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TMI Blog1974 (12) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... property of another; 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". The appellant, Firm of Pratapchand Nopaji, is the plaintiff. in all the three suits, but the defendants of each suit, the respondents before us, are different. The plaintiff claimed ₹ 78,201.15 ans. in ,,original suit No. 106 of. 1954, ₹ 13,978.4 ans. in original suit No. 107 of 1954 and ₹ 91,697.4 ans. in original suit No. 114 of 1954, as amounts due to indemnify him under section 222 of the Contract Act on the strength of payments said to have been made by the plaintiff to third parties on behalf of the defendants who are alleged to have directed the plaintiff to enter into "badla" transactions for them. Three other suits, claiming amounts alleged to have been borrowed, also filed by the same plaintiff, were tried together with these three suits; but, we are not concerned here with the other three suits from the dismissal of which no appeal was preferred. The character of the contract set up in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the patties sent by Bombay Commission agents on the promise of the defendants to repay all such amounts to the plaintiffs with interest. The extracts of the accounts filed with this plaint show the transactions and the amounts paid by the plaintiffs at the request of and on behalf of the defendants". The plaintiff's case was that the authority to engage in Badla transactions on forward contracts, which are contracts for the delivery of specified goods on future dates, implied what is known as "continuation" or "carrying over" in the terminology of the Stock Exchange. The meaning of such a transaction is given, in Halsbury's Laws of England-3rd Edn. Vol. 36 at p. 547 (para 842) as follows "If a purchaser of securities during a dealing period does not wish to complete his purchase during the next following settlement period he may arrange to resell for the current account the securities which he has agreed to buy for that account, and to purchase for the new account. Conversely, a seller of securities during a dealing period who does not wish to deliver during the next following settlement period may arrange to repurchase for the current account the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Burjori Ruttomji Bomanji,(45 I.A. p. 29 @ 33) after examining the facts of a case in which a firm of "pucca adatias" was authorised. by a defendant intending to speculate in differences, to sell and then to resell for the purpose of making profits, it was found that, as the plaintiff could not be said to either lose or benefit correspondingly from variations in price, there could be no agreement in the nature of a wager between the principal and the agent whatever may have been intentions of the principal. It wag held that, in a wagering contract, there has to be mutuality in the sense that the gain of one party would be the loss of the other on the happening of the uncertain event which is the subject matter of a wager. It was pointed out there (at p.33) : "Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. No such intention has been proved'. We, therefore, accept the contention of the appellant that there was no wagering contract between the plaintiff and any of the defendants The next question we may consider is whether the contracts set up could be said to be col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the partnership is not unlawful within the meaning of s. 23(A) of the Contract Act. Re. (ii) Public Policy : The learned Counsel for the appellant contends that the concept of public policy is very comprehensive and that in India, particularly after independence, its content should be measured having regard to political, social and economic policies of a welfare State, and the traditions of this ancient country reflected in Srutis, Smritis and Nibandas. Before adverting to the argument of the learned Counsel, it would be convenient at the outset to ascertain the meaning of this concept and to note how the Courts in England and India have applied it to different situations. Cheshire and Fifoot in their book on "Law of Contract", 3rd Edn., observe at page 280 thus : The public interests which it is designed to protect are so comprehensive and heterogeneous, and opinions as to what is injurious must of necessity vary so greatly with the social and moral convictions, and at times even with the political views, of different judges, that it forms a treacherous and unstable ground for legal decision......... These questions have agitated the Courts in the past, but the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been raised before us is whether the plaintiff, who entered into contracts with third parties, who appeared as witnesses in the cases now before us, so that these third parties made the purchases and settlements in Bombay, the payments for which are the subject matter of suits, was dealing with them as a principal to principal. The High Court had found that the relationship between the plaintiff and the third parties he employed to conclude the transactions was that of a principal to principal. The question whether the parties through whom the, plaintiff actually alleged carrying out of the contract set up between. the plaintiff and the defendants could themselves be regarded as principals or agents of the plaintiffs-.will become quite immaterial if the objects of the contracts are found to be tained with the kind of illegality which is struck by Sec. 23 of the Contract Act. Again, the mere fact that the contracts between the plaintiff and the defendants were entered into at Kurnool in the State of Andhra Pradesh would also not make any difference in principle if the objects of the contracts which were to be carried out at Bombay were of such a kind as to be hit by Sec. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and includes a gully, a teji, a mandi or a tejimandi in goods;" Sec. 2, sub.s. (9) says "Ready delivery contract means a contract which provides for delivery and payment of price either immediately or within such number of days not exceeding seven after the date of the contract and under such conditions as the Gazette, specify in this behalf in respect of any particular goods"; Sec. 2, sub. s. (1) provides "'Recognised association' means an association which is for the time being recognised by the Provincial Government as provided in Section 3"; The recognition of associations is governed by Sec. 3 of the Act, and Sec. 6, sub. s.(1) gives the power to every recognised association to "subject to the sanction of the Provincial Government, make and, from time to time, add to, vary or rescind bye-law for the regulation and control of forward contracts in goods for which such association has been recognised". Sec. 6, sub. s.(2)(f) refers specifically to the power of the recognised Association to lay down, "the terms, conditions and incidents of contracts and the forms of such contracts as are in writing"; and, Sec. 6, sub.s. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "(1) Notwithstanding anything contained in this Act or in any other law for the time being in force on a notification being issued by the Provincial Government in the Official Gazette, options or such kinds of options in such goods and in the whole of the Province of Bombay or such part thereof as may be specified in the notification shall be illegal. (2) Any person entering into any option made illegal under sub-section (1) shall, on conviction, be punishable with imprisonment which may extend to six months or with fine or with both". The Andhra Pradesh High Court had reached the conclusion that it was not necessary to decide the question whether provisions of Sec. 8 clause 1 (a) had been contravened probably because no bye-law made under Section 6 or 7 of the Bombay Act had- been placed before it. No such bye-law has been pointed out to us. We are, therefore, not in a position to hold that there has been an infringement of any bye-law. The High Court had, however, held that there had been a contravention of Sec. 8(1)(b) of the Bombay Act inasmuch as only one of the third parties, namely, Shivdanmal Agarwal & Co., whose partner Ganga Ram was examined as P.W.1, wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are likely to be, detrimental, to public interest;" Section 7(2) of the Central Act provides that "If any person contravenes any order under, Section 3 relating to foodstuffs..... (a) he shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine, unless for reasons to be recorded the court is of opinion that a sentence of fine only will meet the ends of justice; and (b) any property in respect of which the order has been contravened or such part thereof as to the court may seem fit shall be forfeited to the Government........ As already indicated, Sec. 17 of the Central Act keeps alive the provisions of Oil-seeds (Forward Contract Prohibition) Order, 1943. The provisions of this Control Order appear to us to be so important for the decision of the question before us that we reproduce it below in toto. It runs as follows : "1. This order may be called the Oilseeds (Forward Contracts Prohibition) Order, 1943. (2) It extends to the whole of British India. (3) It shall come into force at once. 2. In this order.... (i) "contract" means a contract made, or to be performed in whole or in part in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded from- the provisions of this Order (Noti. No. P & S.C. 75 (2)/43, dated 31st May, 1943) 11. No P.& S.C. 75 (A) 1/43 -In exercise of the powers conferred by clause 5 of, the Oilseeds (Forward contracts Prohibition) Order, 1943, the Central Government is pleased to exclude the following class of contracts from the provisions of the said Order, namely:- "Forward contracts for castor seed, cotton seed or sesamum (tit or jinjil) or specific qualities or types and for specific delivery orders, railway receipts or bills of lading against which contracts are not transferable to, third parties." Learned Counsel for the appellant contended that the Contracts under consideration for groundnut seeds and castor seeds are excluded under the above mentioned notification because they satisfy, in each case, the first of the two alternative conditions of exclusion. These conditions for contracts for sale of ground-nut seeds are : (1) they must relate to specified qualities or. types for specific deliveries at a specified price; and, (2) they should not be transferable to third parties. Excluded forward contracts for castor seeds must (a) be in respect of specified qualities or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n intention to demand actual deliveries from the mere form of the contracts would be to believe, very naively, that they were contracts for the proverbial carrying of coals to Newcastle. If, as both the Trial Court and the High Court have rightly held, the contracts were not for genuine or actual delivery but only for speculation on differences in price, even the first condition for exclusion of these transactions from the purview of the control order, which contemplates actually intended delivery, would not be satisfied. Hence, we have no doubt in our minds that the contracts were not merely void but illegal in the sense that their objects are forbidden. We think that the High. Court correctly distinguished and refused to apply authorities recognising the enforceability of agreements collateral to what are merely void Agreements. It rightly relied on decisions holding agreements collateral to prohibited contracts also to be unenforcible because a taint attaches to them which makes them also contrary to public policy. Such agreements fall within the class of cases mentioned in Gherulal Parakh's case (supra) where harmful results of permitting the contracts, in terms of injury to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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