This article is written by Vidushi Kachroo. The article gives a detailed analysis of the landmark case of Kedarnath Bhattacharji vs. Gorie Mahomed (1886). This is one of the most important cases in which it was held that when a subscriber, with full knowledge of the purpose, makes a subscription in his name, he is under a legal obligation to fulfil the subscription promised as and when required. The article includes the details and facts of the case, the arguments presented, and the judgement given by the Hon’ble High Court of Calcutta.
Introduction
The case of Kedarnath Bhattacharji vs. Gorie Mahomed (1886) is one of the landmark cases related to the concept that once a promise is made for consideration, it can not be taken back after the fulfilment of the consideration. The Calcutta High Court held in this case that a subscription agreement can be considered a perfectly valid contract if the subscribers have knowledge about the purpose of their subscription.
Section 25 of the Indian Contract Act, 1872, lays down that any agreement made without a consideration is void in the eyes of law, with certain exceptions. Consideration is the most important essential which is to be fulfilled for a promise to be called a contract. Section 2(d) of the Indian Contract Act, 1872 defines the term consideration. In the present case, the respondent was sued by the appellant for not fulfilling his promise of paying the subscribed amount which had to be used for erecting the Town Hall in Howrah.
The main question on which both the parties presented their contentions was whether it was correct to hold the respondent liable to pay the promised amount when it was the appellant who had actually made himself liable by entering into a contract with the contractor, for recovering the costs incurred in the process of building the proposed Town Hall or not.
Details of the case
- Case name: Kedarnath Bhattacharji vs. Gorie Mahomed
- Type of case: Civil Reference
- Citation: ILR 14 CAL 64
- Date of judgement: 26 November, 1886
- Court: High Court of Calcutta
- Bench: Chief Justice W. Comer Petheram and Justice Beverley
- Appellant: Kedarnath Bhattacharji
- Respondent: Gorie Mahomed
- Laws involved: Section 2 and Section 10 of the Indian Contract Act, 1872
Facts of the case
In the present case, Kedarnath Bhattacharji (hereinafter referred to as the appellant) was a Municipal Commissioner of Howrah and also the vice chairman of the Municipality. It was decided to build a Town Hall at Howrah and for this purpose, a fund was created to gather subscriptions to cover the cost of construction. For this, the commissioners of the Howrah Municipality entered into a deed, hence declaring themselves as the trustees of the Howrah Town Hall fund.
When the required subscriptions for erecting the Town Hall were achieved, the commissioners, including the appellant, entered into a contract with a contractor to proceed with the work to build the proposed Town Hall. The plans were submitted by the contractor, which were approved by all the commissioners, and the total estimated budget for building the Town Hall was an amount of ₹26,000.
After some time, the subscriptions made to the Town Hall fund were calculated to cover an estimated budget of ₹40,000. Hence, due to an increase in the budget, the plans of construction were also enlarged. This was done with the due approval of all the commissioners.
Gorie Mahomed (hereinafter referred to as the respondent) was one of the subscribers of the Howrah Town Hall fund, who had promised to pay ₹100 for the purpose. However, when he was finally asked to pay the promised amount, he refused to make the payment. This led to the appellant, as a trustee of the Town Hall fund and the vice chairman of the municipality, to sue him for not fulfilling his promise.
The appellant was one of the persons who had made themselves liable to the contractor for fulfilling the costs of the project. The appellant sued the respondent on behalf of all others in the same interest as himself in the Howrah Court of Small Causes. The Registrar of that Court granted the appellant the right to sue under Section 30 of the Civil Procedure Code, 1882.
The respondent contended that the appellant had no right to sue. The judge of the Small Causes Court agreed to this contention and stated that the Registrar had no authority to grant the appellant the right to sue and that the case fell under the ambit of Section 437 of the Civil Procedure Code, 1882, as the Howrah Town Hall was a trust property.
Hence, it was held that the suit was bad ab initio. Moreover, the judge, by referring to the case of Kedar Nath Mittra vs. Alisar Rohoman, held that the respondent was a man with no education, which meant that he entered into the subscription without having full knowledge about what he was subscribing to. Therefore, it was held that the respondent was not liable to pay any amount to the appellant. This judgement was then challenged before the High Court of Calcutta.
Issues raised
After coming across the facts of the case, the Hon’ble High Court of Calcutta had to adjudge the following two issues:
- Whether the suit instituted by the appellant was legally maintainable?
