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Badridas Kothari Vs. Meghraj Kothari - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberCivil Revn. No. 309 of 1961
Judge
Reported inAIR1967Cal25
ActsContract Act, 1872 - Sections 10, 23 and 30; ;Code of Civil Procedure (CPC) , 1908 - Section 115
AppellantBadridas Kothari
RespondentMeghraj Kothari
Appellant AdvocateH.C. Dhar and ;Provash Chandra Basu, Advs.
Respondent AdvocateM.N. Ghosh, ;J.K. Banerji and ;S.C. Chakravarti, Advs.
Cases ReferredGirwar Ltd. v. Dau Dayal
Excerpt:
- .....between the plaintiff and the defendant was fatka or share speculation business and was a wagering contract. there was a denial of consideration.3. the facts found by both the courts may now be clearly stated with a view to appreciate point of law. both the courts found as a fact that the plaintiff and the defendant had dealings in the share market and in these fatka dealings the defendant became liable to the plaintiff for certain money. this was the money for which the promissory note was executed. the plaintiff and the defendant are related. the promissory note is marked exhibit a. the defendant's case that he did not receive any cash consideration for this note has been believed and accepted to be true by both the courts as a fact. no doubt the plaintiff produced his cash.....
Judgment:

P.B. Mukharji, J.

1. This Civil Revision under Section 115 of the Code of Civil Procedure is directed against the order passed by the Full Bench of two learned Judges of the Presidency Court of Small Cause Courts, Calcutta under Section 38 of the Presidency Small Cause Courts Act. The Bench dismissed the application under Section 38 of the Presidency Small Cause Courts Act affirming the decision of the learned Single Judge of that Court dismissing the plaintiffs suit.

2. The facts giving rise to the points of law may be set out briefly. The plaintiff instituted the suit for recovery of Rs. 844.76 paise alleged to be due by the defendant to the plaintiff. The plaintiff's pleading was that on the 5th January, 1956 he lent and advanced a sum of Rs. 775 for business purpose and the defendant acknowledged the sum in writing agreeing to pay interest at -/4/- annas per cent per month. The plaintiff based his claim on a promissory note or handnote dated 5th January, 1956. The defence was that the plaintiff and the defendant were speculators in the share market, the plaintiff incurred some losses in the share business on account of the laches of the defendant and therefore the defendant executed the Promissory Note. This defence was based on the allegation that the transaction between the plaintiff and the defendant was fatka or share speculation business and was a wagering contract. There was a denial of consideration.

3. The facts found by both the courts may now be clearly stated with a view to appreciate point of law. Both the courts found as a fact that the plaintiff and the defendant had dealings in the share market and in these fatka dealings the defendant became liable to the plaintiff for certain money. This was the money for which the Promissory Note was executed. The plaintiff and the defendant are related. The Promissory Note is marked Exhibit A. The defendant's case that he did not receive any cash consideration for this note has been believed and accepted to be true by both the courts as a fact. No doubt the plaintiff produced his cash book, Exhibit 2, in support of payment. He did not produce his account book relating to his share business and it was held that that was the more important book and it was withheld by the plaintiff purposely. The promissory note or the hand-note in its material portion expressly says that the defendant had received from the plaintiff Rupees 775 'in cash'. The courts have found that this was not written in the usual manner in which promissory notes were written and executed. They have also found that the document does not show that on the date it was executed the money was paid to the defendant. The plaintiff admitted in his evidence that his clerk was present at the time of the transaction but that material witness was not examined. The courts further found that there was no corroborative evidence of payment of any cash to the defendant by the plaintiff. Both the courts have held that the defendant suffered loss over fatka dealings in the Stock Exchange while doing business on plaintiff's account and in order to obtain money the plaintiff obtained this receipt, Exhibit 1. The courts held that under Section 30 of the Indian Contract Act fatka dealings come under the category of wagering contracts and these are wagering contracts and therefore void. On these findings the courts dismissed the plaintiff's suit.

4. The plaintiff has now come up in revision before us. Mr. Dhar appearing for the plaintiff Petitioner has ably argued on the intricacies of law of wagering contract both in the English law as well as in the Indian Law. His main contention is that a promissory note executed for wagering transaction and considerations are not void or illegal and therefore, there should have been a decree in favour of the plaintiff in the above facts of the case. Mr. Dhar for the plaintiff petitioner invoked the well-known doctrines of collateral' contracts and 'substituted' contracts which do not come within the mischief of wagering contracts but which courts have held are good in law, The able learning and scholarship which Mr. Dhar has displayed included reliance on the two decisions of the Supreme Court in support of the plaintiffs contention.

