Mohori Bibee v. Dharmodas Ghose

A minor signed a mortgage for Rs. 20,000 in favour of a money lender whose attorney knew he was under age. The minor sued to have the mortgage declared void. The lender's executors asked that he at least repay the money advanced. The Privy Council held that the Indian Act makes competence to contract essential, so the mortgage was void and no repayment was ordered.

Quick Revision

Read the full judgment: BAILII

Parties

Dharmodas Ghose — respondent; the plaintiff in the suit. He was an infant (a person under 21) when he executed the mortgage on 20 July 1895. He sued through his mother and guardian as next friend (a person who sues on behalf of someone who cannot sue in their own name).

Mohori Bibee and another — appellants; the executors of Brahmo Dutt, the defendant in the suit. Brahmo Dutt died after the appeal was instituted, and his executors carried it on.

Brahmo Dutt — money lender carrying on business at Calcutta and elsewhere, in whose favour the mortgage was executed. He was away from Calcutta throughout. His attorney Kedar Nath Mitter carried through the business for him. The letter of 15 July 1895 was sent on the instructions of S. M. Jogendranundinee Dasi, the mother and guardian of Dharmodas Ghose, appointed by the High Court under its Letters Patent.

Procedural History

1. Suit. On 10 September 1895 the infant, through his mother and guardian as next friend, began the action against Brahmo Dutt. The action stated that he was under age when he executed the mortgage. He prayed for a declaration that the mortgage was void and inoperative, and that it be delivered up for cancellation.
2. Court of First Instance. Mr. Justice Jenkins presided, found the facts and granted the relief asked.
3. Appellate Court. It dismissed the appeal from Mr. Justice Jenkins. Both Courts below held that authority bound them to treat infants' contracts as voidable only, and not void. They also held that Section 64 of the Contract Act refers only to contracts made by persons competent to contract, so it does not apply to infants.
4. Privy Council. Brahmo Dutt died after the appeal was instituted, and his executors prosecuted it. The Judicial Committee had the case re-argued on the void-or-voidable point. It delivered its judgment on 4 March 1903 and dismissed the appeal with costs.

Facts

1. On 20 July 1895 Dharmodas Ghose executed a mortgage on some houses belonging to him, in favour of Brahmo Dutt.
2. The mortgage secured repayment of Rs. 20,000 at 12 per cent. interest. The amount actually advanced is stated to be in dispute.
3. Dharmodas Ghose was an infant at the time. He did not turn 21 until the following September.
4. Brahmo Dutt was absent from Calcutta throughout. His attorney Kedar Nath Mitter carried through the whole business. Dedraj, the local manager of Brahmo Dutt, provided the money.
5. While the advance was under consideration, Kedar Nath received a letter dated 15 July 1895. It came from an attorney, Bhupendra Nath Bose, instructed by the infant's mother and guardian.
6. The letter said the mother and guardian had instructed the attorney to write. The High Court had appointed her under its Letters Patent as guardian of the person and property of Dharmodas Ghose.
7. The letter said a mortgage of his properties was being prepared from Kedar Nath's office. It gave notice that Dharmodas Ghose was still an infant under 21. It warned that anyone lending money to him would do so at his own risk and peril.
8. Kedar Nath denied receiving the letter. Both Courts below held that he received it personally on 15 July. The Privy Council calls the evidence on the point conclusive.
9. On the day of execution Kedar Nath got the infant to sign a long declaration that he had prepared. It stated that the infant came of age on 17 June. It also stated that Dedraj and Brahmo Dutt, relying on this, had agreed to advance Rs. 20,000.
10. Both Courts below held that Kedar Nath did not act upon that statement and was not misled by it. They held that he was fully aware of the minority at the time of execution.
11. There is conflicting evidence on when and how the declaration was obtained. The Privy Council held it unnecessary to go into that, because both Courts below found that Kedar Nath was not misled. Relying on an assurance of majority was therefore not the case.
12. Kedar Nath said he got the declaration for the greater security of his client. The infant had no separate legal adviser.

Issues Raised

1. Was the knowledge of Kedar Nath to be imputed to the defendant, Brahmo Dutt?
2. Was the infant estopped by Section 115 of the Indian Evidence Act from setting up his infancy?
3. Is an infant's mortgage void or voidable? Does Section 64 of the Contract Act (restoration of benefit on rescission) therefore require him to repay the money received?
4. Did Section 65 of the Contract Act, or Sections 38 and 41 of the Specific Relief Act, or the maxim that one who seeks equity must do equity, require repayment?

Arguments Contended

Defence of Brahmo Dutt (as pleaded):

• The plaintiff was of full age when he executed the mortgage.
• Neither the defendant nor Kedar Nath had notice of infancy.
• Even if he was a minor, the declaration about his age was made fraudulently (by a false statement made to deceive). That disentitled him to relief.
• In any case, no relief should be granted without making him repay the money advanced.

