r959

The Cominissioncr

of Income-tax,

llydcrabad-Deccan

v.

Jt1essrs. Vazir

Sultan & Sous

Bhagwati ] .

r959

March 26.

406 SUPREME COURT REPORTS [1959] Supp.

I would therefore allow this appeal with costs

throughout.

By

COURT: In accordance with the majority judg­

ment of the Court, the appeal is dismissed with costs

throughout.

Appeal

dismissed.

GHERULAL PARAKH

v.

MAHADEODAS MAIYA AND OTHERS

(JAFER IMAM, A. K. SARKAR and

K. SuBBA RAO, JJ.)

Wager-Collateral contract-Agreement of partnership to enter

into wagering

transactions-Legality-Indian Contract Act,

r872

(9 of I872), SS. 23, 30.

The question for determination in this appeal V1

1as \Vhether -

an agreement of partnership ¥.•ith the object of entering into

vvagering transactions was illegal within the meaning of s. 23 of

the

Indian

Contract Act. The appellant and the respondent

No. I entered into a partnership with the object of entering into

forward contracts for the purchase and sale of wheat with two

other firms and the agreement between them was that the res­

pondent would enter into the contracts on behalf of the partner­

ship and the profit or loss would be shared by the parties equally.

The transactions resulted in loss and the respondent paid the

entire amount due to the third parties. On the appellant deny­

ing his liability for the half of the loss, the respondent sued him

for the recovery of the same and his defence, inter alia, was that

the agreement to enter into the wagering contracts \Vas unlawful

under s. 23 of the Contract Act. The trial Court dismissed the

suit. The High Court on appeal held that though the wagering

contracts \Vere void under s. 30 of the Indian Contract Act, the

object of the partnership was not unlawful within the meaning of

the Act and decreed the suit. It was contended on behalf of

the appellant (r) that a wagering contract being void under

s. 30 of the Contract Act, was also forbidden by law within the

(2) S.C.R. SUPREME COURT REPORTS 407

meaning of s. 23 of the Act, that (2) the concept of public policy I959

was very comprehensive in India since the independence, and

such a contract would be against public policy, (3) that wager-Gherulal Pa.akh

ing contracts were illegal under the Hindu Law and (4) that v.

they were immoral, tested by the Hindu Law doctrine of piocis Ma/iadeodas

obligation of sons to discharge the father's debts. Maiya & Others

Held, that the contentions raised were unsustainable in law

and must be negatived.

Although a wagering

contract was void and unenforceable

under s.

30 of the Contract Act, it was not forbidden by law and

an agreement collateral to such a contract was not unlawful

within

the meaning of s. 23 of the

Contract Act. A partnership

with the object of carrying on wagering transactions was not,

therefore,

hit by that section.

Pringle v. J afer

Khan, (1883) I.L.R. S All. 443, Shibho

Mal v. Lackman Das, (1901) I.L.R. 23 All. 165, Beni Madho Das

v. Kaunsal Kishor Dhusar, (1900) I.L.R. 22 All. 452, Md. Gulam

Mustafakhan

v. Padamsi, A.LR. (1923) Nag. 48, approved.

Thacker v. Hardy, (1878) L.R. 4 Q.B. 685, Read v. Anderson,

(1882)

L.R. IO Q.B.

IOO, Bridger v. Savage, (1885) L.R. IS Q.B.

363, Hyams v. Stuart King, [1908] 2 K.B. 696, Thwaites v. Coulth­

waite, (1896) I Ch. 496, Brookman v. Mather, (1913) 29 T.L.R. 276

and J ajfrey & Co. v. Bamford, (1921) 2 K.B. 351, Ramlall Thackoor­

seydass v. Soojumnull Dhondmull, (1848) 4

M.l.A. 339, Doolubdas

Pettamberdass

v. Ramlall Thackoorseydass and

Ors. (1850) 5 l\U.A.

I09, Raghoonauth Shoi'Chotayloll v. Manickchund and Kaisreechund,

(1856)

6 M.I.A.

251, referred to.

Hill v. William Hill, (1949) 2 All E.R. 452, considered.

The doctrine of public policy was only a branch of the com­

mon

law and just like its any other branch, it was governed by precedents; its principles had been crystallised under different

heads and though it was permissible to expound and apply the)Tl

to different situations, it could be applied only to clear and un­

deniable cas~s of harm to the public. Although theoretically it

was permissible to evolve a new head of public policy in excep­

tional cirumstances, such a course would be inadvisable in the

interest of stability of society.

Shrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas,

I.L.R. (1920) 44 Born. 6, Bhagwanti Genuji Girme v. Gangabisan

Ramgopal,

I.L.R. 1941 Born. 71, and Gopi Tihadi v.

Gohhei Panda,

I.L.R. 1953 Cuttack 558, approved.

Egerton v. Brownlow, 4 H.L.C. l; IO E.R. 359, Janson v.