- Whether, on the basis of the facts stated, the appellant and other trustees were entitled to have the judgement in their favour?
Arguments of the parties
The main argument in this case was based on the question of whether the respondent could be held liable for the payment of the promised subscribed amount when it was the appellant who, among others, had entered into a contract with the contractor.
Appellant
The appellant put forward his contention that the Howrah Town Hall Fund was created to gather subscriptions from the people to cover the cost of the construction of the Town Hall. The respondent had entered his name into the subscription list and made himself liable to pay an amount of ₹100 for the same purpose. The trustees of the fund, including the appellant, entered into a contract with the contractor and made themselves liable for recovering the cost incurred in the construction of the Town Hall on the basis of the subscriptions made by people.
According to the appellant, the respondent entered into a contract with the trustees of the fund because he knew the purpose behind the subscription and was fully aware that on account of those subscriptions, the trustees entered into a contract with the contractor. Hence, the respondent was at fault for refusing to pay the subscribed amount as he was breaching his promise.
Respondent
The respondent on the other hand put forward that though he had subscribed to the Town Hall fund, he was not aware of the purpose for which he was agreeing to subscribe. He defended that being a man of low educational qualification, he had no knowledge as to what he was subscribing for.
He stated that due to his low educational qualification, he could not be expected to be aware of the legal implications that would follow after putting his name on the subscription list. The respondent argued that he did not make any promise for any consideration and hence, he should not be faced with any legal obligation for the payment of the subscribed amount.
Laws involved in Kedarnath Bhattacharji vs. Gorie Mahomed (1886)
This case revolves around the legal concepts entailed in the following sections of the Indian Contract Act, 1872, which have been discussed in detail.
Section 2 of Indian Contract Act
Section 2 of the Indian Contract Act, 1872 (hereinafter referred to as the Act) is the interpretation clause, which lays down all the definitions of the terms used in the Act.
For understanding and defining the term ‘contract’, it is important to understand the terms ‘promise’, ‘consideration’ and ‘agreement’. It is by following this chain of terms that we finally come to the understanding of what is a contract.
Section 2(b) of the Act defines the term promise. It states that when a proposal is accepted it becomes a promise. According to Section 2(a), when a person offers to perform or abstain from performing any act to some other person, he is said to have made a proposal. This proposal is made with the intention of obtaining the consent or acceptance of such other person regarding the performance or abstinence from the performance of the act. When such a proposal is accepted by the other person, it becomes a promise. The one who makes a proposal becomes the promisor and the one who accepts the proposal becomes the promisee.
Section 2(e) states that a promise or set of promises becomes an agreement whenever they are backed by some consideration. Hence, if a promise is made for some consideration, it becomes an agreement.
The term consideration is defined under Section 2(d) of the Act. When the promisor at the desire of the promisor has done or abstained from doing an act, or does or abstains from doing any act, or promises to do or abstain from doing any act, such an act or abstinence is called as consideration. Basically, it means something of a certain value in the eyes of the law in return for which a party to the contract agrees to do or abstain from doing any act.
Section 2(h) states that an agreement enforceable by law is called a contract. This means that an agreement must possess certain essentials for it to be enforceable in the court of law. An agreement must be between competent parties with their free consent while having a lawful consideration for a lawful object. An enforceable contract means that if the contract is breached by any party to the contract, the aggrieved party has the right to institute a suit for breach of contract in the court.
Section 10 of Indian Contract Act
Section 10 of the Act lays down the essential ingredients which make an agreement a valid contract. The essentials of a valid contract are as follows:
Offer and acceptance
There must be an offer made by one party to another in respect of doing or abstaining from doing an act. This offer must be accepted by the other party to whom it was made. There must be consensus ad idem which means that both the parties must accept and understand the terms of the contract in the same sense.
Free consent
The consent must be free from any coercion, fraud, misrepresentation of fact or deception. The parties must enter into the contract on their own will or voluntarily.
Competent parties
The parties must be competent or in the capacity to enter into a contract. They must be of a sound mind and have attained the age of majority, i.e., 18 years.
Lawful consideration and lawful object
There must be a consideration in a contract. The consideration and the object of the contract must be lawful. They should not be anything which is illegal or opposed to public policy.
Intention to create a legal obligation
There must be an intention of both parties to create a legal obligation.
