29. ‘A’ advances Rs. 500/- to a minor ‘B’ on the guarantee of ‘X’ on demand for payment. The borrower pleads minority. Can ‘A’ recover the amount from ‘X’.

1. Facts of the Case

• A, the creditor, advanced Rs. 500/- to B, who is a minor.
• The loan was given on the guarantee of ‘X’, who stood surety for repayment.
• When A demanded repayment, B refused, pleading that he is a minor and therefore not liable under the Indian Contract Act, 1872.
• A then seeks to recover the amount from X, the surety.
• The question arises whether A can recover the money from X, when the principal debtor (B) is a minor and the agreement is void ab initio.

2. Issues in the Case

1. Whether a minor can be a principal debtor under a contract of loan.
2. Whether a contract of guarantee is valid when the principal debtor is a minor.
3. Whether the surety (X) can be made liable for repayment of a debt that is void against the principal debtor.
4. Whether A can legally recover the loan amount from X under the provisions of the Indian Contract Act, 1872.

3. Legal Principles Covered

a) Competency to Contract – Section 11, Indian Contract Act, 1872

“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”

• A minor is not competent to contract.
• Any contract entered into by a minor is void ab initio (void from the beginning).
• Therefore, B, being a minor, cannot be held liable for repayment.

Case Law:

• Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC) Held: A minor’s agreement is absolutely void, and no contractual obligation can arise out of it.

b) Contract of Guarantee – Section 126, Indian Contract Act, 1872

“A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default.”

• A contract of guarantee requires the existence of a valid enforceable liability of the principal debtor.
• When there is no enforceable liability (as in the case of a minor debtor), there can be no valid guarantee.

c) Co-extensive Liability – Section 128, Indian Contract Act, 1872

“The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.”

• Since the principal debtor (B) has no liability, the surety (X) also cannot be held liable, because his liability is dependent on that of the principal debtor.
• The foundation of the surety’s obligation is the existence of a valid debt of the principal debtor.

d) Supporting Case Laws

1. Manmatha Nath Mukherjee v. Seth Dhanraj Dugar (AIR 1933 Cal 719) The court held that where the principal debtor is a minor, the contract of guarantee is void, and the surety cannot be made liable.
2. Kashiba v. Shripat (1895) ILR 19 Bom 697 The court ruled that a guarantee for a minor’s debt is unenforceable, since the principal debtor is not liable.
3. Mohori Bibee v. Dharmodas Ghose (1903) A contract with a minor being void ab initio cannot form a valid basis for any ancillary contract, including a guarantee.

4. Possible Judgement

• Since B is a minor, the loan contract is void ab initio under Section 11 of the Indian Contract Act.
• The principal debtor (B) incurs no enforceable liability, and thus, the contract of guarantee fails because there is no valid debt to guarantee.
• According to Section 128, the surety’s liability is co-extensive with that of the principal debtor. Since B is not liable, X also cannot be held liable.
• Therefore, A cannot recover the amount from X.

Judgement:
The contract of guarantee is void, and A cannot recover Rs. 500/- from X.
The surety’s liability does not exist in law because the principal contract is void due to the borrower’s minority.

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