Driefontein Consolidated Mines, Ltd., (1902) A.C. 484, Fender v.

St. John-Mildmay, (1938) A.C. land Monkland v. Jack Barclay

Ltd., (1951)

l All E.R. 714, referred to.

Like

the common law of England, which -did not recognise

any principle of public policy declaring wagering contracts

illegal,

the Indian

Courts, both before and after the passing of

r959

Gherulal Parakh

v.

M ahadeg_das

Maiya & Others

408 SUPREME COURT REPORTS [1959] Supp.

Act 2r of 1848 and also after the enactment of the Indian Con­

tract Act, 1872, held that wagering contracts were not illegal as

being contrary to public policy and collateral contracts in respect

of them were enforceable in law.

Ramlolt Thackoorseydass v. Soojumnull Dhondmull, (1848) 4

M.I.A. 339, referred to.

Gambling

or wagering contracts

\Vere never declared to be

illegal

by courts in India as being contrary to public policy as

offending the principles of ancient Hindu Law and it was not

possible to give a novel content to that doctrine in respect of

gaming and wagering contracts.

The State of

Bombay v. R. M. D. Chamarbaugwala, [1957]

S.C.R. 874, considered.

The common law of England and that of India never struck

down contracts of wager on the ground of public policy and such

contracts had always been held not to be illegal although the

statute declared them to be void.

The moral prohibitions in Hindu Law texts against gambl­

ing were not legally enforced but were allowed to fall into

desuetude and it was not possible to hold that there was any

definite head. or principle of public policy evolved by courts or

laid down by precedents directly applicable to wagering con­

tracts.

There was neither any authority nor any legal basis for

importing the doctrine of Hindu Law relating to the pious

obligation of sons to pay the father's debt into the dominion of

contracts. Section 23 of the Contract Act was inspired by the

common law of England and should be construed in that light.

The word "immoral" was very comprehensive and varying

in its contents and no universal standard could be laid down.

Any law, therefore, based on such fluid concept would defeat its

purpose. The provisions of s. 23 of the Indian Contract Act

indicated that the Legislature intended to give that word a

restricted meaning. The limitation imposed on it by the expres­

sion" the Court regards it as immoral" clearly indicated that it

was also a branch of the common law and should, therefore, be

confined

to principles recognised and settled by courts. Judicial

decisions confined it to sexual immorality, and \vager could not

be brought in as new head within its fold.

CrvIL APPELLATE JURISDICTION: Civil Appeal No.

215

of

!955.

Appeal from the judgment and decree dated April 1,

1953,

of the Calcutta High

Court in Appeal from

Original Decree No. 89 of 1946, arising

out of the

judgment and decree dated December 4, 1945, of the

Subordinate Judge, Darjeeling, in Money Suit No. 5

of

1940.

(2) S.C.R. SUPREME COURT REPORTS 409

L. K. Jha and D. N. Mukherjee, for the appellant.

C. B. Aggarwala, K. B. Bagchi and Sukumar Gho8h,

for Respondents Nos. l to 5.

1959. March 26. The Judgment of the Court

was delivered by

SUBBA RAO, J.-This appeal filed against the judg­

ment of the High Court of Judicature at Calcutta

raises the question of the legality of a partnership to

carry on business in wagering contracts.

The facts lie in a small compass. They, omitting

those not germane to the controversy before us, are as

follows: The appellant, Gherulal Parakh, and the

first respondent, Mahadeodas Maiya, managers of two

joint families entered into a

partnership to carry on

wagering

contracts with two firms of Hapur, namely,

Messrs. Mulchand Gulzarimull

and Baldeosahay

Suraj­

mull. It was agreed between the partners that the

said contracts would be made in the name of the res­

pondents on behalf of the firm and that the profit and

loss resulting from the transactions would be borne by

them in equal shares. In implementation of the said

agreement,

the first respondent entered into 32

con­

tracts with Mulchand and 49 contracts with Baldeo­

sahay and the nett result of all these transactions was

a loss, with

the result that the first respondent had to

pay to the Hapur merchants the entire amount due to

them. As the appellant denied his liability to bear

his share of the loss, the first respondent along with

his sons filed

0.

S. No. 18 of 1937 in the Court of the

Subordinate Judge, Darjeeling, for the recovery of

half of the loss incurred in the transactions with Mul­

chand. In the plaint he reserved his right to claim

any further amount in respect of transactions with

Mulchand that might be found due to him after the

accounts were finally settled with him. That suit was

referred

to arbitration and on the basis of the award,

the Subordinate Judge made a decree in favour of the

first respondent and his sons for a sum of Rs. 3,375.

After the final accounts were settled between the first

respondent and the two merchants of Hapur and after

52

z959

Gherulal Parakh

v.

Mahadeodas

M

aiya

& Others

Subba Rao ].

I959

Gherulal Parakh

v.

Mahadeodas

M aiya & Others

Subba Rao J.

