Liability of principal inducing belief that agent's unauthorized acts were authorized

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

1. Harshad J. Shah vs L. I. C. of India

   Supreme Court of India 04 Apr 1997 Binding (Supreme Court)

   Court's Decision & Legal Precedent

   The doctrine of apparent authority embodied in Section 237 cannot be invoked merely because an LIC agent collected a premium cheque and later deposited it with the Corporation; the claimant must plead and prove that the principal, by its own words or conduct, induced the third person to believe the act was within the agent's authority. Where the LIC's statutory Regulations/Rules and the agent's letter of appointment expressly prohibited agents from collecting money, no implied or apparent authority could be inferred and the policies remained lapsed.

   On this section: The Court set out the ingredients of Section 237 and refused to apply it, holding that an express statutory prohibition on the agent's authority, published in the Gazette, negatives any inducement by the principal.

   Read the full order on eCourts India

2. Pfieffer Vaccum India Limited vs Mita Cars P. Limited

   High Court 18 Apr 2024 Persuasive (High Court, Single Bench)

   Court's Decision & Legal Precedent

   A car manufacturer which publicly held out a dealer as its authorised agent, and which by its own press notice disclaimed liability only for dealings after the date of termination, thereby induced customers to believe that the dealer's acceptance of booking money was within the scope of his authority; it is therefore bound under Section 237 for the advance collected by the dealer while the dealership subsisted. Failure to produce the dealership agreement it pleaded also drew an adverse inference against the principal-to-principal plea.

   On this section: The Court framed a substantial question of law on Sections 182 and 237 and decreed the suit against the manufacturer by applying the inducement test in Section 237 to a terminated dealership.

   Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.