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Rakurti Manikyam Vs. Medidi Satyanarayana - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 267 of 1970
Judge
Reported inAIR1972AP367
ActsContract Act, 1872 - Sections 23 and 70
AppellantRakurti Manikyam
RespondentMedidi Satyanarayana
Appellant AdvocateMaruti, Adv. for ;G. Venkatrama Sastry, ;P. Anjaneya Sarma and ;P.V.R. Sharma, Advs.
Respondent AdvocateN. Bapiraju, Adv.
Excerpt:
.....between a contract which is void because the consideration or the object of the agreement is unlawful and a contract which is void for other reasons including failure to observe some technical requirement. ' an agreement may be void for any of the reasons mentioned in the several provisions of the contract act such as sections 19, 20, 23, 24, 25, 26, 27, 28, 29 and 30. an agreement may also be void for non-compliance with certain technical requirements imposed by enactments like the registration act, stamp act, section 175(3) of the government of india act of 1935, article 299 of the constitution and the like. maruthi relied on the following sentence in air1962sc779 :therefore, in our opinion, all that the word 'lawfully' in the context indicate is that after something is delivered..........the plaintiff. on appeal by the defendant the learned subordinate judge held that the contract was unlawful and therefore the plaintiff could not recover from the defendant the price to be paid to be paid for the paddy supplied by him. the suit was dismissed and the plaintiff has referred this second appeal. 2. in this second appeal miss. maruti, learned counsel for the plaintiff-appellant submitted that the contract was not unlawful or void because the 'andhra pradesh maximum price control order did not prohibit the sale of paddy above the maximum price fixed by the control order. according to miss maruthi the control order did not contain any provision expressly prohibiting the sale of paddy above the maximum price but merely stated that the maximum price at which paddy may be sold by.....
Judgment:

1. The plaintiff in O.S. No. 58 of 1966 on the file of the District Munsif's Court, Amalapuram is the appellant in this Second appeal. He entered into a contract with the defendant for the sale of 64 bags of paddy at the rate of Rs. 34.25 per bag. The agreement was oral. It was also agreed that Re. 1/- should be paid towards transportation charges. In pursuance of the agreement the plaintiff delivered the paddy to the defendant. The defendant requested time for payment and subsequently failed to pay the price of the paddy. The plaintiff, therefore, filed the suit for recovery of the price of the paddy at the contract rate. The defendant raised several pleas with which we are not concerned now. He also pleaded that the contract was illegal and opposed to public policy as it was contrary to the Andhra Pradesh Paddy Maximum Price Control Order of 1965 and, therefore, the plaintiff was not entitled to enforce the contract and recover the money. The trial Court held that the contract was true and that the defendant took delivery of the 64 bags of paddy from the plaintiff. The trial Court was of the view that if the price stipulated under the contract was above the maximum price fixed by the Maximum Price Control Order it was a matter for the Government to take action against the plaintiff. According to the trial Court the defendant who had taken delivery of the paddy was bound to pay the price at least at the 'control rate' of Rs. 18/- per bag. On that basis the trial Court granted a decree in favour of the plaintiff. On appeal by the defendant the learned subordinate Judge held that the contract was unlawful and therefore the plaintiff could not recover from the defendant the price to be paid to be paid for the paddy supplied by him. The suit was dismissed and the plaintiff has referred this Second Appeal.

2. In this Second Appeal Miss. Maruti, learned counsel for the plaintiff-appellant submitted that the contract was not unlawful or void because the 'Andhra Pradesh Maximum Price Control Order did not prohibit the sale of paddy above the maximum price fixed by the Control Order. According to Miss Maruthi the Control Order did not contain any provision expressly prohibiting the sale of paddy above the maximum price but merely stated that the maximum price at which paddy may be sold by any person was as specified in the schedule . There is no substance in this submission. The Maximum Price Control Order prescribes the maximum price at which paddy may be sold and any contravention of the order is punishable under S. 7 of the Essential Commodities Act, 1955. An agreement to sell paddy above the maximum price fixed under the Maximum Price Control Order is undoubtedly unlawful and void.

3. Miss Maruthi then urged that assuming that the contract was void the plaintiff was nonetheless entitled to be compensated in respect of paddy actually delivered by him to the defendant. She relied on S. 70 of the Indian Contract Act and on the decisions of their Lordships of the Supreme Court in State of West Bengal v. B. K. Mondal & Sons. : AIR1962SC779 . News Marine Coal Co. v. Union of India, : [1964]2SCR859 , Mulamchand v. State of M. P., : [1968]3SCR214 and P. Dhunji Shaw v. Poona Municipality, : [1970]3SCR415 , Section 70 of the Contract Act is as follows:

'Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.'

In the four cases cited by Miss Maruthi their Lordships of the Supreme Court held that notwithstanding the fact that a contract was invalid because of non-compliance with the mandatory provisions of Section 175(3) of the Government of India Act, 1935 or other analogous provisions, a claim for compensation based on Section 70 of the Contract Act would still be maintainable. In the first case Gajendragadkar, J., observed:

'Therefore, in cases falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract nor ask for damages for the breach of the contract for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. All that Section 70 provides is that if the goods delivered are accepted or the work done is voluntarily enjoyed then the liability to pay compensation for the enjoyment of the said goods or the acceptance of the said work arises. Thus, where a claim for compensation is made by one person against another under Section 70, it is not a on the basis of any subsisting contract between the parties, it is on the basis of the fact that something was done by the party for another and the said work so done has been voluntarily accepted by the other party. That broadly stated is the effect of the conditions prescribed by Section 70.'

4. It must be observed that there certainly exists a distinction between a contract which is void because the consideration or the object of the agreement is unlawful and a contract which is void for other reasons including failure to observe some technical requirement. Section 2(g) of the Contract Act says, 'an agreement not enforceable by law is said to be void.' An agreement may be void for any of the reasons mentioned in the several provisions of the Contract Act such as Sections 19, 20, 23, 24, 25, 26, 27, 28, 29 and 30. An agreement may also be void for non-compliance with certain technical requirements imposed by enactments like the Registration Act, Stamp Act, Section 175(3) of the Government of India Act of 1935, Article 299 of the Constitution and the like. Out of the several agreement which are void one is an agreement, the consideration or the object of which is unlawful. Section 23 says:

'The consideration or object of an agreement is lawful unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of 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.'

Apart from Section 23 the only other provision of the Contract Act which uses the word 'lawful' is Section 10 and it is as follows:------

'All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein in India, and not hereby any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence or witness, or any law relating to the registration of documents.'

It will be seen that both in Sections 10 and 23 the word 'lawful' is used to qualify the consideration or object of an agreement and Section 23 states what consideration or object is lawful and what is not lawful. If this is borne in mind it becomes clear that the word 'lawfully' occurring in Section 70 and qualifying the doing or delivery of anything must have reference to the doing or delivery of those things which are stated to be lawful in Section 23 of the Contract Act. In other words, the doing or delivery of anything must not be 'forbidden by law' or 'of such a nature, that if permitted, it would defeat the provisions of any law or is fraudulent', or must not involve or imply 'injury to the person or property of another' or must not be that which nay be regarded by the Court as 'immoral or opposed to public policy'. I am therefore of the view that, for a contractor under Section 70 of the Contract Act the contract found to be void should not be one whose consideration or object is not lawful within the meaning of Section 23 of the Contract Act. Miss. Maruthi relied on the following sentence in : AIR1962SC779 :-----

'Therefore, in our opinion, all that the word 'lawfully' in the context indicate is that after something is delivered or something is done by one person for another and that thing is accepted and enjoyed by the latter, a lawful relationship is born between the two which under the provisions of Section 70 gives rise to a claim for compensation.'

And argued that the word 'lawfully' referred only to the relationship created as a result of the acceptance and enjoyment by a person or a thing done or delivered by another. She argued that the word 'lawfully' had no reference to the lawful or unlawful nature of the doing of a thing or the delivery of a thing. I do not agree. The observations of their Lordships were made in the context of an argument which was advanced to the effect that the word 'lawfully' referred to a pre-existing relationship between the parties which would justify a person doing a thing or delivering a thing to look for compensation for it from the person for whom it is done or to whom it is delivered. I do not think that their Lordships meant to extend the applicability of Section 70 to unlawful contracts.

5. Miss. Maruthi relied on the decision in Sivaramakrishnayya v. Narahari Rao, : AIR1960AP186 and urged that no distinction should be made between a contract which is void because in is unlawful and a contract which is void for other reasons. In that case the learned Judges were considering Section 65 of the Contract Act which in terms refers to contracts which are void and does not use the words 'lawful' or 'unlawful'. I have already pointed out that while every unlawful contract is a void contract every void contract is not necessarily an unlawful contract. When I used the expression 'lawful contract' I mean a contract whose consideration or object is lawful within the meaning of Section 23 of the Contract Act.

6. In the present case, the contract was for the sale of paddy in contravention of the Andhra Pradesh Paddy Maximum Price Control Order. The acceptance of such a delivery could not create a lawful relationship between the contractors. It cannot, therefore, be said that the plaintiff lawfully delivered the paddy to the defendant so as to attract the provisions of Section 70 of the Contract Act. In the result, the Second Appeal is dismissed, but in the circumstances. there will be no order as to costs. No leave.

7. Appeal dismissed.


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