Bhagwandas Goverdhandas Kedia vs. M/s Girdharilal Parshottamdas and Co case widened the scope of communication of offer and acceptance. This case decided the jurisdiction for bringing a suit when the agreement was made over a telephone. This case resolved the issue of the jurisdiction arises at a place of the offeror, i.e., a place where the acceptance is heard by the offeror with instantaneous communication, contrary to communication by post.
- On 22nd July 1959, Bhagwandas Goverdhandas Kedia Oil Mills (defendant-appellant) agreed to supply cottonseed cakes to M/s. Girdharilal Parshottamdas and Co. (plaintiff-respondent) of Ahmedabad over a telephone.
- The respondents brought an action against the appellant in the City Civil Court of Ahmedabad as the appellant failed to supply seed cakes as per the agreement.
- The appellant contended that the respondents’ offer to purchase was accepted at Khamgaon and the delivery and payment of the goods were also agreed to be made in Khamgaon and the City Civil Court of Ahmedabad had no jurisdiction to try the suit.
- The City Civil Court of Ahmedabad held that it had jurisdiction as the acceptance of the offer was initiated in Ahmedabad and was intimidated to the offeree at Ahmedabad and that the contract was formed in Ahmedabad.
- The appellants filed an application in the High Court of Gujarat, which was rejected. Then, the appellants with special leave appealed to Supreme Court.
- Whether the Ahmedabad Civil Court had jurisdiction over the matter?
- Whether the contract was formed at the place of acceptance, or where the acceptance was received?
- Only the court under whose territorial jurisdiction the acceptance is spoken through telephone has jurisdiction to look into any suit regarding the contract.
- For determining where the contract is made, Section 3 and Section 4 are applicable.
- If the making of an offer is cause for breach of contract, then the court in whose territorial jurisdiction such offer was made can look into the matter.
- The court under whose territorial jurisdiction the acceptance was initiated has to look into the matter regarding the acceptance and formation of the contract.
- The judges present to hear this case were Justice Shah, Justice Wanchoo, and Justice Hidayatullah. This case was in favor of respondents with a majority of 2:1.
- Justice Shah and Justice Wanchoo were of the opinion that the majority of the European countries and the US had accepted the rule of consensus ad idem and the contract is made where the acceptance is spoken.
- The Indian Contract Act 1872 doesn’t foresee the contracts formed through instantaneous modes of communication, such as a telephone. Therefore, Ahemdabad Civil Court had the jurisdiction to try the suit since the contract was formed where the acceptance was initiated under its territorial jurisdiction.
- Justice Hidayatullah gave a dissenting opinion, saying that though Indian Contract Act is applicable in India, it was inspired by English Contract Law. In Entores case it was held that a contract is formed only when the communication of acceptance is done and is heard by the offeror. The contract has emerged where the acceptance is received and not where spoken through telephone. Therefore, the Ahmedabad civil city court doesn’t have jurisdiction to look into the matter.
The Honorable Supreme Court held that the Trial Court was correct, and the decision was rightfully made under its jurisdiction where the communication of acceptance is heard by the offeror through the telephone. Therefore, the appeal made was dismissed.
This case widened the scope of communication of offer and acceptance. The court decided to question the place of origin of the cause of action in a suit where the breach was made. It clarified the rules regarding communication of offer, acceptance, and revocation when made over a telephone. It said the rule applied when acceptance is made through the post is not applicable when made through telephone. In cases of agreement over the telephone, the situation is like a conversation happening in front of each other. Therefore, acceptance of the offer is made at the offeror’s place when the communication is instantaneous, i.e., through telephone.