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Manmatha Kumar Saha Vs. Exchange Loan Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCivil;Contract
CourtKolkata
Decided On
Reported inAIR1936Cal567,165Ind.Cas.363
AppellantManmatha Kumar Saha
RespondentExchange Loan Co. Ltd.
Cases ReferredSaral Chand Mitter v. Mohun Bibi
Excerpt:
- .....committee of the privy council in mahomed syedol ariffin v. yeoh ooi gark 1916 p c 242. the appeal in question was from the supreme court of the straits settlement and the observation upon which reliance is placed is as follows:a case of fraud by the appellant on the subject of his age was set up, but it cannot be doubted that the principle recently given effect to in r. leslie v. sheill (1914) 8 k b 607, would apply, and such a case would fail.14. it appears however from the report that in mahomed syedol ariffin v. yeoh ooi gark 1916 p c 242 the sole question for consideration in the appeal was whether or not a certain statement should be treated as admissible in evidence. this being the case, as pointed out by sir shadi lal, c.j. in khan gul v. lakha singh 1928 lah 609 the.....
Judgment:

Edgley, J.

1. In the suit out of which this appeal arises the plaintiff Company sued the defendants on a promissory note alleged to have been executed by defendant 1 who alone contested the suit. It was said that defendant 1 had borrowed the sum of Rs. 300 from the plaintiff company and had agreed to pay interest at the rate of 3 per cent. per mensem. The total amount claimed was Rs. 624. The execution of the promissory note was admitted, but the main defence was to the effect that, at the time of the execution of this document, defendant 1 was a minor. The suit was decreed by both Courts. The findings of the lower appellate Court are to the effect that the appellant was a minor at the time when he executed the promissory note, that he knew that the period of his minority had been extended, that the plaintiff company did not know that defendant 1 was a minor and that this defendant obtained the loan from the plaintiff company by falsely and fraudulently representing that he was not a minor. Defendant 1 has now appealed to this Court and the main contention urged on his behalf is that he was incompetent under the law to contract at the time when he executed the promissory note and that even if it be admitted that he obtained the loan upon a fraudulent misrepresentation of facts, he is nevertheless under no liability to the plaintiff company in respect of this transaction. The first point which arises for consideration in connexion with this appeal is whether, under Section 115, Evidence Act, the minor is estopped, by reason of his representation to the effect that he was a major, from pleading his minority in order to avoid the contract.

2. The question of the applicability of Section 115, Evidence Act, in the case of minors was considered in Brohmo Dutt v. Dharmo Das Ghose (1899) 26 Cal 381. In that case Maclean, C.J. held that this section had no application to the case of a minor on the ground that the term 'person' in Section 115 meant a person who is of full age and competent to enter into a contract and that, as a minor cannot be estopped by a deed or by the recitals in a deed, it would be incongruous to hold that he could be estopped by a parole declaration. In agreeing with the Chief Justice, Ameer Ali, J. stated:

It follows therefore that when the present law declares that an infant shall not be liable upon a contract, or in respect of a fraud in connection with a contract, he cannot be made liable upon the same contract by means of an estoppel under Section 115. I therefore agree that there is no estoppel whatsoever in this case founded upon any representation or alleged representation on the part of the plaintiff.

3. Brohmo Dutt's case (1) came before the Judicial Committee of the Privy Council on appeal in 1903: Mohori Bibi v. Dharmodas Ghose (1903) 30 Cal 539. In deciding that appeal their Lordships of the Judicial Committee held that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Contract Act, and where he purports to do so, his alleged contract is void. The question of estoppel under Section 115, Evidence Act, was raised before the Judicial Committee, but Sir Ford North in his judgment left the question open as is indicated in the following passage:

The Courts below seem to have decided that this section does not apply to infants; but their Lordships do not think it necessary to deal with that question now. They consider it clear that the section does not apply to a case like the present, 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 of the matter is known to both parties.

