Breach of agency undertaking regarding specific business user warrants withdrawal of royalty-free possession during litigation.

The Appellant/Plaintiff filed a suit in 1980 for specific performance regarding Shop No. 15A (the "suit shop")

In 1986, the High Court permitted Respondent No. 2 (Defendant No. 2) to continue in possession of the shop as an Agent of the Court Receiver without payment of compensation, based on an undertaking that she would use the premises only for her "business of a department store" and not part with possession

In 2017, the Appellant moved a Notice of Motion (No. 4568 of 2017) seeking the appointment of a Court Receiver and dispossession of Respondent No. 2, alleging she breached the undertaking by permitting her son, Sanjay Mehra, to conduct an independent business ("M/s. Fifth Season") dealing in watches and gifts

The Trial Court dismissed the Motion, leading to this appeal

1. Whether Respondent No. 2 violated the court order dated 27th March 1986 and the undertaking dated 17th July 1986 by altering the nature of the business and the person in possession

2. Whether an established breach of an agency undertaking necessitates the immediate removal of the Agent and delivery of possession to the Plaintiff in a suit for specific performance

Section 119, Illustration (g) of the Bharatiya Sakshya Adhiniyam, 2023 (formerly Section 114 of the Indian Evidence Act), which allows the court to presume that evidence withheld by a party would be unfavorable to them if produced

Law of Agency under the Code of Civil Procedure regarding the duties of an Agent of the Court Receiver to maintain the status of the property and act within the strict confines of the court-sanctioned occupation agreement

The Court found that Respondent No. 2 committed a clear breach of her 1986 undertaking. The undertaking required two cumulative conditions: the business must be her own, and it must be a "department store"

The Court Receiver’s 2017 report and Respondent’s admissions confirmed the shop was used by her son for a specialized watch/gift business

By failing to produce financial records to show the business was her own, the Court drew an adverse inference under Section 119 of the Bharatiya Sakshya Adhiniyam

The Court rejected the Trial Court's reasoning that use by a son excused the breach, noting that as an Agent of the Court Receiver, she had a "continuing obligation" to disclose material changes in user

However, since the suit for specific performance is pending and Respondent No. 2 has been in possession for 40 years, the Court determined that total dispossession was too harsh. Instead, the appropriate remedy was to withdraw the "indulgence" of free occupation

The Court held that while Respondent No. 2 breached her undertaking, she may remain in possession as Agent of the Court Receiver only if she executes a fresh Agency Agreement by 31st July 2026, which must include the payment of monthly royalty/compensation and furnishing of security. Failure to comply will result in the Court Receiver taking immediate possession

No costs were awarded