VENKATA CHINNAYA RAU V. VENKATA RAMAYA GARU

FACTS

An old woman was providing a sum of money to her sister (plaintiff) out of her estate. Later on, the old lady transferred her property to her daughter (defendant) by a deed of gift which was registered by the respective authorities. The deed was executed based on the condition that the defendant would be paying an amount of Rs. 653/- annually to the old woman’s sister, the plaintiff. Hence, the defendant agreed with the plaintiff, agreeing to pay the sum amount of money every year.

However, after the old woman passed away, the defendant refused to pay the annuity she had promised to the plaintiff. So, the plaintiff sued the defendant to recover the annuity promised by the respondent.

ISSUES

1) Whether the plaintiff can sue the defendant for the amount promised in a contract where the consideration for such promise has been furnished by a person other than the plaintiff herself?

2) Whether the concept of “Privity of Consideration” can be applied in the Indian scenario or not?

LAW

Section 2(d) of Indian Contract Act, 1872: “When at the desire of the promisor, promise or any other person has done or abstained from doing or does or abstains from doing or promises to do or abstain from doing something, such act or abstinence, or promise is called a consideration for the promise”.

PLAINTIFF’S ARGUMENTS

Plaintiff’s contention was that the consideration for the gift deed was the promise of the defendant to pay the annual amount to the plaintiff.

DEFENDANT’S ARGUMENTS

Defendant contended that as the consideration to enforce the contract was not paid by the plaintiff herself, she was not entitled to claim the enforcement of the contract.

JUDGEMENT

The hon’ble high court concluded that the plaintiff should be allowed to recover the annuity from the defendant.

Innes J equated the present case with an English case “Dutton v. Poole[2]” which had a similar kind of situation. He observed in the present case that the plaintiff had already been receiving a sum amount of money out of her sister’s estate even before the creation of the contract in question. When the plaintiff’s sister transferred the property to her daughter (respondent), the respondent agreed with the plaintiff that a similar arrangement would be continued by her. So, due to the refusal of the defendant to pay the annuity, the plaintiff suffered a loss which was sufficient consideration for the promise. As the plaintiff had given the consideration, she was entitled to recover the annuity from the respondent.

Justice Kindersley came to a similar conclusion but on different grounds. He combined the gift deed and the defendant’s promise into one transaction and held that the gift deed was the consideration for the defendant’s promise to pay the annuity to the plaintiff.

ANALYSIS

According to English Law, the consideration must be moved from the promisee only. If any other person fulfils the consideration, then the promisee will be a stranger to the consideration and will not be able to enforce the promise.

But the proposition “Stranger to Consideration” is not applicable in the Indian scenario.

Section 2(d) of the Indian Contract Act states that-

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”.[3]

The language in section 2(d) reveals that under the Indian contract act, it is not mandatory that the consideration must flow from the promisee only, any other person also can furnish the consideration for the promise.

We can put it this way, that a promise can be enforceable if there is a consideration for it and it is completely irrelevant who has furnished the consideration – the promisee or any other person.

In the present case, if we incorporate the gift deed executed by the old lady to the defendant and the defendant’s promise to the plaintiff, it would be one transaction as suggested by Justice Kindersley, where the old lady had already furnished the consideration on the behalf of the plaintiff as the gift deed. Hence, the defendant was supposed to pay the annuity to the plaintiff according to the promise. As the defendant failed to do so, the plaintiff could claim the enforcement of the promise even though she did not furnish the consideration herself.

CONCLUSION

The case Chinnaya v. Ramaya[4] is a landmark case that has clarified the applicability of the concept of “Privity of Consideration” under the Indian Contract Act, 1872 though it is not applicable in English law. It simply means any person other than the promisee also can furnish the consideration for the fulfilment of the promise.

Author(s) Name: Rumela Biswas (CHRIST University, Delhi)

References:

[1] ILR (1876-82) 4 Mad 137

[2] (1678) 2 Lev 210

[3] Indian Contract Act,1872.

[4] ILR (1876-82) 4 Mad 137

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