Bhagwandas Goverdhandas Kedia Vs. Girdharilal Parshottamdas Case Analysis

BHAGWANDAS GOVERDHANDAS KEDIA VS. GIRDHARILAL PARSHOTTAMDAS & CO. & ORS (1966) 1 SCR 656 : AIR 1966 SC 543

FACTS OF THE CASE 

The case is between Mr. Bhagwandas Goverdhan Das Kedia who is the appellant (now referred to as X) and the respondent Mr. Girdharilal Parshottamdas & Co. & Ors. (now referred to as Y). The appellant resided at Khamgaon whereas the respondent was situated at Ahmedabad.  On 22nd July 1965, an oral contract was made over the telephone to supply cottonseed cakes to the Y. X hereby accepted the offer to supply the cottonseed cakes. Upon the failure of the contract, the plaintiff demanded compensation of Rs. 31150 and subsequently filed a case in the City Civil Court of Ahmedabad. They contended that since the cause of action and the payment is due at Ahmedabad, hence the Court of Ahmedabad will have jurisdiction. Whereas the defendants contended that the acceptance of the offer was completed at Khamgaon, the price was to be paid at Khamgaon, and hence the court at Khamgaon will have jurisdiction.

ISSUES

1. Whether telephone as a source of communication comes under the purview of Section 4 of the Indian Contract Act, 1872?
2. Whether the rule applied in postal communications can be used in cases of telephonic or instantaneous communication?
3. Which court will have jurisdiction to try the case?
4. When is a contract complete, and at which place?

RULES 

1. Section 2(a) of the Indian Contract Act, 1872 states that, “When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.”
2. Section 2(b) of the Indian Contract Act, 1872 states that, “When the person to whom the proposal is made, signifies his assent thereto, the offer is said to be accepted. A proposal, when accepted, becomes a promise.”
3. Section 2(e) of the Indian Contract Act, 1872 states that, “Every promise and every set of promises, forming the consideration for each other, is an agreement.”
4. Section 2(h) of the Indian Contract Act, 1872 states that, “An agreement enforceable by law is a contract.”
5. Section 3 of the Indian Contract Act, 1872 states that. “Communication, acceptance and revocation of proposals.—The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptances, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicate such proposal, acceptance or revocation, or which has the effect of communicating it.”
6. Section 4 of the Indian Contract Act, 1872 states that, “Communication when complete.—The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made. —The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.” The communication of an acceptance is complete,— as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. The communication of a revocation is complete,— as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.”

ARGUMENTS OF THE APPELLANT:

1. The plaintiffs had offered to purchase cottonseed cakes by telephone which was accepted at Khamgaon.
2. The contract for the delivery of the goods and the payment was to be made at Khamgaon.
3. In case of contracts made by the telephone or any instantaneous modes of communication, the Court where the offer is accepted will exercise jurisdiction.
4. The ordinary rule of postal communication that contract is complete when acceptance is put into the course of transmission applies to the contract made by the telephone as well.
5. Section 3 and Section 4 of the Indian Contract Act, 1872 should be applied uniformly in cases of instantaneous and non-instantaneous modes of communication.

ARGUMENTS OF THE RESPONDENT:

1. The cause of action will arise at Ahmedabad, as the offer was accepted at Ahmedabad.
2. The goods were to be supplied at Ahmedabad and the payment was to be done through Bank at Ahmedabad.
3. An offer is a part of the cause of action where there is a breach of contract, and hence the jurisdiction will lie from where the offer was made by the proposer.
4. Intimation of acceptance is an essential part of the formation of a contract, and the contract is completed in the place where such intimation is received by the proposer.
5. A contract is complete only when the acceptance is intimated to the proposer.

CASE LAWS USED DURING THE JUDGMENT:

 Emtores Ltd. v. Miles Far Eastern Corp. [1955] 2 Q.B.D. 327 was the leading case which was referred upon by the Apex Court in deciding the matter. In the following case, an offer was made from London to a party in Holland through telex, which was accepted through the same mode of communication. When dispute arose in this case, Denning L.J. observed that in case of instantaneous communication such as telephone or telex, contract is formed when the acceptance is received by the proposer and the place where the acceptance is received is the place of contract.

Baroda Oil Cakes Traders Vs Purushottam Narain Das Bagulia AI R 1954 Born. 491 In the following case, the Supreme Court ruled that until and unless an offer is accepted by the acceptor, the proposer is bound, and he may withdraw the offer before such acceptance. Once the acceptance is put into transmission, then the proposer will be bound and will be waved off his obligation only if the acceptor revokes the acceptance. 

