Bhagwandas goverdhan kedia v s M/S. Gridharilal Parshottamdasand company

Case Name: Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co.  Citation: AIR 1966 SC 543 

Court: Supreme Court of India 

Bench: J.C. Shah, K.N. Wanchoo, and S.M. Sikri, JJ. 

Date of Judgment: 1966 

Parties involved: 

Appellant- Bhagwandas Goverdhan Kedia (Kedia Ginning Factory Oil Mills,  Khamgaon) 

Respondent – M/S. Gridharilal Parshottamdas and company (Ahmedabad) 

Background : 

• The case was at a time when postal communication was the common  method communication in contact. 
• It was new for the interpretation of Section 4 of India Contact Act,1872 ,  for the Court with the sie of telephone and other instantaneous method; In  which a big question arose regarding the jurisdiction. 
• The plaintiff filed a suit in Ahmedabad for breach of contract after defendant  accepted the offer via telephone. 
• Whereas, defendant contended that the contract was complete in  Khamgaon, Maharashtra and challenged the jurisdiction of the Ahmedabad Court.

Facts of the case: 

• M/s Girdharilal Parshottamdas (plaintiff), also a respondent, in Ahmedabad,  made an offer to buy cotton seed cake from the Kedia Ginning Factory Oil Mills  (Khamgaon). 
• Girdharilal was in Ahmedabad, whereas the owner to whom he made the  contract was in Khamgaon, Maharashtra. 
• On 22 July 1959, the parties had a long-distance communication through  telephone, in which the respondent made an offer to buy cotton seed cake. • In response, the appellant (defendant) accepted his offer, and payment and  delivery were to be made in Khamgaon. 
• The plaintiff filed a suit in the City Civil Court, Ahmedabad for breach of  contract, but the defendant challenged the jurisdiction of that court. • The trial court held that Ahmedabad had jurisdiction, and the Gujarat High  Court dismissed the defendant’s revision. The defendant then appealed to the  Supreme Court, arguing that he accepted the offer in Khamgaon, so only  Khamgaon had jurisdiction within the territorial limits. 

Issues: 

• Which court has jurisdiction, whether the place where the offeror heard the  acceptance by the offeree or the place from where the acceptance was spoken. • Whether the same rules are applied or considered as the postal rule. • Whether Section 4 of the Indian Contract Act, 1872, applies to instantaneous  methods of communication like telephone. 

Arguments of the parties: 

1. Plaintiff’s arguments: 
2. a) He contended that the offer was made by the defendant.
3. b) Acceptance is complete only when the words are received by the proposer at  Ahmedabad. So, the Ahmedabad court has jurisdiction. 
4. c) Since telephone is an instantaneous method, the acceptance must be actually  received by the offeror, unlike postal communication. 
5. Defendant’s arguments: 
6. a) The defendant contended that the plaintiff was the one who gave the offer to  him to buy cotton seed cake. 
7. b) The contract was complete the moment he spoke the acceptance on the phone  at Khamgaon, so only Khamgaon had jurisdiction. 
8. c) Communication is complete the moment the acceptor sends the acceptance,  like in other cases. 
9. d) Requiring the offeror to hear the acceptance limits the freedom to contract  unnecessarily. 

Judgement: 

• First, the trial court held that Ahmedabad had jurisdiction, but it was  challenged by the defendant on the ground that the communication was made by  telephone to the plaintiff. 
• The Supreme Court of India held that Ahmedabad had jurisdiction. It  referred to Section 4, which deals with communication and completion of offer  and acceptance, but clarified that it mainly applies to the postal rule. • The Court observed that since telephone is an instantaneous method of  communication, the postal rule cannot apply. In postal communication,  acceptance is complete when it is posted by the acceptor. However, in  instantaneous communication, acceptance is complete when it is put into  transmission and is heard by the proposer, beyond the control of the acceptor,  who cannot revoke it thereafter.
• Therefore, it is not only about the acceptor speaking the acceptance, but  also about the proposer hearing it. Since the acceptance was heard at Ahmedabad,  the Supreme Court held that Ahmedabad had jurisdiction to deal with the case. 

Key Implications: 

• Proper communication is essential; mere consent by the acceptor does not  complete communication until the offeror hears the acceptance. • The court of the place where the acceptance is heard has jurisdiction. • The case shows how different circumstances and developments influence  the interpretation of statutory provisions. 
• Precedents from other countries were considered: in Entores Ltd. (England),  the contract is made at the place where acceptance is heard, determining  jurisdiction. 
• In the USA, there are conflicting views, with some holding that a contract is  made in the district where the acceptance is spoken. 
• The interpretation of law varies according to different needs, circumstances,  and modes of communication. 

