Dharmodas Ghose Case Essay

Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed mortgage of property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. The Privy Council had to ascertain the validity of the mortgage. Under Section 7 of the Transfer of Property Act, every person competent to contract is competent to mortgage. The Privy Council decided that Sections 10 and 11 of the Indian Contract Act make the minor’s contract void. The mortgagee prayed for refund of Rs. 8,000 by the minor. The Privy Council further held that as a minor’s contract is void, any money advanced to a minor cannot be recovered. JUSTICE SIR FORD NORTH On July 20, 1895, the respondent, Dharmodas Ghose, executed a mortgage in favour of Brahmo Dutt, a money-lender carrying on business at Calcutta and elsewhere, to secure the repayment of Rs. 20,000 at 12 per cent interest on some houses belonging to the respondent. The amount actually advanced is in dispute. At that time the respondent was an infant; and he did not attain twenty-one until the month of September following. Throughout the transaction Brahmo Dutt was absent from Calcutta, and the whole business was carried through for him by his attorney, Kedar Nath Mitter, the money being found by Dedraj, the local manager of Brahmo Dutt. While considering the proposed advance, Kedar Nath received information that the respondent was  still a minor; and on July15, 1895, the following letter was written and sent to him by Bhupendra Nath Bose, an attorney: â€Å"Dear Sir, I am instructed by S.M. Jogendranundinee Dasi, the mother and guardian appointed by the High Court of the person and property of Babu Dharmodas Ghose, that a mortgage of the properties of the said Babu Dharmodas Ghose is being prepared from your office. I am instructed to give you notice, which I hereby do, that the said Babu Dharmodas Ghose is still an infant under the age of twenty-one, and any one lending money to him will do so at his own risk and peril.† Kedar Nath positively denied the receipt of any such letter; but the Court of first instance and the Appellate Court both held that he did personally receive it on July 15; and the evidence is conclusive upon the point. On the day on which the mortgage was executed, Kedar Nath got the infant to sign a long declaration, which he had prepared for him, containing a statement that he came of age on June 17; and that Babu Dedraj and Brahmo Dutt, relying on his assurance that he had attained his majority, had agreed to advance to him Rs. 20,000. There is conflicting evidence as to the time when and circumstances under which that declaration was obtained; but it is unnecessary to go into this, as both Courts below have held that Kedar Nath did not act upon, and was not misled by, that statement, and was fully aware at the time the mortgage was executed of the minority of the respondent On September 10, 1895, the infant, by his mother and guardian as next friend, commenced this action againt Brahmo Dutt, stating that he was under age when he executed the mortgage, and praying for a declaration that it was void and inoperative, and should be delivered up to be cancelled. The defendant, Brahmo Dutt, put in a defence that the plaintiff was of full age when he executed the mortgage; that neither he nor Kedar Nath had any notice that the plaintiff was then an infant, that, even if he was a minor, the declaration as to his age was fraudulently made to deceive the defendant, and disentitled the plaintiff to any relief; and that in any case the Court should not grant the plaintiff any relief without making him repay the moneys advanced. Jenkins J., who presided in the Court of first instance, found the facts as above stated, and granted the relief asked. And the Appellate Court dismissed the appeal from him. Subsequently to the institution of the present appeal Brahmo Dutt died, and this appeal has been prosecuted by his executors. The first of the appellants’ reasons in support of the present appeal is that the Courts below were wrong in holding that the knowledge of Kedar Nath must be imputed to the defendant. In their Lordships’ opinion they were obviously right. The defendant was absent from Calcutta, and personally did not take any part in the transaction. It was entirely in charge of Kedar Nath, whose full authority to act as he did is not disputed. He stood in the place of the defendant for the purposes of this mortgage; and his acts and knowledge were the acts and knowledge of his principal. It was contended that Dedraj, the defendant’s gomastha, was the real representative in Calcutta of the defendant, and that he had no knowledge of the plaintiff’s minority. But there is nothing in this. He no doubt made the advance out of the defendant’s funds. But he says in his evidence that â€Å"Kedar Babu was acting on behalf of my master from the beginning in this matter;† and a little further on he adds that before the registration of the mortgage he did not communicate with his master on the subject of the minority. But he did know that there was a question raised as to the plaintiff’s age; and he says, â€Å"I left all matters regarding the minority in the hands of Kedar Babu.† The appellants’ counsel contended that the plaintiff is estopped by Section 115 of the Indian Evidence Act (I. of 1872) from setting up that he was an infant when he executed the mortgage. The section is as follows: â€Å"Estoppels. When one person has by his declaration act or omission intentionally caused or permitted another person to believe a thing to be true, and to act upon such belief, neither he nor his representative shall be allowed in any suit or proceeding between himself and such person or his representative to deny the truth of that thing.