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N.V.P. Pandian Vs. M.M. Roy - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberAppeal No. 254 of 1975
Judge
Reported inAIR1979Mad42
ActsIndian Contract Act, 1872 - Sections 23,
AppellantN.V.P. Pandian
RespondentM.M. Roy
Cases ReferredRatanchand v. Askar
Excerpt:
.....public service mentioned in anson's law of contract. even if it is considered to be a new head of public policy the court should not feel shy to sponsor it. the agreement in the present case was against public policy. the law will not uphold an agreement whereby a person has agreed to use his influence or position for the purpose of securing a title, contract or some other benefit from the government. the object for which the respondent gave the amount to the appellant is to use his influence evidently with the selection committee for selection of candidates to the madras medical college and that is opposed to public policy. it evidences a clear tendency to corrupt or to influence public servants or men in charge of public matters to decide and determine matters otherwise than upon..........refund of rs. 15,000/-. he further pleaded that in any event the object of contract being against public policy, the respondent would not be entitled to any relief.4. the trial court raised the necessary issues for adjudication. the trial court gave the following findings : (1) the appellant received rs. 15,000/- and executed ex. a.1 document; (2) only for aiding and accelerating the effort of obtaining a seat in the madras medical college for her son the respondent has paid rs. 15,000/- to the appellant and in acknowledgment of that payment, the appellant had executed ex. a.1 and (3) even though the agreement was invalid inasmuch as the respondent was a less guilty party, the parties should be restored to the position in which they occupied prior to the coming into existence of the.....
Judgment:
1. The Defendant in O. S. No. 1675 of 1974 on the file of the City Civil Court at Madras is the appellant. The respondent-plaintiff filed the suit for the recovery of a sum of Rs. 15,975/- with future interest and costs in the following circumstances.

2. According to the respondent the appellant is a building contractor and was at the relevant time constructing house No. 35, Muthu Gramani Street, Mylapore, Madras-4. He used to apply for loans to the respondent for his construction work. In 1968, the respondent was making attempts to get a seat for her son in the Madras Medical College. The appellant promised to obtain a seat for the respondent's son in the Medical College if the respondent would lend him some money. Accordingly, the respondent paid Rs. 15,000/- in all to the appellant. However, her son could not get a seat in the Medical College. Since the appellant had obtained the money from the respondent on false representation he was bound to repay the same. On 8-1-1971 he also executed Ex. A-1 agreement undertaking to repay the money on or before 31-3-1971. Since he failed to make the repayment, the suit had to be filed by her for the refund of the money.

3. The appellant in his written statement totally denied the averments in the plaint. He never received any money from the respondent as loan. He did not make any promise to the respondent that he would secure a seat for her son in the Medical College. He denied having executed any agreement as alleged in the plaint. He further stated that the respondent was introduced to him by one Dr. Susai. Dr. Susai and the respondent had told him that one Subramaniam of Chintadripet has undertaken to procure a seat for the respondent's son in the Medical College and had received a large sum of money. However, he could not be traced and hence they wanted the help of the appellant in tracing the whereabouts of the said Subramaniam. They could not tract Subramaniam. They therefore began to falsely implicate the appellant and finally took a promissory note executed by him by force with the help of a police officer just on the eve of his son's wedding. Within a few days of the execution of the promissory note the appellant sent a notice to Dr. Susai and the respondent to return the promissory note. The appellant then issued a lawyer's notice on 17-1-1971 and the respondent sent a notice on 3-12-71 claiming the refund of Rs. 15,000/-. He further pleaded that in any event the object of contract being against public policy, the respondent would not be entitled to any relief.

4. The trial court raised the necessary issues for adjudication. The trial court gave the following findings : (1) The appellant received Rs. 15,000/- and executed Ex. A.1 document; (2) only for aiding and accelerating the effort of obtaining a seat in the Madras Medical College for her son the respondent has paid Rs. 15,000/- to the appellant and in acknowledgment of that payment, the appellant had executed Ex. A.1 and (3) even though the agreement was invalid inasmuch as the respondent was a less guilty party, the parties should be restored to the position in which they occupied prior to the coming into existence of the contract and therefore the appellant should refund the amount he received under the illegal contract. In the result, the trial court decreed the suit. The defeated appellant has appealed to this Court against the Judgment and decree of the trial court.

