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  • Harries, C.J
  • Chakravartti, J.
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  • Sub-rule (2) of R. 7 of O. 32
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Citation Codes
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  • Harries, C.J
  • Chakravartti, J.
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  • Sub-rule (2) of R. 7 of O. 32
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Smart Summary

Structured Summary of the Opinion — Chakravartti, J.

Factual and Procedural Background

The plaintiff sued the defendants for accounts on the basis of an earlier compromise decree and earlier agreements relating to a business carried on under the name Pioneer Calico Printing Works. The business originated with one Bahir Das Das (deceased), who left five sons — three adult sons (referred in the opinion as certain numbered defendants) and two minors (described in the opinion as defendants 4 and 5). After the death of Bahir Das Das, the plaintiff assisted in re-starting the business; the plaintiff contributed Rs. 1,000 and the defendants jointly contributed Rs. 1,000. The plaintiff was to own one half of the business and the defendants jointly the other half.

There were subsequent partnership arrangements and disputes. An agreement dated 1st December 1932 purported to dissolve a partnership and to settle accounts (with arbitration if the parties failed to settle). The plaintiff sued for accounts (Title Suit No. 1216 of 1936, as described in the opinion). During earlier litigation, guardianship for the minors changed and the minors had a guardian ad litem substituted.

The suit failed in the lower courts on the ground that the December 1, 1932 document could not bind minors; a second appeal was disposed of by Edgley, J., by a compromise decree (terms of which the opinion quotes). On the basis of that compromise decree the plaintiff gave a notice of dissolution (18 April 1940) and instituted the present suit on 3 July (year as in the opinion).

The present appeal concerns whether the compromise decree and/or the earlier agreement of 1st December 1932 were binding and effective in circumstances where some of the defendant parties were minors at relevant times and no leave of the Court was shown to have been recorded for the guardian to enter into the compromise.

Legal Issues Presented

  1. Whether a compromise decree to which a minor is a party, entered into without the Court recording leave to the guardian under O. 32, R. 7(2), is voidable by the minor and whether the minor may challenge its validity by way of defence in subsequent proceedings.
  2. Whether a compromise decree that is voidable as against a minor remains binding or effective as between the other parties to the compromise.
  3. Whether the agreement dated 1st December 1932 (purporting to dissolve the partnership and settle accounts) was valid and enforceable in respect of the minors and, if not, whether the invalidity as to the minors vitiates the entire agreement as between the remaining parties.

Arguments of the Parties

Appellant's Arguments (as presented in the opinion)

  • Mr. Ghose relied on the decision in Sajahan Howladar v. Sremath Mistri (51 C.W.N. 26; A.I.R. 1946 Cal. 438) to contend that a minor could not urge the invalidity of a compromise decree when appearing as a defendant — i.e., that a minor cannot challenge such a compromise by way of defence.
  • It was also argued (by or for the appellant) that even if the December 1, 1932 contract was not binding on the minors, it nonetheless remained a valid and operative agreement so far as the remaining (non-minor) parties were concerned.

Respondent's Arguments (as presented in the opinion)