5. The first case relied upon is Kishan Lal v. Bhanwar Lal, : [1955]1SCR439 . That case was concerned with the following facts. A firm carried on the business of commission agents both at Indore and Jodhpur. B from Jodhpur entered into several forward contracts for the purchase and sale of bullion through the firm at Indore. These transactions proved unprofitable to B and the loss aggregated to a sum of Rs. 21,423-1-6 pies. The entire amount was paid to third parties at Indore by A on behalf of B and A received in all, a sum of Rs. 11457-8-0 which B paid from time to time, towards these losses, to As firm at Jodhpur. A therefore filed a suit in Jodhpur Court to recover the balance with interest. B pleaded inter alia that the transactions in suit amounted to wagering contract which were illegal according to the Notification dated 3rd Tune, 1943 issued under the Defence of India Rules and hence the suit was not maintainable. The Supreme Court on these facts came to the conclusion that the suit was really not one to enforce any contract relating to purchase or sale of bullion which came within the prohibition of the notification. The Supreme Court held that it was suit by an agent claiming indemnity against the principal for the loss which the agent had suffered in carrying out the directions of the principal.

6. The present case before us is not between principal and agent nor is it a case of claiming idemnity as between principal and agent. B.K. Mukherjea J. who delivered the judgment of the Supreme Court at page 502 of that report observed as follows:

'The fallacy in the reasoning of the learned Judges lies in the fact that the contract between principal and agent which is entirely collateral to the contract of purchase and sale, has been held by them as coming within the prohibition of the notification merely on the ground that payment by the agent to the principal of the profits of the transaction could be made or demanded at the place where the principal resides. In our opinion the right to idemnity, which is an incident of the contract of agency, is not hit by the notification at all and is a matier which is entirely collateral to a forward contract of purchase and sale of bullion which the notification aims at prohibiting.'

In the present case before us not only it is not a case of principal and agent, not only it is not a case of right to indemnity as between principal and agent but it is also not, in our view, a collateral contract in the sense understood in this branch of the law. We shall presently state why we do not consider the promissory note in this case to be a collateral transaction, after we review some more authorities on the point.

7. The next case on which reliance was placed by Mr. Dhar for the plaintiff appellant is another Supreme Court decision in Gherulal Parakh v. Mahadeodas Maiya, : AIR1959SC781 . Particular reliance was placed on the observation made at page 792 of that report where the Supreme Court said:

'Section 30 of the Indian 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 partnership being an agreement within the meaning of Section 23 of the Indian Contract Act, it is not unlawful, though its object is to carry on wagering transactions. We, therefore, hold that in me present case the partnership is not unlawful within the meaning of Section 23(a) of the Contract Act.'

8. We are afraid this case on the facts cannot help the plaintiff before us. The case of : AIR1959SC781 in the Supreme Court was concerned with very different sets of facts. There the appellant and the respondent entered into a partnership for carrying on wagering transactions and the respondents who carried on the transactions on behalf of the partnership claimed the share of the loss incurred in respect of those transactions from the appellant. The claim was resisted only on three grounds, namely, (1) that the object was forbidden by law; (2) it was op-posed to public policy and (3) it was immoral. The Supreme Court rejected those contention and allowed the claim on Inter alia the reason mentioned above.

9. The case before us is not a case of partnership between two carrying on wagering transactions. Partnership can be and very often is a collateral transaction within the doctrine of that principle illustrated in many judicial decisions on the point which it is needless for us to discuss.

10. What is necessary in the facts of this case to remember is that this is not a case of a collateral or a substituted contract or a partnership agreement or a contract between principal and agent relating to agency or indemnity between them. Here the tacts are simply this that two persona entered into Fatka or wagering transactions in shares and one became indebted to the other. A promissory note was executed for payment of that indebtedness. The plain question is, is this permissible in law speciallyhaving regard to the express provisions in Section 30 of the Contract Act saying:

'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'.