4. The learned advocate for the respondent company places some reliance upon the decision of Caspersz and Chatterjea, JJ. in Surendra Nath Roy v. Krishna Sakhi Dassi (1911) 9 I C 110. In that case the decision of the appeal apparently turned upon the question whether Bijoy Gobinda Saha Choudhury, one of the plaintiffs' vendors, was a minor at the time when he conveyed certain property to the plaintiffs. With regard to this point the learned Judges remarked that the conduct of Bijoy in connexion with this transaction might amount to misrepresentation and legal fraud on his part. They go on to say:

If there was misrepresentation by Bijoy operating to deceive, and if the plaintiffs were deceived by it, we think that Bijoy would be bound by the transaction. There should be clear finding on the point.

5. It appears from the judgment in Surendra Nath Roy's case (3) that the learned Judges relied mainly in support of their decision upon some observations of the Court of appeal in Saral Chand Mitter v. Mohun Bibi (1898) 25 Cal 371. It appears however from the report in Saral Chand Mitter v. Mohun Bibi (1898) 25 Cal 371 that no question relating to the applicability of Section 115, Evidence Act, arose for decision in that case. Jenkins, J. who tried the case in the Court of first instance held that a certain money-lender named Luckhi Narayan had been deceived into making a loan by the defendant's fraudulent misrepresentation. He refused to make a personal decree against the defendant for the repayment of the money advanced, but gave the plaintiff an ordinary mortgage decree and he held that the plaintiff's right to succeed notwithstanding the defendant's infancy, arose from the applicability of a principle of equity which treats fraud as a bar to the plea of disability. Jenkins, J's. line of reasoning was approved by the Court of appeal consisting of Maclean, C.J. and Macpherson and Trevelyan, JJ. and in upholding Jenkins, J's. judgment Maclean, C.J. made the following observations:

There is not, so far as I can discover, any distinction between the law in India and the law in England upon this subject. In my judgment, there is a current of cases decided in the Courts of Equity in England, dating back for 150 years or more, which show that, in equity an infant cannot take advantage of his own fraud. I think it is established that in cases of fraud by an infant the protection which the law throws around him is taken away: in other words, that the defence of infancy cannot be successfully pleaded in defence of a fraud perpetrated by the infant.

6. His Lordship then went on to say:

I think the cases establish that, in a case like the present, the defendant, though at the time when he entered into the contract he was an infant, is not entitled to take advantage resulting from his own fraud.

7. It must be remembered that the case in Surendra Nath Roy v. Krishna Sakhi Dassi (1911) 9 I C 110 was clearly distinguishable on the facts, from the case out of which the present appeal arises and, having regard to the line of reasoning which seems to have been adopted by the learned Judges in that case, it can hardly be taken to go further than to reiterate the general principle laid down in Saral Chand Mitter's case (4) to the effect that an infant is not entitled on equitable principle to take any advantage from his own fraud. In 1928 the leading cases decided by the Courts in India were reviewed by a Full Bench of the Lahore High Court in Khan Gul v. Lakha Singh 1928 Lah 609. One of the questions referred to the Full Bench in that case was whether a minor, who, by falsely representing himself to be a major, had induced a person to enter into a contract was estopped from pleading his minority to avoid the contract. After an exhaustive review of the leading cases on this point, including the decisions of this Court, the learned Chief Justice observed:

It will be seen from the foregoing discussion that not only the English law, but also the balance of the judicial authority in India, is decidedly in favour of the rule that, where an infant has induced a person to contract with him by means of a false representation that he was of full age, he is not estopped from pleading his infancy in avoidance of the contract; and though Section 115, Evidence Act, is general in its terms, I consider for the reasons which I have already given that it must be read subject to the provisions of the Contract Act, declaring a transaction entered into by a minor to be void. My answer to the first question referred to us is, therefore, in the negative.