  • Mr. Gupta, for the respondent, explained peculiar facts of the earlier cited case (Sajahan Howladar) and contended that principles applicable to contracts involving minors (as in Mir Sarwarjan v. Fahhruddin Mohamed Chowdhury) could not be applied in the same way to a compromise decree — because O. 32, R. 7 contains clear statutory provisions about compromises involving minors.
  • Respondent contended that the statutory rule (O. 32, R. 7(2)) required leave of the Court for a guardian to enter into such a compromise and thus the compromise could be voidable against the minor.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Sajahan Howladar v. Sremath Mistri, 51 C.W.N. 26; A.I.R. 1946 Cal. 438 Quoted for the proposition that a minor is not bound by a consent decree entered into by a guardian without leave, and an observation in that decision suggesting the minor must avoid the decree by a direct proceeding — with the further implication (in that decision) that the minor could not challenge it as a defendant. The court observed that the statement in Sajahan Howladar is plainly contrary to the law as authoritatively laid down by the Judicial Committee in Jamna Rai v. Vasant Rao. The opinion records that Jamna Rai was apparently not cited in Sajahan Howladar and thus the court did not consider Sajahan Howladar decisive on the point.
Jamna Rai v. Vasant Rao, 43 I.A. 99; A.I.R. 1916 P.C. 2 Authoritative authority (Judicial Committee / Privy Council) that where a compromise or bond is entered into on behalf of a minor without the leave required by the relevant rule/section, the instrument is not enforceable against the minor; the minor may challenge unenforceability and may do so by way of defence in subsequent proceedings. The court relied on Jamna Rai as settling the legal position: a minor, to whom leave under the rule was not given, can challenge the validity of the compromise; it need not bring a separate suit and may raise the matter by way of defence. This case settled doubts about O. 32, R. 7(2) for the present decision.
Mir Sarwarjan v. Fahhruddin Mohamed Chowdhury, 39 I.A. 1; (39 Cal. 282 P.C.) Addressed principles concerning contracts involving minors (authority referred to as laying down relevant principles about minors and contracts). The opinion records that Mr. Gupta relied on the peculiar facts of Mir Sarwarjan to argue the case should be treated differently, and that the learned Judges in the earlier case accepted the substance of Mir Sarwarjan's principles. However, the court in the present opinion did not treat Mir Sarwarjan as displacing the Privy Council's decision in Jamna Rai on compromises without leave.

Court's Reasoning and Analysis

The court's analysis proceeded in the following logical steps, stated in the opinion:

  1. The relevant statutory provision was identified and quoted: Sub-rule (2) of Rule 7 of Order 32 (O. 32, R. 7(2)), which reads: “Any such agreement or compromise entered into without the leave of the Court be recorded shall be voidable against all parties other than the minor.”
  2. The plain meaning of the Rule was emphasized: where a minor is a party to a compromise and the guardian did not obtain the leave of the Court required to enter into that compromise, the compromise is voidable by the minor. The rule does not distinguish between a minor's position as plaintiff or defendant; it permits the minor to avoid the compromise.
  3. The court resolved a conflict in previous authority by giving controlling weight to the Judicial Committee (Privy Council) decision in Jamna Rai v. Vasant Rao. That decision held, on similar facts, that an instrument entered into without the required leave was not enforceable against the minor and that the minor could defend on that ground; the court in the present matter treated Jamna Rai as authoritatively disposing of doubts about the meaning of O. 32, R. 7(2).
  4. The court contrasted Jamna Rai with the earlier Calcutta Division Bench decision (Sajahan Howladar), observing that Sajahan Howladar contained statements inconsistent with Jamna Rai and that Jamna Rai had apparently not been cited or considered in Sajahan Howladar. Accordingly, Sajahan Howladar's contrary statement was not followed.
  5. Applying Jamna Rai and the statutory rule, the court concluded that the compromise decree in the present case was voidable by the minor (referred to in the opinion as one of the defendant-minors) and that the minor could raise that voidability by way of defence. The court therefore held the compromise decree to be void and ineffective so far as that minor was concerned.
  6. The court then examined whether the compromise decree could nevertheless remain binding and effective as between the remaining parties. It reasoned that the compromise decreed that the plaintiff should be regarded as partner to the extent of eight annas and that the 1st December 1932 document should be regarded as ineffective. The court found it impossible to see how a compromise of that character could remain effective when one of the contracting parties could lawfully drop out because the compromise did not bind him.
  7. The court therefore held that the compromise decree, being not binding upon at least one of the minors, ceased to be an effective and operative compromise decree even as between the remaining parties.
  8. On the validity of the 1st December 1932 agreement: the lower appellate court had found that the minors had been made contracting parties through their guardians and that, because minors cannot enter into contracts of partnership, the December 1, 1932 document was invalid and inoperative even as between the (other) partners. The present court agreed with that view. The court explained that because the agreement proceeded on the assumption that all five defendants had defined shares (the plaintiff eight annas and the five defendants jointly the other eight annas), the invalidity as to the minors rendered the entire agreement incapable of operative effect: the minors' shares could not be ignored and the contractual scheme could not be given workable effect if some owners' shares were unaccounted for.
  9. In consequence of the above reasoning, the court concluded the lower appellate court's view on both questions to be correct.