11. Mr. Dhar for the plaintiff realised his difficulties on the facts of the case arid made a last minute bid to escape from the rigours of the law on the point by a refinement of his argument that a promissory note in this case was really a collateral transaction not hit by Section 30 of the Contract Act. For this purpose he relied on the decision of Ameer Ali, J. in Kshitendra Nath Ray v. Madaneshwar Chatterji, (1936) ILR 63 Cal 1234 where W a member of the Calcutta Turf Club purchased a ticket in the Derby Sweepstake organised by the club for his employee, M, and that the ticket drew a horse and the holder of the ticket became entitled to a prize money. Before the money was handed over to M.K claimed that the ticket had in fact been purchased for him through his agent M to whom he had paid the price. In a suit by K for a declaration that he was entitled to the prize money and for an injunction against M. M contended that the suit was to recover money won on wager and was barred by Section 30 of the Indian Contract Act. The Court held that the suit was competent and M was liable to make over the prize money to K on the around that Section 30 of the Contract Act did not disentitle a principal to recover from his agent the prize money received by him on account of a wagering contract

12. Mr. Dhar reinforced this argument by relying on the decision of Buckland, J. in Leicester and Co. v. S. P. Mullick 27 Cal WN 442: (AIR 1923 Cal 445). There the defendant lost a sum of Rs. 8500 to the plaintiff firm on bets on horse races and on his failure to pay was reported to Royal Calcutta Turf Club. The defendant subsequently executed in favour of the plaintiff firm a Hundi for a sum of Rs. 8500 in consideration of their withdrawing his name from the R. C. T. C. and thereby preventing his being posted as defaulter. Buckland, J. came to the conclusion that the consideration for the Hundi was the plaintiff firm's promise to withdraw the defendant's name from the Royal Calcutta Turf Club in order to prevent the defendant from being posted as a defaulter and therefore such consideration was legal and the plaintiff was entitled to recover. The well-known case of Hyams v. Stuart King, (1908) 2 KB 696 was followed, as well as the principle that contracts by way of wagering and gaming were void but not illegal with reference to the case of Juggerpath Sew Bux v. Ram Dayal, (1883) ILR 9 Cal 791.

13. Both the Calcutta cases in (1936) ILR 83 Cal 1234 and 27 Cal WN 442: (AIR 1923 Cal 445) were really based on the doctrine of collateral contracts. An effort was made by Mr. Dhar to draw an analogy between the present case before us and the 27 Cal WN 442: (AIR 1923 Cal 445) by suggesting that the defendant's plea was that the plaintiff put the defendant tothreats and obtained the document in suit, but that does not help on the facts of this case. There was no analogous factual similarity between the instant case and the case of 27 Cal WN 442: (AIR 1923 Cal 445) where the threat was to post the debtor as a defaulter before the Royal Calcutta Turf Club in case he did not pay the money. To execute a promissory note to avoid being a defaulter of a club and to execute a promissory note to pay for wagering losses are entirely different. In the latter case the promissory note becomes an agreement by way of wager and therefore void within the meaning of Section 30 of the Contract Act. In the former case it is not, because it is collateral. It is needless to point out in this connection that Leicester and Co.'s case, 27 Cal WN 442: (AIR 1923 Cal 445) followed (1908) 2 KB 696 which has since been overruled by the House of Lords in Hill v. William Hill (Park Lane) Ltd., (1949) AC 530 where the House of Lords displaced the High authority which (1908) 2 KB 696 had enjoyed for forty years. The legal plea that an agreement which is forbidden by law can nevertheless be enforceable by the Court on the ground that the expression 'it is forbidden by law' in the first clause of Section 23 of the Contract Act makes con-tract void but not illegal, cannot apply in this case having regard to the facts and having re-card to the direct hit by Section 30 of the Contract Act on the facts of this case. Section 30 of the Contract Act as already pointed out, makes agreement by way of wager void and Section 10 of the Contract Act makes it clear that 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, but goes on to provide 'and are not hereby expressly declared to he void'. Section 30 of the Contract Act expressly declares agreements by way of wager to be void. No doubt in an appropriate case if the facts found that the agreements in question were not agreements by way of wager they will not be hit by Section 30 of the Contract Act. Indeed it was on that foundation that collateral contracts or substituted contracts as in 27 Cal WN 442: (AIR 1923 Cal 445) and (1936) ILR 63 Cal 1234 were said to be not direct 'agreements by way of wager' within the meaning of Section 30 of the Contract Act.

