Case Analysis: Chacko v Mahadevan (2007) | Validity of a Contract

This case analysis of Chacko v Mahadevan [AIR 2007 SC 2967] is written by Siya Jindal and presents a critical analysis of the said case law.

I. Law Points

1. Section 12(b) of the Indian contract act which says:[1]

1. Contract with a drunkard is void.
2. Partial or ordinary drunkenness is not sufficient ground to treat the contract as void.
3. It must be clearly shown that at the time of entering the contract the person pleading drunkenness as a ground to treat the contract as void was fully intoxicated and was totally deprived of making any rational judgement and so could not give valid consent to the contract.

2. The judgement also included the application of the legal maxim Res Ipsa Loquitur, which means things speak for themselves, the application of which shifts the burden of proof on the defendant.

II. Facts of the case

Chacko, the plaintiff had land of an area of 20 Cents (100 Cents being equal to one acre). By sale deed dated executed on 4.9.1982, Chacko sold one cent out of this land for Rs.18000. Thereafter Chacko sold another three cents of this land to Mahadevan for Rs.1000 with a sale deed dated 11.7.1983.

The suit was filed by Chacko and Annakutty (his wife) seeking to invalidate the sale deed dated 11.7.1983 with Mahadevan, on the ground that it was vitiated by fraud and was hence null and void. They also wanted a prohibitory injunction restraining Mahadevan from entering into that property.

The averment in the plaint was that Chacko was given liquor by Mahadevan and under that influence, the sale deed was executed. Hence it was void. The defendant Mahadevan denied the plaintiff’s allegations.[2]

III. Issue

Whether the contract between Chacko and Mahadevan is valid or not?

IV. Judgment

The trial court held that Chacko and Annakutty had not proved any vitiating circumstances to invalidate the said sale deed dated 11.7.1983 entered into with Mahadevan and consequently title to the said land passed to Mahadevan.

Thereafter, Chacko and Annakutty filed an appeal before the First Appellate Court. The First Appellate Court held that the fact that one cent of land was sold for Rs.18000 in a sale deed dated 4.9.1982 and three-cent of the same land was sold in the sale deed dated 11.7.1983 for a sum of Rs.1000 showed that this was an unreasonable transaction and hence the sale deed dated 11.7.1983 was liable to be set aside and invalidated.

Aggrieved, Mahadevan filed a Second Appeal (to be addressed by the high court).

It may be mentioned under Section 96 CPC (civil procedure code), in the First Appeal, the appellate court can go into questions of fact, whereas in a Second Appeal filed under Section 100 of CPC, the High Court cannot interfere with the findings of fact of the First Appellate Court, and it is confined only to the questions of law.

The Supreme Court on a perusal of the judgment of the First Appellate Court dated 29.6.1988, held that the judgement showed that it has been recorded therein that Chacko was not having a sound mind when he executed the contract, which was established from the medical certificate. He was treated from 11.8.1983 to 14.8.1983 in Mental Hospital for Alcoholic Psychosis in Trichur.

This is a finding of a fact which could not have been interfered with by the High Court in the Second Appeal. Added to this, it was also established from the facts that one cent of the land was sold for Rs.18000 on 4.9.1982, while 10 months thereafter, three cents of the same land was sold for only Rs.1000.

This confirmed the finding of the First Appellate Court that Chacko was not of sound mind at least at the time when he executed the sale deed dated 11.7.1983. If one cent of land costs Rs.18000 then three cents of land should accordingly cost Rs.54000.

No one in his right senses would sell property worth Rs.54000 for Rs.1000 supported by the well-known Latin maxim ‘Res ipsa loquitur’ that is, things speak for themselves.

Hence it was believed that Chacko sold the land by sale deed dated 11.7.1983 when he was not of sound mind, and some fraud was played on him at that time.

After consideration of the circumstances, the impugned judgment of the High Court was set aside, and the judgment of the First Appellate Court dated 29.6.1988 was restored, and the sale deed dated 11.7.1983 was quashed.

A sale deed that was executed by practising fraud on the transferor who was also not of a sound mind, was held liable to be quashed and not specifically enforced.[3]

V. Critical Analysis

The facts of the case established that Chacko was not of a sound mind when he entered the contract, so he could not have completely understood the contract and given rational consent to it, so according to section 12(b) of the Indian Contract Act, 1872, the contract was void.

The consideration of the maxim Res Ipsa Loquitur strengthened the observation that the consent was not given with a conscious rational mind as the amount at which the plaintiff agreed to sell the land to the defendant seemed very unreasonable as it was 1/54^th of the amount that someone would generally ask for.

Section 25 of the Indian Contract act, 1872 says that an agreement without consideration is void, but mere inadequate consideration in a contract does not render a contract to be void. However, inadequacy may be taken into account to check whether the consent was free or not.

But in the same case, had it been proved that the plaintiff was of sound mind while entering the contract, it would have been valid.

The maxim is applied to the mere fact that the unconscionable amount could not have provided enough grounds for the contract to be set aside and declared void. Similarly, had Chacko sold the land for Rs.54000 only to Mahadevan, then also the contract could have been valid as the transaction would have seemed completely reasonable and, as per the unsoundness of mind, it would have been pointed out that the plaintiff was treated for Alcoholic Psychosis one month after he had entered into the contract, so there was no concrete proof that he was under the influence of alcohol while finalizing the deal.

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References

[1]Sec 12 (b) Indian contract act 1972, a sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract or form a rational judgment as to its effect on his interests cannot contract whilst such delirium or drunkenness lasts.

[2] Chacko v. Mahadevan, 2007 SCC 363

[3] Avtar Singh, Contract And Special Relief, Eastern Book Company, 12^th edition, page 930.

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