5. The fact that it has been proved that the respondent had paid a sum of Rs. 15,000/- to the appellant admits of no doubt. As per averment in the plaint Rs. 2,000/- was paid in two instalments of Rs. 1,500/- and Rs. 500/- in July, 1968 a sum of Rs. 3,000 /- in Aug. 1968, a sum of Rs. 5,000/- on 24th March, 1969, and a sum of Rs. 5,000/- on 7th Aug. 1969. Exs. A-2 to A-5 are copies of the bank statements of account in the name of the respondent. They would show that the respondent had withdrawn various amounts on the days mentioned in the plaint. Therefore, it can be safely accepted along with the evidence of P. W. 1 that the amounts totaling to Rs. 15,000/- was paid by the respondent to the appellant. Further in Ex. A-1 dated 8-1-1971 the appellant had agreed to repay the sum of Rs. 15,000/- on or before 31-3-1971. It was specifically admitted before me by the learned counsel for the respondent that Ex. A-1 contained the signature of the appellant. However, he would urge that the said document was got executed by Dr. Susai and the respondent under threat and coercion with the help of a high police official. The burden is on him to prove this fact.

There is absolutely no evidence. Even his own evidence as D. W. 1 does not help him. There is not even a proper suggestion to the respondent in her cross examination regarding the circumstances under which Ex. A-1 was got executed. No doubt, learned counsel would state that what he executed was a promissory note and not Ex. A-1 agreement and that even in Ex. A-6 dated 26-11-1972 issued on behalf of the respondent by her counsel what is stated is that the appellant had executed a promissory note on 2-1-1971. It is the case of neither party that the appellant executed two documents Ex. A-1 and another promissory note. In view of the fact that the appellant admits that he executed any one document whether it is called a promissory note or otherwise and in view of the further fact that he admits his signature in Ex. A-1 it could safely be taken that what the appellant executed was only Ex. A-1 and nothing else. I, therefore hold in agreement with the trial court that the appellant received Rs. 15,000/- from the respondent and executed Ex. A-1 agreement.

6. But the question for consideration is whether the respondent would be entitled to maintain the action for the recovery of the plaint claim. It should be noted that the suit is based on the original loan and not merely on Ex. A-1 agreement. The specific case of the respondent is that in consideration of the promise made by the appellant to obtain a seat for her son in the Madras Medical College she paid Rs. 15,000/- to him. No doubt, she would say that she gave the money as loan to the appellant on the latter's assurance that he would obtain a seat for her son in the Madras Medical College. But a reading of the entire para. 3 of the plaint would make it clear that it was because the appellant failed to get a seat for her son in the Madras Medical College that the respondent filed the suit for the refund of the sum of Rs. 15,000/-. A reading of Ex. A-6 notice dated 26-11-1972 sent by the respondent's counsel would make it clear that the amount was paid for the purpose of securing a seat in the Medical College and not as a loan, as is now sought to be made out in the plaint.

On the fact of it, it is clear that the agreement was against public policy. It is well known that selection to the Medical Colleges in the State is made on the basis of merit in accordance with the norms prescribed from time to time by the Government. The public has an interest to see that in the selection candidates for a seat in the Medical College the fittest persons should be selected. The law will not uphold an agreement whereby a person has agreed to use his influence or position for the purpose of securing a title, contract or some other benefit from the Government. The public has a right to demand that the public officials shall not be induced merely by consideration of personal gain to act in a manner other than that which the public interest demands. Therefore, when the respondent borrowed Rs. 15,000/- in consideration of the appellant agreeing to use his influence and secure for her son a seat in the Madras Medical College, it could only be by means other than straightforward.

7. In Halsbury's Laws of England, Fourth Edition, Vol. 9, page 226 para 392 it is stated :

"Any agreement which tends to be injurious to the public or against the public good is invalidated on the grounds of public policy. The question whether a particular agreement is contrary to public policy is a question of law, to be determined like any other by the proper application of prior decisions. It has been indicated that new heads of public policy will not be invented by the courts for the following reasons: 1. Judges are more to be trusted as interpreters of the law than as expounders of public policy; and 2. It is important that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable. However, the application of any particular ground of public policy may well vary from time to time and the courts will not shrink from properly applying the principle of an existing ground to any new case that may arise. Conversely, many transactions are now upheld what in former times would have been considered against the policy of the law. The rule remains, but its application varies with the principles which for the time being guide public opinion. In fact, the adaptability of the rules of public policy derives in large part from the generality and even ambiguity, with which those rules are expressed."