Legal reasoning: 

 This case deals with Sections 3 and 4 of the Indian Contract Act, 1872. Since  this law was made at a time when the common mode of communication was by  post, its interpretation does not always fit contracts made through instantaneous  methods of communication. The issue raised here was which court has jurisdiction  — the place where the acceptance was spoken by the acceptor or the place where  it was heard by the offeror. 

 Looking at similar circumstances in other jurisdictions, in England the Entores  Ltd. Case held that acceptance is complete when it is received by the offeror, and  the contract is made at the place where the acceptance is received. This is because 

when offer and acceptance take place over the telephone, the parties are  considered to be in the presence of each other. 

 The principle Is that acceptance must reach the offeror. Mere intent to accept  is not enough for the completion of a contract. Acceptance must be expressed and  communicated to the offeror. This essential element of acceptance helped the  Court to reject the appellant’s argument that the contract was completed in  Khamgaon at the moment he spoke his acceptance.  

Obiter Dicta: 

 The Court observed that with the development of technology and new  methods of communication, the traditional rules of the Indian Contract Act, 1872,  made for postal communication, may not always fit. It noted that while the postal  rule applies to letters, in cases like telephone or other instantaneous  communication, the contract is complete only when the acceptance is received  and heard by the offeror. The Court also mentioned that in future cases involving  electronic or digital communication, the principle of acceptance being “heard” or  “received” may decide not only contract formation but also jurisdiction. Mere  deciding in the mind to accept, without communicating to the offeror, does not  create a contract, showing the importance of clear external manifestation of  intent. 

Significance: 

 This case is important because it clarified how acceptance works in situations  of instantaneous communication, like over the telephone. It highlights that  acceptance is only complete when it is actually heard by the offeror, which helps  in understanding when a contract comes into existence. Although the judgment  relied on foreign cases, it provides guidance for Indian courts in similar situations.  The case also shows the limitations of older provisions, like Section 4 of the Indian  Contract Act, 1872, when applied to modern communication methods. As per the 

Lowe’s Letter Rule, under both the ICA and common law, acceptance is complete  once the letter is properly posted. This practical rule exists because it is easy to  prove the posting, but almost impossible to disprove someone’s claim that they  never received the letter. If the rule were changed so that acceptance is valid only  when the proposer actually hears it, the proposer could deny the words and  escape liability, giving them a powerful defense and undermining certainty in  commercial dealings. Therefore, the principle needs to balance fairness and  certainty: acceptance is complete once dispatch is properly made, and noted when  the proposer acknowledges receipt. 

Criticism: 

 The case clarified the rule for instantaneous communication, but it does not  cover modern methods like email or messaging apps, which can create similar  issues of “hearing” or “receiving” acceptance. 

 Section 4 of the Indian Contract Act, 1872, was originally made for postal  communication, so applying it to telephone communication shows the law is  somewhat outdated and needs more explicit guidance. 

 The reliance on foreign cases like Entores Ltd. Is helpful, but it may not fully  fit Indian commercial practices or circumstances. 

 The judgment emphasizes that acceptance must be heard by the offeror, but  it leaves open questions about what happens if the message is delayed, lost, or  misheard in modern communication. 

 While the Court rejected the defendant’s argument that the contract was  complete in Khamgaon, it does not give clear rules for future cases where  technology or distance complicates instant communication. 

Additional observation: 

• This case highlights difference between mere intention and external  manifestation of acceptance, as it should by speaking writing or conduct that  clearly so acceptance to purposes.
• The case also shows the relevance of comparative law where they were it is  from us UK how it guide the interpretation of Indian contract law. • The principals establish here may apply to future disputes when the  development of communication upgrade even today it applies Disputes involving  email, messaging ,or other instantaneous digital communication. • It also demonstrates how contract preserve the language which has been  considered advocate to cover cases of this new invention. 

Conclusion: 

 The case of Bhagwandas Goverdhandas Kedia v. M/s. Girdharilal  Parshottamdas and Company laid down the interpretation of Section 4 and  emphasized the essence of acceptance — that it must be heard. Mere deciding in  the mind to accept an offer does not create a contract. Since there is no direct  provision dealing with acceptance through instantaneous communication, this  case clarified which court has jurisdiction when acceptance is made in such a  manner. 

 With the development of technology, similar interpretations are likely to  arise in future cases. A contract, unlike a tort, is not unilateral; therefore,  communication of offer and acceptance must take place in the presence of parties.  In the case of telephone communication, the words of acceptance must be heard  by the offeror to complete the contract. 

Bibliography : 

Footnote citation (Bluebook): 

Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co., AIR 1966 SC  543 (India).