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Analysing Ajhudhi Prasad vs Chandan Lal in the light of Khan Gul vs Lakha Singh

Facts:
A deal for a mortgage was made between Ajudhiya Prasad (Defendant), and Chandan Lal (Plaintiff), elated on October 15th, 1925, in Favor of Chandan Lal by Ajudhiya Prasad. However, Chandan Lal was a minor at the time of the contract, and a certified guardian was appointed for him. Chandan Lal fraudulently misrepresented the facts of him being an infant and moved forward with the contract. Thereafter, a suit was filed in the trial court under section 68 of the Indian Contract Act, 1872, to recover the money from the defendant, and the plaintiff also asserted that the defendant was not minor.

On accessing all the evidence, the trial court found that the defendants were above 18 years of age but below 21 years of age, thus making them fall under the criteria of Infant. However, the trial court held that the plaintiff could not receive the money under section 68 of the Indian Contract Act, 1872 as the defendants were minors and the reason for which the money was spent, i.e., marriage does not fall under the domain of 'necessaries' as mentioned in the section 68 of Indian Contract Act, 1872.

The Fraudulent representation by the defendants and their father made the plaintiff believe that the plaintiff is making a contract with a competent person. Taking all the facts and evidence into account and following the ruling of the Lahore High Court in Khan Gul v. Lakha Singh, the trial court decreed the claim for the recovery of the amount with interest at the contractual rate and future interest in default for sale of the mortgaged property.

The appeal was finally made in the high court of Allahabad for disposal of the case.

Citation : 1937 SCC OnLine All 80
Date of Judgement : May 11, 1937
Bench : Full Bench (Before Sir Shah Muhammad Sulaiman, C.J. And Thom, J & Bennet, J.)

Issue:
  1. Does a minor get a decree for the principal money as a defendant under section 65 of the contract act or any other equitable principle? Even if the minor deliberately misrepresented himself as an adult?

Holding:
The court held that the mortgagee as a defendant could not obtain a decree for the return of the principal money under section 65 of the Contract Act or any other equitable principle, nor can he obtain a decree for the sale of the mortgaged property. Furthermore, the court said neither section 41 of the Specific Relief Act nor section 43 of the Transfer of Property Act had any application to the case because, in the first one, there was no question of the cancellation of an instrument as it was against a minor and in the latter, there had been no transfer at all, but only a void transaction.

Ratio Decidendi:
It was held by the court that the restitution under section 65 of the Indian Contract Act, 1872 can not be made in this case as this case does not fall under the ambit of section 65, i.e., the section is applied only to the contracts agreements which from their very nature were void and were either discovered to be void later or became void, and not agreements made by persons who were altogether incompetent to enter into an agreement and the agreement was, therefore, a nullity from the very beginning. No section in the Indian Contract Act of 1872 holds an agreement with a minor to be void. It was stated that "The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant. Their Lordships are therefore of the opinion that in the

In the present case, there is no such voidable contract as dealt with in section 64." It was further elaborated that providing restitution under section 65 of the Indian Contract Act, 1872 would mean that the court has not interpreted the section in its entirety but only the part that states that "where the contract becomes void", and not to the portion "where the agreement is discovered to be void" thus applicability of this section is not possible.

After analyzing sections 2, 10, and 11 of the Indian Contract Act of 1872, it was established that a person incompetent to contract because of being a minor could not possibly make a contract under the Indian Contract Act of 1872.

Moving forward with the ratio, the high court explained how the result of the judgment would affect future rulings, i.e., if this judgment orders the minors to restitute the money, then it will have an effect on all the agreements by minors will indirectly enforce against them irrespective of mistake, misrepresentation, and fraud. Apart from these negative impacts, passing the decree of restoration of the money advanced to the minor would be equivalent to enforcement of the liability to pay, thus enforcing a contract.

This, in turn, nullifies the effect of the protection provided to the minors; it would make a minor personally liable for restoration of the advantage and payment of compensation and will lead to exploitation of the agreements with the minors. As remarked by LAWRENCE, J., "It would be a simple thing for those who prey upon infants to obtain from them materials which could be used to support a charge of fraud´┐Żas easy as obtaining the usual promissory note. The result would be that the infant would have both to establish his infancy and face a fraud charge."

On the urge of estoppel against minor representation, the court held that no estoppel can be pleaded against a statute, and if the statute says that a contract by a minor is void, nothing can prevent the minor from pleading that such a contract by a minor is void. The court also quoted the remarks of Romer, L.J., that a court of equity cannot say that it is equitable to compel a person to pay any monies in respect of a transaction which, as against that person, the legislature has declared to be void.

Coming to the final part of the judgment, it was held that the rule of equity is a well-settled, well-recognized, and well-accepted principle of English Law and not open to Indian courts to intervene and add up a new rule of equity that is contrary to what is followed in England.

According to the court, the difference between returning property and refunding money is primarily that property can be identified but cash cannot be tracked. The court stated that it is impossible to understand the distinction made in Leslie's case. In England, it is widely acknowledged that there is a distinct difference.

If a property transfer agreement is void and the transferred property can be located, the promisor is the rightful owner and can be pursued. He has every reason to be granted the property back, in his favour. Declaring the claim would, however, be practically equivalent to enforcing the child's pecuniary liability under the void contract in cases where the property cannot be located and the only means of awarding compensation is by granting a money judgement against the minor.

While stating that the contract is void and unenforceable, passing a decree against a minor enforcing his pecuniary liability would also be passing a decree against him on the basis that he had entered into the contract and had not cooperated with its terms. No law of fairness, justice, or good conscience allows a court to use the cover of the equitable doctrine to enforce a minor's defective contract against him.

Critical Analysis:
In the case of Khan Gul vs Lakha Singh it was held that a infant is not prevented from asserting that his infancy rendered the Contract unenforceable and that section 115 of the Evidence Act should be read in combination with section 11 of the Contract Act in the scenario where the infant deceived a person by fraudulently representing himself as a major.

If a child misrepresents his or her age in order to enter into the Contract, this will result in equitable liability. In the exercise of its equitable jurisdiction, the court may put the parties back in the position they were in before to the contract's date.

Restitution doctrine, which is outlined in Section 41 of the Particular Relief Act, is not limited to specific instances. You cannot allow a child to profit from his own deceit. Whether the minor is the plaintiff or the defendant, the doctrine still applies.

However, this case (Ajudiya Prasad vs Chandan Lal) held opposite to Khan Gul and Lakha Singh making minor free of all the liabilities irrespective of whether he is committing misrepresentation or fraud or not, i.e., When an infant makes a false representation about his age, he is liable neither on the Contract nor in the tort. Giving a free hand to the minor and putting them out of all the liabilities made this judgment subject to criticism. The part of the judgment that declares that the estoppel can not be applied to the cases of minors still holds some sensible ground as it keeps minors under a protective umbrella at times of forceful fraudulent contract with majors.

Therefore, the 13th Law Commission report suggests a change to mention in section 65 of the Contract Act. The committee recommends adding an explanation to indicate that section should be applied if a minor makes an agreement on the false representation that he is a major.

The law commission report thus holds the case of Khan Gul as the basis of restitution in cases of contract with minors. Written By: Abdul Haseeb, National Law University Lucknow

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