Madhub Chander v. Raj Coomar Dass 1874 (Case Summary)

In this case the Hon’ble Calcutta High Court addressed the enforceability of agreements that restrain trade under Section 27, Indian Contract Act, 1872. The judgment is a landmark precedent, emphasizing the Indian judiciary’s strict stance on such agreements, except in specific circumstances permitted by law.

Table of Contents

Facts of Madhub Chander v. Raj Coomar Dass

The plaintiff, Madhub Chunder, entered into an agreement with the defendant, Raj Coomar Dass, under which the plaintiff promised not to do a particular business within the city of Calcutta.
In exchange, the defendant agreed to pay a certain sum of money to the plaintiff.
The Plaintiff breached the agreement by doing the particular business within the agreed geographical limits.
The defendant refused to pay the promised amount, leading the plaintiff to file a suit to enforce the agreement.
The defendant argued that the agreement was void as it violated Section 27 of the Indian Contract Act, 1872, which declares agreements in restraint of trade void.

Issues framed

Whether an agreement restricting trade within certain geographical limits violates Section 27 of the Indian Contract Act, 1872?
Whether there are any exceptions to the rule invalidating agreements in restraint of trade?

Subordinate Court Judgment

The Trial Court ruled in favor of the defendant, holding that the agreement was void and unenforceable under Section 27.

The plaintiff appealed to the Hon’ble Calcutta High Court, seeking enforcement of the agreement.

Judgment of Madhub Chander v. Raj Coomar Dass

The Calcutta High Court applied the principle of Section 27 of the Indian Contract Act, 1872.

The court held that the agreement was a clear restraint of trade, as it prevented the plaintiff from carrying out his lawful business within the city of Calcutta. Section 27 was interpreted strictly, allowing no exceptions unless explicitly stated in the law. The court emphasized that allowing such agreements would be contrary to public policy, as they restrict competition and limit economic freedom.

The Calcutta High Court dismissed the plaintiff’s appeal, holding that the agreement was void under Section 27 of the Indian Contract Act, 1872. The defendant was not liable to pay the agreed sum, as the agreement could not be enforced in law.