Holding and Implications

Holding: The appeal is DISMISSED. The court affirmed the view that the compromise decree was voidable and ineffective insofar as it affected the minor(s) and that, because a contracting minor could avoid the compromise, the compromise could not remain an effective instrument as between the remaining parties. The court also upheld the finding that the agreement of 1st December 1932 was invalid in its operative effect because it purported to bind minors to a partnership interest.

Implications:

  • The direct effect is that the compromise decree (as described in the opinion) is not operative as against the minors who were parties thereto without the requisite leave of the Court, and the December 1, 1932 agreement cannot be treated as a valid operative partnership agreement insofar as minors were made contracting parties.
  • The decision follows and applies the authoritative Privy Council decision in Jamna Rai v. Vasant Rao and rejects contrary observations in the earlier Division Bench decision cited (Sajahan Howladar) to the extent inconsistent with Jamna Rai.
  • The court made no claim that it was laying down a novel principle of law beyond applying the settled rule that compromises entered into on behalf of minors without leave are voidable as against the minors; the decision's immediate practical consequence is the dismissal of the appeal and the ordering of costs against the appellant.

Order: Appeal dismissed (Harries, C.J. concurred).

Show full summary ...

    Durga Charan Gangopadhaya v. Akkari Das

    Chakravartti, J.:— The question involved in this appeal is a short one, but the facts make a rather long history.

    2. The plaintiff brought a suit for accounts against the defendants on the basis of a compromise decree to which fuller reference will presently be made. It appears that there was one Bahir Das Das who resided at Serampore and carried on a business in dyeing and printing. He died in 1333 B.S, leaving five sons, three of whom, defendants 1, 2 and 8 of the present suit, were majors and the remaining two defendants 4 and 5 were minors. After the death of Bahir Das Das the business is said to have practically collapsed when the plaintiff came forward with an offer of assistance and thereupon the business was, as it were, reconstructed. It was agreed between the parties that the business would be re-started under the name and style of Pioneer Calico Printing Works, Ltd., the plaintiff contributing Rs. 1000 towards its working capital and the defendants jointly another Rs. 1000 to the same fund. It was further agreed between the parties that the services of one Mr. K. Chatterjee would be availed of as he was an expert in the line. A further term of the agreement was that the plaintiff would be the owner of a half share of the business and the defendants jointly between themselves the owner of the other half.

    3. The business seems to have been carried on for a few years without any trouble arising but about the year 1932, by which time the expert had left, some disagreement seems to have arisen between the parties. It was composed by an agreement entered into on 11th August 1933 whereby a partnership was formed. That was an agreement between the plaintiff on one part and the defendants on the other part, defendants ??? and 5 still being minors and being represented by their guardian, defendant 1. The material terms of this agreement were that the plaintiff would be the owner of a half share of the business as before and the defendants between themselves would be the owners of the remaining half share that defendant 1 would be in charge of the case and accounts, and that if it was found impossible to carry on the business, the parties would dis solve the partnership amicably and settle the accounts between themselves. This agreement was followed by a further agreement executed on 1st December 1932. By that agreement the partnership was dissolved and it was decided that the parties would settle the accounts between themselves and if they failed to do so amicably, they would refer their dispute to arbitration. The plaintiff in due course gave notice to the defendants to settle the accounts, but inasmuch as there was no compliance on the part of the latter, he brought a suit which was Title suit No. 1216 of 1936 for accounts. At the time that suit was brought, defendants 4 and 5 were still minors. At the inception of the suit, both the defendants were represented by defendant 1 as their guardian ad item, but it appears that subsequently, during the pendency of the suit one Bhagabati Dasi was appointed their guardian in a certain guardianship proceeding, and thereupon that lady was substituted as the guardian ad litem of the minors in Suit No. 1216 of 1935. The suit failed both in the trial court and in the Court of first appeal on the ground that the agreement of 1st December 1932 by which the partnership had been sought to be dissolved, was not binding be the minors, and consequently, the suit for accounts, being based on that agreement, could not succeed. A second appeal from the decision of the lower appellate Court was disposed of by Edgley J. on compromise. The terms of the compromise decree were as follows:

    “By consent this appeal is disposed of in the following terms it is agreed that the plaintiff will be regarded by all the parties concerned as a partner to the extent of 8 annas in the Pioneer Calico Printing Works. It is also agreed that the document Ex. 8(a) dated 1st December 1933, must be regarded as ineffective. The plaintiff will, therefore, be at liberty to institute a suit for dissolution of partnership against the defendants on the basis that the partnership still exists between him and the other defendants, in which he has an eight ??? interest and in that Bait he will also be at liberty sue for accounts in respect of the working of the iciness up to date.”

    4. It is not necessary to quote the remaining cases of the compromise decree.

    5. On the basis of this compromise decree, the plaintiff served a notice of dissolution on 18th April 1940 and thereafter brought the present lit on 3rd July following.

    6. Of the various defences taken in the suit, is necessary for the purposes of this appeal to ??? only one. It was contended that inasmuch as both defendants 4 and 5 were minors a 1st December 1932, the alleged contract of dissolution of the partnership was not binding on ??? effective against them. It was contended in ??? next place that in as much as defendant 4 had ??? majority before the compromise decree ad been passed, but had nevertheless been ??? as a minor in the compromise petition ad the decree following thereupon, the decree as not binding upon him. As regards defendent ant 5 it was contended that inasmuch as he ??? to be a minor even at the date of the ??? decree, it was not binding on him all inasmuch as the learned Judge did not ??? any leave to the guardian to enter into the from promise on his behalf.

    7. These contentions have been given effect by the lower appellate Court and it has been intended in support of the appeal that the finding of the lower appellate Court with regard to defendant 4 is erroneous in law and that the ??? with regard to defendant 5, so far as the ??? decree is concerned, is also erroneous ??? as although the decree might be void-Vie at his instance if he sought to have it set side as a plaintiff in an appropriate suit brought or the purpose, he could not question it as a defendant in a suit. It hag been argued in the ??? place that assuming that the contract of ??? December 1932 was not binding on decedent 4 and 5 inasmuch as they were minors at date and could not enter into a contract of ??? it was still a good and valid ??? so far as the remaining parties were concerned.

    8. Having regard to the view we are taking ??? regards the position of defendant 6, it is not necessary to consider whether the learned Judge as right in holding that the compromise decree could not bind even defendant 4 on the ground lat he had attained majority during the penency of the appeal. It is undisputed that defendant 6, at any rate, was a minor at the are of the compromise decree. It cannot also a disputed that Edgley J. did not give or record any leave which he gave or purported to give to ??? guardian ad litem of the minor to enter into the compromise. Having regard to those two facts, it would appear that the compromise was clearly voidable against all parties other than the minor as laid down in R. 7(2) of O. 32. But Mr. Ghose contended on the authority of the decision in the case of Sajahan Howladar v. Sremath Mistri, 51 C.W.N 26 : (A.I.R (33) 1946 Cal. 438), that the minor could not urge the invalidity of the compromise decree as a defendant.

