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TMI Blog1991 (3) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic auction to purchase the evacuee property. He contributed his share. The appellant agreed to convey half the property purchased at the auction. The appellant became the highest bidder for a sum of Rs. 5,000 and he contributed his share and the sale was confirmed on March 11, 1964 and a sale certificate was issued by the custodian of the evacuee property but the appellant had not performed his part of the contract. Accordingly he laid the suit for specific performance or refund of the amount advanced by him. The suit was resisted by the appellant denying the execution of the agreement and also pleaded that the contract is illegal and void being opposed to public policy. The relief of specific performance being discretionary cannot be gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the object or consideration of the transaction and not the reasons or motive which prompted it. Public policy imposes certain limitations upon freedom of contract. Certain objects of contract are forbidden or discouraged by law; though all other requisites for the formation of a contract are complied with, year if these objects are in contemplation of the parties when they entered into the agreement, the law will not permit them to enforce any rights under it. Most cases of illegality are of this sort: the illegality lies in the purpose which one or both parties have in mind. But in some instances the law strikes at the agreement itself, and the contract is then by its very nature illegal. Whenever a plea of illegality or against publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is an agreement between all the competing bidders at the auction sale, be it of the court sale or revenue sale, or sale by the government of its property or privilege and formed a ring to peg down the price and to purchase the property at knock out price, the purpose or design of the agreement is to defraud the third party, namely, the debtor or Govt. whose property is sold out at the court auction or revenue sale, or public welfare. The object or consideration of the contract, oral or written, to share such property is unlawful. There is also implied "injury to the debtor" within the meaning of Section 23. Thereby the contract was fraudulent. The contract thus is also opposed to public policy and is void. Take for instance fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting public sale is to secure as much price or revenue as possible to redeem the debt of the debtor or to secure maximum price to the exchequer for use of public purpose. If such a contract to form a ring among the bidders was to peg down the price and to have the property knocked out at a low price would defeat the above economic interest of the debtor or public welfare. Thereby the agreement becomes fraudulent and opposed to public policy and is void under Section 23. In Ram Lal Misra v. Rajendra Nath Sanyal A.I.R. (1933) Oudh 124 the finding was that the agreement was not merely of an honest combination between two bidders to purchase the property at an advantageous price but goes further by resorting to secret artifice for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are jointly or severally liable to make good to the vendor any loss he sustained by reason of the operation of the agreement. In Md. Issue v. Sreeramulu AIR 1946 Mad 289 the Madras High Court held that an agreement between two bidders not to bid against each other at an auction is not illegal and is not opposed to public policy, The same was followed in Ramalingiah v. Subbartami Reddi AIR 1951 Mad 390 . In Mohafazul Rahim v. Babulal the Nagpur High Court also held that persons agreeing not to bid against each other is not opposed to public policy. 6. The Division Bench of Delhi High Court in Lachman Das and Ors. v. Hakim Sita Ram and Ors. AIR 1975 Delhi 159 had to consider that an agreement entered into by the parties not to bid at the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ud on the court by suppressing the contract as being a decree holder obtained leave of the court and bid in the auction. Therefore, the sale was void on that ground. On further appeal the judicial committee found that the ground on which the High Court set aside the sale was not pleaded, nor an opportunity given to the appellant. Therefore, for the first time that ground cannot be taken before the High Court and having disagreed with the executing court that there was an agreement to dissuade third party to participate in the bid, the sale cannot be set aside on the new ground. The Privy Council confirmed the sale. On those facts the ratio is of no assistance to the appellant since there is no agreement between the appellant and the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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