M.C. Chacko v State Bank of Travancore
📝 Case Title:
M.C. Chacko v. State Bank of Travancore
Citation: AIR 1970 SC 504
Court: Supreme Court of India
Bench: J.C. Shah, V. Ramaswami, and A.N. Grover, JJ.
Date: 28 August 1969
🔎 Background / Facts of the Case:
M.C. Chacko was an employee of the State Bank of Travancore.
His father-in-law maintained an account with the bank and owed a debt to it.
After the father-in-law passed away, Chacko (as the son-in-law) tried to sue the bank for money that was in a separate account, which he claimed was wrongly adjusted by the bank to recover dues from the deceased.
The bank had used funds from one account (not in the name of the deceased) to recover the dues of the deceased customer.
Chacko alleged that this act was unauthorized and illegal, and he filed a suit against the bank in a representative capacity.
⚖️ Legal Issues:
Can a person sue on a contract to which they are not a party?
Does a third party (i.e., someone who is not a signatory or directly involved in the contract) have the right to enforce it or claim damages?
🧑⚖️ Judgment of the Supreme Court:
The Supreme Court dismissed the case and held that:
Only parties to a contract can sue upon it.
A stranger to a contract cannot claim rights or enforce obligations under that contract, even if the contract is made for their benefit.
M.C. Chacko was not a party to the bank’s contract with the deceased.
He had no privity of contract, and therefore, no locus standi (legal standing) to bring a suit against the bank regarding that transaction.
📚 Legal Principles Established:
1. Doctrine of Privity of Contract:
Only the persons who are parties to a contract are bound by it and can enforce it.
A third party (stranger) has no right to enforce the terms of a contract.
2. No Action by Stranger to a Contract:
Even if a contract is made for the benefit of a third party, that person cannot sue unless they are a party to the contract.
3. Limitation of Representative Capacity:
Even when someone acts on behalf of another (such as a legal heir or beneficiary), the court still requires a direct legal relationship or authorization.
🧷 Related Case Laws:
✅ Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915 AC 847)
Established that a contract cannot be enforced by a person who is not a party to it (English law origin of privity doctrine).
✅ Jamna Das v. Ram Avtar (1911 ILR 33 All 692)
Reaffirmed the principle that a third party cannot sue on a contract.
✅ Khwaja Muhammad Khan v. Hussaini Begum (1910) ILR 32 All 410
Exception: In cases of family settlements or marriage arrangements, even a non-party may
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