    9. The words of the statute to which I have referred are reasonably plain. Sub-rule (2) of R. 7 of O. 32 reads thus:

    “Any such agreement or compromise entered into without the leave of the Court be recorded shall be voidable against all parties other than the minor.”

    10. That, to my mind, clearly indicates that a compromise to which a minor is a party, but for entering into which the guardian was not granted any leave by the Court, can be avoided by the minor if he wishes so to do. The rule makes no distinction between the position of the minor as a plaintiff or as a defendant. It certainly does not say that such a compromise decree will be valid and operative till it is set aside by the minor in appropriate proceedings, nor that the minor cannot urge the invalidity of such a decree by way of defence to a suit. But all doubts on the true meaning of O. 32, R. 7(2) have been set at rest by the decision of the Judicial Committee in Jamna Rai v. Vasant Rao, 43 I.A 99 : (A.I.R (3) 1916 P.C 2). There, what happened was that one Yasanta Rao instituted a suit in which one Jamna Rai and one Sethuram, her brother, were defendants, and in the suit the question in dispute was the validity of a will of one Sakharam. This suit was subsequently compromised on the terms that the plaintiff Vasanta Rao should receive Rs. 90,000 in full satisfaction of his claim. At the time of this compromise both Vasanta Rao and Sethuram were minors, but in order to secure the above sum, Jamna Rai and Sethuram, by his grandmother who was guardian of his property, entered into a bond by which they jointly agreed to pay Rs. 90,000 to Vasanta Rao within three months of their taking delivery of the movable and immovable properties of Sakharam as echeduled in the suit. On a suit being brought for the enforcement of this bond, it was held by the Judicial Committee that the leave of the Court not having been obtained on behalf of the minor under Section 462 of the CPC, 1882, the bond was not enforceable against the minor, but it was enforceable to the full amount against the joint contractor. Sir Lawrence Jenkins who delivered the judgment of the Board seems to have regarded the invalidity of the bond as against the minor as patent. He considered it sufficient to say that the requirements of the section not having been observed for the protection of Sethuram, the bond could not be enforced against him. There can be no doubt that Sethuram was a defendant in that suit and he was pleading the unenforceability of the bond by way of defence. This case is thus a clear authority for the proposition that a minor, who is ostensibly a party to a compromise, can challenge the validity of the compromise decree on the ground that leave of the Court was not obtained; that it is not required that he should bring a suit for the purpose; and that he can take that plea by way of defence in a suit as much as he can seek to have the decree set aside by bringing a suit himself.

    11. The decision of this Court relied on by Mr. Ghose does contain a statement of the law which is plainly contrary to what was held by the Judicial Committee in the case to which I. have referred. Mr. Gupta, who appears for the respondent in the present case and also appeared for the respondent in the case cited, explained to us the peculiar facts of that case in which he contended that the principles laid down by the Judicial Committee in the case of Mir Sarwarjan v. Fahhruddin Mohamed Chowdhury, 39 I.A 1 : (39 Cal. 282 P.C), could not be applied to a case of a compromise decree to which a minor was a party. The defence which Mr. Gupta urged was that a contract to which a minor is a party fell to be considered by reference to considerations quite different from those which were applicable to a compromise decree, inasmuch as to the latter applied the clear statutory provisions of O. 32, R. 7. This contention was not in terms accepted by the learned Judges, although they accepted its substance, and they stated their reasons in their own way. In doing so, they observed as follows:

    “No doubt a minor is not bound by a consent decree on the ground that his guardian ad litem had not obtained leave of the Court to compromise. It is not, however, a void decree and he has to avoid it by a proceeding attacking it in a direct manner, and until it is not aside it is binding on him.”

    12. Then the learned Judges proceeded to cite two decisions, one of the Madras High Court and one of this Court which, according to them, lent support to the proposition which they had formulated earlier.

