Case Note & Summary
The litigation arose out of a dispute between an agent and his principals. The agent sued the principals for rendition of accounts for the period of his agency, while the principals filed a separate suit for enforcement of a promissory note that the agent had executed in their favour. The agent's defence in the promissory note suit included an oral agreement by which the principals had agreed not to enforce the note during the agency and unless a sum remained due after accounting. The trial court granted a decree on the promissory note but directed that it should be adjusted against any amount found due upon accounting in the agent's suit. The principals appealed to the High Court, which affirmed the trial court's decision, leading to a further appeal to the Supreme Court. The Supreme Court considered two main legal issues: first, whether an agent can sue his principal for accounts, and second, whether the oral agreement could be proved in view of Section 92 of the Indian Evidence Act, 1872. On the first issue, the Court held that although an agent ordinarily has no statutory right to an account from his principal, there may be special circumstances where it is equitable to allow such a suit. Such circumstances exist when all accounts are in the possession of the principal and the agent cannot determine his claim for commission without an accounting, or where the agent's remuneration depends on the extent of dealings unknown to him. In the present case, the Court found special circumstances that entitled the agent to sue for accounts. On the second issue, the Court held that the oral agreement pleaded by the agent was a collateral agreement, not related to the mode of discharge of the obligation under the promissory note but rather a condition precedent to its enforceability. As such, it fell within the third proviso to Section 92 of the Indian Evidence Act and was provable. The Court therefore dismissed the appeal, upholding the decisions below that allowed the agent's suit for accounts and permitted proof of the oral agreement to defer enforcement of the promissory note pending accounting.
Headnote
A) Principal and Agent - Agent's Right to Sue Principal for Accounts - Agent generally has no statutory right to claim accounts from principal, but special circumstances may render it equitable, such as when all accounts are in principal's possession and agent cannot determine his commission or when agent's remuneration depends on dealings unknown to him - Agent was entitled to sue for accounts in the special circumstances of the case - Held that agent's suit for accounts was maintainable (Paras Not mentioned) B) Evidence - Oral Agreement to Vary Written Contract - Section 92, Proviso 3, Indian Evidence Act, 1872 - An oral agreement constituting a condition precedent to the enforceability of a promissory note is a collateral agreement and can be proved under Section 92 proviso 3 - The agent pleaded an oral agreement that the promissory note would not be enforced during the agency and only after accounting - Held that the oral agreement was provable as it did not contradict the terms of the note but operated as a condition precedent (Paras Not mentioned)
Issue of Consideration
Whether an agent can sue his principal for rendition of accounts; whether an oral agreement creating a condition precedent to the enforceability of a promissory note is provable under Section 92 of the Indian Evidence Act, 1872
Final Decision
Supreme Court dismissed the appeal, holding that an agent can sue his principal for accounts in special circumstances where all accounts are with the principal and the agent cannot determine his commission otherwise; and that an oral agreement creating a condition precedent to the enforceability of a promissory note is a collateral agreement and provable under Section 92 proviso 3 of the Indian Evidence Act, 1872.
Law Points
- Agent generally has no statutory right to sue principal for accounts
- but in special circumstances where accounts are solely with principal and agent cannot otherwise determine his commission
- an equitable right to account exists
- an oral agreement constituting a condition precedent to the enforceability of a promissory note is a collateral agreement and can be proved under Section 92 proviso 3 of the Indian Evidence Act
- 1872
