Honourable judges / Coram: Sir W Comer Petheram, Knight, Chief Justice, and Mr. Justice Beverley
The Specifics of the Case
The important case of Kedarnath Bhattacharji v. Gorie Mahomed [(1887) ILR 14 Cal 64] is an important case that follows up on the reassertion of the rule of law by articulating the fact that “any act done at the will of the promisor’s wish is taken as the fulfillment of consideration of a contract“.
Facts of the Case
The plaintiff in the case, Kedarnath Bhattacharji, is a Municipal Commissioner of the district of Howrah in Kolkata, West Bengal. Kedarnath Bhattacharji is also one of the trustees of the Howrah Town Hall Fund. For some time now, the Howrah Town Hall Fund has been pondering and considering the thought of building a town hall in Howrah. The condition precedent was that the Howrah Town Hall Fund could raise sufficient funds before beginning construction on the building of interest. When they were able to raise the funds that they needed, the members who were interested in the construction started working towards it in their own ways, seeking the subscriptions they could get. When this subscription list made it up to a certain extent, the plaintiff and other commissioners entered into a contract with a contractor for the purpose of constructing the Town Hall. The contractor was given the plans for the building, which were approved. But with the passage of time, as there was an increase in the subscription list, there was a natural increase in the plans too. The cost which was agreed on by the commissioners was twenty-six thousand rupees. But the cost had increased to a sum of up to forty thousand rupees. Even though there is a variation in the terms of the contract between the Commissioners and the contractor, the Commissioners are still liable to the contractor for the entire forty thousand rupees as such an increase in plans for the building was made by the authority of the Commissioners originally had. This means that the commissioners have accepted and approved these changes. The defendant, Gorie Mahomed, also made a subscription to pay rupees hundred for the construction of the Town Hall building. The defendant later refused to pay the same. The commissioners sued the defendant. The issue brought up in the court was whether the plaintiff and the rest of the commissioners, who are already liable to the contractor under the contract for the cost of construction of the building, could sue the defendant to recover the amount that the defendant, Gorie Mohamed, had made a subscription to. Initially, the defendant was sued in the Howrah Court of Small Causes to recover the amount. The power to sue was granted to the plaintiff by the Registrar of the Court under Section 30 of the Code of Civil Procedure of 1908. Here, he argued that the plaintiff had no right to sue the defendant. The judge of the Small Cause Court held that the Registrar had no such power to grant leave to sue. It was also held that the Town Hall falls under the category of trust property. It was held that the suit brought in by the plaintiff was bad ab initio. It came to the notice of the court that the defendant had no basic education. It was argued that it could not be expected of the defendant to be aware and have knowledge in its entirety of matters related to the subscription to which he put his name. The defendant had no obligation under the eyes of the law to pay the amount for which he was sued in the first place. The Small Cause Court dismissed the suit. Furthermore, the plaintiff brought the suit to the Calcutta High Court.
In the High Court of Calcutta, the following issues were raised:
- Whether or not the suit the plaintiff brought is legally maintainable?
- Whether or not the defendant could be held liable and made to pay the amount for the subscription which he failed to pay
The bench is of the view that even if the fact that the plaintiff is a Municipal Commissioner or one of the trustees of the Howrah Town Hall Fund is not taken into consideration, just by the provisions in the Code of Civil Procedure of 1908, it is certain that he can bring a suit on behalf of himself and others who share a joint interest with him. Here, one of the questions which were raised was whether the suit that the plaintiff brought could be maintained by all of the persons who were already liable to the contractor. It was agreed by the court that if a person puts his name down for a subscription to some kind of charity, then, of course, he is not entitled to recover this amount as there is no consideration that is present. But the case that is brought in is different from that of a charity.
The judgment here was given by Sir W. Comer Petheram, Knight, Chief Justice, and Mr. Justice Beverley. The opinion of the bench is that, in a normal scenario, if a person puts his name on a subscription for charitable work, then it cannot be contemplated as a consideration. So, such an amount is not recoverable. But in the present case, the people who were subscribing to their money were well aware as to what purpose the money would be used for. They were also familiar with the fact that on account of their subscription, the plaintiff and other commissioners entered into a contract. Hence, the Calcutta High Court is of the view that the contract so formed is valid in nature, and the consideration for the contract is a good consideration.
The Calcutta High Court held that the defendant, Gorie Mohamed, is liable to pay even if the promise he made in this contract is not entirely to his benefit. This is because the defendant has a responsibility toward the promise he originally made and he cannot take it back after the commencement of the contract. It was also observed that the suit brought by the plaintiff is, of course, legally maintainable.
Section 2(d) of the Indian Contract Act of 1872 discusses what could be considered a good consideration. Consideration in a contract means’ something in return. It is considered an essential element because such consideration could help one understand the intention and motive of the parties involved in the contract. According to Section 10 of the Indian Contract Act of 1872, a contract will only be valid in the eyes of the law if it is entered into for lawful consideration. A contract cannot be formed unless there is a legal consideration. From Section 2(d), it is understood that consideration is an act of abstinence. Such an act or abstinence that results in the formation of consideration for the promise’s promise must be done voluntarily at the desire of the promisor or at the request of the promisor himself. This gives rise to the doctrine of promissory estoppel. This in turn means that if the act or abstinence which forms consideration is done by a person who is not a party to the contract, such act or abstinence does not give rise to a valid consideration for the contract between the promisor and promise. From Section 2(d), it is also understood that the consideration need not be a present consideration. Consideration may be a past, present, or future consideration. Basically, consideration is kind of an advantage that is to be bargained for between parties to a contract. So, the consideration is to have some value. Definitely, those acts or abstinence which are illegal or immoral cannot be claimed to be a valid consideration because such an unlawful consideration does not result in a valid contract that can be enforced in a court of law.
