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P. Seshareddy (D) rep. by his LR cum irrevocable GPA holder and assignee Kotamreddy Kodandarami Reddy vs. State of Karnataka & Ors.

Civil Appeal · 2022 INSC 1191Decided 9 Nov 2022
Civil Appeal Nos. 8252-8254 of 2022
B.R. Gavai · B.V. Nagarathna

Background

P. Seshareddy had a construction contract with the State of Karnataka and gave an irrevocable General Power of Attorney (GPA) to Kotamreddy Kodandarami Reddy, and later assigned all rights and liabilities under the contract to him. After disputes arose, arbitration proceedings were initiated; the original contractor died in 1995, and the arbitration case was later dismissed for default. The GPA holder applied to restore the arbitration case, which the trial court allowed, but the Karnataka High Court set that restoration order aside on a writ petition by the State, holding that the agency had terminated on the contractor's death.

Decision Breakdown

The Supreme Court held that the High Court had erred by relying only on Section 201 of the Indian Contract Act (which says an agency ends on the principal's death) while ignoring Section 202, which protects an agent who has his own interest in the subject matter of the agency from having it terminated to his prejudice. Since the contractor had validly assigned his rights and liabilities under the contract to the GPA holder before his death, the GPA holder had an interest in the contract and was entitled to continue the arbitration proceedings. The Court also held that the High Court, exercising supervisory jurisdiction under Article 227, should not have interfered with the trial court's order unless it was perverse. The impugned High Court judgment was set aside and the trial court's restoration order was reinstated, with directions to expedite the decades-old proceedings.

Lesson Learnt

An agency does not automatically terminate on the principal's death if the agent has acquired his own interest in the subject matter (for example, through a valid assignment): such an agent can continue to pursue legal proceedings in his own right.

Official source (sci.gov.in)View Judgment (PDF)

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