Bhagwandas Goverdhandas Kedia Vs.
Girdharilal Parshottamdas And Co. And Ors.
Bench: Shah, J.C., Wanchoo K.N. and Hidayatullah, M.
Issue:
Whether the contract was formed at the place of acceptance or where the acceptance was received, in case of acceptance is given via telephone?
Facts:
- On 22nd July, 1959 Kedia Ginning Factory and Oil Mills of Khamgaon entered into a contract via telephone to supply cotton seed cakes to M/s. Girdharilal Parshottamdas and Co. of Ahmedabad.
- Asuit in the City Civil Court at Ahmedabad was filed against the Kedia Ginning Factory Oil Mills of Khamgaon for a decree for Rs. 31,150/-.
- The suit was on the ground that appellant failed to supply cotton seeds cake.
- The respondent contended that the cause of action of the suit arose in Ahmedabad as the offer was accepted in Ahmedabad and the payment was also to be made in Ahmedabad.
- The appellant argued that since the offer to purchase the cotton seed cake was made in Khamgaon and the delivery and payment was also to be made in Khamgaon the Ahmedabad City Civil Court has no jurisdiction over the dispute.
- The Ahmedabad City Civil Court passed the judgment that it has jurisdiction as the acceptance of the offer was communicated to offeree in Ahmedabad, the contract is said to be made in Ahmedabad.
- A revision application was filed by the appellant in Gujarat High Court but it was rejected.
- Hence the present appeal lies.
Argument raised by Appellant:
- The Appellant contended that the acceptance was conveyed from Khamgaon, also said that the goods were also to be delivered in Khamgaon and the payment was also to be made from Khamgaon. On these stated events they argued that no part of the cause of action arises in the jurisdiction of City Civil Court of Ahmedabad.
- They 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 conveyed into the telephone instrument.
- They contended that the rule which determines the place where a contract is made is determined by Section 3 and 4 of the Indian Contract Act, 1872, 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 the United Kingdom, dependent not upon express statutory provisions but upon the somewhat elastic rules of common law, have no bearing in determining the present issue.
Argument raised by Respondent:
- The respondent argued that offer is only forms a part of transaction in a suit of breach of contract, and it is the jurisdiction of the state from where the offeror has made the offer and where he receives the acceptance which result in a contract.
- They also 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.
Judgment:
Majority View
The Indian Contract Act does not talk about contract formed over telephone but the framers used the words in such a way to give the act a wide area of application for the future and based on the Section 4 of the contract the court gave its decision.
In the case of a telephone conservation, the contract is only complete when the answer accepting the offer is made[ Denning LJ in Entores Ltd. v. Mills Far East Corporation]. In the majority of European countries and the US, the generally accepted rule based on the theory of consensus ad idem is that the contract is made in the district where the acceptance is spoken.
The Hon’ble court held that when a contract is made by conversation on telephone, the place where acceptance of offer is intimated to the offeror, is the place where the contract is made, and therefore the Civil Court at Ahmedabad had jurisdiction to try the suit.
The appeal was dismissed with costs.
Dissenting View of Justice Hidayatullah
But Justice Hidayatullah had a different viewpoint; according to his opinion; “Regard being had to the words of our statute I am compelled to hold that the contract was complete at Khamgaon. It may be pointed out that the same result obtains in the Conflict of laws as understood in America and quite a number of other countries such as Canada, France, etc. also apply the rule which I have enunciated above even though there is no compulsion of any statute. I have, therefore, less hesitation in propounding the view which I have attempted to set down here.”
