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T.T. Augustine Vs. Changanacherry Municipality - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKerala High Court
Decided On
Case NumberS.A. No. 531 of 1977
Judge
Reported inAIR1982Ker307
ActsContract Act, 1872 - Sections 23 and 30
AppellantT.T. Augustine
RespondentChanganacherry Municipality
Appellant Advocate K. Revindranathan Nair, Adv.
Respondent Advocate P.N.K. Achan and; K. Vijayan, Advs.
DispositionAppeal dismissed
Cases ReferredIn Firm of Pratapchand Nopaji v. Firm of Kotrike Venkata Setty and Sons
Excerpt:
.....rights but not so if object prohibited or mala in se - raffle itself not illegal nor opposed to public policy - sale by respondent valid. - - 20. the aforesaid discussion yields the following results :(1) under the common law of england a contract of wager is valid and therefore both the primary contract as well as the collateral agreement in respect thereof are enforceable; so far as england is concerned, the passages from text-books extracted and the decisions discussed in connection with the first point clearly establish that there has never been such a rule of public policy in that country. it is well established that the object of an agreement cannot be said to be forbidden or unlawful merely because the agreement results in what is known as a 'void contract'.a void..........agreement is lawful unless it is forbidden by law or the court regards it as immoral or opposed to public policy.4. the supreme court in gherulal parakh v. mahadeodas maiya (air 1959 sc 781), after considering the decided cases on the point, held in para 20 at pages 792 as follows:'20. the aforesaid discussion yields the following results : (1) under the common law of england a contract of wager is valid and therefore both the primary contract as well as the collateral agreement in respect thereof are enforceable; (2) after the enactment of the gaming act, 1845, a wager is made void but not illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a colleteral agreement is enforceable; (3) there was a conflict on the question whether the.....
Judgment:

P.C. Balakrishna Menon, J.

1. The defendant is the appellant. The suit is by the Changanacherry Municipality for the balance amount due from the defendant who was an agent of the plaintiff Municipality for the sale of raffle tickets in respect of the Changanacherry Municipal Stadium Fund Raffle conducted by the Municipality with the sanction of the Government. The defendant raised various contentions in defence to the suit. All his contentions were overruled and the suit was decreed by the trial Court. The decision of the trial Court was confirmed in appeal by the lower appellate Court.

2. That the defendant was an agent of the plaintiff-Municipality for the sale of raffle tickets is not in dispute. The only point urged by the learned Counsel for the defendant-appellant is that the contract of agency is for a purpose of wager opposed to Section 30 of the Indian Contract Act and hence the suit is not maintainable. As pet Section 30 of the Contract Act, 'agreements by way of wager are void and no suit shall be brought for recovering anything alleged to be won on any wager or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made'. A contract of agency for sale of raffle tickets is not an agreement by way of wager is clear from the language of the section itself. Raffle itself may constitute several agreements by way of wager by the person promoting the raffle and the persons purchasing tickets with the object of winning the price depending on the uncertain event of a draw in favour of the ticket holder.

3. The further question is whether the contract of agency is unlawful within the meaning of Section 23 of the Contract Act. As per Section 23 the consideration or object of an agreement is lawful unless it is forbidden by law or the Court regards it as immoral or opposed to public policy.

4. The Supreme Court in Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC 781), after considering the decided cases on the point, held in para 20 at pages 792 as follows:

'20. The aforesaid discussion yields the following results : (1) Under the common law of England a contract of wager is valid and therefore both the primary contract as well as the collateral agreement in respect thereof are enforceable; (2) after the enactment of the Gaming Act, 1845, a wager is made void but not illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a colleteral agreement is enforceable; (3) there was a conflict on the question whether the second part of Section 18 of the Gaming Act, 1845, would cover a case for the recovery of money or valuable thing alleged to be won upon any wager under a substituted contract between the same parties; the House of Lords in Hill's case (1949-2 All ER 452), had finally resolved the conflict by holding that such a claim was not sustainable whether it was made under the original contract of wager between the parties or under a substituted agreement between them; (4) under the Gaming Act, 1892, in view of its wide and comprehensive phraseology, even collateral contracts, including partnership agreements, are not enforceable; (5) Section 30 of the Contract Act is based upon the provisions of Section 18 of the Gaming Act, 1845, and though a wager is void and unenforceable it is not forbidden by law and therefore the object of a collateral agreement is not unlawful under Section 23 of the Contract Act; and (6) partnership being an agreement within the meaning of Section 23 of the Contract Act, it is not unlawful, though its object is to carry on wagering transactions. We, therefore, hold that in the present case the partnership is not unlawful within the meaning of Section 23(a) of the Contract Act.'