A further plea that the plaintiff had ratified the mortgage wholly failed. It was not the subject of appeal.

Appellants' contentions on appeal:

• The Courts below were wrong to impute Kedar Nath's knowledge to the defendant. Dedraj, the defendant's Gomastha, was the real representative in Calcutta and had no knowledge of the minority.
• The plaintiff was estopped by Section 115 of the Indian Evidence Act from setting up infancy.
• The point most pressed: the Courts ought not to have decreed for the respondent without ordering him to repay Rs. 10,500 said to have been paid to him. They relied on Section 64 of the Contract Act.
• A new point on Section 65 of the Contract Act, not raised in the Courts below.
• The preamble showed that the Act left contracts by infants outside it.
• Sections 38 and 41 of the Specific Relief Act, and the maxim that one who seeks equity must do equity, required repayment.

The judgment does not record the respondent's arguments.

Court's Reasoning

The judgment is a single opinion delivered by Sir Ford North on behalf of the Board. It numbers no paragraphs, so none are cited.

1. Noted: the Courts below were obviously right on imputed knowledge. Held: Kedar Nath had full authority and stood in the place of the defendant for this mortgage. His acts and knowledge were those of his principal. Why: Dedraj himself said that Kedar Babu was acting on behalf of his master from the beginning. He also said he left all matters regarding the minority in Kedar Babu's hands.
2. Held: on estoppel (Evidence Act, s. 115), the Board did not decide whether the section applies to infants. It held that the section does not apply where the statement is made to a person who knows the real facts and is not misled. "There can be no estoppel where the truth of the matter is known to both parties". In plain words: a party cannot be held to a false statement when the other side knew the truth.
3. Noted: the Board followed English authority (Nelson v. Stocker). 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". In plain words: lying about his age to someone who knew the truth does not cost the infant his protection. The Board notes the same principle in the explanation to Section 19 of the Contract Act.
4. Noted: since the Contract Act, the general current of Indian decisions was that infants' contracts are voidable only. That view did not come without protest and contrary decisions. The Board considered itself free to act on its own view and had the point re-argued.
5. Held: "the whole question turns upon what is the true construction of the Contract Act itself". In plain words: the answer depends on what the Act itself says.
6. Noted: Section 7 of the Transfer of Property Act deals only with persons competent to contract. It says every person competent to contract and entitled to transferable property is competent to transfer it, in the manner allowed by law. Section 4 makes the contract chapters part of the Indian Contract Act. Held: the mortgage falls within the Contract Act.
7. Noted: Sections 2, 10 and 11 of the Contract Act. The Board first set out these definitions from section 2:
   • (e): every promise and set of promises forming the consideration for each other is an agreement.
   • (g): an agreement not enforceable by law is void.
   • (h): an agreement enforceable by law is a contract.
   • (i): an agreement enforceable at the option of one or more parties, but not the other party or parties, is a voidable contract.
8. Noted: section 10 says all agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration (something of value given in return for a promise), and with a lawful object. It excepts agreements expressly declared void. Section 11 sets out competence: majority, sound mind, and not being disqualified by law.
9. Held: the Act makes it essential that all contracting parties be competent to contract. A person incapable by reason of infancy cannot make a contract within the meaning of the Act.
10. Noted: other sections support this view:
    • Section 68: a supplier of necessaries suited to his condition in life is entitled to reimbursement from the property of a person incapable of contracting. The same applies where the supplies go to anyone he must support.
    • Under section 68 he is not personally liable, and no demand is enforceable against him.
    • Sections 183 and 184: no person under majority can employ an agent or be an agent.
    • Sections 247 and 248: a minor admitted to a partnership's benefits cannot be made personally liable.
11. Noted: section 64 says that when a person at whose option a contract is voidable rescinds it, the other party need not perform any promise contained in it. The party rescinding must restore, so far as may be, any benefit received. Held: 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". In plain words: section 64 only works where a valid contract exists, and an infant's agreement is not one. So there was no voidable contract of the kind dealt with in section 64.
12. Held: section 65 has no application. Why: like section 64, it starts from an agreement between competent parties. It has no application where there never was, and never could have been, any contract.
13. Held: the appellants gain nothing even if the preamble showed the Act left infants' contracts outside it. The Act, so far as it goes, is exhaustive and imperative. It provides in clear language that "an infant is not a person competent to bind himself by a contract of this description". In plain words: the Act itself says an infant cannot bind himself by such a contract.
14. Noted: the appellants also relied on another enactment for return of the money. Section 41 of the Specific Relief Act deals with cancellation of an instrument. On adjudging cancellation, the Court may require the party granted relief to make any compensation to the other which justice may require. Section 38 makes similar provision for rescission of a contract. These give the Court a discretion.
15. Held: the Board saw no reason to interfere. Why: the two Courts below held that justice did not require the infant to return money advanced with full knowledge of his infancy.
16. Held: the maxim that he who seeks equity must do equity is the last point over again. Noted: the Board cited Thurstan v. Nottingham Permanent Benefit Building Society ([1902] 1 Ch. 1, since affirmed by the House of Lords). There a mortgage taken from an infant was declared void, and no repayment of the advances was ordered.
17. Noted: Lord Justice Romer said a Court of Equity cannot call it equitable to make a person pay money. The transaction was one which the Legislature has declared void as against that person. The Board said the same applied here.
18. Noted: the Board observes that its construction seems to accord with the old Hindu law, as declared in the laws of Menu (ch. viii. 163) and Colebrooke's Digest. Some decisions before the Contract Act held that an infant's contract was voidable only, in accordance with the English law as it then stood.