14. Here the point, in our view is concluded directly by the Authority of the Privy Council in Kong Yee Lone and Co. v. Lowjee Nanjee, (1901) 28 Ind App 239 (PC). The Privy Council makes it clear in that case that agreements by way of wager are void by Section 30 of the Indian Contract Act and expressly observed that no distinction was to be drawn between the words 'by way of wager' and the expression 'gaming and wagering' as used in the English Gaming and Wagering Act (89 Vict. C 109). The ratio of that decision is that where the circumstances as to contracts for sale, purchase, and delivery of goods are such as to warrant the legal inference that the parties never intended any actual transfer but only to pay or receive differences, the contracts must be deemed to be by way of wager. But the peculiar impact of the Privy Council case on the present case before us lies on the similarity of facts. There before thePrivy Council the suit was brought upon two promissory notes for different sums of money. The defence was that these promissory notes were given for gambling transactions and therefore could not be enforced. That is the very issue before us on the promissory or the handnote in this case. At page 247 of that report Lord Hobhouse expressed the judgment of the Privy Council by saying:

'Their Lordships hold that the consideration of the notes sued on was a number of wager-ing contracts within the meaning of the Indian Contract Act. They will humbly advise His Majesty so to declare, and, reversing the decree below, to dismiss the suit with costs.'

15. We are satisfied on the facts of this case that it comes within the principles of law laid down by the Privy Council in the above case and the similar facts in the present case bring it squarely within the principles of that decision. Here also is a case where the consideration of the promissory notes sued upon was the wagering contracts between the parties directly,

16. The suit, therefore, must fail on those principles of law and on the authority of that decision. Reference may also be made in this Connection to Doshi Talakshi v. Shah UJamsi Velsi, ILR 24 Bom 227 and the observations of Sir L. Tenkins, C. J. at page 229-30 that although in addition to Section 30 of the Contract Act which is mentioned there was a more thorough going local Act of Bombay being Bombay Act TIT of 1865.

17. What remains now for us is to make a brief reference to some subsidiary and minor points raised in the arguments at the Bar by Mr. Dhar for the plaintiff. One such point is about onus. The argument on onus was based on Section 118 of the Negotiable Instruments Act which provides inter alia:

'Until the contrary is proved the presumption shall be made that every negotiable instrument was made or drawn for consideration'. Mr. Dhar argued that the learned Judges of the courts below failed to appreciate this onus. The point is immaterial now because both the defendant and the plaintiff have given evidence and the Courts have found on the facts that the plaintiff could not prove consideration of cash as stated in the promissory note in the suit. In this connection Mr. Dhar for the plaintiff relied on a Calcutta decision in Ramani Mohan v. Surjya Kumar : AIR1943Cal22 which lays down the proposition that the presumption under Section 118 of the Negotiable Instruments Act that a promissory note is for consideration is not limited to the consideration as expressed in the note itself and therefore, where a promissory note is expressed to be for consideration paid in cash the presumption is not rebutted and the promissory note will not be held to be without consideration by merely showing that no cash consideration passed at the time of the execution of the promissory note if it transpires that consideration in some other form passed. The question here again is immaterial so far as this contention is concerned. The lower court came to the conclusion in this case that the promissorynote was false In go far us it stated that the consideration was paid in cash but that there was consideration but that consideration was by way of wagering transactions and wagering losses. As pointed out by Sulaiman C. J. and Bennet, J. in Girwar Ltd. v. Dau Dayal : AIR1935All509 the law is 'But if the Court has, after a consideration of the entire evidence, recorded a clear finding one way or the other, then that finding is based not on a mere presumption but on the evidence and the question of burden of proof is no longer material'.

18. It is difficult to interfere in civil revision under Section 115 C. P. C. in a case of this nature even if we were satisfied on the merits which we are not. After all the Small Causes Court had Jurisdiction. The Pull Bench had jurisdiction under Section 38 of the Presidency Small Cause Courts Act. A mere error in law by courts of competent jurisdiction from which no appeal lies and who commit no error of jurisdiction cannot be corrected in revisional jurisdiction under Section 115 C. P. C.

19. For these reasons the Rule is discharged.

20. There will be no order as to costs.

D. Basu, J.

21. I agree.


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