410 SUPREME COURT REPORTS [1959] Supp.

the amounts due to them were paid, the first respon­

dent instituted a suit, out of which the present appeal

arises, in the Court of the Subordinate Judge, Darjeel­

ing, for

the recovery of a sum of Rs.

5,300 with

interest thereon. Subsequently the plaint was amend­

ed and by the amended plaint the respondents asked

for the same relief on the basis that the firm had been

dissolved.

The appellant and his sons, inter alia,

pleaded in defence that the agreement between the

parties to enter into wagering contracts was unlawful

under s. 23

of the Contract Act, that as the partner­

ship was not registered, the suit was barred under

s. 69(1) of the Partnership Act and that in any event

the suit was barred under 0. 2, Rule 2 of the

Code of

Civil Procedure. The learned Subordinate Judge

found that the agreement between the parties was to

enter into wagering contracts depending upon the rise

.and fall

of the market and that the said agreement

was void as the said object was forbidden by law and

opposed to public policy. He also found that the

claim in respect of the·transactions with Mulchand so

far as

it was not included in the earlier suit was not

barred under

0. 2, Rule 2, Code of Civil Procedure, as

the cause of action in respect of that part of the claim

did

not arise at the time the said

suit was filed. He

further found that the partnership was between the

two joint families of the appellant and the first res­

pondent respectively,

that there could not be in law

such

a, partnership and that therefore s. 69 of the

Partnership Act was not applicable. In the result, he

dismissed

the suit with costs. On appeal, the learned Judges of the High Court

held that the partnership was not between the two

joint families

but was only between the two managers

of the said families and therefore it was valid. They

found that the partnership to do business was only

for a single

venture with each one of the two mer­

chants of Hapur and for a single season and that the

said partnership was dissolved after the season was

over

and therefore the suit for accounts of the dis­

solved firm was

not hit by the provisions of sub­

sections

(l) and (2) of s. 69 of the Partnership Act.

(2) S.C.R, SUPREME COURT REPORTS 411

They further found that the object of the partners

was to deal in differences and that though the said

transactions, being in

the nature of wager, were void

under s.

30 of the Indian Contract Act, the object was

not unlawful within the meaning of s. 23 of the said

Act.

In regard to the

Claim, the learned Judges found

that there was no satisfactory evidence as regards the

payment by the first respondent on account of loss

incurred in the contracts with Mulchand but it was

established

that he paid a sum of Rs. 7,615 on account

of loss in the contracts entered into with Baldeosahay.

In the result, the High

Court gave a decree to the

first respondent for a sum of Rs. 3,807-8-0 and dis­

allowed interest thereon for the reason that as the

suit in substance was one for accounts of a dissolved

firm, there was no liability in

the circumstances of the

case to pay interest. In the result, the High

Court

gave a decree in favour of the first respondent for the

said amount together with another small item and

dismissed the suit as regards " the plaintiffs other

than the first respondent and the defendants other

than the appellant".

Before we consider the questions of law raised in the

case, it would be convenient at the outset to dispose of

questions of fact raised by either party. The learned

Counsel for

the appellant contends that the finding of

the learned Judges of the High

Court that the

partnership stood dissolved after the season was over

was not supported

by the pleadings or the evidence

adduced in

the case. In the plaint as originally

draft­

ed and presented to the Court, there was no express

reference to

the fact that the business was dissolved

and no relief was asked for accounts of the dissolved

firm.

But the plaint discloses that the parties jointly

entered into contracts with two merchants between

March 23, 1937,

and June 17, 1937, that the plaintiffs

obtained complete accounts of profit

and loss on the

aforesaid transactions from the said merchants after

June 17, 1937, that they issued a notice to the defen.

dants to pay them a sum of Rs. 4,146-4-3, being half

of the total payments made by them on account of

I959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao ].

'959

Gherulal Parakh

v.

A1 ahadeod!ls

M aiya &-Others

Subba Rao].

412 SUPREME COURT REPORTS [1959] Supp.

the said contracts and that the defendants denied

their liability. The suit was filed for recovery of the

said amount. The defendant filed a written-statement

on June 12, 1940, but did not raise the plea based on

s. 69 of the Partnership Act. He filed an additional

written-statement on November 9, 1941, expressly

setting up the plea. Thereafter the plaintiffs prayed

for the amendment of the plaint by adding the follow­

ing to the plaint as paragraph 10:

"That even Section 69 of the Indian Partuership

Act is not a bar to the present suit as the joint busi­

ness referred to above was dissolved and in this suit

the Court is required only to go into the accounts of

the said joint business ".

