In the Privy Council
7 CWN 441; 30 M.I.A 114
Mohori Bibee and Another
04 March 1903
Lord Macnaughten, Lord Davey, Lord Lindley, Sir Ford North, Sir A. Scoble and Sir A. Wilson
According to section 11 of the Indian Contract Act (1872), a minor is not competent to contract. However, there are no provisions that explicitly deal with the legal status of a contract entered into by a minor. This gave rise to a debate whether a contract entered into by a minor would be voidable at his option or void ab initio. In this case, the debate regarding the legal status of a contract entered into by a minor was put to rest by declaring that a contract entered into by a minor would be void ab initio.
On 20th July, 1895 the respondent Dharmodas Ghose executed a mortgage in favour of Brahmo Dutt to secure the repayment of Rs. 20,000 at 12 per cent interest with respect to some houses belonging to the respondent. At the time, the respondent was a minor and attained 21 years of age only in the month of September of the same year. In the absence of Brahmo Dutt from Calcutta, the whole transaction was carried out by his attorney Kedar Nath Mitter and the money was advanced by his manager, Dedraj. It was claimed that while the transaction was being considered, the respondent’s mother and guardian, Smt. Jogendranundinee Dasi, had sent a letter through her attorney, Mr. Bhupendra Nath Bose, revealing the minority of the respondent and intimated to Mr. Kedar Nath Mitter that any money lent to the respondent would be at the lender’s own peril. The deed of mortgage contained a declaration by the respondent that hehad attained majority and the mortgagee’s assent to lend him money was obtained upon assurance of the same. Mr. Kedar Nath Mitter was aware of the respondent’s status as a minor. On 10th September 1895, the respondent and his mother initiated an action for the declaration of the mortgage as void and sought cancellation of the same. The Court of First Instance granted the relief sought by the respondent and the Appellate Court dismissed the appeal of the appellants. After the institution of this appeal, Mr. Brahmo Dutt died and this appeal was prosecuted by his executors.
Contentions by appellants:
- The respondent was a major when he executed the mortgage.
- Neither the appellant nor his agent had any notice that the respondent was a minor.
- The respondent made a fraudulent declaration regarding his age and is hence disentitled from seeking any relief.
- The knowledge of the respondent’s actual age which Mr. Kedar Nath Mitter possessed should not be imputed to the appellants as Mr. Dedraj acted as the agent of Brahmo Dutt in this transaction.
- The respondent is estopped by section 115 of the Indian Evidence Act, 1872 from claiming that he was a minor at the time of executing the mortgage.
- The respondent must repay the amount advanced according to section 64 and 38 of the Indian Contract Act (1872); and section 41 of the Specific Relief Act (1877).
- The Indian Contract Act (1872) does not deal with contract by minors.
Contentions by respondent:
- Brahmo Dutt and his agents, Mr. Kedar Nath Mitter and Mr. Dedraj, possessed knowledge of the respondent’s actual age.
- Since the respondent was a minor at the time of executing the mortgage, the contract is void.
Though Mr. Brahmo Dutt was not personally present at the time of the transaction, Mr. Mitter acted as his authorised agent in the transaction and Mr. Dedraj too acted under his instructions in good faith believing Mr. Mitter to be Mr. Dutt’s authorised agent. Hence, their Lordships held that the knowledge of the respondent’s minority possessed by Mr. Mitter was rightly imputed to Mr. Dutt.
Section 115 of the Indian Evidence Act,1872 was held to be not applicable in the instant case as both the parties were aware of the truth. Further, such provision was held to be not applicable in the case of minority as held in Nelson v. Stocker 4 De G. and J. 458 (1859). Their Lordships also relied on section 19 of the Indian Contract Act (1872) which says that a fraud or misrepresentation which does not cause the consent to a contract of the party on whom such fraud is practised, or to whom such misrepresentation is made, does not render the contract voidable.
According to section 64 of Indian Contract Act (1872), when a person at whose option a contract is voidable rescinds the contract, he must restore to the other party any benefits that he might have received from that party. Their Lordships found the same to be applicable only in the case of persons competent to contract and not in the case of minors who are incompetent to contract. The decision of the lower courts to decree in the respondent’s favour without ordering him to return the money advanced was upheld by the Privy Council.
The impugned mortgage in the instant case was executed under the Transfer of Property Act (1882). Section 7 of the aforementioned Act says that a person must be competent to contract in order to be competent to transfer property. Section 4 of that Act provides that the chapters and sections of that Act which relate to contracts are to be considered part of the Indian Contract Act, 1872. Hence, the instant case was considered to fall underTransfer of Property Act (1882).
Their Lordships, taking into consideration sections 2, 10 and 11 of the Indian Contract Act (1872), held that the Act makes it essential that all contracting parties should be “competent to contract,” and expressly provides that a person who by reason of minority is incompetent to contract cannot make a contract within the meaning of the Act. Their Lordships also considered various other provisions of the same Act to point out the void nature of a contract by a minor. Sec. 68 states that if a person incapable of entering into a contract or any one whom he is legally bound to support is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.It is clear from the Act that a minor is not liable even for necessaries, and that no demand with respect to the same is enforceable against him by law, though a statutory claim is created against his property. Under sections 183 and 184 no person under the age of majority can employ or be an agent. Again, under sections 247 and 248, although a person under majority may be admitted to the benefits of a partnership, he cannot be made personally liable for any of its obligations; although he may on attaining majority accept those obligations if he thinks fit to do so.
Their Lordships held that when there was no question of creation of a contract on account of one of the parties being a minor, the question whether such a contract is void or voidable does not arise at all as the contract itself is void ab initio. The Indian Contract Act (1872) is exhaustive and imperative and clearly provides that a minor is not capable of entering into a contract. Their Lordships further found no merit in interfering with the decisions of the lower courts not to order the respondent to return the money advanced. They relied on the decision in Thurston v. Nottingham Permanent Benefit Building Society [L. R. (1902)1 Ch. 1 (1901); on appeal, L. R. (1903) App. Cas. 6] wherein it was held that a Court of Equity cannot say that it is equitable to compel a person to pay any moneys in respect of a transaction which as against that person the Legislature has declared to be void and rejected the appellants’ claim for an equitable remedy. The appeal was dismissed.
The Indian Contract Act (1872) expressly provides that a minor is not competent to contract. However, prior to the enactment of the Act, the Courts held contracts by minors to be voidable according to English authorities. Even after the enactment of this Act, there existed a controversy regarding the nature of a contract by a minor. In this case, the Privy Council with the aid of the various provisions of the Act itself held that any contracts made by a minor would be void ab initio and such minor would not be liable for any legal rights that might accrue to the other party in the contract.
Edited by Parul Soni
Approved & Published – Sakshi Raje