Authorities

• Nelson v. Stocker (4 De G. and J. 458): followed. A false representation made to a person who knows it to be false does not take away the privilege of infancy.
• Thurstan v. Nottingham Permanent Benefit Building Society ([1902] 1 Ch. 1; affirmed [1903] App. C. 6): relied on. An infant's mortgage was declared void and no repayment of advances ordered. Romer L.J. was quoted at p. 13.

Judgement

The appeal wholly failed. The Privy Council advised His Majesty that it should be dismissed. The appellants were to pay the costs of the appeal. The decree of the Court of First Instance stood. It declared the mortgage void and ordered it to be delivered up for cancellation. The infant was not ordered to repay the money advanced.

Legal Principle / Ratio

Under the Indian Contract Act, competence to contract is essential (sections 10 and 11). An infant is not competent to contract. His agreement is therefore not a contract within the meaning of the Act. So the void-or-voidable question does not arise. The restoration provisions of sections 64 and 65 also do not arise, because they presuppose a contract between competent parties. A false statement of age made to a person who knows the truth does not estop the infant or take away the privilege of infancy. On the facts, the discretion under sections 38 and 41 of the Specific Relief Act was not exercised to compel repayment.

Critical Analysis

Analysis based on the judgment text.

The estoppel question was left open. The Board says the Courts below seem to have decided that section 115 does not apply to infants. It did not think it necessary to deal with that question. It decided only that the section does not apply where the other party knows the real facts. This judgment does not decide the position where a false statement of age actually misled the lender.

Repayment was refused partly on discretion tied to the lender's knowledge. Under the Specific Relief Act, the Board declined to interfere with the lower Courts' view. They held that justice did not require repayment of money advanced with full knowledge of the infant's infancy. That reasoning rests on the lender's knowledge. The judgment does not say how the discretion would be exercised where the lender did not know.

Restitution against the infant's property is not addressed beyond the sections discussed. The Board notes that section 68 creates a statutory claim against an infant's property for necessaries. The judgment does not say what the money was used for. It says nothing further on other forms of recovery.

Significance

The judgment departs from the general current of Indian decisions that infants' contracts were voidable only. It rests the result on the construction of the Contract Act itself: an infant is not competent to contract, so there is no contract within the Act. The Board chose to act on its own view of the Act and had the point re-argued for that purpose.

It also fixes two practical consequences on the facts. No estoppel arises where the lender knew the truth. The infant was not made to repay the money advanced, and the Board relied on the English decision in Thurstan for that outcome.

Exam-Important Points

• Facts in one line: an infant mortgaged houses for Rs. 20,000 to a money lender whose attorney knew he was under age. He sued to have the mortgage cancelled. The lender's executors sought repayment.
• Bench: Privy Council; judgment delivered by Sir Ford North on 4 March 1903.
• Holding: an infant is not competent to contract under sections 10 and 11. His agreement is not a contract within the Act. Sections 64 and 65 do not apply, so he need not restore the money.
• Estoppel: section 115, Evidence Act does not apply where the lender knows the real facts. The Board did not decide whether it applies to infants generally.
• Supporting sections cited: 68, 183, 184, 247 and 248 of the Contract Act; sections 38 and 41 of the Specific Relief Act (discretion).
• English authorities mentioned: Nelson v. Stocker (false representation to a person who knows the truth) and Thurstan v. Nottingham Permanent Benefit Building Society (no repayment where the Legislature has declared the transaction void).
• Trap: the Courts below treated infants' contracts as voidable. The Privy Council dismissed the appeal, so the decree stood. It replaced the Courts below's reasoning (voidable only) with its own construction of the Act: an infant's agreement is not a contract at all.

Prepared from the full text of the judgment.