28. A advances to B a minor, Rs. 50,000 on the guarantee of C. On demand for repayment, B refuses to pay on the ground of minority. Can A recover the amount from C.

1. Facts of the Case

• A advanced Rs. 50,000 to B, who is a minor.
• The loan was given on the guarantee of C, who stood as a surety for repayment.
• When the money was demanded, B refused to repay, claiming that as a minor, he is not liable under the Indian Contract Act.
• A then sought to recover the money from C, the guarantor.
• The central issue is whether the guarantor (C) can be made liable when the principal debtor (B) is not competent to contract.

2. Issues in the Case

1. Whether a minor can be a principal debtor under the Indian Contract Act, 1872.
2. Whether a contract of guarantee is valid when the principal debtor (B) is a minor and hence incompetent to contract.
3. Whether C, the guarantor, can be made liable for repayment when the principal debtor’s contract is void.
4. Whether A can legally recover the amount from C under the contract of guarantee.

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, of sound mind, and not disqualified from contracting by any law.”

• A minor is not competent to contract, and any agreement with a minor is void ab initio (void from the beginning).
• Therefore, B, being a minor, cannot incur a contractual liability.

Leading Case:

• Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC) Held: An agreement with a minor is void ab initio; no rights or obligations arise from 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.”

• It involves three parties — the creditor, principal debtor, and surety.
• There must be a valid and enforceable obligation of the principal debtor for the surety to be bound.
• If the principal debtor’s obligation is void, there is no enforceable debt, and hence no liability can arise for the surety.

c) Validity of Guarantee when Principal Debtor is a Minor

• A surety’s liability is co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act.
• If the principal debtor (B) is not liable, then the surety (C) also cannot be held liable, because the foundation of the guarantee — the debt of the principal — does not exist in law.

Supporting Case Law:

• Manmatha Nath Mukherjee v. Seth Dhanraj Dugar (AIR 1933 Cal 719) Held: When the principal debtor is a minor, the contract of guarantee is void, and the surety cannot be held liable, as there is no valid debt.
• Kashiba v. Shripat (1895) ILR 19 Bom 697 The court ruled that a contract of guarantee where the principal debtor is a minor is void, and the surety cannot be made liable.

d) Co-Extensive Liability – Section 128, Indian Contract Act, 1872

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

• Since the principal debtor (B) has no liability, the surety’s liability (C) also does not arise.
• A guarantee without a valid principal debt is void.

4. Possible Judgement

• B, being a minor, is not competent to contract, and therefore the loan agreement is void ab initio under Section 11 of the Indian Contract Act, 1872.
• Since the principal debt itself is invalid, the surety (C) cannot be made liable, as the liability of the surety is co-extensive with that of the principal debtor (Section 128).
• The contract of guarantee fails due to the absence of a valid and enforceable principal obligation.

Judgement:
The agreement of guarantee is void, and A cannot recover the amount from C.
A’s remedy, if any, lies in equity, not under contract law — but in law, the guarantee is unenforceable.

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