The purpose of this assignment is to understand how two cases with facts that look similar on their face ended up with opposite judgements. Kedarnath Bhatacharji V Gorie Mahomed was decided on the 26th November of 1886 and Doraswamy Iyer V Arunachala Ayyar was decided on the 15th August of 1935. Both the cases deal with section 2(d) of the Indian contracts act that talks about consideration and validity and maintainability of contracts.

The facts of Kedarnath Bhattacharji vs. Gorie Mahomed are as follows: The plaintiff was the municipal commissioner of Howrah and one of the trustees of Howrah townhall fund. It was in contemplation to build a Town Hall in Howrah and therefore a subscription list was issued to raise money. After the subscription list reached a certain point the commissioners entered into a contract with a contractor. The plaintiff on being applied to had his name subscribed to the book for rupees 100.

The facts of Doraswamy Iyer vs. Arunachala Ayyar are as follows: The plaintiffs are the trustees of a temple that’s sought to repair a temple and entered into a contract with a maistry who was paid from the village common fund in the February of 1928. As the work proceeded more money was required and a subscription list was raised. The defendant wrote his name in the book for an amount of rupees 125 and failed to pay.

Background: The case primarily deals with section 2(d) of the Indian contracts act that talks about consideration. The section defines consideration as “When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”. In the first case, the promise made by the defendant was backed by a valid consideration to make the arrangement a valid legal contract.

In the second case, however, the promise made by the promisor or the defendant was a mere or bare promise with no consideration and therefore was not binding on the defendant. Both the cases too place before the English Law Revision Committee which was set up in 1937 and the doctrine of promissory estoppel. The doctrine of promissory estoppel a legal principle that a promise is enforceable by law, even if made without formal consideration when a promisor has made a promise to a promisee who then relies on that promise to his subsequent detriment.

Analysis: In the first case (Kedarnath Bhattacharji vs. Gorie Mahomed) the subscriber by subscribing his name says in effect.

..In consideration of your agreeing to enter into a contract to erect or yourselves erecting this building, I undertake to supply the money to pay for it up to the amount for which I subscribe by name....

Therefore, all the aspects of consideration under section 2(d) are fulfilled. The defendant i.e. the trustee of the Howrah town hall fund along with other trustees acted upon the promise of the promisor/plaintiff i.e. Gorie Mahomed who promised to pay rupees 100 and entered into a contract with a third party contractor, therefore, incurring a liability.

The consideration over here for the trustees of the town hall fund was the money and the consideration for Mr Gorie Mahomed was the construction of the town hall building. The next question that arises is whether the plaintiff, as one of the persons who made himself liable under the contract to the contractor for the cost of the building, can sue, on behalf of himself, and all those in the same interest with him, to recover the amount of the subscription from the defendant. It would be fair to agree he could.

Without reference to his being a trustee or a Municipal Commissioner, we think that under the provisions of the Code of Civil Procedure he is entitled to bring an action on behalf of himself and others jointly interested with him. If the action could be maintained on behalf of all, and there were no other section which would preclude this being done, that would cure any technical defect in the case.

There are plenty of subscription lists and charities that are not enforceable however in this particular case the state of things were this; Persons were asked to subscribe, knowing the purpose to which the money was to be applied, and they knew that on the faith of their subscription an obligation was to be incurred to pay the contractor for the work.

The subscriber by subscribing his name says, in effect, “In consideration of your agreeing to enter into a contract to erect or yourselves erecting this building, I undertake to supply the money to pay for it up to the amount for which I subscribe my name.” There is a perfectly valid contract formed and the decision made by the subscribers to the list was a conscious one and there was a clear meeting of the minds with an explicit bargain. Therefore, the judgment was ruled in favour of the plaintiff and the defendant was required to pay the promised sum along with the costs of the hearing.

In the second case (Doraswamy Iyer vs. Arunachala Ayyar and Ors) The trustees of the temple sought to repair the temple and entered into a contract with the maistry in February of 1928 and the maistry was paid from the village common funds, subsequently as work proceeded more money was required and therefore a subscription list was raised.

The question that stands is was there a valid consideration? Section 2(d) defines consideration as hat where at the desire of the promisor the promisee has done or abstained from doing something, such act or abstinence is called consideration. Therefore, the definition makes it clear that the promisor must have acted upon something more than a mere/bare promise.

There must be some bargain between them in respect of which the consideration has been given. In the present case it was never pleaded nor was there any evidence introduced that there was any request by the subscriber when he put his name in the list for Rs.125 to the plaintiffs to do the temple repairs or that there was any undertaking by them to do anything.

Therefore, there was no consideration for the promisor i.e. the defendant, nothing in the subscription list promised or even mentioned that the money would be utilised for the temple repairs or for any other specific purpose.

