Mr. VG and Mr. PG were frading in unlisted shares for the last 3 seven years. They used to borrow funds from each other whenever required for any frade. Within a week's time, they used to refund the money to each other as per circumstances of the case. They were following this practice for the last five years.
On 29 January 2025, Mr. PG wants to buy 20,000 shares of an unlisted company @ 500/- each. But due to insufficiency of funds, he asked Mr. VG for 40 lakhs. Mr. VG & transferred 40 lakhs to Mr. PG, After about three months, Mr. VG reminded that Mr. PG had not refunded 40 lakhs to him till then.
He asked him to pay back his money. Mr. PG told him that he was trying very hard to sell the shares at a reasonable price of 10% more than the price at which he bought these shares but was unable to do so due to market conditions. He asked Mr. VG to sell his shares on his behalf and authorised him to appropriate the amount of loan of Rs. 40 lakhs with interest out of the sale proceeds. Mr. VG agreed to do so.
After about 15 days, when market started recovering Mr. PG denied and revoked the authorization by saying that he would sell his shares himself
With reference to provisions of the Indian Contract Act, 1872, whether the revocation of said agency by Mr. PG was lawful?

Question

Mr. VG and Mr. PG were frading in unlisted shares for the last 3 seven years. They used to borrow funds from each other whenever required for any frade. Within a week's time, they used to refund the money to each other as per circumstances of the case. They were following this practice for the last five years. 
On 29 January 2025, Mr. PG wants to buy 20,000 shares of an unlisted company @ 500/- each. But due to insufficiency of funds, he asked Mr. VG for 40 lakhs. Mr. VG & transferred 40 lakhs to Mr. PG, After about three months, Mr. VG reminded that Mr. PG had not refunded 40 lakhs to him till then. 
He asked him to pay back his money. Mr. PG told him that he was trying very hard to sell the shares at a reasonable price of 10% more than the price at which he bought these shares but was unable to do so due to market conditions. He asked Mr. VG to sell his shares on his behalf and authorised him to appropriate the amount of loan of Rs. 40 lakhs with interest out of the sale proceeds. Mr. VG agreed to do so.
After about 15 days, when market started recovering Mr. PG denied and revoked the authorization by saying that he would sell his shares himself
With reference to provisions of the Indian Contract Act, 1872, whether the revocation of said agency by Mr. PG was lawful?

Accepted Answer

According to Section 202 of the Indian Contract Act, 1872 an agency becomes irrevocable where the agent has himself an interest in the property which forms the subject-matter of the agency and such an agency cannot, in the absence of an express provision in the contract, be terminated to the prejudice of such interest. 
The rule of agency coupled with interest applies and does not come to an end even on death, insanity or the insolvency of the principal. 
In the instant case, Mr. PG appointed Mr. VG to sell his shares on his behalf and authorized him to appropriate the amount of loan of ` 40 lakh with interest out of the sale proceeds. 
Since, interest was created in favour of Mr. VG, thus the revocation of the said agency is not lawful.

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