Author: Shrijeta Pratik, 1st Year law student at KPMSOL, NMIMS, Mumbai.
Essential details of the case:
Citation: 1986 SCC OnLine Ori 20
Appellant: Fakir Chand Seth
Respondent: Dambarudhar Bania
Bench: B Behera, P Misra
Date of Judgment: 25 March, 1986
Original copy: N/A
Facts of the Case:
- The plaintiff appealed the decision of the District Judge in a money case in which he sought for the recovery of Rs. 17,815/- plus interest payable on an agreement signed by the defendant. The plaintiff claimed that he paid the defendant Rs. 15,000 for the supply of paddy and the defendant signed a document including the parties’ conditions of agreement. It was agreed, as per the agreement, that the defendant would supply 350 bags of paddy at a rate of Rs. 43/- per bag of fine paddy and Rs. 45/- per bag of superfine paddy, and that after the shipment, the defendant would return the paper he had signed.
- The plaintiff claims that the defendant failed to supply the paddy or return the deposited money despite many demands and the defendant having written him two letters seeking time to address the situation. The plaintiff claims that he is not a habitual money lender and that the aforementioned deal was a one-time transaction in which he advanced money for the purchase of paddy: as previously stated. The claim was filed for the restoration of the sum of Rs. 15,000/- that the plaintiff had advanced to the defendant, as well as interest at the rate of 12% per year.
- The defendant rejected the plaintiff’s accusations in a written statement, disputing the execution of any instrument in favor of the plaintiff on 19-1-72 and also opposing receiving any money as advance. He further refuted sending a letter, acknowledging receipt of the aforementioned sum, nor did he ever promise to reimburse it, as claimed in the plaint. The defendant has entered a plea that the plaintiff could not legally purchase large volumes of paddy since he was not a licensed dealer. As a result, it is argued that a contract for the sale and purchase of paddy was illegal and void since it would equate to paddy procurement without a proper license.
Issues:
- Whether the plaintiff is entitled to the consideration amount under the Sections 65 and 70 of the Indian Contract Act, 1872?
- Whether the consideration for such a void agreement help in recovering the money advanced?
Judgment:
- The defendant’s plea of total denial of the execution of agreement and advancement of money hereafter having been rejected by the learned trial court, and against which no bend or challenge has been raised during the course of argument; the same shall be taken to be absolute between the parties.
- As a result, on 19-1-72, the plaintiff provided and the defendant accepted an amount of Rupees 15,000/- for the defendant’s supply of 350 bags of paddy at the stated rate to the plaintiff. As previously indicated this agreement was invalid under Section 23 of the Act and could not be enforced by any party.
- There has been no allegation or evidence that the plaintiff was informed that the agreement in issue was in breach of law, namely the Orissa Rice and Paddy Control Order, 1965, on the date of execution of agreement.
- As a consequence, it would be a case in which the plaintiff was unaware that the agreement was illegal and that it was later discovered to be invalid.
- Ultimately, the appeal was successful. The judgment and decree of the learned trial court, which were challenged in this appeal, were reversed, and the suit was decreed in its entirety, including costs.
Critical Analysis:
- The agreement was void since the said work, namely the provision of the amount of paddy specified in the agreement, was performed without even a valid license. Clearly, the amount of money advanced was not gratuitous.
- Acceptance of the aforementioned sum by the defendant entails a matching duty on the defendant’s part for the refund of the money if the work could not be completed due to a legal prohibition.
- Principles of equity have been established in Section 70 of the Act to prohibit undue gain or unjust benefit in such circumstances and to offer remedies in such cases. The Section distinguishes between a contract and an agreement.
- As per the Indian Contract Act, a contract is one that is legally enforceable, whereas a void agreement is one that is not legally enforceable. As a result, when the previous portion of the Section refers to an agreement being found to be void, it means that the agreement is not binding and hence not a contract. It was void, in other words.