The basic understanding in law is that if there is no consideration, then there is no formation of a contract. But there are some exceptions to this rule of law. These exceptions are listed in Section 25 of the Indian Contract Act of 1872. Some of the exceptions are agreements formed between parties based on a relationship of natural love and affection; contracts where a voluntary service was provided in the past for which the pay is at a later time; promises to pay a time bar debt, charity, bailment, agency, etc.
In paragraph 6 of the judgment, it is stated that “The subscriber by subscribing his name says, in effect, that in consideration of your agreeing to enter into a contract to erect or yourselves erect this building, I undertake to supply the money to pay for it up to the amount for which I subscribe my name.“
From the above statement, it is very evident that all the ingredients for consideration to become a good and valid consideration have been met. In the present case, while putting the name down on the subscription list, the defendant was very clear about the facts himself. The subscription was not for any of the exceptions mentioned in Section 25 of the Indian Contract Act of 1872. This means that the defendant was rightly made to pay the amount back. The plaintiff did the right thing by suing the defendant to recover the amount because the defendant did not have the right to withdraw the subscription after its commencement. In this case, the contract entered into by the plaintiff and the other commissioners who had full liability towards the contractor and the defendant was a valid contract. The consideration is a good consideration that can be enforced by a party to the contract, and the plaintiff can go on to sue on behalf of either himself or all those people who share the same interests in suing.
The reason why such a judgment was given by the judges was because of the fact that, usually, subscriptions cannot be recovered because subscriptions are usually not backed by considerations. However, in the preceding case, the people subscribing had a general understanding and knowledge of subscription in general, as well as the purpose of subscription in particular. They were aware of where the money they were giving was applied to, and they were also aware of the fact that when they were subscribing to pay the sum, an obligation would also arise as a result of such a subscription. The obligation arising here is the liability to pay the contractor a certain sum for the work he has done for the construction of the Town Hall.
This is basically the doctrine of promissory estoppel. The doctrine is framed on the principles of equity, fairness, and moral conscience. The intention of the doctrine of promissory estoppel is that if a party makes a clear promise to the other party and the other party acts on the promise, then there is an obligation on the party who made the promise. The obligation is that the party cannot retract his or her words or promises. It is not permissible to go back on his words because it would contradict the basic principle on the basis of which the doctrine is framed.
It can also be understood that the agreement which is formed between the plaintiff and the other persons of interest, like the Commissioners, to build a town hall or to construct the same through a third party, does give rise to a lawful and valid consideration for the subscription of money from the defendant’s end. It is clear now that this scenario results in a comprehensively valid contract and for good consideration at that.
In the case of Kedarnath Bhattacharji v. Gorie Mahomed [(1887) ILR 14 Cal 64], the defendant’s act is similar to that of the promisor’s act. This act itself gives rise to a good consideration of the promise the defendant made. It does not matter whether there were any personal gains, significance, or benefits the defendant could make out of such a promise. This is the reasoning which helps us find out why the judgment given by the Howrah Court of Small Causes was overruled by the Calcutta High Court. As mentioned above, paragraph 6 of the judgment clearly shows the knowledge and awareness on the part of the defendant when he put his name on the subscription list. “In consideration of your agreeing to enter into a contract to erect a… I undertake to supply the money.” it itself is the promise here. The act done by the defendant, which is to put his name on the subscription list, which resulted in the formation of a contract between him and the contractor, shows the defendant’s desire. This desire shown by the defendant (herein the promisor) is enough consideration that will fall under the ambit of Section 2(d) of the Indian Contract Act of 1872. This was a clear promise to pay for the performance of the contractor in constructing the Town Hall building, and so the defendant, Gorie Mohamed, could not revoke the promise once the contract started. According to Rt Hon Sir Alfred Denning, when an act or abstinence is done by one party at the request of another party, even if such a request is expressed or implied in nature, the act or abstinence can be considered to be a sufficient “good consideration”.
This case and the judgment given by Sir W. Comer Petheram, Knight, Chief Justice, and Mr. Justice Beverley have been applied in several other cases. The Madras High Court in the case of Maharaja Perumal Mudaliar v. Sendanatha Mudaliar [AIR 1918 Mad 311; 44 Ind Cas 479] went on to explain that the promise to pay a subscription is enforceable as soon as there is a definite act or abstinence which takes place with respect to the performance of the promised subscription.
Kedarnath Bhattacharji v. Gorie Mahomed [(1887) ILR 14 Cal 64] is a case that takes the lead and establishes the fact that once a promise is made, the promisor is responsible for carrying out his duty and cannot revoke the promise after it has begun. It is understood that consideration is a very important element for a contract to be considered valid in the eyes of the law. This case also establishes and affirms the importance of promise and consideration. Further, this judgment confirmed the rule of law by articulating the fact that “any act done at the will of the promisor’s wish is taken as the fulfillment of consideration of a contract“. In a conclusion, it can also be said that Section 10 of the Indian Contract Act of 1872, which talks about lawful consideration, and Section 2(d) of the Indian Contract Act of 1872, which defines what consideration is in the first place, gives us a very clear picture as to the importance of consideration during the formation of a valid contract which is enforceable in a court of law.