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Section 217: Agent's right of retainer out of sums received on principal's account

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 216 All 266 Sections of Indian Contract Act Section 218

Legal Commentary & Landmark Judgments: Section 217

Section 217 confers upon the agent a statutory right of retainer, permitting the deduction and retention of sums received on the principal's account to satisfy advances made, proper disbursements incurred, and accrued agency remuneration.

  • Statutory Possessory Retainer Over Money: Empowers the agent to exercise a self-help deduction over funds legitimately collected for the principal to satisfy verified outstandings before remitting the balance.
  • Requisite Nexus with Agency Business: The right of retainer is strictly limited to debts, advances, and expenses properly incurred within the business of the specific agency; it cannot be exercised for unconnected personal loans or unrelated debts.
  • Prerequisite to Remittance Obligation: Section 217 acts as a statutory qualification to the agent's general duty to pay over sums under Section 218, operating automatically as an equitable set-off at the moment of receipt.
Key Landmark Precedents:
  • Narayandas v. Sangli Bank Ltd. AIR 1966 SC 170: The Supreme Court affirmed that an agent's right of retainer is an automatic statutory adjustment mechanism exercisable against sums collected in the course of agency transactions.
  • Radhakrishna v. Union of India AIR 1959 AP 653: The High Court ruled that an agent cannot retain money entrusted to him for a specific earmarked statutory purpose or trust incompatible with general appropriation.
  • Ram Lal v. Asian Commercial Bank (1928) ILR 9 Lah 350: The Lahore High Court held that a collecting bank or commercial agent cannot appropriate proceeds received for transmission toward unliquidated or disputed claims outside the agency mandate.
Courtroom Practice & Strategic Litigation Guidance:

When defending an agent in a recovery suit filed by a principal, plead Section 217 as a specific statutory defense of retainer rather than a procedural counter-claim under CPC Order VIII Rule 6A. File a detailed contemporaneous schedule of out-of-pocket expenses and vouchers proving that all disbursements were properly incurred in conducting the principal's business.

Section 216 All 266 Sections of Indian Contract Act Section 218