Must not be expressly void
The contract must be something which has been expressly declared as void in the Act.
Judgement of the case
In this case, the judgement was delivered by Chief Justice Petheram. The court held that the suit instituted by the appellant was legally maintainable and gave its decision in the favour of the appellant. The court held that the arrangement between the appellant and the respondent can be considered a perfectly valid contract with good consideration. Hence, making it legally valid to sue the respondent for evading his liability as promised by him initially.
The court ordered that the Small Causes Court ought to decree the suit for the amount claimed by the appellant. Hence, it was held that the appellant is entitled to the amount claimed by him and also to recover the cost incurred by him on the litigation process from the respondent.
The Hon’ble High Court of Calcutta reached this conclusion by observing the facts of the case very carefully and hearing the contentions made by both the appellant and the respondent. The court gave its opinion on the two issues raised separately.
Issue 1: whether this suit was maintainable
The court gave an affirmative opinion on this issue. It was held that the appellant did have the right to sue the respondent for recovering the amount of subscription promised to be paid by him. The court laid down a dissenting opinion on the judgement given by the Judge of the Howrah Small Causes Court.
When the case was initially heard before the Small Causes Court, the Judge of that Court held that the appellant had no right to sue the respondent. The appellant was allowed by the Registrar to sue the respondent under Section 30 of the Civil Procedure Code, 1882; however, the Judge of the Small Causes Court did not find the Registrar to be authorised to allow such a right. Hence, the appellant’s claim was dismissed.
The Calcutta High Court, in its proceedings, stated that the suit filed by the appellant is legally maintainable as he possesses the right to bring a lawsuit on behalf of others having similar interests. It was also held that even if there was any technical fault in the filing of the suit, the court could allow it to proceed by accepting the appellant to act on behalf of other trustees. This was held to ensure that justice is done without giving much importance to the minor procedural issues.
Issue 2 : whether the trustees are entitled to recover the subscribed amount from the respondent
This issue was the focal point of the entire suit. It had to be decided whether the respondent is under any legal obligation to pay the amount subscribed in his name to the appellant or he can evade this liability on the contention put forward by him before the court. Initially, the Small Causes Court held the decision in favour of the respondent by stating that he was not under any legal obligation to pay the amount subscribed under his name.
The judge gave the rationale behind his judgement that the respondent was a man of low educational qualification, which clearly meant that he had no knowledge about what he was subscribing to. It was held that he was clueless about the implications which would follow if he did not pay the amount to which he had subscribed in the fund list. Hence, he can not be held liable for something he was not aware of.
The Calcutta High Court dissented from the opinion of the Small Causes Court. The court held that there are numerous subscriptions made by people under their names in various funds and it is not possible to recover such subscriptions.
This is because such subscriptions are made for the trusts which are public property and people make such subscriptions without having the knowledge as to where their money is going to be spent. In such cases, the subscribers can not be held liable for the payment of the amount subscribed under their names. However, in the present case, a different scenario appears before the court.
The trust, i.e., the Howrah Town Hall fund, was established for the sole purpose of collecting subscriptions which would be enough for erecting a Town Hall at Howrah. This intention was made clear by all the trustees, including the appellant, of the fund. There was no ambiguity as to what were the subscriptions collected going to be used for.
The respondent can not claim having no knowledge about the purpose of the fund to which he promised to pay the amount of ₹100 by putting his name in the subscriber’s list. The educational qualification does not matter here as the respondent was already aware that on the basis of the subscriptions collected by the fund, the trustees were going to enter into a contractual liability with the contractor to cover the costs incurred in the construction of the Howrah Town Hall.
This, in the eyes of the court, was a good contract. The court held that the promise made by the respondent to pay ₹100 was against the consideration of the Town Hall being constructed. Hence, it can be considered that he had entered into a contract with the appellant and all the trustees because this arrangement consists of all the essential requirements of a valid contract.
The court held that this was a perfectly valid contract with good consideration and all the essentials of a contract which is enforceable in the court by the appellant acting on behalf of other persons having the same interest.
Rationale behind the judgement
The rationale behind the judgement given by the Calcutta High Court was that the promise made by the respondent to pay ₹100 to the Town Hall fund was against the consideration of having the Town Hall constructed. The court observed that a contract was formed between the appellant and the respondent because all the essential requirements of a valid contract were present in the arrangement.
