1965 (8) TMI 86 - SC - Indian Laws

Supreme Court Affirms City Civil Court Jurisdiction over Contract Dispute

BHAGWANDAS GOVERDHANDAS KEDIA Versus M/s. GIRDHARILAL PARSHOTTAMDAS AND CO. ANDOTHERS

The Supreme Court affirmed the jurisdiction of the City Civil Court at Ahmedabad in a case involving the formation of a contract for the sale of cotton ... - Issues Involved:1. Jurisdiction of the City Civil Court at Ahmedabad.2. Place of contract formation in the case of telephonic communication.Detailed Analysis:1. Jurisdiction of the City Civil Court at Ahmedabad:The plaintiffs argued that the cause of action arose at Ahmedabad because the offer to sell cotton seed cake was accepted there, and the delivery and payment were to be made at Ahmedabad. The defendants contended that the contract was concluded at Khamgaon, where the acceptance was made, and therefore, no part of the cause of action arose within the jurisdiction of the City Civil Court at Ahmedabad.The Trial Court found that the offer was made from Ahmedabad and accepted at Khamgaon, with delivery and payment to be made at Khamgaon. However, it held that the place where acceptance of the offer is intimated to the offeror is where the contract is made, thus conferring jurisdiction to the City Civil Court at Ahmedabad. The High Court of Gujarat rejected the defendants' revision application in limine.The Supreme Court considered whether the making of an offer at a place which has been accepted elsewhere forms part of the cause of action. It concluded that mere making of an offer does not form part of the cause of action for breach of contract. The Court emphasized that acceptance and intimation of acceptance are necessary for a binding contract. The Court affirmed the Trial Court's view, holding that the contract was made at Ahmedabad where acceptance was communicated, thereby affirming the jurisdiction of the City Civil Court at Ahmedabad.2. Place of Contract Formation in Telephonic Communication:The primary issue was whether a contract made by telephonic conversation is complete where the acceptance is spoken or where it is heard. The defendants argued that the contract is made where the acceptance is spoken into the telephone, while the plaintiffs contended that it is made where the acceptance is received.The Supreme Court examined the principles of the common law and statutory provisions of the Indian Contract Act. Sections 3 and 4 of the Act deal with communication, acceptance, and revocation of proposals. Section 4 states that the communication of an acceptance is complete 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, and against the acceptor when it comes to the knowledge of the proposer.The Court noted that the rule in England, as decided in Entores Ltd. v. Miles Far East Corporation, is that a contract by instantaneous communication (e.g., telephone) is complete only when the acceptance is received by the offeror. The Court observed that in telephonic conversations, parties are in a sense in the presence of each other, and communication is instantaneous. Therefore, the rule applicable to contracts by post or telegram, where acceptance is complete when put into transmission, does not apply.The Court held that in the case of telephonic communication, the contract is complete when acceptance is communicated to the offeror. Thus, the place of contract formation is where the acceptance is received. The Court concluded that the contract was made at Ahmedabad where the acceptance was communicated, affirming the jurisdiction of the City Civil Court at Ahmedabad.Separate Judgment by Hidayatullah, J.:Hidayatullah, J. dissented, holding that under the Indian Contract Act, the communication of acceptance is complete 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. He argued that the contract was complete at Khamgaon where the acceptance was spoken into the telephone, as the acceptance was put in the course of transmission to the proposer at that point. Therefore, he concluded that the contract was made at Khamgaon, and the Ahmedabad court lacked jurisdiction.Conclusion:The majority opinion of the Supreme Court held that the contract was made at Ahmedabad where the acceptance was communicated, thereby affirming the jurisdiction of the City Civil Court at Ahmedabad. Hidayatullah, J. dissented, holding that the contract was made at Khamgaon where the acceptance was spoken into the telephone. The appeal was dismissed with costs in view of the majority opinion.