Therefore, it would be fair to say that this was a mere promise and there was no valid consideration which would have given rise to a contract and hence this promise made by the defendant was not binding. Therefore, the court ruled in favour of the defendant and dismissed the suit with costs allowed throughout. The judgement also referred to the case in re Hudson (1885) 54 LJ Ch 811. The promise there was to contribute a large sum of money to the Congregational Union for the payment of Chapel debts.

The promisor paid a large instalment of his promised contribution and then died. The Congregational Union then sought to make the promisor's executors liable. The contention was that on the strength of the promise the Committee of the Union had incurred liabilities and that this amounted to consideration. It was held that the claim was unsustainable as the promisee had not undertaken any liability as part of the bargain with the promisor.

Pearson, J., in his judgment said:
What is the consideration for the promise which was to make it a contract?
There was no consideration at all. Mr Cookson says that there was a consideration because the consideration was the risks and liabilities which the parties were to undertake who composed themselves into a committee and became the distributors of the fund.

In the first place, there was no duty between themselves and Mr Hudson (the promisor) which they undertook at that time; there was no binding obligation between themselves and Mr Hudson”. The facts of the refereed case help us understand the scope of section 2(d) and why the promise made by the defendant was a ‘bare’ promise unsupported by any valid consideration, therefore, not giving rise to any contract and more importantly there was no explicit bargain here and there was no meeting of minds.

Conclusion:
There are a few problems that arise with the definition of consideration under section 2(d) in the second case (Doraswamy Iyer vs. Arunachala Ayyar and Ors). The definition of consideration in Section 2(d) of the Indian Contract Act 1872 substantially anticipated the far-reaching reforms to the orthodox doctrine of consideration that were proposed by the English Law Revision Committee (1937).

These included making enforceable, through the doctrine of promissory estoppel, promises without consideration in the traditional sense that were meant to and did induce reliance; making enforceable a promise to perform a pre-existing duty, and making binding a promise to keep an offer open.

The pivots of the definition in Section 2(d) were: a subjective conception of consideration on which value was to be measured by the desire of the contractors alone, as opposed to an external standard; a concomitant purging of the traditional requirements of benefit and detriment; and the recognition of induced reliance as a form of consideration.

The definition was designed to mark the vanishing point of consideration without having to formally abolish it. This design, however, went awry as courts and scholars in India projected the orthodox English model of consideration, replete with benefit and detriment, and external standards of value, upon this provision. Consequently, an ingenious piece of draftsmanship came to be eclipsed by orthodoxy.

It is my opinion that the second case (Doraswamy Iyer vs. Arunachala Ayyar and Ors) is a better-suited case of the rule of promissory estoppel. In this case, the promise relied on the promise of the promisor to his detriment however there was no valid contract because of lack of valid consideration under section 2(d).

I agree with the judgements of both the courts on both the cases to a full extent and believe both the judgements were completely valid and adhered to the law for reasons explained above.
Cases discussed:

1. Kedarnath Bhattacharji vs. Gorie Mahomed (26.11.1886 - CALHC):
2. Doraswamy Iyer vs. Arunachala Ayyar and Ors. (15.08.1935 - MADHC): Manu/TN/0269/

References:

1. Kedarnath Bhattacharji vs. Gorie Mahomed (26.11.1886 - CALHC): Manu/WB/0012
2. Doraswamy Iyer vs. Arunachala Ayyar and Ors. (15.08.1935 - MADHC): Manu/TN/0269/
3. re Hudson (1885) 54 LJ Ch 811.
4. Swaminathan S, “Eclipsed by Orthodoxy: The Vanishing Point of Consideration and the Forgotten Ingenuity of the Indian Contract Act 1872” (2017) 12 Asian Journal of Comparative Law 141.
5. Pinnel v Cole (1602) 5 Co Rep 117.
6. (1884) 9 App Cas 605
7. Hawkes v Saunders (1782) 1 Cowp 289.
8. (1840) 11 Ad & El 438.
9. Sir George Rankin, writing extra-judicially, found s 2(d) to be the most noticeable innovation of the Act: George Rankin, Background to Indian Law (Cambridge University Press 1946) 103.
10. AC Patra, The Indian Contract Act, 1872 (Asia Law House 1966) 125.
11. The Law Commission of India, ‘Thirteenth Report, Contract Act, 1872’ (1958) 7.
12. Holmes, The Common Law (n 20) 293; Sir William Reynell Anson, Principles of the English Law of Contract and of Agency in its Relation to Contract (Ernest W Huffcut ed, 8th edn, Banks and Bros 1896) 93-94.
13. Muthukaruppa Mudali v PM Kathappudayan (1914) 27 MLJ 249; Pollock and Mulla, Indian Contract Act, 14th edn (n 22) 75.
14. The Indian Law Commission (1958) certainly thought that the copula ‘at the desire of’ was incapable of encompassing such cases of promissory estoppel (n 26) 7 and hence felt the need to import the doctrine.

Written By: Ashish Narang