MOHORI BIBEE

Vs.

DHARMODAS GHOSE

ILR (1903) 30 CAL 539 (PC)

The Section 2(h) of the Indian Contract Act, 1872 defines contracts as an agreement enforceable by law. The contracts cannot be entered into by any person; the competency regarding the same has been laid down under Section 11 of the Act. The Section 11 of the Indian Contract Act, 1872 states that the person of age of majority, sound mind and not disqualified by law are competent to contract. The age of majority has been determined by the Indian Majority Act, 1875; according to the Section 3 of the said Act the person who completed the age of 18 is major.

The Contract Act lays down the law regarding competency but nowhere states about the effect of the contract if entered by the minor person. This conundrum has been settled by the following landmark case.

BENCH:

Lord Mcnaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir Andrew Scoble, Sir Andrew Wilson

COURT:

Privy Council

FACTS

In the present case, Dharmodas Ghose while he was minor entered into an agreement with Brahmodutt who was moneylender to secure a loan of Rs 20,000. At the time of the transaction the attorney, who acted on behalf of the moneylender, had the knowledge that the Dharmodas is a minor. Later, minor brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, the mortgage was void and inoperative and the same should be cancelled.

In this case, appeal was filed by Brahmodutt's executors and they contended that minor represented his age fraudulently therefore law of estoppel should apply and also if the instrument is cancelled as pleaded by the Dharmodas then he should be made to pay the loan according to Section 64 and 65 of Contract Act.

ISSUES

1) Whether the deed was void under section 2, 10 and 11 of the Indian Contract Act, 1872 or not?

2) Whether the defendant was liable to return the amount of loan which he had received by him under such deed or mortgage or not?

3) Whether the mortgage commenced by the defendant was voidable or not?

 

JUDGMENT

After considering the facts of the case, Privy Council held that the agreement entered into with minor is void ab initio i.e. void from the very beginning. The court further held regarding the contentions of the defendant that, firstly law of estoppel will not apply since the attorney of Brahmodutt had knowledge of fact of minority of Dharmodas. Secondly, Section 64 and 65 of Indian Contract will not apply as there wasn't an agreement at the first place and for the application of Section 64 and 65 the contract must be between competent parties.

Therefore, a precedent of minor's agreement are void ab initio had been laid down in the present case.

ANALYSIS

In this case, various principles of law had been analysed and laid down as follows:

 

1) Law of Estoppel:

The Law of estoppel means if any person incurs liability on another person's representation then such person will not be allowed to change his position.

In the present case, the law of estoppel was not applied because the attorney of an appellant had knowledge about the fact of a minority of minor. However, in various other cases it has been held that the Law of Estoppel will not apply against the minor, despite the fact that the minor made an intentional misrepresentation, he will still be allowed to plead minority as a defence to evade liability. The reason behind such proposition is that the law made minor incompetent to contract because the person of such age should not be made liable to incur liabilities and applying the law of estoppel will defeat the purpose of S.11 of the Contract Act which makes the minor incompetent. Therefore, the law of estoppel will not apply against the minor as by such application he will be made to incur liability.

 

2) Section 64 and 65 of Indian Contract Act, 1872:

The Section 64 and Section 65 of the Indian Contract Act, relates to the restoration of benefit received under voidable and void contracts respectively. The court observed that Section 64 and 65 applies to the contract between competent wherein it has been declared as void or voidable. However, in the present case the parties to the contract were not competent and therefore the provisions of restoration of benefit under Contract Act won't be applicable in the present case.

 

3) Refund under Specific Relief Act, 1877

The Section 41 of Specific Relief Act, 1877 i.e. current Section 33 Specific Relief Act, 1963 states that on adjudging the cancellation of an instrument, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require. Basically, this provision means that the party who wants the cancellation of instrument from the court must restore the benefit it received under instrument. In the

present case, appellant wants the cancellation of instrument and also restoration of benefit; therefore, he can't claim the benefit of refund under Specific Relief Act.

In order to rectify the situation of minor agreement, Law Commission in its 13th Report suggested that an explanation to the Section 65 should be added that and it should be made applicable to minor agreements too.

The various courts have developed the equitable doctrine of restitution in the case of minor's agreement. According to this doctrine, if the benefit received by minor under the transaction are either goods or anything else other than the money, then such goods or things as long as traceable shall be restored back to bonafide party to an agreement. However, the law regarding restitution of money i.e. where the benefit received under the transaction is in the form of money has not yet been settled; regarding this view courts have difference of opinion.

The settled law is that agreements with the minor are void ab initio.