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Report No. 9 88. Section 41.- We recommend that in section 41, the obligation to restore any benefit obtained under the instrument in question should be provided for, for the reasons we have already given in connection with section 38 [para. 86, ante]. 89. Under sections 38 and 41, a plaintiff who obtains relief on the ground that a contract to which he was a party is void or voidable, may be required by the Court to make compensation to the defendant. To this we have added the obligation of restoring any benefit which the plaintiff may have obtained under the instrument. The question is whether the equitable principle should not similarly apply in favour of the plaintiff in a case where the defendant successfully resists the suit of the plaintiff on the ground (a) that the instrument is void or (b) that it is voidable and he has avoided it. It may be pointed out, at the outset, that though the above sections of the Specific Relief Act and section 19A of the Contract Act provide the equitable relief only to the defendant in the suit, section 65 of the Contract Act enables the relief to be awarded against 'any person'. The Privy Council1 applied this section to give relief to a mortgagee, who had brought a suit on his mortgage, to recover the amount lent by him under the mortgage, with compound interest. The principle followed by the Privy Council was explained very clearly in a subsequent case arising out of the same transaction.1 1. Nisar Ahmad v. Mohan Mancuha, AIR 1940 PC 2004. 2. Mohan Manucha v. Manzoor Ahmad, AIR 1943 PC 29 (34). "A defendant who when sued for money lent pleads that the contract was void can hardly regard with surprise a demand that he restore what he received thereunder." A further question which arises is whether the same principle should be made applicable to the case of voidable contracts. The modern principle of unjust enrichment does not make any distinction between void and voidable contracts. There is an obiter dictum of the Privy Council1 to the effect that section 65 of the Contract Act extends also to voidable contracts. 1. Satgur Prasad v. Har Narain, AIR 1932 PC 89 (91). As however section 65 uses the word 'void' and the observation of the Privy Council is in the nature of an obiter dictum, we propose, by way of abundant caution, that the principle underlying section 65 should be expressly made applicable to avoidable contracts, where the defendant relies on the voidability of the contract. A specific provision to this effect may be added at the end of the Chapter on Cancellation [vide section 36(1) of App. I]. 90. Though section 65 of the Contract Act applies in terms to void contracts, the Privy Council has held1 that that section has no application to contracts entered into by parties who were not competent to enter into any contract, and this view has been followed by the High Courts.2 1. Mohori Bibee v. Dharmadas, (1903) 30 Cal 539 PC. 2. Ajudhia v. Chandan, AIR 1937 All 610 (613-4) FB; Tikkilal v. Komal, ILR 1940 Nag 632; Punjabai v. Bhagvandas, AIR 1929 Bom 89. As to section 41 of the Specific Relief Act, the consensus of opinion is that it applies where the minor is the plaintiff and seeks to set aside a transaction on the ground of his minority or asks for other relief on the footing that the transaction is a nullity.1 1. Appaswami v. Narayanasami, AIR 1930 Mad 945; Mahadeo v. Nana Banaji, AIR 1946 Nag 359. But as regards the application of section 41 as against a minor defendant, there is a sharp difference of opinion between the Lahore1 High Court on the one hand and the Allahabad2 and Andhra3 High Courts on the other. According to the Lahore High Court,1 the equitable principle underlying the section should be equally applicable to the plaintiff and the defendant, and that, accordingly, when a minor enters into a contract on a false representation as to his age, and in a suit on the contract refuses to perform it on the ground of his minority, he must restore the proprietary or pecuniary benefit derived by him from the contract, whether he is the plaintiff or the defendant in the suit. 1. Khan Gul v. Lakha Singh, AIR 1928 Lah 609 (617-8) FB. 2. Ajudhai v. Chandan, AIR 1937 All 610 (618) FB. 3. Lutch Arao v. Bhimayya, AIR 1956 Andh 182. In other words, according to the Lahore High Court, the minor defendant should be bound not only to restore the property, if any, but also the monetary consideration obtained under the contract. Sulaiman, C.J., in the Allahabad case,1 was prepared to accept this principle so far as restoration of specific property was concerned, but not to the extent of reÂpayment of the pecuniary benefit, for that, according to him, "would be tantamount to enforcing the minor's pecuniary liability under the contract which is void.2" This view has been followed by the Andhra High Court.3 1. Ajudhia v. Chandan, AIR 1937 All 610 (618) FB. 2. Ajudhia v. Chandan, AIR 1937 All 610 (617) FB. 3. Lutcharao v. Bhimayya, AIR 1956 Andh 182 (187). Having considered the rival points of view we are inclined to prefer the view of Shadi Lal, C.J., in the Lahore case.1 We have already recommended the acceptance of the doctrine of unjust enrichment.2 According to that doctrine, the obligation to restore an unjust benefit should not depend upon the mere accident of a person coming before the Court as a plaintiff or defendant. We also agree with the view that restoration of status quo ante would not amount to the enforcement of the void contract against the defendant. The principle applicable to a minor will also apply to the case of a person of unsound mind. 1. Khan Gul v. Lakha Singh, AIR 1928 Lah 609 (617-8) FB. 2. Vide Report on the Limitation Act [Third Report of the Law Commission]. We recommend, therefore, that a sub-section should be included in the new provision suggested by us1 to the effect that when a defendant successfully resists a suit on the ground that the contract is void, owing to his incapacity at the time of the contract, he must restore any benefit, whether proprietary or monetary, which he has actually received under the contract. But no question of liability to make any compensation, would arise in such a case. 1. Section 36 of Appendix I. |
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