Gujarat High Court
Ashokbhai Ramcharan Shrivastava vs Dhaniben Mohammedbhai Chauhan on 1 August, 2024
Author: Biren Vaishnav
Bench: Biren Vaishnav
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 272 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2024
In R/FIRST APPEAL NO. 272 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ? NO
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy of the NO
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or NO
any order made thereunder ?
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ASHOKBHAI RAMCHARAN SHRIVASTAVA
Versus
DHANIBEN MOHAMMEDBHAI CHAUHAN & ORS.
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Appearance:
MR DHRUV K DAVE(6928) for the Appellant(s) No. 1
for the Defendant(s) No. 1,2,2.1,2.2,2.3,3,3.1,3.2,3.3,3.4,4,5,6,7
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 01/08/2024
ORAL JUDGMENT
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(PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE)
1. The present appeal is filed under Section 96 of the Code of Civil
Procedure, 1908 (hereinafter referred to as "the Code") by the
appellant-original plaintiff, being aggrieved and dissatisfied with the
judgment and order dated 08.11.2023 passed below Exh.69 by the
learned 12th Additional Senior Civil Judge & Additional Chief Judicial
Magistrate, Vadodara in Special Civil Suit No.202 of 2010. By the
aforesaid judgment and order, the learned Civil Judge has allowed the
application preferred by the original defendants-respondents herein
under Order VII Rule 11 (a) and (d) of the Code, thereby rejecting the
plaint.
2. The material facts, which are necessary for adjudication of the
present appeal as pleaded by the original plaintiff in the plaint, are
reproduced hereunder:
2.1 The suit land consists of an agricultural land bearing revenue
survey no.529 having block no.357 admeasuring 00 Hectatre 88 ARE'S
and 02 sq. mtrs. situated at Village-Kapurai, Taluka/District-Vadodara
(hereafter referred to as "the suit land"). The aforesaid suit land is a
new tenure restricted tenure land and the original defendant nos.1 to
5 with condition to get convert the aforesaid suit land into an old
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tenure land, had executed one irrecoverable power of attorney in
favour of defendant no.6 on 01.08.2006. The defendant no.6 on the
basis of such authority conferred by the original owners/ defendant
nos.1 to 5 had executed the disputed agreement to sell dated
22.02.2007 in favour of the plaintiff, by which, the defendants had
agreed to sell the suit land in favour of the plaintiff. The sale
consideration of the suit land was agreed for an amount of
Rs.9,50,000/- and right from the execution of the Banakhat in various
installments, the plaintiff claimed to have paid an amount of
Rs.5,50,000/- and the remaining amount was agreed to be paid on
conversion of the suit land from tenure to old tenure and subject to
the execution of the registered sale deed. While entering into the
notarized Banakhat, one of the conditions, which was incorporated
was that the plaintiff had agreed to make payment of the premium
amount towards such conversion of the suit land from new tenure to
old tenure.
2.2 It is the case of the plaintiff that the defendant nos.2 to 5
through their lawyer had served a legal notice dated 25.09.2007 by
R.P.A.D upon defendant no.6, thereby declaring their intention of
revoking the power of attorney dated 01.08.2006. The aforesaid
defendants had also declared such intention by publishing a public
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notice in the Sandesh Newspaper on 04.10.2007.
2.3 It is the case of the plaintiff that thereafter the defendant no.6
through his lawyer had addressed reply dated 08.10.2007 and the
same was also published in the local newspaper on 09.10.2007. By
referring to the aforesaid fact, the plaintiff has contended that he
became aware about the aforesaid controversy and had approached
defendant nos.1 to 6. At that stage, defendant nos.2 to 5 had
informed him that the proceedings for conversion of suit land from
new to old tenure land has been entrusted to one Bhupendrabhai
Nathabhai Patel and one Jafarbhai Mahammadbhai Qureshi of
Tandalja and subsequently their power of attorney has also been
revoked and assured the plaintiff not to raise any concern.
2.4 It is the case of the plaintiff that defendant nos.1 to 5, had
thereafter, not responded as assured and in fact, they had issued
notice seeking title clearance certificate by inviting objection on
06.03.2010 in Sandesh Newspaper, as if they intended to sell the suit
land to third parties. In such circumstances, the plaintiff had raised
objections through his lawyer on 09.03.2010.
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2.5 By referring to the aforesaid pleadings, the plaintiff has
submitted that the cause of action had therefore, arisen for the
plaintiff to approach the court of learned Additional Civil Judge by
filing suit for specific performance of his notarized Banakhat dated
22.02.2007 in respect of the suit land as well as for appropriate
declaration and permanent injunction against the defendant Nos.1
to 6.
3. Having examined the facts of the case, it would be relevant to
examine the different reliefs sought for by the original plaintiff-
appellant herein in the aforesaid civil suit. It transpires from the order
that pending the aforesaid suit, the original owners-defendant nos.1
to 5 have sold the suit land by executing a registered sale deed dated
21.08.2019 in favour of the defendant no.7. The plaintiff was,
therefore, constrained to move application for joining the defendant
no.7 as party defendant and further amendment was also sought in
the original prayer clause challenging the aforesaid sale deed. The
plaintiff has approached the court of learned Civil Judge seeking
following reliefs:
"1. It is prayed to get implemented the
Agreement to Sell executed by the respondent on
22/02/2007 for the land described in suit para : 1
situated at Kapurai, Ta. Dist. Vadodara, R.S.No.529
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Block No.357 admeasuring 00-08-02. Moreover, it is
prayed to draw a decree in favour of the plaintiff
that the respondent Nos. 1 to 5 shall obtain and
provide the necessary government and Semi-
Government permissions, they shall convert the
land mentioned in the appendix from new tenure
to old tenor and after paying the remaining
consideration, shall execute a registered sale deed
as a whole or in parts with the possession in favor
of the plaintiff or in favor of the persons as
instructed by the plaintiff.
2. It is prayed to declare that, the respondents do
not have any right to do any act that deprive the
rights of us the plaintiff under the Agreement to
Sell dated 22/02/2007 executed by the respondent
for the land described in suit para : 1 or to transfer
or assign the said land or any part therein to any
one by any mean or to make any change in it's
current form, to excavate, construct or to make
encumbrance over the same.
3. It is prayed to declare that, any act of
respondents Nos.1 to 5 that is illegal, ultra vires,
arbitrary, void and that deprive the rights of us the
plaintiff under the Agreement to Sell shall not be
binding to us the plaintiff by any mean.
4. It is prayed to pass a permanent injunction that
the respondents, their accomplice or agent shall
not do any act that deprive the rights of us the
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plaintiff under the Agreement to Sell dated
22/02/2007 executed by the respondent for the
land described in suit para : 1 nor they shall transfer
or assign the said land or any part therein to any
one by any mean or to make any change in it's
current form, to excavate, construct or to make
encumbrance over the same.
AMENDED PRAYER CLAUSE:
4.1 It is prayed to pass an order to hold the
Registered Sale Deed null and void ab initio, which
was executed by the said respondents Nos. 1 to 5 in
favor of respondent No.7 on 21/08/2019 vide
registration No.1164, as the same is against the
rights of us the plaintiffs as per the Agreement to
Sell.
4.2 It is prayed to hold that, the respondent No.7
has no right, interest of any kind on the basis of the
so called impugned sale deed executed in his
favour.
4.3 It is prayed to pass an order declaring that, the
respondent No.7 does not have any right to get
loan, encumbrance or debt in connection with suit
land or to make any change in it's condition or to
execute any Agreement to Sell, gift deed, sale deed
or rent agreement for the said suit land in favor of
anyone or to to transfer the same to anyone by any
mean.
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4.4 It is prayed to pass a permanent injunction that,
the respondent no.7 shall not get any loan,
encumbrance or debt on the suit land by himself or
by their accomplices or agents, they shall not make
any change in the condition of the same, they shall
not transfer the suit land to anyone by executing
Agreement to Sell, sale deed, rent agreement or by
any mean.
5. It is prayed to Grant the cost of this suit from the
respondents.
6. It is prayed to pass any other order which is favor
of the plaintiff."
CAUSE OF ACTION:
4. In order to appreciate the controversy of Order VII Rule 11 of
the Code, it would be germane to examine the cause of action as
pleaded in the plaint. The translated version of the cause of action as
pleaded reproduced hereunder:
"(3) The cause of the suit as mentioned in their
plaint by the plaintiff is as below.
"(9) The cause of this suit arose when the
respondent No.6 the power of attorney holder for
the respondents Nos.1 to 5 executed Agreement to
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Sale on 22/02/2006, in favour of us the plaintiff and
before that, when the respondent No.6 introduced
the respondent No.1 to 5 and orally decided to sell
their land mentioned in the annexure and when an
irrevocable power of attorney was executed by the
respondents Nos.1 to 5 in favour of the respondent
No.6 on 11/08/2006 and when the respondent No.2
to 5 made efforts to cancel the power of attorney
of the respondent No.6 vide the notice dated
25/09/2007 and vide the public notice through their
Advocate Priyakant L. Dave and when the reply to
the same was made by the respondent No.6
through their Advocate Shri Bahadursinh Gemalsinh
Jadav and when the respondent No.6 informed us
the plaintiff regarding the same recently and when
we the plaintiff contacted respondents Nos.1 to 5
as per the details of the suit and as mentioned in
the suit, at all the instances when they gave
assurance to us the plaintiff and thereafter, when
the respondents, in collusion with each other,
published the public notice regarding the title
clearance certificate through their Advocate Viral
Modi in Sandesh Daily on 06/03/2010 and when we
were compelled to send a reply to the same by
RPAD and thereafter, the cause of action arose in
the Jurisdiction of Hon'ble Court.
9.1 Respondent No. 1 to 5 and Proposed
Respondent No.7 of this case, acted in connivance
with each other and forged a bogus Registered Sale
Deed and as Respondent No. 7, got the Entry No.
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5143 mutated on 21/08/2019 to get his name
entered into revenue record and as I - the Plaintiff
obtained copy of village form No. 7 and 12 recently,
I came to know about the facts in detail and hence,
the present cause has arisen during the pendancy
of the suit and it continues even today.
5. This brings us to the grounds on which the defendant no.7 has
moved application at Exh.69 under Order VII Rule 11 of the Code
praying for rejection of the plaint and consequential dismissal of the
suit. Essentially the aforesaid defendant no.7 has sought rejection of
the plaint on the ground that indisputably the suit land was a new
restricted tenure land, in view of the provisions of Section 43 of the
Gujarat Tenancy and Agricultural Land Act, 1948 on the date of
execution of the Banakhat dated 21.02.2007 of which the specific
performance is sought for by the plaintiff. Secondly, on the ground
that in absence of any prior permission being sought for from the
competent authority namely the Collector before entering into such
Banakhat in respect of the suit land, no cause of action had arisen for
the plaintiff to apply for specific performance of a void agreement. It
was, therefore, contended that the plaint is required to be rejected in
terms of Order VII Rule 11 (a) and (d) of the Code. The aforesaid
application of the defendant no.7 was vehemently objected by the
original plaintiff. The written arguments were submitted at Exh.87.
