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TMI Blog1959 (3) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In implementation of the said agreement, the first respondent entered into 32 contracts with Mulchand and 49 contracts with Baldeosahay and the nett result of all these transactions was a loss, with the result that the first respondent had to pay to the Hapur merchants the entire amount due to them. As the appellant denied his liability to bear his share of the loss, 'the first respondent along 'With his sons filed O. S. No. 18 of 1937 in the Court of the Subordinate Judge, Darjeeling, for the recovery of half of the loss incurred in the transactions with Mulchand. In the plaint he reserved his right to claim any further amount in respect of transactions with Mulchand that might be found due to him after the accounts were finally settled with him. That suit was referred to arbitration and on the basis of the award, the Subordinate Judge made a decree in favour of the first respondent and his sons for a sum of ₹ 3,375. After the final accounts were settled between the first respondent and the two merchants of Hapur and after the amounts due to them were paid, the first respondent instituted a suit, out of which the present appeal arises, in the Court of the Subordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence as regards the payment by the first respondent on account of loss incurred in the contracts with Mulchand but it was established that he paid a sum of ₹ 7,615 on account of loss in the contracts entered into with Baldeosahay. In the result, the High Court gave a decree to the first respondent for a sum of ₹ 3,807-8-0 and disallowed interest thereon for the reason that as the suit in substance was one for accounts of a dissolved firm, there was no liability in the circumstances of the case to pay interest. In the result, the 'High Court gave a decree in favour of the first respondent for the said amount together with another small item and dismissed the suit as regards the plaintiffs other than the first respondent and the defendants other than the appellant . Before we consider the questions of law raised in the case, it would -be convenient at the outset to dispose of questions of fact raised by either party. The learned Counsel for the appellant contends that the finding of the learned Judges of the High Court that the partnership stood dissolved after the season was over was not supported by the pleadings or the evidence adduced in the case. In the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found by both the Courts. It follows from the said findings that the partnership was only in respect of forward contracts with two specified individuals and for a particular season. But it is said that the said findings were not based on any evidence in the case. It is true that the documents did not clearly indicate any period limiting the operation of the partnership, but from the attitude adopted by the defendants in the earlier suit ending in an award and that adopted in the present pleadings, the nature of the transactions and the conduct of the parties, no other conclusion was-possible than that arrived at by the High Court. If so, s. 42 of the Partnership Act directly applies to this case. Under that section in the absence of a contract to the contrary, a firm is dissolved, if it is constituted to carry out one or more adventures or undertakings, by completion thereof. In this case, the partnership was constituted to carry out contracts with specified persons during a particular season and as the said contracts were closed, the partnership was dissolved. At this stage a point raised by the learned Counsel for the respondents may conveniently be disposed of. The learned Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless-it is forbidden by law, or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Under this section, the object of an agreement, whether it is of partnership or otherwise, is unlawful if it is forbidden by law or the Court regards it as immoral or opposed to public policy and in such cases the agreement itself is void. The learned Counsel for the appellant advances his argument under three sub-heads: (i) the object is forbidden by law, (ii) it is opposed to public policy, and (iii) it is immoral. We shall consider each one of them separately. Re. (i)--forbidden by law: Under s. 30 of the Indian Contract Act, agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Sir William Anson's definition of wager as a promise to give money or money's worth upon the determination or ascertainment of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no action shall be brought or maintained to recover any such sum of money. While the Act of 1845 declared all kinds of wagers or games null and void, it only prohibited the recovery of money or valuable thing won upon any wager or desposited with stakeholders. On the other hand, the Act of 1892 further declared that moneys paid under or in respect of wagering contracts dealt with by the Act of 1845 are not recoverable and no commission or reward in respect of any wager can be claimed in a court of law by agents employed to bet on behalf of their principals. The law of England till the passing of the Act of 1892 was analogous to that in India and the English law on the subject governing a similar situation would be of considerable help in deciding the present case. Sir William Anson in his book On Law of Contracts succinctly states the legal position thus, at page 205: ................ the law may either actually forbid an agreement to be made, or it may merely say that if it is made the Courts will not enforce it. In the former case it is illegal, in the latter only void; but inasmuch as illegal contracts are also void, though void contracts are not necessarily illeg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t illegal. Fitch v. Jones (5 E. B. 238) is plain to that effect. Money paid in discharge of a bet is a good consideration for a bill of exchange: Oulds v. Harrison (10 Ex. 572); and if money be so paid by a plaintiff at the request of a defendant, it can be recovered by action against him : Knight v. Camber (15 C.B. 562); Jessopp v. Lutwyoho (10 Ex. 614); Rosewarne v. Billing (15 C. B. (N. S.) 316); and it has been held that a request to pay may be inferred from an authority to bet: Oldham v. Ramsden (44 L. J. (C. P.) 309). Having regard to these decisions, I cannot hold that the statute above referred to precludes the plaintiff from maintaining this action. In Read v. Anderson.( (1882) L.R. 10 Q.B. 100.) where an agent was employed to make a bet in his own name on behalf of his principal, a similar question arose for consideration. Hawkins, J., states the legal position at page 104: At common law wagers were not illegal, and before the passing of 8 9 Vict. c. 109 actions were constantly brought and maintained to recover money won upon them. The object of 8 9 Viet. c. 109 (passed in 1845) was not to render illegal wagers which up to that time had been lawful, but simpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hew that this action is maintainable, and the only authority the other way is that of Beyer v. Adams (26 L. J. (Ch.) 841), and that case cannot be supported, and is not law. This case lays down the correct principle and is supported by earlier authorities. The decision in Partridge v. Mallandaine ((1887) L.R. 18 Q.B. 276.) is to the effect that persons receiving profits from betting systematically carried on by them are chargeable with income-tax on such profits in respect of a vocation under 5 6 Vict. c. 35 (the Income Tax Act) Schedule D. Hawkins, J., rejecting the argument that the profession of bookmakers is not a calling within the meaning of the Income Tax Act, makes the following observations, at page 278: Mere betting is not illegal. It is perfectly lawful for a man to bet if he likes. He may, however, have a difficulty in getting the amount of the bets from dishonest persons who make bets and will not pay. The decision in Hyams v. Stuart King ([1908] 2 K.B. 696.) deals with the problem of the legality of a fresh agreement between parties to a wager for consideration. There, two bookmakers had betting transactions together, which resulted in the defendant g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now problem, namely, whether a substituted agreement for consideration between the same parties to the wager could be enforced, and the majority held that it could be enforced, while Fletcher Moulton, L. J., recorded his dissent. We shall have occasion to notice the dissenting view of Fletcher Moulton, L. J., at a later stage. The aforesaid decisions establish the proposition that in England a clear distinction is maintained between a contract which is void and that which is illegal and it has been held that though a wagering contract is void and unenforceable between parties, it is not illegal and therefore it does not affect the validity of a collateral contract. 'The same principle has been applied to collateral contracts of partnership also. In Thwaites v. Coulthwaite ((1896) 1 Ch. 496.) the question of legality of a partnership of bookmaking and betting was raised. There the plaintiff and defendant were partners in a-bookmakers and betting business, which was carried on by the defendant; the plaintiff claimed an account of the profits of the partnership, and the defendant contended that, having regard to the nature of the business, no such relief could be obtained. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) where an action by one of the partners in a bookmakers and betting business against the other for an account of the partnership dealings was entertained. But the Court gave liberty to the defendant to object to repaying anything which represented profits in such business. The reason for this apparent conflict between the two parts of the decision is found in the express terms of the provisions of the Gaming Act of 1892. Commenting upon Thwaites v. Coulthwaite (1) in which Chitty, J., held that such an action would lie for an account of the profits of the partnership, Sargant, J., pointed out that in that case the Gaming Act, 1892, was not referred to. At page 101, the learned Judge says: Curiously enough, in that case the Gaming Act, 1892, was not referred to, and although the decision is a good one on the general law, it cannot be regarded as a decision on the Act of 1892. This judgment confirms the principle that a wager is not illegal, but states that after the Gaming Act, 1892, a claim in respect of that amount even under a collateral agreement is not maintainable. In O'Connor and Ould v. Ralston ((1920) 3 K.B. 451.), the plaintiff, a firm of bookmakers, fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem a cheque for that sum post- dated October 10, 1946, and to pay the monthly instalments of pound 100 thereafter. On the respondents agreeing to that course, the appellant sent a post-dated cheque to them