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Minor's Capacity to Contract: Mohori Bibee v/s Damodar Ghose

Acts: Indian Evidence Act, 1877 and Indian Contract Act, 1872.

Procedural History:
The trial Court granted relief to the defendant on the contention that the plaintiff was of full age when he executed the mortgage, that neither he nor his attorney knew that the respondent was a minor and, even if he was a minor the declaration as to his age was fraudulently made to deceive the defendant.

Citation: (1903) 30 Cal. 539
Court: Calcutta High Court
Judge: Lord McNaughton, Lord Davey, Lord Lindley, Sir Ford Noth, Sir Andrew Scoble, Sir Andrew Wilson.
Decided On: 4th March 1903

On July 20, 1895, Dharmodas Ghose (the respondent), mortgaged his property as security in favour of Brahmo Dutt, a moneylender carrying on business at Calcutta, to secure the repayment of Rs. 20,000 at 12 percent interest. A part of this amount, Rs. 8000 was advanced to the respondent on the same date.

The respondent was a minor when the mortgage was executed, although the defendant was absent throughout the process and all the transaction was done by his attorney, Kedar Nath.

Kedar Nath, also received a letter on 15 July, 1895, informing him that the respondent was still a minor.

On September 10, 1895, Dharmodas along with his mother filed a suit against Bharmo Dutt, stating that he was under age when he executed the mortgage and hence, the contract should be held void and cancelled.

Bharmo Dutt died while the petition was in process and the further appeal was prosecuted by his executors.

  • Whether the knowledge of Kedar Nath about the minority must be imputed to the defendant?
  • Whether a minor person is competent to enter a contract?
  • Whether the mortgage deed was void u/s 2, 10, 11 of Indian Contract Act, 1872? Whether the mortgage money was to be returned or not?

Rationale of the Privy Council:
The privy council held that Kedar Nath stood in 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 decided that the rule of estoppel as embodied in Section 115 of the Indian Evidence Act, 1872 did not apply to the present case, 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 is known to both the parties.

The restitution of money under section 64 of the Indian Contract Act, 1872 could not be granted as it was held that it applied only to contracts made by persons competent to contract, and therefore not to minors. Hence, a minor's agreement is absolutely void and not voidable. Similarly, Section 65 of the Indian Contract Act, 1872 cannot be applied as its very basis lies in the competency of the parties.

Section 2, 10 and 11 of the Indian Contract Act, 1872 was referred to for drawing the reference that a minor cannot enter a contract as he/she is incompetent to contract. Hence, any contract with a minor is void ab initio.

Section 41 of the Specific Relief Act was also relied upon to decide why the mortgage money should be returned. It was decided that, given the facts of this case, justice did not require for them to order the return of money that the respondent had advanced to him because of his knowledge of his minor status.

Decision of the Privy Council:
The Privy Council held that the agreement was absolutely void as a minor is incompetent to contract and the defendant is not entitled to get back the mortgage money as he had given the loan with full knowledge that the borrower was a minor.

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