    13. With regard to the observation which I have quoted from the decision in the case of Sajahan Howladar, 61 C.W.N 26 : (A.I.R (33) 1946 Cal. 438), it is only necessary to say that the decision of the Privy Council in the case of Jamna Rai v. Vasanta Rao, 43 I.A 99 : (A.I.R (3) 1916 P.C 2), was apparently not cited before the learned Judges and, in any event, they do not seem to have had that decision present to their mind when they made the said observations. It is true that the observation emanated from a Division Bench, but having regard to the principle authoritatively laid down by the Judicial Committee, we do no consider that the existence of those observation in a decision of a Division Bench is any ??? to our deciding the present case in accordance with the opinion of the ??? Committee.

    14. In our opinion, for the reasons give above, the compromise decree, so far as ??? affected defendant S. must be held to be void and ineffective, inasmuch as he seeks to avoid it, although he is doing so as a defendant in the suit. The question then arises as to we the compromise decree is still binding on the remaining parties. I shall leave aside the case of defendant 4 which presents a further complication. But in my view, even so far as the ??? parties are concerned, the compromise decree could not be regarded as binding or effective in the special facts of the present case. The compromise decree, as I have already stated, recite that all the parties were agreeing that the plain tiff was a partner to the extent of eight anna in the business concerned. They were also agreeing that the agreement of 1st December 1932 would be regarded as ineffective and that limitation would be saved for the plaintiff by eliminating the dissolution which was sought to be caused on the date. It is impossible to see how a compromise of that character can remain effective or operative when one of the contracting parties drop out of it by reason of the fact that it is no binding upon him. In my view, the compromise decree not being binding on defendant 5, 6 ceased to be an effective and operative compromise decree even so far as the remaining parties were concerned.

    15. In view of the above finding, it is hard necessary to consider whether the agreement of 1st December 1932 was a valid agreement. The lower appellate Court has found that defendants and S. who were undoubtedly minors a the date of that agreement, had not merely been admitted to the benefits of the partnership but were made contracting parties through the guardians. But as minors cannot enter into contract of partnership, the lowerappellate Court has found that even in so far as the (major?) part ners are concerned, the contract of 1st December 1932 was invalid and inoperative. Just as in the case of the compromise decree, so in the case ??? this agreement, Mr. Ghose contended that the rest of the agreement could still survive and ??? would be a valid contract as between the plain tiff and defendants 1, 2 and 3. It appears to ??? that this contention is plainly untenable. As have stated already, one of the terms of the agreement was that the plaintiff would have an sight annas share in the interest and the five defendants between themselves would have a joint interest in the remaining eight annas. If by reason of the minority of defendants 4 and 5 the agreement is to be regarded as invalid and imperative so far as they are concerned, it is impossible to see that any valid, workable or intelligible contract survives so far as it concerns the remaining parties. The minors certainly had a share and an agreement which proceeds on the footing that the entire property is being dealt with in a certain way and is to be held in certain shares, cannot be given any effect after the owners of some of the shares are held to be treed of the agreement and their shares are thus left unaccounted for. Mr. Ghose tried to go further backward into the facts and to establish that as a matter of fact defendants 4 and 5 had no share in the business. To my mind, it is not possible for him to adopt that course. The contract was one based on the assumption that all the defendants had an interest in the business and in judging the validity or otherwise of the contract, it is only that assumption which can be regarded and any enquiry into the alleged real position would noise, in my view, admissible. If the validity of the contract is to be judged on the basis that all the five defendants had a share in the business and that the share was a joint share of eight annas, the effect of the agreement being invalid, so far as defendants 4 and 5 were concerned, is, in my view, to make the whole agreement invalid.

    16. For the reasons given above, it appears to me that the view taken by the lower appellate Court on both the questions was correct. This appeal must accordingly fail and it is dismissed with costs.

    Harries, C.J:— I agree.

    R.G.D

    17. Appeal dismissed.

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    Comments

    Durga Charan Gangopadhaya v. Akkari Das
    (Sep 8, 1948)