On August 14, 1942, the defendant filed a further addi­

tionn,I written-statement alleging that the allegations

in paragraph 2 were not true and that n,s no date of

the alleged dissolution had been mentioned in the

plaint, the plaintiffs' case based on the said alleged

dissolution was

not maintainable. It would be seen

from

the aforesaid pleadings that though an express

allegation

of the fact of dissolution of the partnership

was only made by an amendment on November 17,

1941,

the plaint as originally presented contained all

the facts sustaining the said plea. The defendants in

their written-statement, inter alia, denied that there

was any partnership to enter into forward contracts

with the said two merchants and that therefore

con­

sistent with their case they did not specifically deny

the said facts. The said facts, except in regard to the

question whether the partnership was between the two

families or only between

the two managers of the

families on which there was difference of view between

the

Court of the Subordinn,te Judge and the High Court.,

were concurrently found by both the Courts. It

follows from the said findings that the pn,rtnership was

only

in respect of

forwn,rd contracts with two specified

individuals

and for a particular season. But it is said

that the said findings were not based on any evidence

in the case. It is true that the documents did not

clearly indicate any period limiting the operation of

the partnership, but from the attitude adopted by the

(2) S.C.R. SUPREME COURT REPORTS 413

defendants in

the earlier suit ending in an award and

1

959

that adopted.in the pdresent pleadings,£ thhe

nat~re of Gherul-:i-Parakh

the transact10ns an the conduct o t e parties, no v.

other conclusion was possible than that arrived at by Mahadeodas

the High Court. If so, s. 42 of the Partnership Act Maiya & Others

directly applies to this case. Under that section in

the absence of a contract to the contrary, a firm is dis- Subba Rao J.

solved, if it is constituted to carry out one or more

adventures or undertakings, by completion thereof. In

this case, the partnership was constituted to carry out

contracts with specified persons during a particular

season and as the said contracts were closed, the part-

nership was dissolved.

At this stage a point raised by the learned Counsel

for the respondents may conveniently be disposed of.

The learned Counsel contends that neither the learned

Subordinate

Judge nor the learned Judges of the High Court found that the first respondent entered into any

wagering transactions with either of the two mer­

chants of Hapur and therefore no question of illegality

arises in

this case. The law on the subject is well. settled and does not call for any citation of cases. To

constitute a wagering

contract there must be proof

that the contract was entered into upon terms that the

performance of the contract should not be demanded,

but only the difference in prices should be paid. There

should be common intention between the parties to

the wager that they should not demand delivery of

the goods but should take only the difference in prices

on

the happening of an event. Relying upon the said

legal position,

it is contended that there is no evidence

in

the case to establish that there was a common

in­

tention between the first respondent and the Hapur

merchants not to take delivery of possession but only

to gamble in difference

in prices. This argument, if

we may say so, is not really germane to the

. question

raised in this case.

The suit was filed on the basis of

a dissolved

partnership for accounts. The defendants

contended

that the object of the partnership was to

carry on wagering transactions, i. e., only to gamble

in differences without any intention to give or take

delivery of goods. The

Courts, on the evidence, both

r959

Gherulal Parakh

v.

Mahadeodas

Maiya G Others

Subba Rao ].

414 SUPREME COURT REPORTS [1959] Supp.

direct and circumstantial, came to the conclusion that

the partnership agreement was entered into with the

object of carrying on wagering transactions wherein

there was no intention to ask for or to take delivery

of goods but only to deal with differences. That is a

concurrent finding of fact, and, following the usual

practice of this Court, we must accept it. We, there­

fore, proceed on the basis that the appellant and the

first respondent entered into a partnership for carry­

ing on wagering transactions and the claim related

only to the loss incurred in respect of those transac­

tions.

Now

we come to the main and substantial point in

the case. The problem presented, with its different

facets, is whether

the said agreement of partnership is

unlawful

within the meaning of s. 23 of the Indian

Contract Act.

Section 23 of the said Act, omitting

portions unnecessary for the present purpose, reads as

follows:

" 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 pub­

lic policy.

In each of these cases, the consideration or object

of an agreement is said to be unlawful. Every agree­

ment of which the object or consideration is unlawful

is

void."

Under this section, the object of an agreement, whe­

ther it is of partnership or otherwise, is unlawful if it

is forbidden by law or the Court regards it as immoral

or opposed to public policy and in such cases the

agreement itself is void.

The learned Counsel for the appellant advances his

argument under three sub.heads: (i) the object is for­

bidden by law, (ii)

it is opposed to public policy, and

(iii) it is immoral. We shall consider each one of them

separately. .

Re.

(i)-forbidden by law :

Under s. 30 of the Indian

Contract Act, agreements by way of wager are void;

and no suit shall be brought for recovering anything

(2) S.C.R. SUPREME COURT REPORTS 415

alleged to be won

on any wager, or entrusted to any

person to abide the result of any game or other

uncer­

tain event on which any wager is made. Sir William

Anson's definition

of

"wager" as a promise to give

money or money's worth upon

the determination or

ascertainment of an uncertain event accurately brings

out the concept of wager declared void by s.

30 of the

Contract Act. As a contract which provides for pay­

ment of differences only without any intention on the

part of either of the parties to give or take delivery of

the goods is admittedly a wager within the meaning

of

s.