and also enclosed a letter agreeing- to pay the monthly instalments. As the post-dated cheque was dishonoured and the appellant failed to pay the entire amount, the respondents filed a suit claiming the amount due to them under the subsequent agreement. The respondents contended that the sum the appellant had promised to pay was not money won upon a wager within the meaning of the second branch of s. 18, but was money due under a new lawful and enforceable agreement and that even if the sum was to be regarded as won on a wager, the agreement was outside the scope of the second branch of s. 18 of the Gaming Act, 1845. The House of Lords by a majority of 4 to 3 held that the agreement contained a new promise to pay money won upon a wager and that the second branch of s. 18 applied to all suits brought to recover money alleged to have been won on a wager and therefore the contract was unenforceable. In coming to that conclusion, Viscount Simon, one of the Judges who expressed the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endants' firm which was an association formed for the purpose of a betting business was a legal partnership under the English Law. The learned Judge relied upon the Gaming Act. 1892 in holding that it was not possible under the English law to have any such partnership. At page 718, the learned Judge observed: In my opinion no such partnership is -possible under English law. Without considering any other grounds of objection to its existence, the language of the Gaming Act, 1892, appears to me to be sufficient to establish this proposition. It is essential to the idea of a partnership that each partner is an agent. of the partnership and (subject to the provisions of the partnership deed) has authority to make payments on its behalf for partnership purposes, for which he is entitled to claim credit in the partnership accounts and thus receive, directly or indirectly, repayment. But by the Gaming Act, 1892, all promises to pay any person any sum of money paid by him in respect of a wagering contract are null and void. These words are wide enough to nullify the fundamental contract which must be the basis of a partnership, and therefore in my opinion no such partnership is poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the respondents. Again the Privy Council considered a similar question in Doolubdass Pettamberdass v. Ramloll Thackoorseydass and others (1850) 5 M.I.A. 109. There again the wager was upon the price that the Patna opium would fetch at the next Government sale at Calcutta. There the plaintiff instituted a suit in the Supreme Court of Bombay in January, 1847, to recover the money won on a wager. After the suit was filed, Act 21 of 1848 was passed by the Indian Legislature where under all agreements whether made in speaking, writing, or otherwise, by way of gaming or wagering, would be null and void and no suit would be allowed in any Court of Law or Equity for recovering any sum of money or valuable thing alleged to be won on any wager. This section was similar in terms to that of s. 18 of the Gaming Act, 1845. Their Lordships held that the contract was not void and the Act 21 of 1848 would not invalidate the contracts entered into before the Act came into force. Adverting to the next argument that under Hindu Law such contracts were void, they restated their view expressed in Ramloll Thackoorserdas v. Soojumnull Dhondmull ((1848) 4 M.I.A. 339.) thus at page 127: Thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract, the Nagpur High Court, in Md. Gulam Mustafakhan v. Padamsi (A.I.R. (1923) Nag. 48.) held that the partner who paid the amount could legally claim the other partner's share of the loss. The learned Judge reiterated the same principle accepted in the decisions cited supra, when he said at page 49: Section 30 of the Indian Contract Act does not affect agreements or transactions collateral to wagers......... . The said decisions were based upon the well-settled principle that a wagering contract was only void, but not illegal, and therefore a collateral contract could be enforced. Before closing this branch of the discussion, it may be convenient to consider a subsidiary point raised by the learned Counsel for the appellant that though a contract of partnership was not illegal, in the matter of accounting, the loss paid by one of the partners on wagering transactions, could not be taken into consideration. Reliance is placed in support of this contention on Chitty's Contract, p. 495, para. 908, which reads: Inasmuch as betting is not in itself illegal, the law does not refuse to recognise a partnership formed for the purpose of betting. Upon the dissol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the collateral agreement in respect thereof are enforceable; (2) after the enactment of the Gaming Act, 1845, a wager is made void but not illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a collateral agreement is enforceable; (3) there was a conflict on the question whether the second part of s. 18 of the Gaming Act, 1845, would cover a case for the recovery of money or valuable thing alleged to be won upon any wager under a substituted contract between the same parties: the House of Lords in Hill's Case,( (1921) 2 K.B. 351.) had finally resolved the conflict by holding that such a claim was not sustainable whether it was made under the original contract of wager between the parties or under a substituted agreement between them; (4) under the Gaming Act, 1892, in view of its