Mohori Bibee v. Dharmodas Ghose

Namra Chauhan

Punjabi University Patiala

This Case Commentary is written by Namra Chauhan, a Third Year Law Student of Punjabi University Patiala

Case Details:

Ø Citation: AIR 1903 PC 88

Ø Court: Privy Council

Ø Decided On: 4th March 1903

Ø Decided by: The Lords of the Judicial Committee of the Privy Council

Ø Subject: Indian Contract Law

Ø Appealed From: The High Court of Judicature at Fort William in Bengal

Ø Parties:-

§ Appellant: Mohori Bibee and Another

§ Respondent: Dharmodas Ghose

Ø Decision By: Sir For North

Ø Sitting Judges:-

§ Lord Macnaghten

§ Lord Davey

§ Lord Lindley

§ Sir Ford North

§ Sir Andrew Scoble

§ Sir Arthur Wilson

Ø Sections mentioned:-

§ Indian Contract Act, 1872 – Sections – 2,10,11,64, 65

§ Indian Evidence Act, 1872 – Section - 115; now BSA, 2023 section- 122

§ Specific Relief Act,1877 – Section- 41; now Specific Relief Act, 1963 section- 33

Abstract:

Mohori Bibee v Dharmodas Ghose[1] was a landmark case in India related to the question of the validity of contracts entered into by Minors. It was one of the first Indian contract law cases to literally hold that contracts entered into by minors are void ab initio, which means that they are void from the very beginning.

Here in this case, Dharmodas Ghose, a minor, advanced a loan from his uncle Brahmo Dutt by mortgaging his property. Mohori Bibee later bought up the mortgage. The claim was presented before the Privy Council, the highest appellate court in British India.

The Privy Council held that the contract was void from the very beginning. It means the court held that there is no legal standing of such agreements because they are not binding in law.

The case also reinforced the rule that minors will not be held liable to perform contracts. Also, it was ruled that such dealings without their consent or knowledge do not create any operative liability on the parents or guardians.

Facts of the Case:

In the case of Mohori Bibee v. Dharmodas Ghose, it is stated that Dharmodas Ghose's age was under 18 years and hence he was not allowed by law to contract. He possessed a certain plot of land whose management was under his mother. He even mortgaged his land to Brahmo Dutt for a sum of Rs. 20000 at 20% p.a. interest.

Brahmo Dutt was a loan shark and Kedar Nath was the one looking after his business. Yes, Kedar Nath was an agent of Brahmo Dutt.

Brahmo Dutt was informed by the mother of Dharmodas that he was a minor and therefore did not have contract capacity concerning the land. Kedar Nath who was acting for Brahmo Dutt was aware that Dharmdas Ghose was a minor and could not enter into such agreements.

On the 10th of September, 1895, a suit was instituted against Brahmo Dutt by Dharmodas Ghose, and his mother asserting that the mortgage was invalid as Dharmodas was a minor at such time. They indicated that they wished for the termination of the contract.

The case was still pending hearing when Brahmo Dutt died, hence the representatives stepped in.

The plaintiffs believed that the agreement was void ab initio and should be rescinded since the defendant, Dharmodas Ghose misrepresented his age when he applied for the mortgage.

Mohori Bibee is the one who is seeking for the appeal to be heard; however, she represents the interests of the deceased Brahmo Dutt.

Issue:

What is the standing of an Agreement about a minor underground whether it is void or voidable?
Does the law of Estoppel apply against the minor in this case or not?
Whether the minor is bound to repay the loan which has been taken by him?
When an agreement made by a minor is made without the consent or knowledge of the guardians or parents made them operative liable or not?
Is the mortgage commenced by the defendant voidable or not?

Arguments:

[2]The defendant (money-lender), amongst other points, contended that:-

(i) The minor had intentionally misrepresented his age; hence he is estopped from asserting this habit at the time of the transaction in issue, and therefore, no relief should be given to the minor in this case.

(ii) As far as the respondent is minor, in case the mortgage is canceled as requested, the respondent should also be asked to repay the loan in the amount of Rs. 10,500 which he had borrowed.

The defendant's contentions were rejected. Minor's agreement was void, and it was held that the minor could not be asked to repay the loan taken by him. On the above-stated points raised by the defendants, the matter was decided as under:-

1. The defendant's (money-lenders) contention that the minor had falsely misstated his age, the law of estoppel should apply against him and he should not be allowed to contend that he was a minor, was considered.

The Privy Council rejected this contention, and the minor was allowed to plead that he was a minor at the time of the agreement and the agreement was void. It was found that the fact that the plaintiff was a minor at the time of agreeing was known to the defendant's agent it was held that the law of estoppel as stated in Section 115 of, the Indian Evidence Act, did not apply to the present case, because in this statement (about age) was made to a person who knew the real was not misled by the untrue statement. It was observed[3]:

"There can be no estoppel where the truth of the matter is known to both the parties, and their Lordships hold, 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."

2. Another contention of the defendant (money-lender) was that, if the plaintiff (minor's) claim to order the cancellation of the mortgage is allowed, the minor should be asked to refund the loan taken by him, under Sections 64 and 65, Indian Contract Act.

Their Lordships observed that Section 64 applied to the case of a voidable contract. Minor's agreement being void, Section 64 did not apply to the case and therefore the minor could not be asked to pay the amount under this Section.

Application of Section 65, Indian Contract Act, to the present case was also considered, it was observed that this Section, like Section 64, applies to 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.[4] The minor, therefore, could not be asked to repay the amount even under Section 65.