The Supreme Court was considering the question as to whether a partnership agreement for the purpose of carrying on wagering contracts is opposed to Sections 30 and 23 of the Contract Act. In paras 24 and 25 at page 795 it is stated thus:

'24. This leads us to the question whether in England or in India a definite principle of public policy has been evolved or recognised invalidating wagers. So far as England is concerned, the passages from text-books extracted and the decisions discussed in connection with the first point clearly establish that there has never been such a rule of public policy in that country. Courts under the common law of England till the year 1845 enforced such contracts even between parties to the transaction. They held that wagers were not illegal. After the passing of the English Gaming Act, 1845 (8 and 9 Vict. c. 109) such contracts were declared vpid. Even so, the Courts held that though a wagering contract was void, it was not illegal and therefore an agreement collateral to the wagering contract could be enforced. Only after the enactment of the Gaming Act, 1892 (55 Vict. c.9) the colleteral contracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions cited supra the question of public policy was specifically raised and negatived by Courts: (See 1878-4 QBD 685, 1908-2 KB 696 and 1921-2 KB 351). It is therefore abundantly clear that the common law of England did not recognise any principle of public policy declaring wagering contracts illegal.

25. The legal position is the same in India. The Indian Courts, both before and after the passing of the Act 21 of 1848 and also after the enactment of the Contract Act, have held that the wagering contracts are not illegal and the collateral contracts in respect of them are enforceable. We have already referred to these in dealing with the first point and we need not cover the ground once again, except to cite a passage from the decision of the Judicial Committee in (1846-51) 4 Moo Ind App 339 (PC) which is directly in point. Their Lordships in considering the applicability of the doctrine of public policy to a wagering contract observed at p. 350:

'We are of opinion, that, although, to a certain degree, it might create a temptation to do what was wrong, we are not to presume that the parties would commit a crime; and as it did not interfere with the performance of any duty, and as if the parties were not induced by it to commit a crime, neither the interests of individuals or of the Government could be affected by it, we cannot say that it is contrary to public policy'. There is not a single decision after the above cited case, which was decided in 1846, up to the present day wherein the Courts either declared wagering contracts as illegal or refused to enforce any collateral contract in respect of such wagers, on the ground of public policy. It may, therefore, be stated without any contradiction that the common law of England in respect of wagers was followed in India and it has always been held that such contracts, though void after the Act of 1848 were not illegal. Nor the Legislatures of the States excepting Bombay made any attempt to bring the law in India in line with that obtaining in England after the Gaming Act 1892. At the time of the passing of the Contract Act, there was a Central Act, Act 21 of 1848, principally based on the English Gaming Act, 1845. There was also the Bombay Wagers (Amendment) Act 1865, amending the former Act in terms analogous to those later enacted by the Gaming Act, 1892. Though the Contract Act repealed the Act 21 of 1848, it did not incorporate in it the provisions similar to those of the Bombay Act; nor was any amendment made subsequent to the passing of the English Gaming Act, 1892. The legislature must be deemed to have had the knowledge of the state of law in England, and, therefore, we may assume that it did not think fit to make wagers illegal or to hit at collateral contracts. The policy of law in India has therefore been to sustain the legality of wagers'.

In Firm of Pratapchand Nopaji v. Firm of Kotrike Venkata Setty and Sons (AIR 1975 SC 1223), the Supreme Court had occasion to consider the validity of a contract of agency for the purpose of entering into what is known as badala transactions, which involves speculations on the rise and fall in the prices of goods in the market. After quoting a passage from AIR 1959 SC 781, the Court in para 7 stated thus:

'7. If an agreement is merely collateral to another or constitutes an aid facilitating the carrying out of the object of the other agreement which though void, is not in itself prohibited, within the meaning of Section 23 of the Contract Act, it may be enforced as a collateral agreement. If on the other hand, it is part of a mechanism meant to defeat what the law has actually prohibited, the Courts Will not countenance a claim based upon the agreement because it will be tainted with an illegality of the object sought to be achieved which is hit by Section 23 of the Contract Act. It is well established that the object of an agreement cannot be said to be forbidden or unlawful merely because the agreement results in what is known as a 'void contract'. A void agreement, when coupled with other facts, may become part of a transaction which creates legal rights, but this is not so if the object is prohibited or 'mala in se'.

5. From these decisions of the Supreme Court, it is clear that a raffle itself is not illegal nor is it opposed to public policy. A collateral contract of agency for the purpose of sale of raffle tickets is therefore perfectly valid and is enforceable in law.

The Second Appeal fails and is dismissed. No costs.


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