† The Courts below seem to have decided that this section does not apply to infants; but their Lordships do not think it necessary to deal with that question now. They consider it clear that the section does not apply to a  case like the present, where the statement relied upon is made to a person who knows the real facts and is not misled by the untrue statement. There can be no estoppel where the truth of the matter is known to both parties, and their Lordships hold, in accordance with English authorities, that a false representation, made to a person who knows it to be false, is not such a fraud as to take away the privilege of infancy: Nelson v Stocker [1 De G. & J. 458]. The same principle is recognised in the explanation to Section 19 of the Indian Contract Act, in which it is said that a fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practiced, or to whom such misrepresentation was made, does not render a contract voidable. The point most pressed, however, on behalf of the appellants was that the Courts ought not to have decreed in the respondent’s favour without ordering him to repay to the appellants the sum of Rs. 10,500, said to have been paid to him as part of the consideration for the mortgage. And in support of this contention Section. 64 of the Contract Act (IX of 1872) was relied on: Both Courts below held that they were bound by authority to treat the contracts of infants as voidable only, and not void; but that this section only refers to contracts made by persons competent to contract, and therefore not to infants. The general current of decision in India certainly is that ever since the passing of the Indian Contract Act the contracts of infants are voidable only. This conclusion, however, has not been arrived at without vigourous protests by various judges from time to time; nor indeed without decisions to the contrary effect. Under these circumstances, their Lordships consider themselves at liberty to act on their own view of the law as declared by the Contract Act, and they have thought it right to have the case reargued before them upon this point. They do not consider it necessary to examine in detail the numerous decisions above referred to, as in their opinion the whole question turns upon what is the true construction of the Contract Act itself. It is necessary, therefore, to consider carefully the terms of that  Act; but before doing so it may be convenient to refer to the Transfer of Property Act (IV of 1882), s.7 of which provides that every person competent to contract and entitled to transferable property †¦ is competent to transfer such property †¦ in the circumstances, to the extent, and in the manner allowed and prescribed by any law for the time being in force. That is the Act under which the present mortgage was made, and it is merely dealing with persons competent to contract; and s. 4 of that Act provides that the chapters and sections of that Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872. The present case, therefore, falls within the provisions of the latter Act. Then, to turn to the Contract Act, s. 2 provides (e) Every promise and every set of promises, forming the consideration for each other, is an agreement. (g) An agreement not enforceable by law is said to be void. An agreement enforceable by law is a contract, (i) An agreement which is enforceable by law at the option of one or more of the parties- thereto, but not at the option of the other or others, is a voidable contract Sect. 10 provides: â€Å"All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not thereby expressly declared to be void.† Then Sec. 11 is most important, as defining who are meant by â€Å"persons competent to contract;† it is as follows: â€Å"Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. Looking at these sections, their Lordships are satisfied that the Act makes it essential that all contracting parties should be â€Å"competent to contract,† and expressly provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act. This is clearly borne out by later sections in the Act. Sec. 68 provides that, â€Å"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 beyond question that an infant falls within the class of persons here referred to as incapable of entering into a contract; and it is clear from the Act that he is not to be liable even for necessaries, and that no demand in respect thereof is enforceable against him by law, though a statutory claim is created against his property. Under Section. 183 and 184 no person under the age of majority can enjoy or be an agent. Again, under Section. 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. The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant. Their Lordships are, therefore, of opinion that in the present case there is not any such voidable contract as is dealt with in Sec tion 64. A new point was raised here by the appellants’ counsel, founded on s. 65 of the Contract Act, a section not referred to in the Courts below, or in the cases of the appellants or respondent. It is sufficient to say that this section, like Section. 64, starts from the basis of there being an agreement or contract between competent parties, and has no application to a case in which there never was, and never could have been, any contract. It was further argued that the preamble of the Act showed that the Act was only intended to define and amend certain parts of the law relating to contracts, and that contracts by infants were left outside the Act. If this were so, it does not appear how it would help the appellants. But in their Lordships’ opinion the Act, so far as it goes, is exhaustive and imperative, and does provide in clear language that an infant is not a person competent to bind himself by a contract of this description . Another enactment relied upon as a reason why the mortgage money should be returned is Section 41 of the Specific Relief Act (I of 1877), which is as follows: â€Å"Sec. 41. 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.† Sec.38. provides in  similar terms for a case of rescission of a contract. These sections, no doubt, do give a discretion to the Court; but the Court of first instance, and subsequently the Appellate Court, in the exercise of such discretion, came to the conclusion that under the circumstances of this case justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy, and their Lordships see no reason for interfering with the discretion so exercised.