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6. The learned Civil Judge upon considering the pleadings of the
plaint as well as the documents produced along with the plaint and
upon appreciation of the oral as well as written submissions made by
the learned counsels for the respective parties, after considering the
provisions of Order VII Rule 11 of the Code, noticed that though in the
cause of action, the plaintiff has pleaded the issuance of title
clearance certificate by the original owners/defendant nos.1 to 6
being notified on 06.03.2010, the cause arose for the plaintiff to
approach the Court of learned Civil Judge by filing the suit on
01.04.2010, arrived at a conclusion that the suit was filed within a
prescribed period of limitation of three years and hence, did not
entertain the application of the defendant no.7 on the issue of
limitation. On the aspect of the failure of the plaintiff to obtain prior
permission in terms of Section 43 (1) and 43(2) of the Tenancy Act, the
learned Civil Judge upon appreciation of the provision itself and the
undisputed facts of the case, in light of the decision of this High Court
in the case of Ganpatlal Manjibhai Khatri vs. Manguben Babaji
Thakor reported in 2019 (0) AIJEL-HC 241533 as well as in the case of
Vijaybhai Shambhubhai Patel vs. Sushilaben Dayalbhai reported in
2021 (0) AIJEL- HC 244418 and in the case of Naranbhai Kanjibhai
Gajera vs. Vinodbhai Shankarbhai Patel reported in 2023 (0) AIJEL-
HC 245860, arrived at a conclusion that the agreement to sell is a
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illegal agreement, of which, no specific performance can be granted
by the court of law. The court also took into consideration Section 23
of the Indian Contract Act, and therefore, arrived at a conclusion that
the suit was barred by the provisions of Order VII Rule 11 (a) and (d)
of the Code. The learned Civil Judge by impugned judgment and order
dated 08.11.2023, allowed the application at Exh.69 preferred by
original defendant no.7, thereby rejecting the plaint in terms of Order
VII Rule 11 (a) and (d) of the Code and consequently dismissed the
suit. Hence, this appeal at the instance of the original plaintiff under
Section 96 of the Code.
7. Mr. Dhruv K. Dave, learned counsel for the appellant-original
plaintiff, at the outset, has invited our attention to the facts of the
case. Mr. Dave, learned counsel, had initially prayed for an
adjournment in light of the issue at large pending consideration in the
reference before the larger Bench constituted. The matter was
adjourned on few occasions. Learned counsel for the appellant had
fairly pointed out that the reference has been answered by the Full
Bench of this Court in the case of Shaikh Ismailbhai Hushanbhai
(Dead) by L.Rs. vs. Vankar Ambalal Dhanabhai reported in AIR 2024
GUJARAT 61 , whereby the suit seeking specific performance of an
agreement to sell entered in violation of the restrictions imposed on
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an agricultural land, in view of Section 43 of the Tenancy Act, is held
not maintainable. However, learned counsel had sought adjournment
to address the court on the ground as to whether the learned Judge
committed an error while not taking into consideration other reliefs
sought for by the plaintiff.
7.1 Mr. Dave, learned counsel for the appellant, had made
strenuous attempt to convince us that even if the agreement to sell
was entered in violation of provisions of Section 43 of the Tenancy
Act, the same would not take away the jurisdiction of the court of law
to examine the issue of refund of the Bana amount.
8. We had inquired from the learned counsel for the appellant as
to whether any such prayer was sought for, to which, Mr. Dave,
learned counsel had fairly pointed that no alternative relief for refund
of bana amount is sought for. However, the appeal being continuation
of the original suit proceedings, this Court can always permit the
appellant to amend his prayer clause in the original plaint and can
always examine the aforesaid issue.
9. We appreciate the efforts made by learned counsel for the
appellant, however, on both the submissions made by learned counsel
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for the appellant, we are of the view that no error has been
committed by learned Civil Judge, while rejecting the plaint and
consequently dismissing the suit.
10. On both the issues, we are bound by the decision of the Full
Bench of this court in the case of Shaikh Ismailbhai Hushanbhai
(supra) as well as by the decision of our Bench in the case of
Ashokbhai Madhubhai Patel vs. Madhubhai Jagubhai Patel & Ors.
passed in R/First Appeal No. 2346 of 2024 with Civil Application
(for Stay) No. 1 of 2024 on 10.07.2024. It would be appropriate to
reproduce the relevant observations made in the case of Ashokbhai
Madhubhai Patel (supra). The same reads as under:
"6 Having considered the submissions made by
the learned counsels for the respective parties, it is a
matter of no dispute that from the pleadings of the
plaint itself when it was revealed that the disputed
property was a new tenure land which could not be
alienated without the prior permission of the Collector,
an Agreement to Sell entered into between the parties
before seeking such a previous permission was clearly
hit by the bar of Sec.43 of the Gujarat Tenancy Act. It
was in this light that the defendants had filed
applications under Order VII Rule 11 of the Code of
Civil Procedure that the suit for specific performance
based on illegal and invalid Agreement to Sell was not
maintainable.
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6.1 To the contention raised by the learned Senior
Advocate Mr.Vyas on the alternative submission of the
relief alternatively prayed for for damages and / or
compensation and the fact that the Full Bench had not
dealt with such a contention, we need to consider the
decision of the Full Bench in light of the facts and the
submissions made by the learned counsels for the
respective parties. The questions which were framed
by the Full Bench, read thus:
"9 The main question which falls for our consideration
is "whether the plaint is liable to rejected under Order
VII Rule 11 of the CPC on the ground that suit for
specific performance of contract based on an illegal or
invalid Agreement to Sell, hit by Section 43 of the
Tenancy Act, 1948, is not maintainable?"
10 At this stage, the ancillary issues raised by the
learned Advocates of the first set appearing for the
vendees , who are agitating that the above question is
to be answered in Negative "No", are to be taken note
of, inasmuch as, the contention of the learned
Advocates is that without answering the following
issues, answer to the question of reference is not
possible.
11 The issues raised before us are : -
(i) Where an agreement contains a condition that prior
to effecting the sale, the requisite permission of the
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competent authority under Section 43 or 63 of the
Tenancy Act, 1948 shall be sought, such an agreement
whether can be specifically enforced strictly in
accordance thereof ?;
(ii) Where an Agreement to Sell contains condition that
the restricted tenure shall first be converted to old
tenure and, thereafter, such old tenure land shall be
sold, be invalid under Section 43 of the Tenancy Act,
1948 ?;
(iii) Where an agreement contains condition that the
agricultural land shall first be converted to non-
agricultural land and, thereafter, such non-agricultural
land shall be sold, be invalid under Section 63 of the
Tenancy Act, 1948;
(iv) Whether invalidity of agreement under Section 43
or 63 of the Tenancy Act, 1948 is limited to the said Act
or does it absolves the parties from their reciprocal
rights and obligations under the agreement and make
the agreement unenforceable in Civil Court?;
(v) Whether a plaint can be rejected on the ground of
transaction being invalid under the Tenancy Act, 1948
when the alternative remedy of refund of earnest
money or compensation or other remedy like
permanent injunction, protection of possession,
damages etc, have also been sought in the suit ?;
(vi) In absence of any order passed by the Competent
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Authority under The Gujarat Tenancy and Agricultural
Land Act, 1948 (in short "the Tenancy Act, 1948),
invalidating the Agreement to Sell, whether plaint can
be rejected under Order VII Rule 11 of CPC or the suit
for specific performance can be dismissed by the Civil
Court, on the ground that the said agreement is invalid
under Section 43 or 63 of the Tenancy Act, 1948;
(vii) Whether the Civil Court has jurisdiction to
adjudicate the issue as to whether such agreement is
or not invalid in view of the bar under Section 85 of the
Tenancy Act, 1948?;
6.2 Question (V) when read indicates that the Full
Bench before it had the issue to be considered was
whether a plaint can be rejected on the ground of
transaction being invalid when the alternative remedy
of refund of earnest money or compensation or other
remedy have also been sought in the suit. Extensively
arguments have been raised by the learned counsels
for the respective parties even on the issue of whether
the relief of compensation could have been prayed for
and the suit could have been dismissed. Reading paras
33 and 34 of the decision in the Full Bench give us an
insight of the arguments before the Full Bench. Paras
33 and 34 read as under:
" 33 Ms. Trusha M. Patel, learned advocate, adding to
the above argument, would submit that the question is
as to whether in absence of any order passed by the
competent authority under the Tenancy Act, 1948
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invalidating the Agreement to Sell, the plaint can be
rejected or the suit for specific performance can be
dismissed by the Civil Court, merely on the ground that
the said agreement is invalid under Section 43 of the
Tenancy Act. She tries to impress upon us by
submitting that when the alternative remedy of refund
of earnest money or compensation, or other remedies,
such as permanent injunction, protection of
possession, damages etc. have been sought in the suit
while seeking the decree of specific performance of
agreement, the plaint cannot be rejected on the
ground of the transaction being invalid under the
Tenancy Act. For rejection of the plaint, under Order
VII, Rule 11 of the Code of Civil Procedure, the suit has
to be barred and not the remedy sought in the said
suit. The plaint cannot be rejected where other reliefs
have been sought, which can only be granted by the
Civil Court. Partial rejection of the plaint is not
permissible.
34 It was further argued that Section 65 of the India
Contract Act,1872, puts an obligation on a person, who
has received advantage under a void contract or a
contract that becomes void. In view of the said
provision, in a suit where alternative relief of refund of
sale consideration is sought or the reliefs of
compensation and damages are prayed, it would be
maintainable and plaint cannot be rejected under
Order VII, Rule 11 of the Code of Civil Procedure.
Reference has been made to Section 65 of the Transfer
of Property Act to assert that the said provision
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recognizes the rights and liabilities of the buyer and
seller in absence of a contract to the contrary and
seller is bound to disclose to the buyer any material
defect in the property or his seller's title thereto or
which the seller is and the buyer is not aware, and
which the buyer could not, with ordinary care,
discover."
6.3 It will be also in the fitness of things to
reproduce para 50 of the decision of the Full Bench,
which reads as under:
"50 A conjoined reading of Sub-section (1) and (2) of
Section 43 gives a clear indication that the Legislature
did not intend to make the transaction null and void.
The word "invalid" in Sub-section (2) of Section 43
cannot be read over as inter-changeable with "null and
void". The use of word "invalid" is a conscious decision
of the legislature and "invalid" has a separate meaning
than "illegal". Reliance is placed on the decision of
Laurance Arthur Adamson 20 to urge that the words
used in a statute must be taken in their legal sense
unless the contrary intention appears. The legislature
has chosen to use the word "invalid" in
contradistinction to the word "nullity" or "null and
void", as employed in other statutes. Once the
Legislature has chosen to use the term "invalid" in
preference to "null and void", the term should be
understood as being distinct from "null and void" or
"nullity" and such a differential use is to be duly
respected by the Court, while reading and interpreting
the statutory provision. It was argued that the
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statutory provision as also the statute must be read as
a whole keeping in mind the intention of the
legislature to assign meaning to the words in the
Statute."
