GURMUICH SINGH Vs. AMAR SINGH

JUDGEMENT

(1.) The unsuccessful defendant/appellant resisted the suit of the respondent for specific performance of the agreement of sale of 27 bighas and 2 biswas of the land situated in Chakkarkarman Village. According to the respondent he and the appellant contracted that the appellant would participate on their behalf in a public 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. 00 and he contributed his share and the sale was confirmed on 11/03/1964 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 granted in favour of the respondent. The trial court decreed the suit; on appeal and on further second appeal the District court and the High court confirmed the same. Thus this appeal on special leave under Article 136 of the Constitution.

(2.) The contention neatly argued by Shri Khanna, the learned counsel for the appellant, is that the agreement is opposed to public policy and, therefore, it is void under S. 23 of the Contract Act, 1872. According to him the agreement was to knock out the public property on a minimum price and that, therefore, the object of the agreement is opposed to public policy and is hit by S. 23. We found no force in the contention. S. 23 of the Contract Act adumbrates that the consideration or object of an agreement is lawful unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provision of any law; or is fraudulent, or involved or implied injury to the persons or property of another; or the court regard 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 word object would mean the purpose and design which is the object of the contract, if it is opposed to public policy which tends to defeat any provision of law or purpose of law, it becomes unlawful and thereby it is void under S. 23 of the Contract Act. S. 23 is concerned with 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, yet 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 public policy is raised as a defence to a contractual claim, the test to be applied is: Does public policy require that this claimant, in the circumstances which have occurred, should be refused relief of which he would otherwise have been entitled with respect to all or part of his claim In addition, once the court finds that the contract is illegal and unenforceable, a second question should be posed which would also lead to greater clarity: Do the facts justify the granting of some consequential relief (other than enforcement of the contract) to either of the parties to the contract.

(3.) In Chandra Sreenivasa Rao v. Korrapati Raja Rama Mohana Rao, Subba Rao, J. , as he then was, while considering the word "object" in S. 23 of the Contract Act in the context of enforceability of the debt secured to celebrate the marriage of the minor which was prohibited by the Child Marriage Restraint Act, held that the word "object" in S. 23 meant "purpose" or "design" of the contract. The purpose of borrowing was unlawful as it was opposed to the public policy of celebrating the marriage of a minor in violation of the statutory provisions, and therefore, the promissory note was held to be unenforceable. An agreement between A and B to purchase property at an auction sale jointly and not to bid against each other at the auction is perfectly lawful, though the object may be to avoid competition between the two. But if there 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 government 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 S. 23. Thereby the contract was fraudulent. The contract thus is also opposed to public policy and is void. Take for instance four persons participated at an auction sale; pursuant to their previous agreement, they made a pretext of participation in the auction; bid up to an agreed price though the real value of the property is much more than what they had offered for. Here the design or object of their forming a ring is to knock out the property for a song to defraud the debtor or public. What is the object of the public policy in this regard The scope of public policy was classified into five groups in paragraph 1134 at p. 686 of Chitty on Contract (26th edn. , Vol. 1 thus :