract Act: Termination of agency, where agent has an interest in subject-matter

Legal Commentary & Landmark Judgments: Section 202