Bhagwan das Goverdhan das Kedia vs M/s. Girdhari lal Parshottam das & Co.


 

Case Comment

Bhagwan das Goverdhan das Kedia vs M/s. Girdhari lal Parshottam das & Co.

Equivalent citations: A.I.R. 1966 SC 543; 1966 SCR (1) 656

Author: S C

Bench: Shah, J.C.

PETITIONER………………………………………………BHAGWANDAS GOVERDHANDAS KEDIA

 

                                                                  Vs.

 

RESPONDENT…………………………………………….M/S.  GIRDHARILAL PARSHOTTAMDAS AND CO.ANDOTHERS

 

DATE OF JUDGMENT:30/08/1965

 

Bench:

SHAH, J.C.

WANCHOO, K.N.

HIDAYATULLAH, M.

 

Introduction:

The case widened the scope of communication of offer and acceptance.This case decided the jurisdiction for bringing a suit when the agreement was made over a telephone. This case resolved the issue of the jurisdiction arises at a place of the offeror, i.e., a place where the acceptance is heard by the offeror with instantaneous communication, contrary to communication by post.The Supreme Court by a 2:1 majority stated that when a contract is made by telephone, the place where the acceptance is intimated is the place (place of offeror) where the contract is made.

 

Provisions of Law involved:

The Indian Contract Act, 1872- Section 2, 3, 4.

 

 

Issue:

Whether the contract was formed at the place of acceptance, or where the acceptance was received?

 

Facts:

The respondent made an offer from Ahmedabad to the petitioner by telephone to purchase certain goods (cotton seed cake) and the petitioner accepted the offer at Khamgaon by telephone. The respondent commenced an action at Ahmedabad against the petitioner for a decree of Rs. 31,150 on the plea that petitioner had failed to supply the goods which they had agreed to supply under an oral contract, negotiated between the parties by conversation on long distance telephone.

Both the Trail Court and the High Court held that when a contract is made by conversation on the telephone the place where the acceptance of offer is intimated to the offeror, is the place where contract is made, and therefore, the Civil Court at Ahmedabad had jurisdiction to try the suit.

 

Contentions:

Petitioner’s Arguments-

The petitioner contended that in the case of a contract by conversation on telephone, the place where the offer is accepted is the place where the contract is made, and that Court alone has jurisdiction within the territorial jurisdiction of which the offer is accepted and the acceptance is spoken into the telephone instrument. It was submitted that the rule which determines the place where a contract is made is determined by section 3 and 4 of the Indian Contract Act, and applies uniformly whatever may be the mode employed for putting the acceptance into a course of transmission, and that the decisions of the Courts in United Kingdom, dependent not express statutory provisions but upon the somewhat elastic rules of common law, have no bearing in determining this question.

Respondent’s Arguments-

The respondent on other hand contended that making of an offer is part of the cause of action in a suit for damages for breach of contract, and the suit lies in the Court within the jurisdiction of which the offeror has made the offer which on acceptance has resulted into a contract. Alternatively, they contend that intimation of acceptance of the offer being essential to the formation of a contract, the contract takes place where such intimation is received by the offeror.

Background on the issue:

In Adams v. Lindsell (1818), it was ruled by the Court of King’s Bench in England that the place of sending the letter is where the contract is made. This rule was subsequently approved in Dunlop v. Vincent Higgins (1848) by the House of Lords. In the present case too, the petitioner is claiming since letter was send from Khamgaon, hence contract was made there.

This norm was not followed in the case Entores Ltd. v. Miles Far East Corporation (1955). It was held in the Entores case that the rule about instantaneous communications between parties is different from the rule about the post. The contract in such case is complete when the acceptance is received by the offeror and the contract is made at the place where the acceptance is received.

Dissenting Part of Judgement:

Justice Hidayatullah gave a dissenting opinion, saying that though Indian Contract Act is applicable in India, it was inspired by English Contract Law. He stated that no modification has been done in the Indian Contract Act since 1872 till 1966. He emphasized to consider the language of the statute and intent of the law maker.Further he said that though we follow common law, but it is not necessary that whatever happens in England needs to be followed in India. Therefore, the Ahmedabad civil city court doesn’t have jurisdiction to look into the matter.

Inference:

From reading of Section 4 of Indian Contract Act, 1872 it can be understood that communication of acceptance is complete from the point of view of Proposer when Acceptor has sent the acceptance in course of transmission to Proposer and from the point of view of Acceptor when his acceptance comes to the knowledge of the Proposer. By keeping in mind, the Adams case and Dunlop case it can be inferred that the place from where communication of acceptance is sent will be the place where contract is made. But the Court looking upon the latest development in technology and English law relied upon the Entores case and stated that since telephonic medium is an instantaneous mode of communication, the place where contract is made should be where the acceptance is heard.

Such a finding is important because it widened the scope of communication of offer and acceptance.If there is a dispute regarding a contract, then the Court under relevant jurisdiction is approached keeping in mind the place of formation of contract.

Conclusion:

In the instant case, the Supreme Court by majority (Shah J. and Wanchoo J.) held that the Contract Act does not expressly deal with the place wherein a contract is made in case of telephonic conversation.  In case of telephonic conversation in a sense the parties are in presence of each other. The communication of speech is instantaneous imitating offer and acceptance, rejection or counter offer. In past the Posts and Telegraph Department had a general control over the communication and based upon this system the place of formation of contract was decided. But the Court said that this was not aground for assuming the analogy of a contract made by post will govern the telephonic mode of making contracts. The ruling in Entores case was followed by the Court. Therefore,acceptanceof the offer is made at the offeror’s place when the communication is instantaneous, i.e., through telephone.

Thus, it was held by the Supreme Court that the conversation in contention resulted in the contract at Ahmedabad and not at Khamgaon.

 

 

 

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