B.N. Banerjee, J.
1. These two appeals involve the same question of law and are dealt with together.
2. One Radhakanta Das, now deceased, was, at all material times, a stockholder of and a dealer in corrugated iron sheets.
3. In Second Appeal No. 891 of 1953 (arising out of money suit No. 84 of 1950), the plaintiff appellant, Jahed Sheikh, paid to the said Radhakanta Das (who was original defendant No. 1), in his said business, a sum of, Rs. 500/- as advance towards the price of ten bundles of corrugated iron sheets agreed to be sold by the latter to the former. The advance was paid on the 8th November, 1947, and is evidenced by a receipt, marked exhibit 1.
4. Defendants respondents Nos. 2 to 4 are said to be agents of Radhakanta Das, in the said business. The receipt, exhibit 1, was signed by defendant No.2, Kamalesh, on behalf of defendant No. 1 Radhakanta. Defendants respondents Nos. 1(1) to 1(7) are heirs and legal representatives of the original defendant No. 1 Radhakanta, who were substituted, on the death of Radhakanta, in his place.
5. The case made by the plaintiff, Jahed Shaikh, was that the defendants respondents did not deliver the goods agreed to be sold, nor did they refund the money advanced by the plaintiff. The plaintiff laid his claim at Rs. 600/- inclusive of compensation.
6. The claim, made by the plaintiff, was contested by the defendants Nos. 1, 3 and 4. They denied the contract for sale of corrugated iron sheets and also the payment, by the plaintiff, of a sum of Rs. 500/-, by way of advance. Further, they denied that defendants Nos. 2 to 4 were agents of defendant No. 1, in the said business. Also, it was contended, that the contract was unlawful, being in contravention of the Iron and Steel (Control of Production and Distribution) Order, 1941, and as such, the plaintiff was not entitled to get a refund of the money advanced.
7. In Second Appeal No. 958 of 1953 (arising out of money suit No. 21 of 1950) Ali Aktar Hossain, plaintiff appellant, paid to Radhakanta Das, now deceased (who was original defendant No. 1), in his business, a sum of Rs. 4243/- as advance towards the price of 97 bundles of corrugated iron sheets, agreed to be sold by the latter to the former. Respondents Nos. 1(1) to 1(7) are heirs and legal representatives of Radhakanta Das, now deceased.
8. The case made by the plaintiff Ali Aktar Hossain was that defendant No. 1 Radhakanta, jointly with defendants respondents Nos. 2 to 4, carried business as stockholders of and dealers in corrugated iron sheets. Pro forma defendants respondents Nos. 5 to 13, being in need of corrugated iron sheets, approached the plaintiff with a request to secure for them corrugated iron sheets. The plaintiff negotiated with defendants Nos. 1 and 2 and entered into the agreement aforesaid. Pro forma defendants Nos. 5 to 13 had paid the price in the hands of the plaintiff, which amount he advanced to defendant No 1, on the 6th May 1947, and obtained a receipt (also marked exhibit 1 in money suit No. 21 of 1950J. Delivery of the corrugated iron sheets was not made as agreed upon, nor was the money advanced refunded to the plaintiff. The plaintiff in his turn had, however, to return the money, paid in his hands, to proforma defendants respondents Nos. 5 to 13. In these circumstances, the plaintiff appellant, Ali Aktar Hossain, filed money suit No. 21 of 1950, and laid his claim at Rs. 4500/- inclusive of compensation.
9. The claim made by the plaintiff AH Aktar Hossain was contested by the principal defendants on lines similar to that taken in money suit No. 84 of 1950, hereinbefore indicated.
10. In both the cases, the Courts of appeal below found that there were agreements made, as stated by the plaintiffs in the two suits, and that the two sums of money had actually been paid by the respective plaintiffs, in the two suit, to defendant No. 1 Radha Kanta Das. The claims made by the respective plaintiffs, in the two suits, were, however, dismissed on the ground that the agreements were illegal, being in contravention of the provisions of the Iron and Steel (Control of Production and Distribution) Order, 1941.