8. Anson in his 'Principles of the English Law of Contract, 22nd Edition, has arranged the contracts which the courts will not enforce because they are contrary to public policy under certain heads. The second head of Anson relates to agreements tending to injure the public service.

9. In Gherulal Parakh v. Mahadeodas ( Subba Rao, J. (As he then was) stated the law with regard to public policy thus :-(at p. 795)

"Public policy or the policy of the law is an illusive concept. It has been described as 'untrustworthy guide'' 'variable quality' 'uncertain one', 'unruly horse', etc. The primary duty of a court of law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the court may relieve them of their duty on a rule founded on what is called the public policy. The doctrine of public policy is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is one a branch of common law, and, just like any other breach of common law, it is governed by precedents; the principles have been crystallised under different heads and though it is permissible for courts to expound and apply and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days."

In this statement of law Justice Subbarao himself has not closed the door of evolution of any new head of public policy. Danckwerts L. J. in Nagle v. Fielden, ((1966) 2 QB 633 at p. 650) observes :

"The law relating to public policy cannot remain immutable. It must change with the passage of time. The wind of change blows upon it."

In Enderby town football Club v. F. A. Limited, (1970-3) WLR 1021) Lord Denning said :

"I know that over three hundred years ago Hobart C. J. said, 'the public policy is an unruly horse.' It has often been repeated since. So unruly is the horse, it is said (per Burrough, J. in Richardson v. Mellis, (1824) 2 Bing 229 at 252), that no Judge should try to mount it lest it run away with him. I disagree. With a good man in the saddle the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice as was done in Nagle v. Fielden, (1966) 2 WIR 1027." As I have already stated, the present case comes under the head 'agreement tending to injure the public service' mentioned in Anson's Law of Contract. Even if it is considered to be a new head of public policy, the Court should not feel shy to sponsor it. In Ratanchand v. Askar Chinnappa Reddy, J. has quoted the following passage from an article by Dr. F. A. Mann in 59 Law Quarterly, Review at page 298 :

"Public policy may be an unruly horse. But this does not mean that on the proper occasion a Judge must not take his courage in his hands and mount the steed."

Lord Chief Baron Pollock succinctly put the law as early as 1853 in Egerton v. Earl Brownlow ((1853) 4 H. L. C. 1) thus :

"the conclusions to which I have arrived, from the decided cases and the principles they involve, are that all matters relating to the public welfare all acts of the legislature or the executive must be decided and determined upon their own merits only; and that it is against the public interest (and therefore not lawful) for any one officiously, wantonly and capriciously...... to create any pecuniary interest or other bias of any sort in the decision of a matter of public nature, and which involves the public welfare.........."

Again we find the following statement of the law in Montefoire v. Menday Motor Components Co. Ltd., ((1918) 2 KB 241).

"A contract may be against public policy either from the nature of the acts to be performed or from the nature of the consideration. In my judgment it is contrary to public policy that a person should be hired for money or valuable consideration when he has access to persons of influence to use his position and interest to procure a benefit from the Government."

In Ratanchand v. Askar where the plaintiff agreed to finance and use his influence with the Ministers of the Government and secure the estate to the defendants' predecessor for which the plaintiff should be given a share in the estate as and when it was got, it was held by a Bench of the Andhra Pradesh High Court that the agreement was destructive of all sound and good administration. The agreement disclosed a tendency to corrupt or influence public servants to decide matters otherwise than on their own merits. The agreement was void as being opposed to public policy. Following the principles laid down in the above decisions I have no hesitation to hold that the object for which the respondent have Rs. 15,000/- to the appellant is to use his influence evidently with the selection committee for selection of candidates to the Madras Medical College and that is opposed to public policy. It evidence a clear tendency to corrupt or to influence public servants or men in charge of public matters to decide and determine matters otherwise than upon their merits, a tendency most injurious to public office. In this context, the learned Judges of the Andhra Pradesh High Court have emphasised that it is irrelevant that the persons proposed to be influenced are incorruptible and are persons whose ability, honesty and patriotism are beyond all questions and it is the very tendency of the agreement that makes it contrary to public policy. I therefore confirm the finding of the trial court that the agreement under which the respondent paid Rs. 15,000/- to the appellant is invalid as it is opposed to public policy.

