Case: Mohori Bibee v. Dharmodas Ghose (1903)

Citation

(1903) 30 Cal 539 (Privy Council)

Court

Privy Council

Date of Judgment

4 July 1903

Bench

Lord Macnaghten, Lord Lindley, Lord Davey

Facts of the Case

Dharmodas Ghose, a minor, mortgaged his property to Brahmo Dutt, a moneylender, to secure a loan of Rs. 20,000. At the time of executing the mortgage deed, Dharmodas was underage, and this fact was known to the moneylender’s agent.

Dharmodas only received Rs. 8,000 from the loan and later sued to have the mortgage set aside, claiming that he was a minor at the time and, therefore, the contract was void. The moneylender argued that the contract was valid and sought enforcement of the mortgage.

Legal Issues

1. Whether a minor’s agreement is void or voidable under Indian contract law.
2. Whether a party who has advanced money under a void agreement can seek compensation or restitution.

Reasoning of the Court

1. Nature of a Minor’s Agreement
   • The court held that, under Section 11 of the Indian Contract Act, 1872, a minor is not competent to contract. Hence, any agreement entered into by a minor is void ab initio (void from the beginning).
2. No Estoppel Against a Minor
   • The court rejected the moneylender’s claim that Dharmodas was estopped from denying his ability to contract. A minor cannot be estopped from asserting their incapacity to contract.
3. Restitution Under Void Contracts
   • The court observed that Section 65 of the Indian Contract Act, which deals with restitution, applies only to agreements that are voidable, not those that are void ab initio. Since the contract was void, there was no question of restitution.

Judgment

The Privy Council ruled in favor of Dharmodas Ghose, declaring the mortgage void. The court held that a minor’s agreement is void and cannot be enforced by the other party. Furthermore, the moneylender was not entitled to any compensation or restitution for the loan advanced.

Significance of the Case

1. Foundational Principle
   • This case firmly established that any agreement entered into by a minor is void ab initio, setting a precedent in Indian contract law.
2. Protection of Minors
   • The judgment reinforced the principle of protecting minors from exploitation and unfair contracts.
3. Restitution Clarification
   • The case clarified that Section 65 of the Indian Contract Act does not apply to agreements void from inception.

Conclusion

The case of Mohori Bibee v. Dharmodas Ghose is a landmark judgment that continues to guide contract law, particularly regarding the competency of parties to contract. It ensures that minors are shielded from the consequences of agreements they are not legally capable of entering.