11. The line of reasonings adopted by the Courts of appeal below in both the cases is almost similar. The reasons were that at the time of the two agreements, the Iron and Steel (Control of Production and Distribution) Order, 1941, promulgated under rule 81 of the Defence of India Rules was in force. Clause 4 of that Order made acquisition of or agreements to acquire iron and steel except under the authority of and in accordance with the conditions contained or incorporated in a general or special written order of the Controller, illegal and punishable as an offence. The provisions in the Control Order of 1941 were, at all material times, continued by subsequent legislative measure. The plaintiffs, in the two suits, had no general or special permits from the Controller when they entered into the agreements for purchase. The agreements were, therefore, unlawful and void under Section 23 of the Indian Contract Act. The Courts of appeal below relied on a principle of English Law under which a person who entered into a transaction forbidden by law must not expect any assistance from law, and came to the conclusion that the aforesaid principle of law was applicable in India, subject, of course, to the provisions of Section 65 of the Indian Contract Act. The Courts of appeal below, in the two cases, were further of opinion that the two agreements, being unlawful and void, were not enforceable in law and were not contracts. Consequently, the plaintiffs were not entitled to enforce their respective claims, as sought to be done. In that view of the matter, the claims of the two plaintiffs were dismissed. Hence the two second appeals by the two plaintiffs.
12. Mr. Mukunda Behari Mullik, appearing for the plaintiffs appellants, in the two appeals, challenged the correctness of the decisions in both the appeals, and submitted that even though the agreements were to be taken to be unlawful, the same not having been performed, either in part, or at all, the defendants respondents, who received the money, were bound to return the money advanced.
13. We are of opinion that there is good deal of substance in the argument advanced by Mr. Mallik.
14. Under Section 23 of the Indian Contract Act, when the consideration or object of an agreement is forbidden by law, the agreement is unlawful and void. Agreement for acquisition of corrugated iron sheets, as in these two cases, without general or special written order from the Controller was forbidden under the Control Order of 1941, hereinbefore referred to. Therefore, if the acquisition of corrugated iron sheets had been made under the agreements, without the permit from the Controller, that would undoubtedly have been unlawful. But the two agreements in the two suits, which are evidenced by the two receipts (both marked as exhibit 1 in the two suits), did not show, on the face of them, that the agreements were for acquisition of corrugated iron sheets without authorisation by the Controller. It may be that at the time when the agreements for purchases were entered into, the two plaintiffs in the two suits, had no permit from the Controller, and, also, that they did not obtain the necessary permits at any time thereafter. But that will not without more go to show that their intention and object were to acquire corrugated iron sheets without permits, clandestinely and in violation of the provisions of the Control Order.
15. The defendant, Radhakanta Das, was an authorised stockholder and dealer in corrugated iron sheets. He knew best that no supply could be given unless permits or authorisation to buy were first had and obtained, by the two plaintiffs. Unless he was a dishonest person, he would never have accepted the deposits, if the agreements were to the effect that supplies were to be made to the plaintiffs, without valid permits or authorisation to buy, and in violation of the provisions of the Control Order. Reading the two receipts, which embody the terms of the two agreements, we are not prepared to hold that such must have been the agreements. There is nothing to indicate in the two receipts (both marked exhibit 1) that the supplies to the two plaintiffs were agreed to the made without and before the actual legal formalities for such supplies had first been complied with.
16. Even assuming that the agreements were for unlawful acquisition of corrugated iron sheets, even then the plaintiffs' claim must not necessarily fail, in the context of events in the two instant cases.
17. The rule in English law, of course, is, as observed by the Courts of appeal below, that money paid under an illegal contract cannot be recovered. But even in England, there are certain exceptions recognised to the general rule of non-recovery. One such exception is that when the parties are not in pari delicto, i.e., not both equally to blame for the illegality, the more innocent party will be allowed to recover. In Reynell v. Sprye, (1852) 1 De G. M & G 660 (679), Knight-Bruce, L. J. said;
'But where the parties to a contract against public policy, or illegal, are not in pari delicto (and they are not always so), and where public policy is considered as advanced by allowing either, or at least the more excusable of the two, to sue for relief against the transaction, relief is given to him.'
The other exception is that if the illegal purpose has not been carried out, the law allows a locus paenitentiae to the party who demands the return of money paid before the illegal purpose is carried out. So either party to an illegal agreement may rescind it while it remains executory and recover from the other party any money which he might have paid to him thereunder, although to enable him to do so, he must prove the making of the illegal contract as part of his case. But if the illegal purpose has been wholly or substantially effected or frustrated, the law allows no locus paenitentiae.
18. Bigos v. Bousted, (1951) 1 All ER 92, is an authority for the second exception indicated above.
19. So far as the law in India is concerned, the second exception, indicated above, appears to have been adopted.
20. In the case of Petherpermal Chetty v. Muniandi Servai 35 Ind App 98 (103) (PC), Lord Atkinson observed as follows :
'In conspiracy, the concert or agreement of the two minds in the offence, the overt act is but the outward and visible evidence of it. Very often the overt act is but one of the many steps necessary for the accomplishment of the illegal purpose, and may, in itself, be comparatively insignificant and harmless; but to enable a fraudulent confederate to retain the property transferred to him in order to effect a fraud the contemplated fraud must, according to the authorities, be effected. Then, and then alone, does the fraudulent grantor, or giver, lose the right to claim the aid of the law to recover the property he has parted with.'