30 of the Contract Act, the argument proceeds,

such a transaction, being void under

the said section,

is also forbidden

by law within the meaning of s. 23

of the Contract Act. The question, shortly stated, is

whether

what is void can be equated with what is

for­

bidden by law. This argument is not a new one, but

has been raised in England as well as in India and has

uniformly been rejected. In England the law relating

to gaming and wagering contracts is contained in the

Gaming Acts of 1845 and 1892. As the decisions

turned upon the relevant provisions of the said Acts,

it would help to appreciate them better if the relevant

sections of

the two Acts were read at this stage : Section 18 of the Gaming Act, 1845:

" Contracts by way of gaming to be void, and

wagers or sums deposited with stakeholders not to be

recoverable

at law-Saving for subscriptions for

prizes-............... All contracts or agreements, whe-

ther by parole or in writing, by way of gaming or

wa--

gering, shall be null and void; and ......... no suit shall

be

brought or maintained in any court of law and

equity for recovering any sum of money or valuable

thing alleged to be

. won upon any wager, or which

shall

have been deposited in the hands of any person

to abide the event on which any wager shall have

been made: Provided al

ways, that this enactment

shall not be deemed to apply to any subscription or

contribution, or agreement to subscribe or contribute,

for

or towards any plate, prize or sum of money

to be awarded to the

winµer or winners of any

lawful game, sport, pastime or exercise."

I959

Gherul al PMakh

v.

Mahadeodas

Maiya & Others

Subba Rao].

1959

Ghe1ulal Parakh

v.

i'vf ahadeodas

M

aiya

& Others

Subba Rao ].

416 SUPREME COURT REPORTS [1959] Supp.

Section 1 of the Gaming Act, 1892 :

" Promises to repay sums paid under contracts

void by 8 & 9 Viet. c. 109 to be null and void.-Any

promise, express or implied, to pay any person any

sum of money paid by him under or in respect of any

contract or agreement rendered null and void by the

Gaming Act, 1845, or to pay any sum of money by

way of commission, fee, reward, or otherwise in respect

of any such contract, or of any services in relation

thereto or in connexion therewith, shall be null and

void, and no action shall be brought or maintained to

recover any such sum of money."

While the Act of 1845 declared all kinds of wagers or

games null and void, it only prohibited the recovery

of money or valuable thing won upon any wager or

desposited with stakeholders. On the other hand, the

Act of 1892 further declared that moneys paid under

or in respect of wagering contracts dealt with by the

Act of 1845 are not recoverable and no commission or

reward in respect of any wager can be claimed in a

court

of law by agents employed to bet on behalf of

their principals. The law of England till the passing

of the Act of 1892 was analogous to that in

India and

the English law on the subject governing a similar

situation would be

of considerable help in deciding the

present case.

Sir William Anson in his book" On Law

of Contracts" succinctly states the legal position thus,

at page 205:

" ............... the law may either actually forbid an

-agreement to be made, or it may merely say that if it

is made the Courts will not enforce it. In the former

case

it is i!Iegal, in the latter only void ; but inasmuch

as illegal contracts are also void, though void contracts

are not necessarily illegal, the distinction is for most

purposes not important, and even judges seem some­

times to treat the two terms as inter-changeable."

The learned author

proceed~ to apply the said general

principles to wagers

and observes, at page 212, thus: "Wagers being only void, no taint of illegality

attached to a transaction, whereby one man employed

another to make bets for him ; the ordinary rules which

(2) S.C.R. SUPREME COURT REPORTS 417

govern the relation of employer and employed applied

in such a caRe."

Pollock and Mulla in their book on Indian Contract

define the phrase "forbidden by law " in s. 23 thus, at

page 158:

"An act or undertaking is equally forbidden by

law whether it violates a prohibitory enactment of th::i

Legislature or a principle of unwritten law. But in

India, where the criminal law is codified, acts forbid-

den

by law seem practically to consist of acts punish-

able

under the

Penal Code and of acts prohibited by

special legislation, or

by regulations or orders made

under authority derived from the

Legislature."

Some of the decisions, both English and Indian,

cited at the Bar which bring out the distinction be­

tween a

contract which is forbidden by law and that

which is void may now be noticed. In Thacker v.

Hardy

(1), the plaintiff, a broker, who was employed

by the defendant to speculate for him upon the stock

Exchange, entered into contra.cts on behalf of the

defendant with a third party upon which he (the

plaintiff) became personally liable. He sued the defen­

dant for indemnity against the liability incurred by

him and for commission as broker. The Court held

that the plaintiff was entitled to recover notwith­

standing the provisions of 8 & 9 Viet. c. 109, s. 18

(English Gaming Act, 1845). Lindley,

J., observed at

page 687: "Now, if gaming and wagering were illegal, I

should be

of opinion that the illegality of the transac­

tions in which

the plaintiff and the defendant were

engaged would

have tainted, as between themselves,

whatever the plaintiff had done in futherance of their

illegal designs, and would have precluded him from

claiming,

in a court of law, any indemnity from the

defendant in respect of the liabilities he had incurred :

Cannan v. Bryce (3 B. & Ald. 179) ; M cK innell v.