8. This decision of the Lahore High Court was cited with approval by Buckland, J. in Sarada Prosad Das v. Binay Krishna Dutta 1931 Cal 393. I am entirely in agreement with the views expressed on this point by the learned Chief Justice of the Lahore High Court and it follows that, in my opinion, the minor defendant is not estopped by Section 115, Evidence Act, from pleading his minority to avoid the contract in respect of which he was sued. The further question arises, however, for consideration as to whether the minor defendant is entitled to retain any benefit which he has received under the contract or, in other words, whether he should not be compelled to refund the consideration money obtained by him through his fraudulent misrepresentation. Clearly his liability, if any, would not be ex-contractu, but could only arise with reference to principles of equity. On behalf of the appellant some reliance was placed upon the decision of this Court in Dhanmull v. Ram Chunder Ghose (1897) 24 Cal 265, in which it was held that in a case where an infant had obtained a loan upon a false representation that he was of age, no suit to recover the money could be maintained against him. The correctness of that decision was, however, doubted by the Court of Appeal in Saral Chand Mitter v. Mohun Bibi (1898) 25 Cal 371 in which the principle was definitely adopted that an infant is not entitled to take any advantage resulting from his own fraud. The question as to a minor's liability in respect of compensation was raised in Brohmo Dutt v. Dharmo Das Ghose (1899) 26 Cal 381, but it was found in that particular case that the defendant had not been actually misled. In this connection Maclean, C.J. stated:

Then, we are asked to exercise the discretionary powers vested in us under Sub-section 28 and 41, Specific Relief Act. That is a matter for the discretion of the Court; the learned Judge in the Court below has exercised his discretion adversely to the appellant, and I see no reason which would justify us in differing from that conclusion. On the contrary I do not think that in a case of this class where a man, who has been told that the person with whom he is dealing is a minor, still chooses to lend him money, 'Justice requires' that it should be returned to him.

9. When this case was considered on appeal by the Judicial Committee of the Privy Council, the question as to the liability of the minor to return the money advanced to him was further considered and on this point Sir Ford North's observations were as follows:

Another enactment relied upon as a reason why the mortgage money should be returned is Section 41, Specific Relief Act (1 of 1877), which is as follows: 'Section 41. On adjudging the cancellation of an instrument the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require.' Section 38 provides in similar terms for a case of rescission of a contract. These sections, no doubt, do give a discretion to the Court; but the Court of first instance, and subsequently the appellate Court in the exercise of such discretion, came to the conclusion that, under the circumstances of this case, justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy, and their Lordships see no reason for interfering with the discretion so exercised.

10. It would appear, therefore, that the Judicial Committee have in effect recognised the principle that the Courts in India have an equitable discretion to direct the refund of money which an infant may have obtained by his own fraud provided the lender is actually deceived by the fraud perpetrated by the minor. It may of course be argued that jurisdiction to order restitution only exists in cases in which the minor invokes the order of the Court as a plaintiff, but as Sir Shadi Lal, C. J., has pointed out in Khan Gul v. Lakha Singh 1928 Lah 609, cited above:

It is difficult to understand why the granting of an equitable remedy should depend upon a mere accident; namely whether it is the minor or his adversary who has taken the initiative in bringing the transaction before the Court. The material circumstances in both cases are exactly the same. A contract has been entered into with an infant and as it is an invalid transaction it must be cancelled.

11. His Lordship goes on to say:

All that can reasonably be said is that the Court, in deciding whether relief against fraud practised by an infant should or should not be granted, will consider along with other circumstances of the case the fact that the infant is a defendant and not a plaintiff. But there is no warrant either in principle or in equity for the general rule that the relief shall never be granted where the infant happens to be a defendant.

12. It is of course true that the Judicial Committee of the Privy Council decided Mohori Bibi v. Dharmodas Ghose (1903) 30 Cal 539 before the decision of the Court of appeal in England in R. Leslie v. Sheill (1914) 8 K B 607. In that case the Court of appeal adopted the view that to direct an infant who had obtained a loan on a false representation as to his age to refund the amount of the advances would be an indirect way of enforcing a void contract. This however is not the view which appears to have been generally adopted by the Courts in India and as pointed out by Sir Shadi Lal, C.J. in Khan Gul v. Lakha Singh 1928 Lah 609 cited above:

It must be remembered that, while in India all contracts made by an infant are void, there is no such general rule in England. For instance, a contract for necessaries is not affected by the Infants' Relief Act, 1874, and can be validly entered into by an infant. There should therefore be greater scope in India than in England for the application of the equitable doctrine of restitution.

