KATHOOM BIVI AMMAL Vs. ARULAPPA NADAR

JUDGEMENT

(1.) THIS appeal arises out of O. S. No. 42 of 1962. Defendants 2 and 1, who are husband and wife are the appellants. The first defendant filed O. S. No. 17 of 1962 against her step-daughter, Fareeda Beevi, her husband and the plaintiff in O. S. No. 42 of 1962 for a declaration that the two mortgage deeds executed by her step-daughter's husband, the third defendant in that suit, one in favour of her step-daughter, the first defendant in that suit, and the other in favour of the second defendant in that suit, who as already mentioned is the plaintiff in O. S. No. 42 of 1962, were void and not binding on her. The third defendant in that suit was her power-of-attorney agent and in that capacity, he executed the mortgages in favour of the first and second defendants in that suit. On the ground that they had been executed by him after she had cancelled the power-of-attorney in favour of the third defendant that suit was decreed and there was no appeal, against it either by the first or by the second defendant. O. S. 42 of 1962 was filed by the second defendant in O. S. No. 17 of 1962 against the plaintiff in O. S. No. 17 of 1962 as the first defendant, her husband as the second defendant, a tenant under the first defendant as the third defendant and the son-in-law of defendants 1 and 2 as the fourth defendant, this son-in-law being the third defendant in O. S. No. 17 of 1962. O. S. No. 42 of the 1962 was dismissed. As against that dismissal, the plaintiff in O. S. No. 42 of 1962 filed an appeal and that appeal was allowed and the suit decreed. Defendants 1 and 2 have, therefore, come upon appeal to this court. The trial Court held that the first defendant had cancelled the power-of-attorney executed by her in favour of the fourth defendant on 2nd September, 1958, and that, therefore, the mortgage executed by the fourth defendant in favour of the plaintiff was not valid. But it gave a decree against the fourth defendant for the sum due on the mortgage. The lower appellate Court also held that the power-ofattorney was validly cancelled though there seems to be some confusion in its mind with regard to this point as seen from its discussion in paragraphs 9 and 10 of its judgment. However, on the ground that under Section 208 of the Indian contract Act, the termination of the authority of an agent does not take effect, so far as regards third persons, before it becomes known to them. The cancellation would not bind them and consequently the mortgage deed executed by the fourth defendant in favour of the plaintiff was valid. But it gave only a charge decree for the mortgage amount. The plaintiff has, therefore, filed a memorandum of cross- objections and wants a decree for possession of the mortgaged property to be granted in his favour.

(2.) AS both the Courts below have held that the power-of-attorney executed by the first defendant in favour of the fourth defendant has been validly cancelled by her even before the fourth defendant executed the mortgage in favour of the plaintiff, the only question that arises is whether under Section 208 of the Indian Contract act, such cancellation will have the effect of making the mortgage executed by the fourth defendant void as against the first defendant Section 208 of the Indian contract Act is as follows: "208. The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or so far as regards third persons, before it becomes known to them". Illustration (b) to this section is ae follows:-" (b) A, at Madras, by letter directs B to sell for him some cotton lying in a warehouse in Bombay and afterwards by letter, revokes his authority to sell and directs B to send the cotton to Madras. B, after receiving the second letter, enters into a contract with C, who knows of the first letter, but not of the second, for the sale to him of the cotton. C pays B, the money, with which B absconds, C's payment is good as against A. " this illustration is apposite to the facts of this case. In Mulla on Indian Contract act, Students' Edition, Eighth Edition, page 226, the case of Trueman v. Loder, (1840) 11 Ad and El 589, is referred to. That was a case where A traded as B's agent with B's authority. All parties with whom A made contracts in that business were held to have a right to hold B liable to them until B gives notice to the world that a's authority is revoked and It makes no difference if in a particular case the agent intended to keep the contract on his own account. It is argued on behalf of the appellant that it is very unreasonable to expect that the first defendant should inform the whole world that she had cancelled the power-of-attorney given to the fourth defendant, and that that she cannot be expected to approach every body with whom the fourth defendant was likely to enter into contract and inform them of the cancellation. I do not think that such considerations have any relevance in the face of the clear words of the section. The policy of the law, apparently in the interests of trade and commerce, is that the agent's action should bind the principal, even though the principal might have cancelled the agent's authority unless the third persons with whom the agent enters into contracts knew of the termination of the agency. On this point, therefore, the conclusion of the lower appellate Court is correct, and it should be held that the mortgage executed by the fourth defendant in favour of the plaintiff is valid and binding on the first defendant.

(3.) ONE point, which was strenuously urged by the appellants in this Court was that this appeal is barred by res judicata. The argument is put thus; The first defendant in O. S. No. 42 of 1962 obtained a decree in O. S. No. 17 of 1962 holding that the mortgage executed by the fourth defendant in favour of the plaintiff and Fareeda beevi, who were the first and second defendants respectively in that suit (O. S, no. 17 of 1962) was void and not binding on the first defendant, who was the plaintiff in that suit. There was no appeal against that decree. It has, therefore, become final and operates as res judicata because the same question arises in this suit. On the other hand, it is urged on behalf of the contesting respondent that this question was not raised by the first defendant in his appeal before the lower appellate Court and that if she had raised that question he could at least have filed an appeal with a petition to excuse delay and that the appellants should, therefore, not be allowed to raise this question of res judicata in this Court. There is considerable force in this contention. But all the same I will discuss the question of res judicata that has been raised.