Robinson (3 M. & W. 434); Lyne v. Siesfeld (1 H. &

N. 278). But it has been held that although gaming

and wagering contracts cannot be enforced, they are

(r) (1878) L.R. 4 Q.B. 685.

53

x959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao j.

1959

Gherulal Parakh

v.

Mahadeodas

Maiya &>Others

S11bba Rao ] .

418 SUPREME COURT REPORTS [1959] Supp.

not illegal. Fitch v. Jones (5 E. & B. 238) is plain to

that effect. Money paid in discharge of a bet is a

good consideration for a bill

of exchange:

Oulds v.

Harrison (10 Ex. 572); and if money be so paid by a

plaintiff

at the request of a defendant, it can be

reco­

vered by action against him : Knight v. Gamber (15 C.

B. 562); J essopp v. Lutwyoho (10 Ex. 614); Rosewarne

v. Billing (15 C. B. (N. S.) 316); and it has been held

that a request to pay may be inferred from an autho­

rity to bet: Oldham v. Ramsden (44 L. J. (0. P.) 309).

Having regard to these decisions, I cannot hold that

the statute above referred to precludes the plaintiff

from

maintaining this

action."

In Read v. Anderson (

1

)

where an agent was employed

to

make a bet in his own name on behalf of his princi­

pal, a similar question arose for consideration.

Hawk­

ins, J., states the legal position at page 104 :

"At common law wagers were not illegal, and

before the passing of 8 & 9 Viet. c. l 09 actions were

constantly brought and maintained to recover money

won upon them. The object of 8 & 9 Viet. c. 109

(passed in 1845) was not to render illegal wagers which

up to

that time had been lawful, but simply to make

the law no longer available for their enforcement,

leaving the parties to them to pay them or not as their

sense of honour might

dictate."

After citing the provisions of s. 18 of that Act, the

learned Judge proceeds to observe thus, at page

105:

" There is nothing in this language to affect the

legality of wagering contracts, they are simply rend­

ered null and void; and not enforceable by any pro­

cess of law. A host of authorities have settled this

to be the- true effect of the Statute."

This judgment of Hawkins, J., was confirmed on appeal

(reported in' 13 Q. B. 779) on the ground that the

agency became irrevocable on the making of the bet.

The judgment of the Court of Appeal cannot be consi­

dered to be a

direct decision on the point. The said

principle was affirmed

by the Court of Appeal again

in Bridger v. Savage

('). There the plaintiff sued his

(1) (1882) L.R. 10 Q.B. 100. (2) (1885) L.R. 15 Q.B. 363.

(2) S.C.R. SUPREME COURT REPORTS 419

agent for the amount received by him in respect of the

winnings from the persons with whom the agent had

betted. Brett, M. R., observed at page 366 :

" ............ the defendant has received money

which he contracted with

the plaintiff to hand over

to him when he had received it. That is a perfectly

legal

contract ; but for the defendant it has been con­

tended that the statute 8 & 9

Viet. c. 109, s. 18, makes

that contract illegal. The answer is that it has been

held by the Courts on several occasions that the sta­

tute applies only to the original contract made be­

tween

the persons betting, and not to such a con­

tract as was made here between the plaintiff and defendant."

Bowen, L. J., says much to the same effect at page

367:

"Now with respect to the principle involved in

this case, it is to be observed that the original contract

of betting is not an illegal one, but only one which is

void.

If the person who has betted pays his bet, he

does nothing

wrong; he only waives a benefit which

the statute has given to him, and confers a good title

to the money on the person to whom he pays it.

Therefore when

the bet is paid the transaction is com­

pleted,

and when it is paid to an agent it cannot be

contended

that it is not a good payment for his prin-

cipal.

...........

So much, therefore, for the principle

governing this case. As

to the authorities, the cases

of

Sharp v. Taylor (2 Phil. 801), Johnson v. Lansley

(12 C. B. 468), and Beeston v. Beeston (1 Ex. D. 13),

all go

to shew that this action is maintainable, and

the only authority the other way is that of Beyer v.

Adams (26 L. J.

(Ch.) 841), and that case cannot be

supported,

and is not

law." This case lays down the

correct principle and ~s supported by earlier authori­

ties.

The decision in Partridge v. Mallandaine (

1

)

is

to the effect that persons receiving profits from betting

systematically carried on

by them are chargeable with

income-tax on such profits

in respect of a

"vocation"

under 5 & 6 Viet. c. 35 (the Income Tax Act) Sche­

dule D. Hawkins, J., rejecting the argument that the

(r) (1887) L.R. 18 Q.B. 276.