13. It is however argued by the learned advocate for the appellant that the decision of the English Court of appeal in R. Leslie v. Sheill (1914) 8 K B 607 should be adopted as the law of India having regard to certain observations made by the Judicial Committee of the Privy Council in Mahomed Syedol Ariffin v. Yeoh Ooi Gark 1916 P C 242. The appeal in question was from the Supreme Court of the Straits Settlement and the observation upon which reliance is placed is as follows:

A case of fraud by the appellant on the subject of his age was set up, but it cannot be doubted that the principle recently given effect to in R. Leslie v. Sheill (1914) 8 K B 607, would apply, and such a case would fail.

14. It appears however from the report that in Mahomed Syedol Ariffin v. Yeoh Ooi Gark 1916 P C 242 the sole question for consideration in the appeal was whether or not a certain statement should be treated as admissible in evidence. This being the case, as pointed out by Sir Shadi Lal, C.J. in Khan Gul v. Lakha Singh 1928 Lah 609 the observations of the Privy Council Mahomed Syedol Ariffin v. Yeoh Ooi Gark 1916 P C 242, must be regarded as obiter dicta and though entitled to great respect, are not absolutely binding on the Courts in India. Further, these observations certainly cannot be taken to override what appears to have been an express recognition by the Judicial Committee in Mohori Bibi v. Dharmodas Ghose (1903) 30 Cal 539 of the principle that in appropriate cases the Courts in this country are empowered to order restitution by minors on equitable grounds. In my opinion therefore the minor defendant should not be allowed to retain the benefit which he has received as a result of his fraudulent misrepresentation and I consider that on equitable principles in a suit properly framed he might be called upon to refund the consideration money which has been received by him. It is however clear as stated above that his liability in this respect arises not ex contractu but on equitable considerations and the plaintiff could not therefore in any event claim interest on the loan, because the liability to pay interest would arise on one of the stipulations of the contract.

15. It appears however from the pleadings in the case out of which this appeal arises that the plaintiff has based his claim on the contract and that he has not put forward an alternative claim for restitution of the consideration money. Order 7, Rule 7, Civil P. C., requires that every plaint shall state specifically the relief which the plaintiff claims either simply or in the alternative. The circumstances of the case out of which this appeal arises indicate that the defect in the plaint such as it is, arose from a bona fide misunderstanding of the law in this subject and, this being the case, I think the plaintiff should now be allowed to amend his plaint, if so advised. It is urged that an amendment of the plaint by allowing the plaintiff to set up alternative case for restitution would, in effect, alter the nature of the suit. I find however that a similar question arose in Saral Chand Mitter v. Mohun Bibi (1898) 25 Cal 371, cited above. In the Court of first instance Jenkins, J. had allowed the plaintiff by amendment to set up an alternative case and, with regard to this matter, the Court of appeal held that it was the intention of the legislature to afford ground for a final decision upon the subject in dispute so as to prevent further litigation and that Jenkins, J. was perfectly right in allowing, in the manner he did, the amendment of the plaint.

16. Having regard to the considerations mentioned above, this case will be remanded to the lower appellate Court for re-hearing after allowing the plaintiff to amend his plaint if he so desires. It will then be for the lower appellate Court, if necessary, after allowing the appellant also to amend his pleadings and taking such further evidence as may be necessary, to re-hear the appeal and also to look carefully into the conduct of the plaintiff Company and ascertain whether a case for restitution of the consideration money on equitable grounds has been made out. The judgment and decree of the learned Subordinate Judge are therefore set aside and this appeal is remanded to the lower appellate Court for re-hearing in accordance with the directions contained in this judgment. Costs will abide the final result.


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