6.4 With regard to the argument of Sec.70 of the
Contract Act, as is evident from the argument set out
by the very counsel for the appellant herein, that has
been a part of the argument too before the Full
Bench, paras 59 to 61 of the judgement of the Full
Bench, read as under:
"59 Mr. Dhaval D. Vyas, learned advocate, adding the
above noted contentions of the learned Advocates for
the vendees, would submit that it is to be kept in mind
as to what would be the stage of deciding the
question as to enforceability of the agreement in a
suit for specific performance of an agreement hit by
Section 43 of the Tenancy Act, 1948, or whether it is at
the stage of Order VII, Rule 11 of the Code of Civil
Procedure. It was contended that presuming that the
agreement is void, in the light of Section 70 of the
Indian Contract Act, it would be the duty of the
vendor/defendant to compensate the Vendee for his
non-gratuitous act. It is the vendor who has to put it
before the Court that the contract is invalid, the
defence in the nature of Written statement under
Order VIII, Rule 2 is to be made categorically stating
that whether the transaction is void or voidable by law
nongratuitous. Bare denial of a valid contract in the
written statement by the defendant would not be a
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denial of the legality or sufficiency in law of such
contract in view of Order VI, Rule 8 of the Code of Civil
Procedure. Further, the plaintiff is not bound to make
any statement as to a matter of fact as to whether the
burden of proof lies upon the other side. No
statement of fact as to a matter, which the law
presumes in his favour, is to be brought up in the
pleading. The question as to whether a contract is
illegal or unenforceable in law being said to be void or
it is forbidden by law, as per Section 23 of the Contract
Act, cannot, thus, be seen at the stage of Order VII,
Rule 11 of the Code of Civil Procedure. The Civil Court,
on prima facie, consideration of the plaint and the
documents filed therewith, will not be able to reach at
the conclusion, without framing of the issue and
without leading evidence that it can be culled out
from the reading of the plaint on its face value that
the suit is barred being based on an agreement hit by
Section 43 of the Tenancy Act, 1948. The Civil Court,
thus, cannot reject the suit under Order VII, Rule 11 of
the Code of Civil Procedure, mandatorily.
60 The decisions of the Apex Court in Sita Ram22 ,
Firm of Pratapchand Nopaji23 , Kalyanpur Lime Works
Ltd.24 have been relied upon to argue that the
principle that the Courts will refuse to enforce an
illegal agreement at the instance of a person, who
himself is a party to the illegality or fraud, has
exceptions, as narrated therein in paragraph No. "11"
of Sita Ram (supra) as under:-
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"11. The principle that the Courts will refuse to
enforce an illegal agreement at the instance of a
person who is himself a party to an illegality or fraud is
expressed in the maxim in pari deucto portior est
conditio defendentis. But as stated in Anson's
'Principles of the English Law of Contracts', 22nd End.,
p. 343: 'there are exceptional cases in which a man will
be relieved of the consequences of an illegal contract
into which be has entered cases to which the maxim
does not apply. They fall into three classes: (a) where
the illegal purpose has not yet been substantially
carried into effect before it is sought to recover
money paid or goods delivered in furtherance of it; (b)
where the plaintiff is not in pari delicto with the
defendant. (c) where the plaintiff does not have to
rely on the illegality to make out his claim.'"
61 It was submitted that it is well established that
object of an agreement cannot be said to be forbidden
or unlawful, merely because the agreement results in
what is known as "void" contract. A void agreement,
coupled with other facts, may become part of a
transaction, which creates legal right. The real
question is whether the agreement between the
parties is so connected with the execution of an object
prohibited by a law so as to be hit by Section 23 of the
Contract Act. It was argued that the object of the
agreement in question, in the instant case, to transfer
a New Tenure land cannot be said to be prohibited by
law, inasmuch as, Section 43 of the Tenancy Act, 1948
itself permits such transfer with the previous sanction
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of the Collector. As the object of the agreement itself
cannot be said to be forbidden by law or unlawful,
merely because of the language employed in Section
43(2), the agreement without the previous sanction of
the Collector cannot be said to be a void agreement so
as to empower the Civil Court to reject the plaint
under Order VII, Rule 11 of the Code of Civil
Procedure. "
6.5 Analyzing the arguments of the learned
counsels for the respective parties, the Full Bench set
out to examine these issues and in doing so relied
upon several decisions of the Hon'ble Supreme Court
as well as of this Court and even of the other High
Courts qua the analysis of the arguments as set out in
question (vii) of the Full Bench. It will be in the fitness
of things to reproduce paragraphs 90 to 108 on the
appreciation of the restriction on transfer in context
of the Contract Act. Paras 90 to 108 read as under:
"90 To deal with the above submission, we find that
the words "invalid", "forbidden by law" and "void"
have to be understood in the context of the provisions
of the Indian Contract Act, 1872. Section 23 of the
Contract Act provides as to when consideration or
object of an agreement is said to be lawful. It
prescribes that the consideration or object of an
agreement is lawful, unless it is forbidden by law.
Meaning thereby, that an agreement of which the
consideration or object is forbidden by law is unlawful.
It further provides that every agreement of which the
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object or consideration is unlawful is void. The
interpretation clause in Section 2(c) of the Contract
Act states that "an agreement not enforceable by law
is void". The Contract, within the meaning of Section
2(h) of the Contract Act is an agreement enforceable
by law. Section 2(i) states that an agreement, which is
enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or
others, is a voidable contract. Section 2(j) states that a
contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable.
Section 23 of the Indian Contract Act, 1872 is relevant
to be noted as under:-
"23. What consideration and objects are lawful, and
what not.-The consideration or object of an agreement
is lawful, unlessIt is forbidden by law; or is of such a
nature that, if permitted, it would defeat the
provisions of an law; or is fraudulent; or involves or
implies, injury to the person or 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."
91 The Allahabad High Court in the case of Nutan
Kumar32 considering the provisions of Section 2(h)(g)
and Section 23 of the Contract Act, has noted that
every agreement made for or about any matter or
thing which is either forbidden by any Statute or
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would defeat the provisions of any law, or the Court
regards it as opposed to public policy, is unlawful and
ipso facto void. It was held that an agreement
offending a Statute or public policy or forbidden by
law is not merely void, but it is invalid from nativity. It
cannot become valid even if the parties thereto agree
to it. The concept that an agreement may be void in
relation to a specified person and may be valid or
voidable within the parties thereto is not applicable to
an agreement, the very foundation whereof law
interdicts; or which is of such a character that, if
permitted, it would frustrate the provisions of any law;
or is fraudulent; or involves or implies injury to the
person or property of another; or the Court regards it
as immoral or opposed to public policy. Neither party
can enforce such an agreement. No legal relations
come into being from an agreement offending a
statute or public policy. It was held that void
agreements are destitute of all legal effects and force.
They are totally ineffectual rather cipher. No legally
enforceable relationship, right or liability emanates
therefrom. The distinction between 'illegal' and 'void'
contracts has been highlighted in paragraphs
No.'72','73' and '74' therein as under:
"72. In Deep Narain Singh v. Nageshwar Prasad, AIR
1930 AH 1 at p. 3 (FB) : (1930 All LJ 45), it has been
observed as under :
"There is a clear distinction between an agreement
which may be forbidden by law and one which is
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merely declared to be void. In the former case, the
legislature penalises it or prohibits. In the latter case,
it merely refuses to give effect to it."
73. It may be observed that the distinc-tion between
illegal and void contracts may be very thin but it is
there. Sir William Anson in his Book "On Law of
Contracts" has very succinctly stated the legal position
as thus : "..... The law may either 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 illegal, the distinction is for most purposes
not important and even Judges seem sometime to
treat the two terms as interchangeable." See Gherulal
Parekh's case, AIR 1959 SC 781 at p. 786."
74. In Manna Lal Khetan v. Kedar Nath Khetan, (1977) 2
SCC 424 : (AIR 1977 SC 536) at p. 430 para 11, it has
been observed by the Supreme Court as under.
"A contract is void if prohibited by statute under a
penalty, even without express declaration that the
contract is void, because such a penalty implies a
prohibition." The above authorities lead to a
conclusion that although for all practical purposes,
illegal contracts and void contracts are taken at par
with each other nevertheless the dis tinction between
the two is there. Illegality of a contract arises as a
result of infraction, contravention or breach of any
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express or implied provisions of law properly so-called
that is a constitutionally valid enactment made by the
legislature or of a subordinate legislation i.e. rules,
bye-laws, regulations or orders -- or even usages and
customs -- having the force of law. On the other hand,
the void contract is one which is declared as such by
virtue of sections 23 to 30 etc. of the Contract Act or
by a provision of any other enactment."
92 In the case of Mannalal Khetan33 while interpreting
the language employed in Section 108 of The
Companies Act, 1956, wherein words " shall not
register" has occurred, it was observed that the
mandatory character is strengthened by the negative
form of the language. The prohibition against transfer
without complying with the provisions of the Act is
emphasized by the negative language. Negative
language is worded to emphasis the insistence of
compliance with the provisions of the Act. Negative
words are clearly prohibitory and are ordinarily used as
a legislative devise to make a statutory provision
imperative.
93 The decision of the Apex Court in the case of Raza
Buland Sugar Co. Ltd.34 has been noted in paragraph
"17" therein to record that the prohibitions and
negative words can rarely be directory, in the
following manner:-
"17. In Raza Buland Sugar Co. Ltd. v. Municipal Board
Rampur(4) this Court referred to various tests for
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finding out when a provision is mandatory or directory.
The purpose for which the provision has been made,
its nature, the intention of the legislature in making
the provision, the general inconvenience or injustice
which may result to the person from reading the
provision one way or the other, the relation of the
particular provision to other provisions dealing with
the same subject and the language of the provision
are all to be considered. Prohibition and negative
words can rarely be directory. It has been aptly stated
that there is one way to obey the command and that is
completely to refrain from doing the forbidden act.
Therefore, negative, prohibitory and exclusive words
are indicative of the legislative intent when the
statute is mandatory. (See Maxwell on Interpretation
of Statutes 11th Ed. p. 362 seq.; Crawford Statutory
Construction, Interpretation of Laws p. 523 and Seth
Bikhraj Jaipuria v. Union of India"
94 It was held that where a contract, express or
implied, is expressly or by implication forbidden by
Statute, no Court will lend its assistance to give it
effect. A contract is void if prohibited by a Statute
under penalty, even without express declaration that
the contract is void. It was observed in paragraph "20"
as under:-
"20. It is well established that a contract which
involves in its fulfilment the doing of an act prohibited
by statute is void. The legal maxim 'A pactis
privatorum publico juri non derogatur means that
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'private agreements cannot alter the general law.
Where a contract, express or implied, is expressly or by
implication forbidden by statute, no court can lend its
assistance to give it effect. (See Mellis v. Shirley L.B.)
(Supra). What is done in contravention of the
provisions of an Act of the Legislature cannot be made
the subject of an action."
95 Justice Subba Rao in the case of Chandra
Sreenivasa Rao while dealing with a question
pertaining to Section 23 of the Indian Contract Act has
considered the question as to the connotation of the
word "object" in Section 23 in contradistinction to the
word "consideration". It was noted that the word
"object" in Section 23 of the Contract Act is distinct
from the word "consideration" and meant as
"purpose" or "design". If the "purpose" of the parties is
to defeat the provisions of the law, the "object" of the
agreement is unlawful. In other words, an agreement
designed to defeat the "object" and "purpose" of a law
is an agreement forbidden by law within the meaning
of Section 23 of the Indian Contract Act. The question
would be as to whether the agreement, which is
forbidden by law, can be enforced by a Court of law.
96 In light of the above position of law, considering
the language employed in Section 43(1) of the
Tenancy Act, 1948 this Court in Hasvantbhai
Chhanubhai Dalal (supra) has considered the
difference between the 'void' and 'illegal' agreement
in paragraphs "61","62","64" and "65" as under:-
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"• DIFFERENCE BETWEEN "VOID" AND "ILLEGAL"
AGREEMENT:
61. The Indian Contract Act, 1872 has made it clear
that there is a thin line of difference between void and
illegal agreement. A void agreement is one which may
not be prohibited under law, while an illegal
agreement is strictly prohibited by law and the parties
to the agreement can be penalized for entering into
such an agreement. A void agreement has no legal
consequences, because it is null from the very
beginning. Conversely, the illegal agreement is devoid
of any legal effect, since it is started. All illegal
agreement are void, but the reverse is not true. If an
agreement is illegal, other agreements related to it
are said to be void. An agreement that violates any law
or whose nature is criminal or is opposed to any public
policy or immoral is an illegal agreement. These
agreements are void ab initio, and so the agreements
collateral to the original agreement are also void. Here
the collateral agreement refers to the transaction
associated or incidental to the main agreement. The
difference between void and illegal agreement can be
drawn clearly on the following grounds:
[1] An agreement which loses its legal status is a void
agreement. An illegal agreement is one which is not
permissible under law.
[2] Certain void agreements are void ab initio while
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some agreements become void when it loses its legal
binding. On the other hand, an Illegal agreement is
void since the very beginning. A void agreement is not
prohibited by Penal Code, 1860 (IPC), but IPC strictly
prohibits an illegal agreement.
[3] The scope a void contract is comparatively wider
than an illegal contract as all agreements which are
void may not necessarily be illegal, but all illegal
agreements are void from its inception.
[4] A void agreement is not punishable under law
whereas an illegal agreement is considered as an
offence, hence the parties to it are punishable and
penalised under Penal Code, 1860 (IPC).
[5] Collateral agreements of a void agreement may or
may not be void i.e. they may be valid also. Conversely,
collateral agreements of an illegal agreement cannot
be enforceable by law as they are void ab initio.
62. It is quite clear that the void and illegal agreement
are very different. One of the factors that make an
agreement void is the illegality of the contract, such as
contract whose object or consideration is unlawful.
Moreover, in both the two agreements loses its
enforceability by law.
xxx xxx xxx
64. In the case of Rajasthan Housing Board v. New Pink
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City Niarman Sahkari Samiti Limited reported in (2015)
7 SCC 601, the Supreme Court had the occasion to
consider the provisions of the Rajasthan Tenancy Act,
1955. The litigation before the Supreme Court had
something to do with the land acquisition
proceedings. In the said case, the parcels of land were
transferred by the Scheduled Caste khatedars in
favour of a person who was not the member of the
Scheduled Caste. The Supreme Court held that the
agreement of sale of land by the Scheduled Caste
khatedars to the Housing Society could be termed as
void ab initio. The Supreme Court took the view
thatthe decree for specific performance of the
agreement obtained by the society being prohibited
under Section 42 of the Rajasthan Tenancy Act, 1955
and opposed to public policy could be termed as a
nullity and unenforceable. of course, it is true that the
word used in Section 42 of the Rajasthan Tenancy Act,
1955 is "void", whereas the word used in Section 43(2)
of the Tenancy Act, 1948 is "invalid". However, if the
transaction is found to be opposed to public policy,
the same cannot be enforced. This principle would be
applicable irrespective of the fact whether the
transaction is invalid or void. Section 43 of the Tenancy
Act has its own importance. There is a fine distinction
between a restricted tenure and old tenure. If a
person derives land in accordance with the provisions
of the Tenancy Act, such acquisition is one of a
restricted tenure land. The land is given for a specific
purpose keeping in mind the object of the Act, 1948. I
may quote the observations made by the Supreme
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Court in paras 26, 27, 28 and 30 as under:
"26. In the instant case, the transaction is ab initio void
that is right from its inception and is not voidable at
the volition by virtue of the specific language used in
section 42 of the Rajasthan Tenancy Act. There is
declaration that such transaction of sale of holding
"shall be void". As the provision is declaratory, no
further declaration is required to declare prohibited
transaction a nullity. No right accrues to a person on
the basis of such a transaction. The person who enters
into an agreement to purchase the same, is aware of
the consequences of the provision carved out in order
to protect weaker sections of Scheduled Castes and
Scheduled Tribes. The right to claim compensation
accrues from right, title or interest in the land. When
such right, title or interest in land is inalienable to non-
SC/ST, obviously the agreements entered into by the
Society with the Khatedars are clearly void and
decrees obtained on the basis of the agreement are
violative of the mandate of section 42 of the Rajasthan
Tenancy Act and are a nullity. Such a prohibited
transaction opposed to public policy, cannot be
enforced. Any other interpretation would be defeasive
of the very intent and protection carved out under
section 42 as per the mandate of Article 46 of the
Constitution, in favour of the poor castes and
downtrodden persons, included in the Schedules to
Articles 341 and 342 of the Constitution of India.
27. In State of Madhya Pradesh v. Babu Lal [(1977) 2
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SCC 435] : (AIR 1977 SC 1718), the provisions
contained in section 165(6) of M.P. Land Revenue
Code, 1959 came up for consideration before this
Court. The High Court directed the State to file a suit
for declaring the decree null and void. The decision
was set aside. It was held that the case was a glaring
instance of violation of law as such the High Court
erred in not issuing a writ. The decision of the High
Court was set aside. The transfer which was in
violation of proviso to section 165(6) transferring the
right of Bhuswami belonging to a tribe, was set aside.
28. This Court in Lincal Gamango v. Dayanidhi Jena
[(2004) 7 SCC 437 : AIR 2004 SC 3457] while
considering the provisions of Orissa Scheduled Areas
Transfer of Immovable Property (by Scheduled Tribes)
Regulation, 1956 which prohibited alienation of rural
property by a tribal to a non-tribal, declared such
transaction to be null and void. This Court while
relying upon the decision in Amrendra Pratap Singh v.
Tej Bahadur Prajapati [(2004) 10 SCC 65 : AIR 2004 SC
3782] has laid down that no right can be acquired by
adverse possession on such inalienable property.
Adverse possession operates on an alienable right. It
was held that non- tribal would not acquire a right or
title on the basis of adverse possession.
30. This Court in Amrendra Pratap, ((2004) 10 SCC 65 :
AIR 2004 SC 3782) (supra) has laid down that the
expression 'transfer' would include any dealing with
the property when the word 'deal with' has not been
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defined in the statute.Dictionary meaning as the safe
guide can be extended to achieve the intended object
of the Act. The transaction or the dealing with
alienable property to transfer title of an aboriginal
tribe and vesting the same in non-tribal was construed
as transfer of immovable property. Extending the
meaning of the expression 'transfer of immovable
property' would include dealing with such property as
would have the effect of causing or resulting in
transfer of interest in immovable property. When the
object of the legislation is to prevent a mischief and to
confer protection on the weaker sections of the
society, the court would not hesitate in placing an
extended meaning, even a stretched one, on the word,
if in doing so the statute would succeed in attaining
the object sought to be achieved. When the
intendment of the Act is that the property should
remain so confined in its operation in relation to
tribals that the immovable property to one tribal may
come but the title in immovable property is not to
come to vest in a non-tribal the intendment is to be
taken care by the protective arm of the law and be
saved from falling prey to unscrupulous devices, and
this Court concluded any transaction or dealing with
immovable property which would have the effect of
extinguishing title, possession or right to possess such
property in a tribal and vesting the same in a nontribal,
would be included within the meaning of 'transfer of
immovable property'.
65. In Ram Karan v. State of Rajasthan [(2014) 8 SCC
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282], the Supreme Court has laid down that the
transfer of holding by a member of Scheduled Caste to
a member not belonging to the Scheduled Caste by
virtue of Section 42 of the Rajasthan Tenancy Act is
forbidden and unenforceable. Such a transaction is
unlawful even under Section 23 of the Contract Act
and an agreement or such transfer would be void
under Section 2(g) of the Contract Act. This principle
of law, as explained by the Supreme Court in Ram
Karan (supra) fortifies the view taken by the learned
Single Judge of this Court in the case of Hardik
Harshadbhai Patel (supra). Keeping this principle in
mind, I have arrived to the conclusion that the word
"invalid" or the word "void", so far as the Section 43 of
the Tenancy Act is concerned, would not make by
difference. The true test is whether the transaction is
unlawful, as opposed to the public policy. Whether
such transaction would defeat the very object with
which such restriction has been imposed in Section 43
of the Tenancy Act."
97 With reference to the provisions of Section 43 of
the Tenancy Act, it was observed in Paragraph "67"
therein that:-
"67. The language of Section 43 of the Tenancy Act is
plain and simple. There is no absolute bar or an
embargo as regards the transfer of a new tenure land
or entering into an agreement of sale with respect to a
new tenure land. Section 43 only says that the parties
cannot enter into such agreement without the prior
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permission of the Collector and if the parties have
entered into such agreement without the permission
of the Collector, such transaction would be invalid.
Thus, it is for the Collector to decide whether
permission should be granted or not. It is for the
Collector to consider whether such transfer would be
in consonance with the Constitutional Scheme in Part
IV of the Directive Principles. The Collector may also
consider whether the agreement is void under Section
23 of the Contract Act as opposed to the public policy.
Before the permission is given, the Collector is
enjoined, by operation of Article 46 of the
Constitution, to inquire whether such alienation is void
under law or violates the provisions of the
Constitution and whether the permission could be
legitimately given. In that behalf, the competent
authority is enjoined to look to the nature of the
property, subject matter of the proposed conveyance
and preexisting rights flowing thereunder and
whether such alienations or encumbrances violate the
provisions of the Constitution or the law. If the answer
is in the positive, then without any further inquiry the
permission straightway would be rejected. Even in
case the permission is granted, it would be decided on
the anvil of the relevant provisions of the Constitution
and the law [Murlidhar Dayandeo Kesekar v.
Vishwanath Pandu Bardu reported in AIR 1995 SCW
2224]. "
98 It was further held in Paragraph "84" that:-
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"84. Thus, having regard to the aforesaid discussion, I
have reached to the conclusion that the transaction
between the parties being hit by Section 43 of the
Tenancy Act and being opposed to the public policy, as
explained under Section 23 of the Contract Act, is not
enforceable in law. There is a clear bar for entering
into an Agreement to Sell of the granted lands
without previous the permission of the Collector. If an
agreement is entered into in respect of the granted
land in violation of Section 43, it is invalid. Section 23
of the Indian Contract Act, 1872 bars the enforcement
of a contract if it is forbidden by law. An agreement
offending a statute or public policy or forbidden by
law is not merely void but it is invalid from nativity.
The term law' in this Section must be understood in
the sense of the term explained in Article 13(3) of the
Constitution. Thus, what is done in contravention of
the provisions of any law cannot be made the subject
matter of an action. If the contract is expressly
prohibited by law, it is void-ab-initio and cannot be
enforced. In the circumstances, Courts cannot grant a
decree for specific performance subject to the
permission, which may be obtained by one of the
parties from the Collector. I am of the view that the
suit filed by the plaintiff for enforcement of the
invalid agreement cannot be entertained by the Civil
Court."
99 The decision of the Apex Court in the case of Sita
Ram (supra), has been noted in paragraph Nos. "75"
and "85" therein as under: -
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"75. The Supreme Court in the case of Sita Ram v.
Radha Bai reported in AIR 1968 SC 534 has very
succinctly explained the law on the subject. I may
quote the relevant observations as under:
"12. The principle that the Courts will refuse to
enforce an illegal agreement at the instance of a
person who is himself a party to an illegality or fraud is
expressed in the maxim In pari causa potior est
conditio possidentis. But as stated in Anson's
'Principles of the English Law of Contracts', 22 nd Ed.,
p. 343:"there are exceptional cases in which a man will
be relieved of the consequences of an illegal contract
into which he has entered-cases to which the maxim
does not apply They fall into three classes (a) where
the illegal purpose has not yet been substantially
carried into effect before it is sought to recover
money paid or goods delivered in furtherance of it (b)
where the plaintiff is not in pari delicto with the
defendant : (c) where the plaintiff does not have to
rely on the illegality to make out his claim."
13. There was in this case no plea by the plaintiff t hat
there was any illegal purpose in entrusting the
jewellery to Lachhmi Narain. It was also the plaintiffs
case that Gomti Bai knew that the jewellery in dispute
was entrusted by the plaintiff to Lachhmi Narain, and
if the averments made in the plaint are to be the sole
basis for determining the contest, Gomti Bai did not
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suffer any loss in consequence of the entrustment.
Assuming that the Trial Court was competent without
a proper pleading by the appellant and an issue to
enter upon an enquiry into the question whether the
plaintiff could maintain an action for the jewellery
entrusted by her to Lachhmi Narain, the circumstances
of the case clearly make out a case that the parties
were not "in pari delicto". It is settled law that "Where
the parties are not in pari delicto, the less guilty party
may be able to recover money paid, or property
transferred, under the contract. This possibility may
arise in three situations. First, the contract may be of a
kind made illegal by statute in the interests of a
particular class of persons of whom the plaintiff is
one.* * *
Secondly, the plaintiff must have been induced to
enter into the contract by fraud or strong pressure.
***
Thirdly, there is some authority for the view that a
person who is under a fiduciary duty to the plaintiff
will not be allowed to retain property, or to refuse to
account for moneys received, on the ground that the
property or the moneys have come into his hands as
the proceeds of an illegal transaction" See Anson's
'Principles of the English Law of Contract' p. 346..."
xxx xxx xxx
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xxx xxx xxx
85. The principle that the Courts will refuse to
enforce an illegal agreement at the instance of a
person who is himself a party to an illegality has been
very succinctly explained by the Supreme Court in its
decision in the case of Sita Ram (supra) by applying
the maxim in pari causa potior est conditio
possidentis. The Supreme Court, by referring to
Anson's 'Principles of the English Law of Contracts',
explained that there are exceptional cases in which a
person would be relieved of the consequences of an
illegal contract into which he has entered and the
above referred maxim is not applied. The Supreme
Court classified the three exceptional circumstances :
(a) where the illegal purpose has not yet been
substantially carried into effect, (b) where the
plaintiff is not in pari delicto with the defendant, and
(c) where the plaintiff does not have to rely on the
illegality to make out his claim. This principle
explained by the Supreme Court in Sita Ram (supra)
applies on all fours to the case on hand. The plaintiff
could be said to be in pari delicto with the defendants
and he has no other option, but to rely upon the
invalid agreement of sale for the purpose of seeking
the discretionary relief of specific performance. It is
not the case of the plaintiff that he had been induced
to enter into the contract by fraud or strong
pressure."
100 In the case of Waman Shriniwas Kini36 the Apex
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Court was dealing with the question as to whether
the Court would be enforcing an agreement, which is
prohibited and made illegal by the statutory
provisions, turning down the plea of waiver on the
agreement of the opponent therein that under the
agreement between him and the respondent, he was
entitled to sub-let the premise. It was held that the
plea of waiver cannot be raised because as a result of
giving effect to that plea, the Court would be
enforcing an illegal agreement and, thus,
contravening the statutory provisions of Section 15,
based on the public policy and produce the very
result which the Statute prohibits and makes illegal.
By enforcing the contract, the consequence will be
the enforcement of an illegality and infraction of the
statutory provisions, which cannot be condoned by
any conduct or agreement of parties.
101 The Full Bench of the Allahabad High Court in
Nutan Kumar and others (supra), has considered the
question as to whether the suit for ejectment and
recovery of arrears of rent and damages etc. based
on a lease agreement which is unenforceable in the
eye of law, can be maintained by the lessor against
the lessee. It was observed in paragraphs
"97","98","99","100" and "101" that:-
"97. Now coming to the second question as to
whether such a lease as aforesaid is enforceable and
a suit of ejectment and recovery of arrears of rent
and damages etc. based on such lease can be
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maintained by the lessor against the lessee, the
following propositions of law enunciated by Sir
William Anson in his book 'Law of Contract' (26th Edn.
Edited by A. G. Guest), may usefully be quoted below
as guiding principles on the question :
"It is scarcely surprising that the Courts will refuse to
enforce an illegal agreement at the suit of a person
who is himself implicated in the illegality. But it is also
a rule of English law that money or property
transferred by such a person cannot be recovered. In
the colourful words of Wilmot C.J. : 'All writers upon
our law agree in this, no polluted hand shall touch the
pure fountains of justice. Whoever is a party to an
unlawful contract, if he hath once paid the money
stipulated to be paid in pursuance thereof, he shall
not have the help of a court to fetch it back
again.'This principle is expressed in the maxim in pari
delicto potior est conditto defendant is."
98. The principle expressed in the maxim popularly
known as 'pari delicto' is, however, subject to
following among other exceptions under which the
man will be relieved of the consequences of an illegal
contract into which he has entered
(a) Where the plaintiff seeking recovery of the
property given to the defendant in an illegal
transaction has withdrawn from a transaction and
approached the court before the illegal purpose of
the transaction can be executed in whole or in part;
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(b) Where the plaintiff is not in pari delicto with the
defendant;
(c) Where the plaintiff though in pari delicto with the
defendant suffered from any incapacity of the nature
which vitiates a contract or was as a matter of fact
forced to be party to the illegality by reason of the
compulsions of social or economic inequality having a
bearing upon the bargaining capacities of the parties;
and,
(d) Where the plaintiff does not have to rely on the
illegality to make out his claim.
99. The learned author has further stated the
principle in the following words :
"There is yet one more factor which may defeat an
ostensibly valid contract. It is that of illegality. Public
policy imposes certain limitations upon freedom of
contract. Certain objects of contract are forbidden or
discouraged by law; and 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 agreement the law will not
permit them to enforce any rights under it." (p. 292)
"The nature and effects of statutory illegality may
vary considerably. A statute may declare that a
certain type of contract is expressly prohibited. There
is then no doubt of the intention of the legislature
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that such a contract should not be enforced. What is
done in contravention of the provisions of an Act of
Parliament cannot be made the subject matter of an
action." (p. 293)
100. Equally useful are the following views expressed
on the point by Pollock and Mulla in their book 'On
Indian Contract and Specific Relief Acts', I2th Edn. at
p. 232 :
"If a contract is expressly or by necessary implication
forbidden by statute or it is ex facie illegal or both
parties know that though ex facie legal it can be
performed by illegality or is intended to be
performed illegally, the law will not help the plaintiffs
in any way i.e. by direct or indirect enforcement of
rights under the contract. And for this purpose both
the parties are presumed to know the law. If
expressly prohibited by law, the contract is void ab
initio. If both parties have knowledge that a contract
could not be carried out without a violation of the
law, the contract would be un-enforceable. But if only
one party has such knowledge the innocent party is
not precluded because otherwise it would injure the
innocent, benefit the guilty and put a premium on
deceit. If a contract can be performed in one of two
ways, i.e. legally or illegally it is not an illegal contract
though it is un-enforceable at the suit of a party who
chooses it to perform illegally."
101. In Anson's Law of Contract (supra), it has also
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been propounded that where the plaintiff is not
relying upon the illegal contract, he may sue the
defendant for possession delivered to the latter
under the illegal contract. To quote the learned
Author -
"It is settled law that the ownership of property can
pass under an illegal contract if the parties so intend,
as in the case of goods sold to a buyer under an
illegal contract of sale.
Where, however, only a limited interest is
transferred, as under a contract of bailment or a
lease, it is equally well established that the owner of
the property can recover it from the bailee or lessee
if he is not forced to found his claim on the illegal
contract, but simply relies on his title to the
property."
"This principle is extremely difficult of application
since it is frequently hard to determine whether a
plaintiff is relying upon his title, or upon the
contractual provisions of title, orupon the contractual
provisions of the illegal agreement. For example, it
seems probable that a landlord can recover premises
let to a tenant under an illegal agreement once the
term of years has expired; but it is a matter of doubt
whether he could recover them in the meantime
under a covenant which provided for forfeiture for
non-payment of rent. Would he be relying on his
independent right of ownership, or (more probably)
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upon the contractual provisions of the illegal lease ?"
102 The decision of the Apex Court in Waman
Shirniwas Kini (supra) was considered in paragraph
Nos. "102", "103","104","105" and "106" in the
following manner:
"102. In Waman Sriniwas v. R. B. and Company, AIR
1959 SC 689, 'A' was the tenant for about 20 years in
the premises known as 'Fida Ali Villa' situate at kalyan
in Bombay. The building was purchased by 'R' who
gave notice to 'A' to vacate as he wanted to construct
a new building on the site of the old building. 'A'
agreed to vacate and 'R' to let to him a portion of his
new building. 'A' had four sub-tenants in the building
aforesaid, three of them also shifted to the new
premises which were let to 'A' by 'R'. The new
premises was let to 'A' on certain agreement
regarding sub-tenancy. 'R' Brought a suit for
ejectment on the ground of non-payment of rent and
subletting of premises. The defence of 'A' was that
under the terms of lease, he had the right to sub-let
the premises.
103. Section 15 of Bombay Hotel and Letting House
Rent Control Act, 1947 prohibited sub-letting and
made it unlawful for a tenant to assign or to transfer
his interest in the premises let to him. It was held by
Supreme Court that an agreement contrary to the
provisions of Section 15 could be unenforceable as
being in contravention of the express provisions of
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the Act which prohibited it; (2) that it was not
permissible to any person to rely upon the contract.
104. While commenting on the maxim --'in pan delicto
Eotiorest conditie posidentes' -- the Supreme Court in
the above noted case observed as under :
"The maxim must not be understood as meaning that
where a transaction is vitiated by illegality the person
left in possession of goods after its completion is
always and of necessity entitled to keep them. Its
true meaning is that where the circumstances are
such that the court will refuse to assist either party,
the consequence must, in fact, follow that the party
in possession will not be disturbed."--(Per Du Paroq L.
J. In Dow Makess Ltd. v. Barnet Instruments Ltd.
1945-1 K. B. 65, 72).
105. The Supreme Court further held :--
The first respondent in the present case did not call
upon the court to enforce any agreement at all. When
the instrument of lease was executed and possession
given and sub-letting done it received its full effect;
no aid of the court was required to enforce it. The
respondent's suit for ejectment was not brought for
enforcement of the agreement which recognised sub-
letting but he asked the court to enforce the right of
eviction which flows directly from an infraction of the
Act (S. 15) and for which the Act itself provides a
remedy. There is thus a manifest distinction between
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this case where the palintiff asked the court to afford
him a remedy against one who by contravening
Section 15 of the Act has made himself liable to
eviction and those cases where the court was called
upon to assist the plaintiff in an agreement the
object of which was to do an illegal act. The
respondent. is only seeking to enforce his rights
under the statute and the appellant cannot be
permitted to assert in a court of justice any right
founded upon or growing out of an illegal
transaction. " --
106. The Supreme Court further held --"..... Whether
Court would aid the appellant in enforcing a term of
agreement which Section 15 of the Act declares to be
illegal. By enforcing the contract the consequence
will be the enforcement of an illegality and infraction
of a statutory provision ....."
103 The observation of the Apex Court in the case of
Manna Lal Khetan (supra) was noted in the paragraph
"107" as under:- "
107. The observations of the Supreme Court in Manna
Lal Khetan, (1977) 2 SCC 424 : (AIR 1977 SC 536)
(supra) at p. 430, para 20 may also be quoted usefully
on the point under discussion.
"It is well established that a contract which involves in
its fulfilment the doing of an act prohibited by statute
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is void. The legal maxim 'A' pactis provatorum publico
juri non deroga-tur means that private agreements
cannot alter the general law. Where a contract
express or implies, is expressly or by implication
forbidden by statute, no court can fend its assistance
to give it effect. (See Mellis v. Shirley LB) What is done
in contravention of the provisions of an Act of the
legislature cannot be made the subject of an action."
104 In light of the above discussion, we find ourselves
in complete agreement with the law laid down by this
Court in Rameshbhai Chaturbhai Prajapati (supra) and
Hasvantbhai Chhanubhai Dalal (supra) in holding that
the agreement being unlawfully, barred by Section 43
of the Tenancy Act, 1948, in view of the specific bar
contained about the execution of the agreement
without previous sanction of the Collector/competent
authority, is unenforceable in the eye of law. The
reason being that the plaintiff would have no option,
but to rely upon an illegal contract to make out his
claim and the Courts will refuse an illegal agreement
at the instance of a person, who is himself a party to
the illegality.
105 We find ourselves in concurrence with the
decision of the Division Bench in Ganpatlal Manjibhai
Khatri (supra), wherein it is held that there is a total
prohibition of even entering into an agreement in
writing for the purpose of sale under Section 43 of
the Tenancy Act, 1948. The Agreement to Sell entered
into without the prior permission or sanction of the
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Collector cannot but be termed as invalid or void as
the same was entered into without the prior
permission or sanction of the Collector. The suit for
specific performance of contract based on invalid
Agreement to Sell, hit by Section 43 of the Tenancy
Act, 1948, is not maintainable in law. If the agreement
is rendered invalid under Section 43 of the Tenancy
Act, 1948, such agreement is incapable of being
specifically enforceable. If the Agreement to Sell itself
is invalid, no decree for specific performance can be
passed by the trial Court.
106 We are in concurrence with the observation of
the Division Bench in Ganpatlal Manjibhai Khatri
(supra) that the jurisdiction to order specific
performance of a contract is based on the existence
of valid and enforceable contract. Where valid and
enforceable contract has not been made, the Court
will not make a contract for them. The specific
performance will not be ordered if the contract itself
suffers from some defect, which makes the contract
invalid or unenforceable.
107 In the case of Jayamma the question of
interpretation of Section 61 of the Karnataka Land
Reforms Act, 1961 fell for consideration before the
Apex Court, in a matter wherein an application
purported to be under Section 276 of the Succession
Act, 1985 for grant of Letters of Administration had
been filed on the basis of a will, which was converted
into a suit and decreed by the trial Court holding that
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the testator executed the will with full knowledge,
having sound state of mind and it was not obtained by
practicing fraud, misrepresentation or duress. In
appeal, the High Court set aside the decree holding
that the application for grant of Letters of
Administration was not maintainable in view of
Section 61 of the aforesaid Act, the subject matter of
testament meant agricultural land with occupancy
right could not have been assigned. Section 61 of the
aforesaid Act provided for restriction on transfer of
land of which the tenant has become occupant and
reads as under:-
"61. Restriction on transfer of land of which tenant
has become occupant. (1) Notwithstanding anything
contained in any law, no land of which the occupancy
has been granted to any person under this Chapter
shall within fifteen years from the date of the final
order passed by the Tribunal under sub-section (4) or
sub-section (5) or sub-section (5-A) of Section 48-A be
transferred by sale, gift, exchange, mortgage, lease or
assignment; but the land may be partitioned among
members of the holder's joint family.
(2) .......................
(3) Any transfer or partition of land in contravention
of sub-section (1) shall be invalid and such land shall
vest in the State Government free from all
encumbrances and shall be disposed of in accordance
with the provisions of Section 77."
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108 The Apex Court, having discussed the
construction of the provisions of Section 61 therein
has held that the statutory embargo on transfer of
land is stricter in a case where tenant has become
occupant, than a land held by the tenant simpliciter.
Sub-section (3) of Section 61 lays down that any
transfer of land in contravention of Sub-section (1)
shall be invalid, whereupon the same shall vest in the
State Government free from all encumbrances. The
legislative intent that the land should not be allowed
to go into the hands of a stranger to the family is,
therefore, manifest. The tenor of Section 61 is that
except partition amongst cosharers, no transfer of
the property, in any manner, is permissible. It was,
thus, held in paragraph No.21 as under:-
"21. It is not disputed that in view of the purport and
object the Legislature sought to achieve by enacting
the said provision the expression 'assignment' would
include a Will."
6.6 Therefore, what is evident from the extract
reproduced hereinabove is that the Full Bench dealt
with the discussion in context of the term in the
Contract Act being "invalid", "forbidden by law" and
"void" as understood in context of the provisions of
the Indian Contract Act. Perusal of paragraph 96 of
the decision would indicate that, it set out the
difference between void and illegal agreements.
Relying on a decision in the case of Rajasthan
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Housing Board (supra), we find that the Hon'ble
Supreme Court had the occasion to consider the
provisions of the Rajasthan Tenancy Act. Before the
Supreme Court was a case in context of the land
acquisition proceedings where parcels of lands were
transferred by the scheduled castes Khatedars in
favour of a person who was not a member of a
scheduled caste. The Supreme Court held that such a
transfer was void ab initio. Para 26 of the decision in
the case of Rajasthan Housing Board (supra), reads
as under:
"26. In the instant case, the transaction is ab initio
void that is right from its inception and is not
voidable at the volition by virtue of the specific
language used in section 42 of the Rajasthan Tenancy
Act. There is declaration that such transaction of sale
of holding "shall be void". As the provision is
declaratory, no further declaration is required to
declare prohibited transaction a nullity. No right
accrues to a person on the basis of such a transaction.
The person who enters into an agreement to
purchase the same, is aware of the consequences of
the provision carved out in order to protect weaker
sections of Scheduled Castes and Scheduled Tribes.
The right to claim compensation accrues from right,
title or interest in the land. When such right, title or
interest in land is inalienable to non-SC/ST, obviously
the agreements entered into by the Society with the
Khatedars are clearly void and decrees obtained on
the basis of the agreement are violative of the
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mandate of section 42 of the Rajasthan Tenancy Act
and are a nullity. Such a prohibited transaction
opposed to public policy, cannot be enforced. Any
other interpretation would be defeasive of the very
intent and protection carved out under section 42 as
per the mandate of Article 46 of the Constitution, in
favour of the poor castes and downtrodden persons,
included in the Schedules to Articles 341 and 342 of
the Constitution of India.
27. In State of Madhya Pradesh v. Babu Lal [(1977) 2
SCC 435] : (AIR 1977 SC 1718), the provisions
contained in section 165(6) of M.P. Land Revenue
Code, 1959 came up for consideration before this
Court. The High Court directed the State to file a suit
for declaring the decree null and void. The decision
was set aside. It was held that the case was a glaring
instance of violation of law as such the High Court
erred in not issuing a writ. The decision of the High
Court was set aside. The transfer which was in
violation of proviso to section 165(6) transferring the
right of Bhuswami belonging to a tribe, was set aside.
28. This Court in Lincal Gamango v. Dayanidhi Jena
[(2004) 7 SCC 437 : AIR 2004 SC 3457] while
considering the provisions of Orissa Scheduled Areas
Transfer of Immovable Property (by Scheduled
Tribes) Regulation, 1956 which prohibited alienation
of rural property by a tribal to a non-tribal, declared
such transaction to be null and void. This Court while
relying upon the decision in Amrendra Pratap Singh v.
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Tej Bahadur Prajapati [(2004) 10 SCC 65 : AIR 2004 SC
3782] has laid down that no right can be acquired by
adverse possession on such inalienable property.
Adverse possession operates on an alienable right. It
was held that non- tribal would not acquire a right or
title on the basis of adverse possession.
30. This Court in Amrendra Pratap, ((2004) 10 SCC 65 :
AIR 2004 SC 3782) (supra) has laid down that the
expression 'transfer' would include any dealing with
the property when the word 'deal with' has not been
defined in the statute.Dictionary meaning as the safe
guide can be extended to achieve the intended object
of the Act. The transaction or the dealing with
alienable property to transfer title of an aboriginal
tribe and vesting the same in non-tribal was
construed as transfer of immovable property.