There was a promise, good consideration, parties of sound mind and a lawful object, all of which make a perfectly valid contract enforceable in a court of law. This created a legal obligation on the respondent to pay the amount promised by him to the appellant.
The court overturned the decision of the Small Causes Court which was given in the favour of the respondent. The opinion of the judge that the appellant had no right to sue on behalf of other trustees and the inability of the respondent to understand the legal implications of not paying the amount on the grounds of low educational qualification was denied by the Calcutta High Court.
The High Court held that the appellant was entitled to the right to sue the respondent on behalf of other trustees because all of them had the same interest. The court also stated that even if there were defaults in the procedural aspect of instituting the suit, the court could allow it to meet the ends of justice.
The court’s findings clearly state that the respondent was fully aware that on the basis of the subscriptions made to the fund list, the trustees, including the appellant, would be entering into a contract with the contract, making themselves liable for the recovery of the amount incurred in the construction of the Town Hall. Hence, the court held the respondent liable for the payment of the subscribed amount.
Analysis of Kedarnath Bhattacharji vs. Gorie Mahomed (1886)
This case lays down the concept of once a promise is made, it can not be taken back. The respondent had subscribed to the Howrah Town Hall fund, promising that he would pay an amount of ₹100 for the purpose of erecting the Town Hall. The trust or the fund was established by the appellant and other Municipal Commissioners, who became the trustees of the fund by forming a deed, for the purpose of collecting subscriptions from the general public so that the costs of constructing the Town Hall could be covered.
After a certain period, when it was felt that the fund had collected a sufficient number of subscriptions, the appellant along with the other trustees entered into a contract with a contractor, on the faith that the subscribers of the fund would pay the amount promised by them. This contract created a legal liability on all the trustees to cover the costs incurred in the construction of the Town Hall.
The denial of the respondent to pay the subscribed amount on the grounds of having no knowledge as to what he was signing up for was dismissed by the Calcutta High Court. It was held that once a promise is made for good consideration and full knowledge, such a promise constitutes a perfectly valid contract and can not be taken back.
Hence, when the respondent promised to pay ₹100 for the purpose of constructing the Town Hall, he made himself legally obligated to pay that amount whenever he was asked by the appellant to do so. He can not evade his liability by saying he had no knowledge when the facts make it clear that the appellant and other trustees were going to enter into a contract with the contractor on the faith that the subscriptions made in the fund list would cover the entire cost of the construction.
Conclusion
The case of Kedarnath Bhattacharji vs. Gorie Mahomed (1886) made it clear that once a promise is made, for good consideration and with the knowledge that a legal liability would occur on the basis of that promise, such promise can not be taken back after the fulfilment of the consideration. The respondent had to pay the amount subscribed under his name because he was fully aware that on the faith that the subscribers would fulfil their promise of paying the subscribed amount, the appellant, along with other trustees, was going to enter into a contract, making themselves liable for covering the cost incurred in the construction of the Howrah Town Hall.
The Calcutta High Court rejected the contention of the respondent that he was not aware of what he was subscribing to because he did not possess good educational qualifications. The court held that the promise made by the respondent had no relation to him being a man of low education. He was fully aware of the purpose with which the fund was established and the legal liability which the appellant and other trustees made themselves liable for, from the very beginning.
It was held that the respondent could not evade his liability of fulfilling the promise made by him after the consideration, which was the construction of the Howrah Town Hall, was fulfilled. He is under a legal obligation to pay the amount promised by him to the appellant. Hence, the judgement was given in the favour of the appellant.
Frequently Asked Questions (FAQs)
What are the essentials of a valid contract?
For a contract to be valid, there must be parties competent to contract, an offer made and acceptance, free consent, lawful consideration, lawful object and an intention to create a legal obligation.
Is a contract made with no consideration valid?
No, a contract made without consideration is not valid. Section 25 of the Indian Contract Act, 1872 clearly states that a contract made without any consideration is void.
What was stated by Section 30 of the Civil Procedure Code, 1882?
Section 30 of the Civil Procedure Code, 1882 stated that when a single suit consists of numerous persons having the same interest, the court may allow any one or more of such persons to sue or be sued or to defend on behalf of all the persons. However, the court shall give notice of the suit to all the persons involved in the suit.
References
- The Indian Contract Act by Dr. R.K. Bangia
- https://www.juscorpus.com/kedarnath-vs-gorie-mohammad-a-case-study/