The Law Commission of India[5] disagreed with the interpretation given by the Privy Council to Section 65. In their view, Section 65 covers the case of a minor, who makes false representation that he is a major and such a minor should be asked to pay compensation. They recommended that an Explanation be added to Section 65 to give effect to their opinion. Their opinion is as under:[6]

"We feel that the Judicial Committee had not correctly interpreted Section 65 and we think that an agreement is 'void or is discovered to be void' even though the invalidity arises because of the incompetency of a party to a contract. We recommend that an Explanation be added to Section 65 to indicate that that Section should be applicable where a minor agrees on the false representation that he is a major" No amendment of the Indian Contract Act has been made so far to give effect to the recommendation of the Law Commission.

3. The money-lender claimed the refund of the mortgage money under another provision also, i.e.; Section 41, Specific Relief Act, 1877[7].

As regards this Section, it was held that this Section gives discretion to the Court to order compensation, but under the circumstances of this case, justice did not require the return of the money advanced to the minor, as the money had been advanced with the full knowledge of the infancy of the plaintiff. The claim for refund under the Specific Relief Act was, therefore, disallowed.

Rule / Judgment:

The trial court’s ruling concluded that the mortgage deed or other arrangements which the plaintiff and the defendant entered into were inoperative because it was executed by one who was an infant during the execution of the mortgage deed.

Brahmo Dutt being aggrieved by the trial court’s judgment filed an appeal to the Calcutta High Court.

the Calcutta High Court decided that they agreed with the judgment of the Trial Court and therefore dismissed the appeal by Brahmo Dutt.

Thus, later on, he appealed to the Privy Council and again the Privy Council ruled that there was no contract possible between minors and adults dismissing Brahmo Dutt’s appeal.
The main orders passed by the Council were:

No contract with a minor or an infant is enforceable and is void/ void ab initio (non-existent from the very formation).
For the reason that the above-mentioned minor was legally incapable of entering into such a mortgage transaction, any such contract creating a mortgage will be unenforceable and not recognized by the law.
Minor Dharmodas Ghose is not liable to repay the money lent to him because he did not enter into a contract and thereby could not be held to his promise.

Significance:

Judicial Precedent: The present case set a clear decision in the context of Indian law about minors entering into contracts, and held that such contracts are null and void.

Protects Minor: The decision is important concerning the minors’ interests in such dealings. They cannot be preyed upon or made to comply with a contract for which they cannot be understood due to legal limitations. It held that such written contracts are void of minors, thus safeguarding their interests.

Effects on Contractual Obligations: This case also serves as an eye opener for parties dealing with Contracts to ascertain the Age and capacity of a Contracting person to minimize or avoid probabilities of such incidents.

Capacity to Contract: It cleared the overall picture regarding minors and capacity to contract in India.

Brief Analysis:

Capacity to Contract: It was held by the Privy Council in Mohori Bibee v. Dharmodas Ghose that any type of contract or agreement with a minor or an infant in any circumstance shall be void and unenforceable. Every contract with the infants will be ineffective right from the beginning. The Majority Act, 1875 explained the meaning of a minor in which it was stated that a person who is less than 18 years old or has not attained the age of 18 years is not qualified to make or enter into any form of contract or agreement.

The case of Mohori Bibee v. Dharmodas Ghose analyzed and established various principles.

Law of Estoppel: In the case of Mohori Bibee v. Dharmodas Ghose the doctrine of estoppel was not invoked because the counsel of the appellant was aware of the fact that the respondent was a minor. But in many instances, it has been ruled that the doctrine of estoppel does not work against minors.

Section 64 and 65 of the Indian Contract Act, 1872: The provisions in sections 64 and 65 of the Indian Contract Act are concerned with restoring the benefits obtained under a voidable contract and void contract, respectively.

In the case of Mohori Bibee versus Dharmodas Ghose, it was observed by the court that these sections related to contracting were however limited to contracts made between parties who were of sound mind and which had been set aside. It was held, however, that the parties in that case were incompetent because the respondent was a minor, and these contract provisions allowing benefits to be restored would not have been relevant.

The perspective of law relating to reimbursement – the Specific Relief Act, 1877 (now Section 33 of the Specific Relief Act, 1963)

Section 41 of the Specific Relief Act, 1877 corresponds to the present provision termed under Section 33 of Specific Relief Act 1963 which provides that if a court penalizes a party and orders that a certain instrument be withdrawn, the judge may order the said party who benefits from the imposition to pay some monetary compensation to the other party as the case may be.

This rule essentially means that when one party approaches a court to have an instrument unmade and to put them back in the position as if the instrument has never been created, aka the return of benefits received by that party, that party cannot invoke the provisions of the Act claiming that he must be reimbursed those benefits. In this case, the appellant sought the cancellation of the instrument along with the restoration of benefits; hence they cannot recover any amount under this Act.

Conclusion:

The case of Mohori Bibee v. Dharmodas Ghose is pivotal in an examination of the restrictions imposed on minors about contracts. It underscores the principle that agreements can not be enforced upon minors. This assertion defends the interest of the minors and also simplifies the understanding of capacity and contractual obligations in India.

Endnotes:

1. (1903) 30 LA. 14 (PC)

2. Dr. R.K. Bangia, Indian Contract Act, 88 (Fifteenth Edition,2016)

3. Supra 1, p. 122

4. ibid, p. 124

5. Law Commission of India, 13th Report, on Indian Contract Act,1872

6. ibid, p. 20

7. Now Specific Relief Act, 1963 Section 33

Reference: