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Lakhiram Agarwalla and ors. Vs. Brajlal Agarwalla and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtOrissa High Court
Decided On
Case NumberSecond Appeal No. 482 of 1969
Judge
Reported inAIR1974Ori49; 39(1973)CLT1107
ActsContract Act, 1872 - Sections 65
AppellantLakhiram Agarwalla and ors.
RespondentBrajlal Agarwalla and ors.
Appellant AdvocateG. Rath, Adv.
Respondent AdvocateB.K. Mohanty, Adv.
DispositionAppeal allowed
Cases Referred and Qadir Buksh v. Hakam
Excerpt:
.....new india assurance co. ltd. v birendra mohan de, 1995 (2) gau lt 218 (db) and union of india v smt gita banik, 1996 (2) glt 246, are not good law]. - the defendants failed to establish that the stock of broken rice was unfit for human consumption or that it has been seized and destroyed by the corporation of calcutta......defendants on the allegation that pursuant to an agreement they had despatched by train 93 bass of broken rice to the defendants for effecting sale thereof at the rail-head, i. e. shalimar railway station. the defendants had quoted the prevailing market rate to be rs. 17.50 per-maund. as the defendants did not pay the price and raised false pleas to avoid the liability, the plaintiffs were obliged to come to the court.3. the defendants in a joint written statement denied that the despatch of the consignment was not in the manner as pleaded by the plaintiffs; the defendant no. 2 had informed the second plaintiff that the defendants were not licensed dealers under the west bengal food grains licensing order and thus it would be difficult for them to dispose of the consignment of broken.....
Judgment:

R.N. Misra, J.

1. The plaintiffs are in appeal against the reversing decree of the learned District Judge. Plaintiffs 1 and 2 are the partners of the firm, plaintiff No. 3. Similarly defendants 1 to 4 are partners of the Firm, defendant No. 4,

2. The plaintiffs filed a suit on 17-6-1963 for recovery of Rs. 4068.75 from the defendants on the allegation that pursuant to an agreement they had despatched by train 93 bass of broken rice to the defendants for effecting sale thereof at the rail-head, i. e. Shalimar Railway station. The defendants had quoted the prevailing market rate to be Rs. 17.50 per-maund. As the defendants did not pay the price and raised false pleas to avoid the liability, the plaintiffs were obliged to come to the Court.

3. The defendants in a joint written statement denied that the despatch of the consignment was not in the manner as pleaded by the plaintiffs; the defendant No. 2 had informed the second plaintiff that the defendants were not licensed dealers under the West Bengal Food Grains Licensing Order and thus it would be difficult for them to dispose of the consignment of broken rice at Calcutta; it was ultimately agreed that theplaintiffs would despatch, the consignment to Shalimar with their man and attempt would be made for disposal with the assistance of defendant No. 3 the plaintiffs representative accompanying the consignment not the stock transported to the premises of one Mohanlal & Co. with the help of defendant No. 3: the stock of broken rice was unfit for human consumption and the authorities of the Calcutta Corporation ceased and destroyed the same and even started a prosecution, against Mohanlal & Co.; the claim was not tenable as the contract was illegal, the Bargarh Court had no jurisdiction: the suit suffered from defect of non-joinder of parties -- Corporation of Calcutta and Mohanlal & Co. were necessary parties; the claim was barred by limitation, etc.,

4. The learned Trial Judge found that the suit as laid was maintainable; the defendants failed to establish that the stock of broken rice was unfit for human consumption or that it has been seized and destroyed by the Corporation of Calcutta. He further found that the contract was valid and the plaintiffs were entitled to recover the price of the 93 bass of broken rice. Accordingly he decreed the suit with pendente lite and future interest.

5. Upon appeal by the dependants the learned District Judge sustained all the findings of the trial Court except the one relating to the legality of the deal forming the basis of the claim. He found that in 1960 when the rice was consigned, there were in vogue statutory control orders both in Orissa and West Bengal and neither the plaintiffs nor the defendants had the requisite license to possess and deal in rice. He assumed that the parties were aware of the position and, therefore, the contract was void ab initio and the provisions of Section 65 of the Contract Act was not applicable. He accordingly reversed the decree of the trial court and dismissed the suit In this second appeal the plaintiffs assail the reversing decree.

6. The only question that has to be considered is whether the plaintiffs are entitled to rely upon the equitable provision in Section 65 of the Contract Act. That section provides:--

'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 doctrine of 'restitution in integrum' is of general application and Section 65 incorporates that equitable provision. Both at common law in England and in this country courts have taken theview that the rule should be liberally construed in order to do equity and justice between parties.

7. Section 65 of the Contract Act does not apply to contracts which were ab initio void to the knowledge of the contracting parties but is applicable to cases where at least the plaintiffs were not aware of the void character of the contract (though from the inception the contract was invalid) and discovered it to be so (AIR 1922 P. C. 403).

8. The defence plea in Paragraph 7 of the written statement that the defendant No. 2 had notified the plaintiff No. 2 of absence of the reauisite license at Calcutta and, therefore, the deal would not be possible has not been established at the trial The defendant No. 2 as D. W. 3 has only casually said that he had mentioned about there being no license at Calcutta. The finding of the appellate court that the deal was illegal to the knowledge of the parties from the very beginning is a conclusion based upon no evidence. Mr. Mohanty for the respondents tried to put it as an inference of fact from the proved facts. I am not able to accept that contention particularly in the background of several untenable pleas of the defendants. Those pleas hav-ing been negatived by both the courts below, the defendants were to compensate the plaintiffs unless Section 65 of the Contract Act was not to be applied.

9. Reliance has rightly been placed by the learned counsel for the appellants on the case of Sivaram Krishnaih v. Venkata Narahari Rao AIR 1960 Andh. Pra. 186, wherein a case of this type. Section 65 of the Contract Act was relied upon to sustain the decree for refund of the value. The learned Chief Justice said:--

'The effect of Section 65 is that, in such a situation, it enables a person 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.'

Mr. Mohanty relied upon the cases of Kearle v. Thomson ((1890) 24 QBD 742) and Qadir Buksh v. Hakam AIR 1932 Lah 503 (FB). The principle indicated in the aforesaid cases is beyond dispute. But the question that pertinently has arisen for determination in this case is to whether at the time the contract was entered into and the despatch of the consignments of broken rice was made, whether both the parties or at least the plaintiff knew that the contract was void. If the finding to be reached is that the_plaintiff wasnot aware of that position, the only conclusion that can be reached is that the contract was discovered to be void, The application of Section 65 of the Contract Act is kept out only in those cases where the contract was known to be void at the time it was entered into. A distinction has been made between the oases where the contract is void from the inception and is known to the parties to be so at the time it is entered into and a contract which is void from the inception but parties or at least one of the parties enters into it bona fide and later is discovered to be void- In the first case Section 65 is not applicable while in the second case benefit is available of that statutory provision.

10. I, therefore, hold that the plaintiffs were entitled to the compensation for the 93 bass of broken rice. The second appeal succeeds. The judgment and decree of the appellate court are set aside and those of the trial court are restored with costs to the appellants throughout.


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