JUDGMENT:

At first, the case was brought up before the Civil Court of Ahmedabad, where the Court held the argument of the respondent correct and exercised jurisdiction. The Court held that since the offer was accepted in Ahmedabad, hence the jurisdiction will be exercised here only. To this, the defendant then filed a revision petition in the High Court of Ahmedabad, which upheld the decision of the Trial Court. Subsequently, a special leave petition was filed in the Supreme Court against the decision of the High Court.

Supreme Court rejected the contention of the respondent that the offer is a part of the cause of action in case of breach of contract. They relied upon the judgment passed in Baroda Oil Cakes Traders Vs Purushottam Narain Das Bagulia AI R 1954 Born. 491 that offer does not constitute a part of the cause of action. Justice J.C. Shah and Justice K.N. Wanchoo supported the view presented in Emtores Ltd. v. Miles Far Eastern Corp and held that in cases of instantaneous communication, the place where the acceptance was heard will have jurisdiction.

DISSENTING OPINION OF JUSTICE HIDAYATULLAH

Justice Hidayatullah presented his dissenting opinion in this case. He went by the language of the statute and stressed the fact that our lawmakers would have intended to include all the means of communication in the same statute. Also, there is no such difference in telephonic communication and postal communication because once the acceptor put his acceptance in transmission be it in the form of telephonic acceptance or by any other means to the proposer as to be out of his power to revoke (As per to section 4 of the Indian Contract Act 1872), communication of acceptance was complete, and the proposer was bound by contract so formed, however quick the transmission may be. There remains no scope of revocation once the acceptance is communicated, however fast or slow the transmission may be. He relied on the judgment of Carrow Towing Co. v. The Ed Mc William, (46 D.L.R. 506) where it was held that acceptance through the telephone is the same as acceptance through letter or post. Hence, the place of contract in both the cases will be from where the communication of acceptance is sent. Justice Hidayatullah also presented some questions relating to telephonic contracts as:

1. What if the telephone line failed?

2. What if the telephone line failed at one end and there was no repetition of the acceptance or the refusal?

3. What if the telephone line failed at one end and repetition was there? In such a case, what will be the position of a contract?

He was also of the notion that all the English principles and judgments don’t need to be followed.

The case holds relevance to the topic of postal rule as well. Whether rules of postal communication will be applied in telephonic or instantaneous communication was raised in the following case. No doubt that the postal rule differs from situations where the parties are in direct contact with each other and there is instantaneous communication of offer, counter-offer, acceptance, or rejection but in non-instantaneous communication, there is an interference of a third community or party without which the communication of offer or acceptance is not possible whereas instantaneous communication needs no medium.

Albeit, the case was decided by a 2:1 majority, ruling that the rules governing instantaneous and non-instantaneous communications are different.

CONCLUSION:

Beyond doubt, this case holds a paramount position in governing communication and place of contract. The developments that this case has led are of utmost importance in today’s time when even standard form of contracts has come into picture. The most important development that this case has made is it has broadened the scope of Section 4. Since Section 4 deals only with the part that when the acceptance of the communication of acceptance and revocation is complete but does not take any stand on the place of contract and doesn’t imply that the contract is formed qua the proposer at one place and qua the acceptor at another place, acceptance and communication of acceptance are necessary for the contract to be made as unlike tort, the ‘meeting of mind’ is necessary in the contract formation. The contract becomes complete only when the acceptance is made by the acceptor and the acceptance is received by the proposer. 

Since telephone and other modes of instantaneous communication were not there when the Indian Contract Act, 1872 was framed and the act does not separately speak about wireless, wired or postal communication, the lawmakers must have presumed that it will cover all such means as rightly pointed out by Justice Hidayatullah in his dissenting opinion. Also, the case clearly differentiates the types of communication mainly instantaneous and non-instantaneous communication and what all rules will be applied to them as clearly stated that the postal rule will not be applied to telephonic communication.

REFERENCES:

1. Vivek Kumar Verma, Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas, Indian Case Law ( Jan. 15, 2013), Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal Parshottamdas | Indian Case Law
2. BHAGWANDAS GOVERDHANDAS KEDIA VS. GIRDHARILAL PARSHOTTAMDAS & CO. & ORS,  (1966) 1 SCR 656 : AIR 1966 SC 543, https://indiankanoon.org/doc/1386912/ 

This article has been written by Sanskriti Saxena, from Dharmashastra National Law University, Jabalpur.