Winding up of an LLP by the Tribunal; agent and agency; agency coupled with interest

Grounds for winding up by the Tribunal. An LLP may be wound up by the Tribunal (the National Company Law Tribunal):

1. if the LLP decides that it be wound up by the Tribunal;
2. if, for more than six months, the number of its partners is reduced below two;
3. if it has acted against India's sovereignty and integrity, the security of the State or public order;
4. if it has failed, for any five financial years in a row, to file its Statement of Account and Solvency or its annual return; or
5. if the Tribunal considers it just and equitable to wind it up.

Agent and agency. “An agent is a person employed to do any act for another, or to represent another in dealings with third persons; the person for whom” the act is done, or who is so represented, is the principal (s. 182). The contract by which the principal employs the agent in this way is the contract of agency, and the relation it creates between them is agency. Essentials: the principal must be of the age of majority and of sound mind (s. 183); any person may be an agent, though only a major of sound mind is responsible to the principal (s. 184); and no consideration is necessary to create an agency (s. 185).

Creation of agency. The relation arises whenever one person has authority to act on behalf of another and consents to act; the authority may be express (given by words spoken or written) or implied (inferred from the circumstances of the case, including the ordinary course of dealing) (ss. 186, 187). Agency may also arise in four other ways:

• By estoppel (s. 237): where the principal, by words or conduct, leads a third person to believe that someone is his agent, he cannot afterwards deny the agency against that person. Example: a shop owner who lets his nephew take orders from customers at the counter cannot later refuse an order the nephew accepted.
• By necessity: where an emergency arises while a person is in charge of another's property, he gains authority to do what is needed to save the owner from loss. The essentials are a real emergency, no chance to reach the owner in time, and action in good faith for the owner's benefit. Example: a warehouse keeper who, during a flood, moves a customer's grain to higher ground at some cost can recover that cost from the customer.
• By ratification (s. 196): where someone acts in another's name without authority and that person later adopts the act, an agency arises with effect from the date of the act. The ratifier must know the material facts and must adopt the whole transaction.
• By operation of law: where the law itself treats one person as the agent of another; a partner, for instance, is the agent of the firm for the purposes of its business.

The case. Where the agent himself has an interest in the property that the agency deals with, the principal cannot, without an express contract allowing it, end the agency so as to harm that interest (s. 202). B is owed ₹12,000 by A and has been authorised to sell A's property at Jaipur and pay himself out of the proceeds: his authority secures his own debt, so the agency is coupled with his interest. A cannot revoke the authority he gave B.