wide and comprehensive phraseology, even collateral contracts, including partnership agreements, are not enforceable; (5) s. 30 of the Indian Contract Act is based upon the provisions of s. 18 of the Gaming Act, 1845, and though a wager is void and unenforceable, it is not forbidden by law and therefore the object of a collatera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds .......... In popular language ... the contract should be given the benefit of the doubt . Anson in his Law of Contract states the same rule thus, at p. 216: Jessel, M. R., in 1875, stated a principle which is still valid for the Courts, when he said: '-You have this paramount public policy to consider, that you are not lightly to interfere with the freedom of contract '; and it is in reconciling freedom of contract with other public interests which are regarded as of not less importance that the difficulty in these cases arises..... We may say, however, that the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules. The application of these to particular instances necessarily varies with the conditions of the times and the progressive development of public opinion and morality, but, as Lord Wright has said public policy, like any other branch of the Common Law, ought to be, and I think is, governed by the judicial use of precedents. If it is said that rules of public policy have to be moulded to suit new conditions of a cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have no doubt been founded upon the prevailing and just opinions of the public good ; for instance, the illegality of covenants in restraint of marriage or trade. They have become a part of the recognised law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise. In Janson v. Driefontein Consolidated Mines, Ltd.( (1902) A.C. 484.) an action raised against British underwriters in respect of insurance of treasures against capture during its transit from a foreign state to Great Britain was resisted by the underwriters on the ground that the insurance was against public policy. The House of Lords rejected the plea. Earl of Halsbury, L.C., in his speech made weighty observations, which may usefully be extracted. The learned Lord says at page 491: In treating of various branches of the law learned persons have analysed the sources of the law, and have sometimes expressed their opinion that such and such a provision is bad because it is contrary to public policy; but I deny that any Court can invent a new head of public policy ; so a cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efontein Consolidated Mines Ltd. Lord Atkin commented thus, at page 11: ............... Lord Halsbury indeed appeared to decide that the categories of public policy are closed, and that the principle could not be invoked anew unless the case could be brought within some principle of public policy already recognised by the law. I do not find, however, that this view received the express assent of the other members of the House; and it seems to me, with respect, too rigid. On the other hand, it fortifies the serious warning illustrated by the passages cited above that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds . Lord Thankerton summarised his view in the following terms, at p. 23: In the first place, there can be little question as to the proper function of the Courts, in questions of public policy. Their duty is to expound, and not to expand, such policy. Thai does not mean that they are precluded from applying ail existing principle of public policy to a new set of circumstances, where such circumstances are clearly wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s dictum that the categories of public policy are closed, he gives a warning that the doctrine should be invoked only in clear cases in which the harm to the public is substantially incontestable, Lord Thankerton and Lord Wright seem to suggest that the categories of public - policy are well-settled and what the Courts at best can do is only to apply the same to new set of circumstances. Neither of them excludes the possibility of evolving a new bead of public policy in a changing world, but they could not conceive that under the existing circumstances any such head could be discovered. Asquith, L. J., in Monkland v. Jack Barclay Ltd. ((1951) 1 All E.R. 714.) restated the law crisply at p. 723: The Courts have again and again said, that where a contract does not fit into one or other of these pigeon-holes but lies outside this charmed circle, the courts should use extreme reserve in holding a contract to be void as against public policy, and should only do so when the contract is incontestably and on any view inimical to the public interest . The Indian cases also adopt the same view. A division bench of the Bombay High Court in Shrinivas Das Lakshminarayan v. Ram Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy has been evolved or recognized invalidating wagers. So far as England is concerned, the passages from text-books extracted and the decisions discussed in connection with the first point clearly establish that there has never been such a rule of public policy in that country. Courts under the common law' of England till the year 1845 enforced such contracts even between parties to the transaction. They held that wagers were not illegal. After the passing of the English Gaming Act, 1845 (8 9 Vict. c. 109), such contracts were declared void. Even so; the Courts held that though a wagering contract was void, it was not