To the same effect is the judgment in Venkatramayya v. Pullayya, ILR 59 Mad 998: (AIR 1936 Mad 717) (FB) and also a much more recent decision of the same High Court reported in Tirupathi Mudali v. Lakshmana Mudali : AIR1953Mad545 .
21. The same view was also taken by the Patna High Court in the case of Gopi Krishna v. Janak Prasad, : AIR1951Pat519 .
22. The history of the development of the law of fraudulent conveyances was reviewed in the case Jadunath Poddar v. Ruplal Poddar, ILR 33 Cal 967. It was held in that case that if the purpose for which the assignment was made was not carried into execution and nothing was done under it, the mere intention to effect an illegal object did not deprive the assignor of the right to recover the property back from the assignee who gave no consideration for it.
23. The two cases relied on by the Courts of appeal below are distinguishable. The case reported in Ledu Coachman v. Hiralal 19 Cal WN 919: (AIR 1916 Cal 266) was a case in which a sum of money appears to have been paid to the Nazir of the Court of the District Judge of Barisal for the purpose of securing to the plaintiff the post of permanent peon, within a given period. In a suit for recovery of the money, so advanced, it was held that where the money had been paid under an unlawful agreement, but nothing else was done in performance of it, money may be recovered back, but this will not be allowed if the agreement is actually criminal or immoral. It was held in that case that the agreement was void on the face of it, and was void ab initio and if the Courts were to assist the plaintiff to recover his money, bribery and corruption would be encouraged.
24. The proposition of law, enunciated in the above case, is not of any assistance in the facts of the instant two cases. The agreements in question, as we have already found, were not per se illegal on the face of them, and therefore, would not fall within the mischief of the decision. Assuming for the sake of argument that they were unlawful, even then wehold that they were not unlawful to that degree, which was condemned in the decision reported in 19 Cal WN 919 : (AIR 1916 Cal 226). The agreements were unlawful, if at all, because they violated a technical statutory provision. In the days of Control Orders, i.e., during the period of the last Great War, the Control Orders were so many that it was difficult for anybody to remember all of them. If in depositing moneys, an offence was at all technically committed, we are not prepared to hold that there was any mens rea on the part of the plaintiffs, and in that view of the matter, so long as the contracts remained executory contracts, the plaintiffs, by their conduct, did not disentitle themselves to assistance from the Court.
25. The other case relied upon by the Courts of appeal below is the case reported in Durgeshnandini v. Bhowanipur Banking Corporation 43 Cal WN 260. There the plaintiff, a Bank, made an act of felony so far as the defendant was concerned and extorted from her a mortgage bond. In a suit for enforcement of the mortgage, it was held that when for securing the withdrawal of a criminal prosecution against a certain person, a third party receives a make-believe loan from the complainant and the major part of the consideration is applied by the latter for the satisfaction of a debt owing to him by the accused, the complainant cannot recover from such third party even such small part of the loan as he may have actually received himself.
26. The facts of the case reported in 43 Cal WN 260 are so very different from the facts of the present case that no analogy can be drawn between the two, and we are of opinion that there is nothing in the decision reported in 43 Cal WN 260 which militates against the point of law herein before enunciated.
27. In the facts and circumstances of the present case, we are of opinion, in the first place, that in the terms evidenced by the two receipts there was no agreement to supply corrugated iron sheets to the plaintiffs unlawfully and in contravention of the Iron and Steel (Control of Production and Distribution) Order, 1941. Even assuming that the agreement in each case was ab initio unlawful, even then we hold that as between the plaintiffs and the defendants, the plaintiffs were the more innocent and were not in pari delicto with the defendants in the matter of the agreement said to be unlawful. In that view of the matter, a Court will assist them in recovering the money paid by them to the defendants.
28. Lastly, we are of opinion that the plaintiffs are not really seeking to enforce unlawful contracts. The claims made by them, in the two suits, evidenced their desire to repudiate the agreements and to get back their money. In these circumstances law will allow them locus paenitentiae and will, in that view of the matter, permit them to recover the money paid.
29. In the above view of the matter, we are of opinion that the claims made by the plaintiffs in the two suits must succeed. We set aside the judgments and decrees of the two Courts below and allow the appeals. The two suits are decreed in favour of the two plaintiffs.
30. In view of the fact that the grounds, on which these two appeals succeed, were not taken in the memoranda of appeals, we make no order as to costs in the two appeals.
Renupada Mukherjee, J.
31. I agree.