Mohori Bibi vs Dharmodas Ghose case gave the well-defined principle that any contract entered by a minor is void ab initio and doctrine of restitution turns out to be unenforceable in such circumstances. Competency is a significant element in contract law, it is the foundation of every valid contract. Section 11 of the Indian Contract Act 1872 asserts that every individual of the age of majority is competent to contract but initially there was an ambiguity in relation to the status of contracts entered by a minor and whether section 65 of the act which states the principle of restitution is applicable.
Hon’ble Lord Machsngter, Hon’ble Lord Davey, Hon’ble Lord Lindley, Hon’ble Sir Ford North, Hon’ble Sir A.Scoble, Hon’ble Sir A.Wilson
Contract Act: Section 10, section 11, section 64, section 65.
Transfer of Property Act: Section 7.
Specific Relief Act: Section 41 (Section 33 of 1963 Act).
- Dharmodas Ghose (minor) mortgaged some of his properties in favor of Brahmo Dutt (money-lender) and received a certain sum of money.
- The whole process was carried out through Kedar Nath(advocate) with no direct involvement of Brahmo Dutt.
- During the execution of the mortgage deed, Dharmodas Ghose was an infant/minor and the fact of his infancy was known to Kedar Nath as the mother of Dharmodas Ghose send a letter informing about the same which was fully acknowledged by Kedar Nath, and yet he continued with the execution of the deed.
- Thereafter the mother of Dharmodas Ghose filed a legal suit for declaring the deed void, as Dharmodas Ghose was a minor.
- A second appeal was made in the High Court.
- Whether the contract by a minor be considered void or voidable?
- Whether Dharmodas Ghose is liable for the repayment of the amount received by him?
The reliance was placed mainly on section 64 of The Indian Contract Act, 1872, and section 41 (section 33 of 1963 act) of the Specific Relief Act.
It was contended that section 64 of the act is founded on the principle of restitution. It states “When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is the promisor. The party rescinding a voidable contract shall, if he had received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received” thereby making Dharmodas Ghose liable for repayment of the amount already received in reference to the mortgage deed.
Additionally, section 41 (section 33 of 1963 act) of Specific Relief Act,1963 also expressed that if an agreement is characterized as void because of the factor of incompetency under section 11 of contract act, then the court may compel the party to compensate/repay the benefit received to the legitimate owner. The section also pointed out the liability of Dharmodas Ghose for repayment.
- The courts took the liberty in interpretation of various provisions and they analyzed section 4 of the Transfer of Property Act, 1882 which stated that every provision of the act in relation to the contract should be read in consonance with the Indian Contract Act, 1872 which subsequently led to section 7 of transfer of property act which stated that every person competent to contract can transfer his property as per the prescribed methods.
- So as to examine the concept of competency, the courts turned to section 11 of The Indian Contract Act, 1872, which characterizes the minor as incompetent to contract. Thereby making any contract entered into by a minor evidently void. And it is against the principle of equity to compel a person to pay in respect to an agreement that is pronounced as void by the legislation itself.
- After analyzing various relevant provisions of the law, the court came to the following conclusion- that as per section 11 of The Indian Contract Act, 1872 minors are incompetent to contract and any minor’s agreement is absolutely void. Therefore, relief cannot be provided under section 64 or even section 65 of The Indian Contract Act, 1872 as both provisions specify that the existence of an agreement or a contract by competent parties is necessary and in the present case, it is concluded that there was no such agreement.
- Regarding the discretion provided under section 41 (section 33 of 1963 act) of Specific Relief Act, 1963 the court of the first instance and appellate court have already concluded that according to the events of the case where there was full knowledge of the infancy the court did not see any reason to compel the repayment and interfere with the desecration which was already exercised.