10. The next question for consideration is whether in such circumstances the respondent would be entitled to maintain an action to refund of the money. The learned trial Judge has granted a decree for refund of the money in favour of the respondent on the ground that she was a less guilty party. There is absolutely no evidence at all available in the case for this finding of the lower court. There is no evidence except the ipse dixit of P. W. 1 that the appellant volunteered to procure a seat for the respondent's son in the Madras Medical College provided the latter would pay him Rs. 15,000/-. It is the specific case of the respondent that she was trying for a seat for her son in the Madras Medical College and that it was in that connection that she paid Rs. 15,000/- to the appellant on the latter promising to get a seat. In the circumstances, it could only be concluded that only the respondent must have approached the appellant for necessary help in the matter of securing the seat for her son in the Medical College. Therefore, both the appellant and the respondent must be considered to be in pari delicto. Where each party is equally in fault the law favours him who is actually in possession. The maxim in pari delicto potior est conditio possidentis is founded on the principles of public policy, which will not assist a plaintiff who has paid over money or handed over property in pursuance of an illegal or immoral contract, to recover it back, for the Courts will not assist an illegal transaction in any respect. In Sita Ram v. Radha Bai it has been held thus : (at p. 537)

"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 delicto potior est conditio possidentis'.......... But 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........... Where the parities 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: Firstly, 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, 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."

The present case does not fall in any of the exceptional cases referred to above.

11. In Kuju Collieries v. Jharkhand Mines a mining lease was given in favour of the plaintiff contrary to the provisions of Mines and Minerals (Regulation and Development) Act, 1948 and the Mineral Concession Rules, 1949. There was proof to shoe that the plaintiff could not have been in ignorance of the legal position. On the basis of the lease, the plaintiff did not get possession of the leased property and, therefore the plaintiff instituted the suit for recovery of possession of the leased property along with mesne profits or in the alternative for refund of the sum of Rs. 80,000/- and certain other sums. After the institution of the suit the relief in respect of possession of the mines became unenforceable in view of the Bihar Land Reforms Act. Therefore, the only relief which was pressed by the plaintiff was his claim for the refund of Rs. 80,000/-

Alagiriswami, J.

on behalf of the court held that the lease in favour of the plaintiff was contrary to the provisions of the Mines and Minerals (Regulation and Development) Act, 1948 and the Mineral Concession Rules, 1949 and as such void from its inception. Consequently, payment of the sum of Rs. 80,000/- was not made lawfully, nor was it done under a mistake or under coercion and it could not be recovered. An attempt was made before the Supreme Court to bring the case within Section 65, 70, or 72 of the Contract Act. In dealing with this contention it was observed that S. 65 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, knows that 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 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." It also ruled out the applicability of Sections 70 and 72 of the Contract Act on the ground that the payment of the money was not made lawfully, nor was it done under a mistake or under coercion. In coming to this conclusion, the Supreme Court approved the decision of the Hyderabad High Court in Budhulal v. Deccan Banking Co. (AIR 1955 Hyd. 69) (FB).

12. Following these decisions, it has to be held that the instant case falls clearly under the maxim pari delicto potior est conditio possidentis. The respondent must have known when she paid Rs. 15,000, that she was paying the money for an illegal object or an object opposed to public policy. She cannot in any way be considered to be less guilty party as none of the situations contemplated in Sitaram v. Radha Bai is present. I therefore follow the

decisions in Kunju Collieries v. Jharkhand Mines and in Ratanchand v. Askar , and hold that the respondent is not entitled to a refund of the money from the appellant. The respondent herself could not get the relief she wanted without setting up and proving the illegal object for which she had paid the money. I therefore set aside the judgment and decree of the trial court, dismiss the suit and allow the appeal with costs.

13. Appeal allowed.


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