illegal and therefore an agreement collateral to the wagering contract could be enforced. Only after the enactment of the Gaming Act, 1892 (55 Vict. c. 9), the collateral contracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions cited supra the question of public policy was specifically raised and negatived by Courts: See Thacker v. Hardy ((1878) L.R. 4 Q.B. 685.); Hyams v. Stuart King ([1908] 2 K.B. 696.) ; and Michael Jeffrey Company v. Bamford ((1949) 2 All E. R. 452.). It is therefore abundantly clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; nor was any amendment made subsequent to the passing of the English Gaming Act, 1892. The legislature must be deemed to have had the knowledge of the state of law in England, and, therefore, we may assume that it did not think fit to make wagers illegal or to hit at collateral contracts. The policy of law in India has therefore been to sustain the legality of wagers. The history of the law of gambling in India would also show that though gaming in certain respects was controlled, it has never been absolutely prohibited. The following are some of the gambling Acts in India: The Public Gambling Act (111 of 1867); The Bengal Public Gambling Act (11 of 1867); The Bombay Prevention of Gambling Act (IV of 1887); Madhya Bharat Gambling Act (LI of 1949); Madhya Pradesh Public-Gambling Act; Madras Gaming Act (111 of 1930); The Orissa Prevention of Gambling Act (XVII of 1955); the Punjab Public Gambling Act (111 of 1867); the Rajasthan Public Gambling Ordinance (Ordinance XLVIII of 1949) and the U.P. Public Gambling Act. These Acts do not prohibit gaming in its entirety, but aim at suppressing gaming in private houses when carried on for profit or gain of the owner or occupier thereof a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law, except in so far as such law has been altered by legislative enactment. Besides the matters above referred to, there are certain additional matters to which the Hindu Law is applied to the Hindus, in some cases by virtue of express legislation and in others on the principle of justice, equity and good conscience. These matters are adoption, guardianship, family relations, wills, gifts and partition. As to these matters also the Hindu Law is to be applied subject to such alterations as have been made by legislative enactments: See Mulla's Hindu Law, para. 3, p. 2. In other respects the ancient Hindu Law was not enforced in Indian Courts and it may be said that they became obsolete. Admittedly there, has not been a single instance in recorded cases holding gambling or wagering contracts illegal on the ground that they are contrary to public policy as they offended the principles of ancient Hindu Law. In the circumstances, we find it difficult to import the tenets of Hindu Law to give a novel content to the doctrine of public policy in respect of contracts of gaming and wagering. To summarize: The common law of England and that of India have never struck down contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with which Court of Law have dealt is sexual immorality............. . Halsbury in his Laws of England, 3rd Edn., Vol. makes a similar statement, at p. 138: A contract which is made upon an immoral consideration or for an immoral purpose is unenforceable and there is no distinction in this respect between immoral and illegal contracts. The immorality here alluded to is sexual immorality. In the Law of Contract by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279: Although Lord Mansfield laid it down that a contract contra bonos mores is illegal, the law in this connection gives no extended meaning to morality but concerns itself only with what is sexually reprehensible. In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157: The epithet immoral points, in legal usage, to conduct or purposes which the State, though disapproving them, is unable, or not advised, to visit with direct punishment. The learned authors confined its operation to acts which are considered to be immoral according to the standards of immorality approved by Courts. The case law both in England and India confines the operation of the doctrine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The State of Bombay v. R. M. D. Chamarbaugwala ([1957] S.C.R. 874.). This question was not raised in the pleadings. No issue was framed in respect of it. No such case was argued before the learned Subordinate Judge or in the High Court; nor was this point raised in the application for certificate for leave to appeal to the Supreme Court filed in the High Court. Indeed, the learned Advocate appearing for the appellant in the High Court stated that his client intended to raise one question only, namely, whether the partnership formed for the purpose of carrying on a business in differences was illegal within the meaning of s. 23 of the Contract Act. Further this plea was not specifically disclosed in the statement of case filed by the appellant in this Court. If this contention had been raised at the earliest point of time, it would have been open to the respondents to ask for a suitable amendment of the plaint to sustain their claim. In the circumstances, we do not think that we could with justification allow the appellant to raise this new plea for the first time before us, as it would cause irreparable prejudice to the respondents. We express no opinion on this point. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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