Extending the meaning of the expression 'transfer of
immovable property' would include dealing with such
property as would have the effect of causing or
resulting in transfer of interest in immovable
property. When the object of the legislation is to
prevent a mischief and to confer protection on the
weaker sections of the society, the court would not
hesitate in placing an extended meaning, even a
stretched one, on the word, if in doing so the statute
would succeed in attaining the object sought to be
achieved. When the intendment of the Act is that the
property should remain so confined in its operation in
relation to tribals that the immovable property to
one tribal may come but the title in immovable
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property is not to come to vest in a non-tribal the
intendment is to be taken care by the protective arm
of the law and be saved from falling prey to
unscrupulous devices, and this Court concluded any
transaction or dealing with immovable property
which would have the effect of extinguishing title,
possession or right to possess such property in a
tribal and vesting the same in a nontribal, would be
included within the meaning of 'transfer of
immovable property'.
65. In Ram Karan v. State of Rajasthan [(2014) 8 SCC
282], the Supreme Court has laid down that the
transfer of holding by a member of Scheduled Caste
to a member not belonging to the Scheduled Caste
by virtue of Section 42 of the Rajasthan Tenancy Act
is forbidden and unenforceable. Such a transaction is
unlawful even under Section 23 of the Contract Act
and an agreement or such transfer would be void
under Section 2(g) of the Contract Act. This principle
of law, as explained by the Supreme Court in Ram
Karan (supra) fortifies the view taken by the learned
Single Judge of this Court in the case of Hardik
Harshadbhai Patel (supra). Keeping this principle in
mind, I have arrived to the conclusion that the word
"invalid" or the word "void", so far as the Section 43
of the Tenancy Act is concerned, would not make by
difference. The true test is whether the transaction is
unlawful, as opposed to the public policy. Whether
such transaction would defeat the very object with
which such restriction has been imposed in Section 43
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of the Tenancy Act."
6.7 Reading thereof would indicate that in light of
the specific bar under the Tenancy Act, the
transaction of sale was void. The Supreme Court held
that the right to claim compensation would accrue
from the right, title or interest of the land and when
the agreements entered into itself were clearly void
and a nullity, such a transaction being opposed to
public policy cannot be enforced. The transaction
being null and void, the Supreme Court therefore
held that the right to claim compensation would also
not accrue. Reliance as is evident from para 99 of the
decision of the Full Bench was based on a decision of
the Supreme Court in the case of Sitaram Vs. Radha
Bai & Ors., reported in AIR 1968 Supreme Court 534.,
which reads as under:
"99 The decision of the Apex Court in the case of Sita
Ram (supra), has been noted in paragraph Nos.
"75" and "85" therein as under: -
"75. The Supreme Court in the case of Sita Ram v.
Radha Bai reported in AIR 1968 SC 534 has very
succinctly explained the law on the subject. I may
quote the relevant observations as under:
"12. The principle that the Courts will refuse to
enforce an illegal agreement at the instance of a
person who is himself a party to an illegality or fraud
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is expressed in the maxim In pari causa potior est
conditio possidentis. But as stated in Anson's
'Principles of the English Law of Contracts', 22 nd
Ed., p. 343:"there are exceptional cases in which a
man will be relieved of the consequences of an
illegal contract into which he has entered-cases to
which the maxim does not apply They fall into three
classes (a) where the illegal purpose has not yet
been substantially carried into effect before it is
sought to recover money paid or goods delivered in
furtherance of it (b) where the plaintiff is not in pari
delicto with the defendant : (c) where the plaintiff
does not have to rely on the illegality to make out
his claim."
13. There was in this case no plea by the plaintiff t
hat there was any illegal purpose in entrusting the
jewellery to Lachhmi Narain. It was also the plaintiffs
case that Gomti Bai knew that the jewellery in
dispute was entrusted by the plaintiff to Lachhmi
Narain, and if the averments made in the plaint are
to be the sole basis for determining the contest,
Gomti Bai did not suffer any loss in consequence of
the entrustment. Assuming that the Trial Court was
competent without a proper pleading by the
appellant and an issue to enter upon an enquiry into
the question whether the plaintiff could maintain an
action for the jewellery entrusted by her to Lachhmi
Narain, the circumstances of the case clearly make
out a case that the parties were not "in pari delicto".
It is settled law that "Where the parties are not in
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pari delicto, the less guilty party may be able to
recover money paid, or property transferred, under
the contract. This possibility may arise in three
situations. First, the contract may be of a kind made
illegal by statute in the interests of a particular class
of persons of whom the plaintiff is one.* * *
Secondly, the plaintiff must have been induced to
enter into the contract by fraud or strong pressure.
***
Thirdly, there is some authority for the view that a
person who is under a fiduciary duty to the plaintiff
will not be allowed to retain property, or to refuse
to account for moneys received, on the ground that
the property or the moneys have come into his
hands as the proceeds of an illegal transaction" See
Anson's 'Principles of the English Law of Contract' p.
346..."
xxx xxx xxx
xxx xxx xxx
85. The principle that the Courts will refuse to
enforce an illegal agreement at the instance of a
person who is himself a party to an illegality has
been very succinctly explained by the Supreme Court
in its decision in the case of Sita Ram (supra) by
applying the maxim in pari causa potior est conditio
possidentis. The Supreme Court, by referring to
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Anson's 'Principles of the English Law of Contracts',
explained that there are exceptional cases in which a
person would be relieved of the consequences of an
illegal contract into which he has entered and the
above referred maxim is not applied. The Supreme
Court classified the three exceptional circumstances :
(a) where the illegal purpose has not yet been
substantially carried into effect, (b) where the
plaintiff is not in pari delicto with the defendant, and
(c) where the plaintiff does not have to rely on the
illegality to make out his claim. This principle
explained by the Supreme Court in Sita Ram (supra)
applies on all fours to the case on hand. The plaintiff
could be said to be in pari delicto with the
defendants and he has no other option, but to rely
upon the invalid agreement of sale for the purpose
of seeking the discretionary relief of specific
performance. It is not the case of the plaintiff that he
had been induced to enter into the contract by fraud
or strong pressure."
6.8 Reading of the aforesaid paras would indicate
that where the parties are not in pari delicto, the less
guilty party may be able to recover the money paid.
However, where the party himself is aware of the
illegality, on the maxim of pari delicto, such a person
cannot claim the relief of even compensation on
being wronged at the hands of the plaintiff.
6.9 In paragraphs 140 to 142 of the decision of the
Full Bench, the question of enforceability of the
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agreement hit by section 43 of the Tenancy Act has
been dealt with. Paras 140 to 142 of the Full Bench
decision read as under:
"140 In the end, on the issue of grant of decree of
specific performance of an Agreement to Sell which
is contrary to the statutory provisions, we may refer
to the decision of the Apex Court in Narayanamma
(supra) wherein applying various tests, referring to
the decision of the Apex Court in Kedar Nath
Motani39 it was held that if the decree is granted in
favour of the plaintiff on the basis of an illegal
agreement which is hit by a statute, it will be
rendering active assistance of the Court in enforcing
an agreement which is contrary to law. A ticklish
question has also arisen in the situation of the said
case where both the parties were common
participators in the illegality. Referring to the
opinion of Hidayatulla, J in Kedar Nath Motani
(supra) and the opinion of Gajendragadkar, J in
Immani Appa Rao40 it was noted that where the
claim of the plaintiff is entirely based upon an
agreement which is hit by the statutory provisions,
although illegality is not pleaded by the defendant
nor sought to be relied upon by him in defence, yet
the Court itself, upon the illegality appearing from
the evidence will take notice of it and will dismiss the
action on the doctrine ex turpi causa non oritur actio,
i.e. no polluted hand shall touch the pure fountain of
justice.
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141 It was held therein that as against rendering
active assistance of the Court in enforcing an
agreement which is contrary to law, if the balance is
tilted towards the defendant, no doubt that they
would stand benefited even inspite of they
committing illegality, however, in such course, what
the Court would be doing is only rendering an
assistance which is wholly of a passive character. As
held by Gajendragadkar, J in Immani Appa Rao
(supra), the first course would be clearly and patently
inconsistent with the public interest, whereas the
latter course is lesser injurious to public interest than
the former.
142 The position of law is, thus, clear that any
transfer in violation of the statutory provision being
invalid or illegal in the eye of law cannot be enforced
by the Civil Court by granting a decree of specific
performance on conditional basis, even if the
defendant is benefited to some extent by the order
of the Civil Court. The arguments of the learned
Advocates that the defendant-vendor having
pocketed the sale consideration cannot be permitted
to claim for dismissal of the suit on the principle that
"No act of Court can prejudice a party", does not
merit consideration."
6.10 The aforesaid paragraphs of the decision of
the Full Bench would indicate that the Full Bench
positively held that any transfer which is in violation
of the statutory provisions being invalid, cannot be
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enforced by a Civil Court by granting a decree of
specific performance. Even the argument of the
learned counsels of having pocketed the sale
consideration cannot be permitted in light of
dismissal of the suit on the principle that "No act of
the Court can prejudice a party". In light of this, the
submission of the learned Senior Advocate Mr.Vyas,
that the Full Bench had not dealt with the issue of
the alternative relief of compensation or damages
cannot be accepted. It is in light of this, that the
submission of the learned Counsel for the appellant
that the plaintiff's plaint cannot be rejected in part
cannot be accepted in light of the fact that the
alternative relief of compensation arose itself out of
a contract which was held to be incapable and invalid
to be performed of which, the plaintiff and the
defendants were very much aware of, which
therefore leads us to believe that on the principle of
pari delicto and in light of the decision of the
Supreme Court in the case of Sita Ram (supra), the
contention that the plaint was rejected in part also
cannot be accepted.
6.11 On the argument of the provisions of Sec.65 ,
60 and 70 of the Contract Act, it will be in the fitness
of things to reproduce paragraphs 6 to 9 of the
decision of the Supreme Court in the case of Kuju
Collieries (supra).
"6 We are of the view that s. 65 of the Contract
Act cannot help the plaintiff on the facts and
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circumstances of this case. Section 65. reads as
follows :
"When an agreement is discovered to Be void, or
when a contract becomes void, any person who has
received any advantage under such agreement or
contract is bound to restore it, or to make
compensation for it to the person from whom he
received it".
The section makes a distinction between an
agreement and a contract. According to s. 2 of the
Contract Act an agreement which is enforceable by
law is a contract and an agreement which is not
enforceable by law is said to be void. Therefore,
when the earlier part of the section speaks of an
agreement being discovered to be void it means that
the agreement is not enforceable and is, therefore,
not a contract. It means that it was void. It may- be
that the parties or one of the parties to the
agreement may not have, when they entered into
the agreement, known that the agreement was in
law not enforceable. They might have come to know
later that the agreement was not enforceable. The
second part of the section refers to a contract
becoming void. That refers to a case where an
agreement which was originally enforceable and was,
therefore, a contract,. becomes void due to
subsequent happenings. In both these cases any
person who has received any advantage under such
agreement or contract is bound to restore such
advantage, or to make compensation for it to the
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person from whom he received it. But where even at
the time when the agreement is entered into both
the parties knew that it was not lawful and,
therefore, void, there was no contract but only an
agreement and it is not a case where it is discovered
to be void subsequently. Nor is it a case Of the
contract becoming void due to subsequent
happenings. Therefore, s. 65 of the Contract Act did
not apply.