I959

Glterulal Paraklt

v.

M altadeodas

1Waiya & Others

Subba Rao ].

420 SUPREME COURT REPORTS [1959] Supp.

1

959 profession of bookmakers is not a calling within the

h 1

-

1

- 11 meaning of the Income Tax Act, makes the following

G eru a Para•i .

v. observat10ns, at page 278:

Mahadeodas "Mere betting is not illegal. It is perfectly law-

Maiya e,. Others fol for a man to bet if he likes. He may, however,

have a difficulty in getting the amount of the bets

Subba Rao J · from dishonest persons who make bets and will not

pay."

The decision in Hyams v. Stuart King (1) deals with

the problem of the legality of a fresh agreement be­

tween parties to a wager for consideration. There,

two bookmakers had betting transactions together,

which resulted in

the defendant giving the plaintiff a

cheque for

the amount of bets lost to him. At the

request of the defendant, the cheque was held over

by

the plaintiff for a time, and part of the amount of

the cheque was paid by the defendant. Subsequently

a fresh verbal agreement was come to between the

parties, by which, in consideration of the plaintiff

holding over the cheque for a further time and refrain­

ing from declaring

the defendant a defaulter and

thereby injuring him with his customers, the defend­

ant promised to pay the balance owing in a few days.

The balance was never paid and the plaintiff filed a

suit to recover the money on the basis of the fresh

verbal agreement. The

Court of Appeal, by a majo­

rity, Fletcher Moulton, L. J., dissenting, held that the

fresh verbal agreement was supported by good con­

sideration and therefore the plaintiff was entitled to

recover

the amount due to him. At page

705, Sir

Gorell Barnes posed the following three questions to

be decided in

the case: (I) Whether the new contract

was itself one which falls within the provisions of 8

& 9 Viet. c.

109, s. 18; (2) whether there was any

illegality affecting that contract; and (3) whether

that contract was a lawful contract founded on good

consideration.

Adverting to the second question,

which is

relevant to the present case, the President

made the following observations at page

707 :

" ............... it is to be observed that there was

nothing illegal in the strict sense in making the bets.

(1) (1908] 2 KB. 6g6.

(2) S.C.R. SUPREME COURT REPORTS 421

They were merely void under 8 & 9 Viet. c. 109, and

there would have been no illegality in paying them.

There is no

doubt whatever about this. There was also

nothing illegal in giving the cheque nor would there

have been any illegality in paying it, though the

defendants could not have been compelled by the

plaintiff to pay it, because by statute it was to be

deemed

and taken to have been made and given for an

illegal consideration, and therefore void in the hands

of the plaintiff. .. .... The statutes do not make the

giving or paying of the cheque illegal, and impose

no

penalty for so doing. Their effect and

inten­

tion appear only, so far as material, to be that gaming

or wagering contracts cannot be enforced in a Court

of Law or Equity ................ "

The view expressed by the President is therefore con­

sistent with the view all along accepted by the Courts

in England. This case raised a new problem, namely,

whether a substituted agreement for consideration be­

tween the same parties to the wager could be enforced,

and the majority held that it could be enforced, while

Fletcher Moulton, L. J., recorded his dissent. We

shall

have occasion to notice the dissenting view of

Fletcher Moulton, L. J., at a later stage. The

afore­

said decisions establish the proposition that in Eng­

land a clear distinction is maintained between a con­

tract which is void and that which is illegal and it

has been held that though a wagering contract is void

and unenforceable between parties, it is not illegal

and therefore it does not affect the validity of a colla­

teral contract.

The same principle has been applied to collateral.

contracts of partnership also. In Thwaites v. Ooulth­

waite (1) the question of legality of a partnership of

bookmaking and betting was raised. There the plain­

tiff and defendant were partners in a bookmakers and

betting business, which was carried on by the defend­

ant; the plaintiff claimed an account of the profits of

the partnership, and the defendant contended that,

having regard to the nature of the business, no such

relief could be obtained. Chitty, J., rejected the

(1) (1896) I Ch. 496.

I959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao].

422 SUPREME COURT REPORTS [1959] Supp.

I959 plea holding that the partnership WaS Valid, for the

Gherulal Parakh following reasons, among others, and stated at page

v. 498:

Mahadeod,,, "The Gaming Act, 1845 (8 &. 9 Viet. c. 109), did

Maiya & Othm not make betting illegal; this statute, as is well

known, merely avoided

the wagering contract. A man

Sttbba Rao J.

may make a single bet or many bets ; he may habitu-

ally bet; he may carry on a betting or bookmakers

business within

the statute, provided the business as

carried on by him does not fall within the prohibition

of

the Betting Act, 1853."