7 The Privy Council in its decision in Harnath
Kaur v. Inder Bahadur Singh (1923, 50 f. A. 69, 75-76)
observed:
The section deals with (a) agreements and (b)
contracts. The distinction between them is apparent
by s. 2; by clause (c) every set of promises forming
the consideration for each other is an agreement,
and by clause (h) an agreement enforceable by law is
a contract. Section 65, therefore, deals with (a)
agreements enforceable by law and (b) with
agreements not so enforceable. By clause(g)an
agreement not enforceable by law is said to .lm15
be void. An agreement therefore, discovered to be
void is one discovered to be not enforceable by law,
and, on the language of the section would include an
agreement that was void in that sense from its
inception as distinct from a contract that becomes
void."
8 A full Bench of five Judges of the Hyderabad
High Court in Budhulal v. Deccan Banking Company
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(AIR 1955 Hyd. 69) speaking through our brother,
Jaganmohan Reddy J., as he then was, referred with
approval to these observations of the Privy Council.
They then went on to refer to the observations of
Pollock and Mullah in their treatise on Indian
Contract and Specific Relief Acts, 7th Edn. to the
effect that s. 65, Indian Contract Act does not apply
to agreements which are void under s. 24 by reason
of an unlawful consideration or object and there
being no other provision in the Act under which
money paid for an unlawful purpose may be
recovered back, an analogy of English law will be the
best guide. They then referred to the reasoning of
the learned authors that if the view of the Privy
Council is right namely that agreements discovered
to be void' apply to all agreements which are ab-
initio void including agreements based on unlawful
consideration, it follows that the person who has
paid money or transferred property to another
for .an illegal purpose can recover it back from the
transferee under this section even if the illegal
purpose is carried into execution and both the
transferor and transferee are in pari delicto. The
Bench then proceeded to observe:
"In. our opinion, the view of the learned authors is
neither supported by any of the subsequent Privy
Council decisions nor is it consistent with the natural
meaning to be given to the provisions of S. 65. The
section by using the words 'when an agreement is
discovered to be void' means nothing more nor less
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than: when the plaintiff comes to know or finds out
that the agreement is void. The word 'discovery'
would imply the preexistence of something which is
subsequently found out and it may be observed that
s. 66, Hyderabad Contract Act makes the knowledge
(11m) of the agreement being void as one of the pre-
requisites for restitution and is used in the sense of
an agreement being discovered to be void. If
knowledge is an essential requisite even an
agreement ab-initio void can be discovered to be
void subsequently. There may be cases where parties
enter into an. agreement honestly thinking that it is a
perfectly legal agreement and where one of them
sues the other or wants the other to act on it, it is
their. that he may discover it to be void. There is
nothing specific in s. 65 Indian Contract Act or its
corresponding section of the Hyderabad Contract
Act to make it inapplicable to such cases.
A person who, however, gives money for an unlawful
purpose knowing it to be so, or in such circumstances
that knowledge of illegality or unlawfulness can as a
finding of fact be imputed to him the agreement
under which the payment is made cannot on his part
be said to be discovered to be void. The ,criticism
that if the aforesaid view is right then a person who
has paid money or transferred property to another
for illegal purpose can recover it back from the
transferee under this Section even if the illegal
purpose is carried into execution, notwithstanding
the fact that both the transferor and transferee are
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in pari delicto, in our view, overlooks the fact that
the courts do not assist a person who comes with
unclean. hands. In such cases, the defendant
possesses at,. advantage cover the plaintiff- in pari
delicto potior est condition defendentio.
Section 84, Indian Trust Act however has made an
exception in a case where the owner of property
transfers it to another for illegal purpose and such
purposes is not carried it into execution or the
transferor is not as guilty as the t ransferee or the
effect of permitting the transferee to retain the
property might be to defeat the provisions of any
law the transferee must hold the property for the
benefit of the transferor".
This specific provision made by the legislature
cannot be taken advantage of in derogation of the
principle that s. 65 Contract Act in applicable where
the object of the agreement was illegal to the
knowledge of both the parties at the time it was
made. In such a case the agreement would be void
ab- initio and there would be no room for the
subsequent discovery of that fact,,.
We consider that this criticism as well as the view
taken by the Bench is justified. It has rightly pointed
out that if both the transferor and transferee are in
pari delicto the courts do not assist them.
9 A Division Bench of the Andhra Pradesh High
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Court in its decision in Sivaramakrisnaiah v. Narahari
Rao (AIR 1960 AP 186 held that "In order to invoke
section 65 the invalidity of the contractor
agreement should be discovered subsequent to the
making of it. This cannot be taken advantage of by
parties who knew from the beginning the illegality
thereof. It only applies to a case where one of the
parties enters into an agreement under the belief
that it was a legal agreement, i.e. without the
knowledge that the agreement is forbidden by law
proposed to public policy and as such illegal. The
effect of section 65 is that in such a situation, it
enables a person not in pari delicto to claim
restoration since it is not based on an illegal contract
but dissociated from it. That is permissible by reason
of the section because the action is not founded on
dealings which are contaminated by illegality. The
party is only seeking to be restored to the status quo
ante. Section 65 also does net recognise the
distinction between a contract being illegal by
reason of its being opposed to public policy or
morality or a contract void for other reasons. Even
agreement the performance of which is attended
with penal consequences, are not outside the scope
of section 65. At the same time Courts will not
render assistance to persons who induce innocent
parties to enter into contracts of that nature by
playing fraud on them to retain the benefit which
they obtained by their wrong".
They also referred with approval to the earlier
decision of the Hyderabad High Court in Budhulal v.
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Deccan Banking Co. Ltd. (supra)."
6.12 Reading of the aforesaid decision of the
Supreme Court would indicate that a person who
gives money for an unlawful purpose knowing it to
be so and in such circumstances knowing of the
illegality in the unlawfulness can as a finding of fact
be imputed with the knowledge of the fact that such
an agreement which he had entered into was illegal.
He therefore cannot be entitled to say that he
should be refunded the money arising towards
damages or compensation for a transaction which
was void and illegal. The Supreme Court held that
the provisions of Sec.65 and 70 made by the
legislature cannot be taken advantage of where the
object of the agreement was illegal to the
knowledge of both the parties at the time it was
made. It is a case here that it is not on a subsequent
discovery that the plaintiff came to know of the
agreement being illegal. With open eyes as it is
evident from the plaint itself it was the case of the
defendant that the land in question was a restricted
tenure land and would not therefore be alienable
without previous permission of the Collector. Having
done so, it will not lie on the face of the plaintiff now
to plead for an alternative relief of compensation
and damages when he was pari delicto to the
contract itself. It will be in the fitness of things to
reproduce para 50 of the decision in the case of
Katta Sujata (supra), which deals with the nature of
specific relief Act. Para 50 accordingly reads as
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under:
"50 While discussing the nature of the Specific
Relief Act, in the aforesaid case, this Court had
observed as under:
"16. Injunction is a form of specific relief. It is an
order of a court requiring a party either to do a
specific act or acts or to refrain from doing a specific
act or acts either for a limited period or without limit
of time. In relation to a breach of contract, the
proper remedy against a defendant who acts in
breach of his obligations under a contract, is either
damages or specific relief. The two principal varieties
of specific relief are, decree of specific performance
and the injunction (See David Bean on Injunctions).
The Specific Relief Act, 1963 was intended to be "an
Act to define and amend the law relating to certain
kinds of specific reliefs". Specific relief is relief in
specie. It is a remedy which aims at the exact
fulfilment of an obligation. According to Dr. Banerjee
in his Tagore Law Lectures on Specific Relief, the
remedy for the nonperformance of a duty are (1)
compensatory, (2) specific. In the former, the court
awards damages for breach of the obligation. In the
latter, it directs the party in default to do or forbear
from doing the very thing, which he is bound to do or
forbear from doing. The law of specific relief is said
to be, in its essence, a part of the law of procedure,
for, specific relief is a form of judicial redress. Thus,
the Specific Relief Act, 1963 purports to define and
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amend the law relating to certain kinds of specific
reliefs obtainable in civil courts. It does not deal with
the remedies connected with compensatory reliefs
except as incidental and to a limited extent. The right
to relief of injunctions is contained in Part III of the
Specific Relief Act. Section 36 provides that
preventive relief may be granted at the discretion of
the court by injunction, temporary or perpetual.
Section 38 indicates when perpetual injunctions are
granted and Section 39 indicates when mandatory
injunctions are granted. Section 40 provides that
damages may be awarded either in lieu of or in
addition to injunctions. Section 41 provides for
contingencies when an injunction cannot be granted.
Section 42 enables, notwithstanding anything
contained in Section 41, particularly Clause (e)
providing that no injunction can be granted to
prevent the breach of a contract the performance of
which would not be specifically enforced, the
granting of an injunction to perform a negative
covenant. Thus, the power to grant injunctions by
way of specific relief is covered by the Specific Relief
Act, 1963."
However, the conclusion in the above paragraph,
taken in isolation, would not support the final
outcome in the aforesaid case, wherein it was held
that an injunction order granted under Section 9 of
the Arbitration and Conciliation Act would involve
consideration of settled principles under the Code
of Civil Procedure or the Specific Relief Act. It was
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nowhere stated in the aforesaid case that the
Specific Relief Act of 1963 stricto sensu provided for
only procedural mechanism. We find it difficult to
read the aforesaid case in the manner alluded to by
the High Court."
6.13 In light of the aforesaid, we are of the opinion
that while dealing with the question of
maintainability of the suit for specific performance,
the Full Bench in the decision of Shaikh Ismail
(supra) did deal with the ancilliary question of the
alternative relief of damages and compensation as is
set out from the relevant paragraphs of the decision.
Even otherwise, as held by Kuju Collieries (supra),
considering the definition of "Contract", as defined
in Sec. 2(h) of the Contract Act, when it is clearly
found that an agreement which is unenforceable in
law can be said to be void and therefore the present
case being a case where the new tenure land was a
subject matter of the Agreement to Sell which was in
absolute contravention to the provisions of Sec.43 of
the Tenancy Act and of which the plaintiff himself
was very much aware at the inception and it was not
a case of a subsequent discovery of the fact, he was
clearly dis-entitled to claim even the alternative
relief of compensation of damages particularly
considering that both the parties were pari delicto
and therefore the Court cannot come to the
assistance of such a person who was knowingly privy
to such an illegality.
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7 For the aforesaid reasons therefore, we find
no merit in the appeal and the appeal is accordingly
dismissed with no orders as to cost.
11. In light of the aforesaid decisions, we are of the firm view that
the aforesaid issue is no more res integra and in absence of any other
arguments being canvassed by learned counsel for the appellant, no
interference is required in the present appeal. Hence, the appeal
stands dismissed summarily. Civil application for stay stands disposed
of, accordingly. No order as to costs.
(BIREN VAISHNAV, J)
(NISHA M. THAKORE,J)
SUYASH SRIVASTAVA