In Thomas v. Day (' ), a similar question arose. There

the plaintiff claimed an account and money due under

a partnership which he alleged had existed between

himself

and the defendant to take an office and carry

on a betting business as bookmakers. Darling, J.,

held that a partnership to carry on the business of a

bookmaker was

not recognized by law, that even if

there was such a legal partnership, an action for ac­

count would

not lie as between the two bookmakers

founded

on betting and gambling transactions. This

judgment certainly supports the appellant; but the

learned Judge did not take notice of the previous

decision on

the subject and the subsequent decisions

have

not followed it. When a similar objection was

raised

in Brookman v. Mather (

2

), Avery, J., rejected

the plea and gave a decree to the plaintiff. There the

plaintiff aud the defendant entered into a partnership

to carry on a betting business. Two years thereafter,

in

1910, the partnership was dissolved and a certain

amount was found due to the plaintiff from the defend­

ant and the latter gave the former a promissory note

for

that amount. A suit was filed for the recovery of

the amount payable under the promissory note.

Avery,

J., reiterated the principle that betting was not

illegal per se. When the decision in Thomas v. Day (

1

)

was cited in support of the broad principle that the

betting business could not be recog11ized as legal in a

Court of Justice, the learned Judge pointed out that

that case was decided without reference to Thwaites

(1) (1908) 24 T.L.R. 272.

(2) (1913) 29 T.L.R. 276.

(2) S.C.R. SUPREME COURT REPORTS 423

v. Ooulthwaite (

1

). This judgment, therefore, correct­

ed

the deviation made by Darling, J., in Thomas v.

Day (

2

)

and put the case law in line with earlier pre­

cedents.

The earlier view was again accepted and followed

in

Keen v. Price

(3) where an action by one of the

partners in a bookmakers and betting business against

the other for an account of the partnership dealings

was entertained.

But the

Court gave liberty to the

defendant to object to repaying anything which re­

presented profits in such business.

The reason for

this apparent conflict between the two parts of the

decision is found in the express terms of the provisions

of the Gaming Act of 1892. Commenting upon Thw­

aites

v. Coulthwaite

(1) in which Chitty, J.,. held that

such an action would lie for an account of the profits

of the partnership, Sargant, J., pointed out that in that

case the Gaming Act, 1892, was not referred to. At

page 101, the learned Judge says:

" Curiously enough, in that case the Gaming Act,

1892, was

not referred to, and although the decision

is a good one on

the general law, it cannot be regard­

ed

as a decision on the Act of

1892."

This judgment confirms the principle that a wager is

not illegal, but states that after the Gaming Act, 1892,

a claim

in respect of that amount even under a

colla­

teral agreement is not maintainable.

In O'Connor and Ould v. Ralston (

4

), the plaintiff, a

firm

of bookmakers, filed a suit claiming from the

defendant the amount of five cheques drawn by him

upon his bank in payment of bets which he had lost

to them and which had been dishonoured on

presenta­

tion. Darling, J., held that as the plaintiffs formed an

association for

the purpose of carrying on a betting

business, the action would not lie. In coming to that

conclusion the learned Judge relied upon the

dissent­

ing view of Fletcher Moulton, L. J., in Hyams v. Stuart

King (5). We shall consider that decision at a later

stage.

(r) (1896) I Ch. 496. (2) (1908) 24 T.L.R. 272.

(3) (1914) 2 Ch. 98. (4) (1920) 3 K.B. 451.

(5) [1908] 2 K.B. 696,

I959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao ].

'959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao J.

424 SUPREME COURT REPORTS [1959] Supp.

The opinion of Darling, J., was not accepted in

Jeffrey & Co. v. Bamford (1) wherein lVIcCardie, J.,

held that a partnership for the purpose of carrying on

a betting and bookmakers business is not per se illegal

or impossible in law.

The learned Judge says at page

356: " ............ betting or wagering is not illegal at

common law .... ..

It has been repeatedly pointed out that mere bett­

ing on horse races is not illegal ".

The learned Judge, after noticing the earlier decisions

already considered by us and also some of the observa­

tions

of Fletcher Moulton, L. J., came to the conclusion

that the partnership was not illegal.

We shall now scrutinize

the decision in Hill v.

William

Hill(') to see whether there is any substance

in the argument of the learned Counsel for the appel­

lant that this decision accepted the dissenting view of

Fletcher Moulton, L. J., in Hyam§ v. Stuart King (

3

)

or the view of Darling, J., in Thomas v. Day(') and

O'Connor and Ouki v. Ralston("). The facts in that

case were: The appellant had betting transactions with

the respondents, a firm of bookmakers. As a result

. of those transactions, the appellant lost£ 3,635-12-6.

As

the appellant was unable to pay the amount, the

matter was referred to the committee of Tattersalls,

who decided that the appellant should pay the respon­

dents a sum of £ 635-12-6 within fourteen days and

the balance by monthly instalments of

£100. It was

laid down that if the appellant failed to make those

payments, he was liable to be reported to the said

committee which would result in his being warned off

Newmarket Heath and posted as defaulter. The

appellant informed the respondents that he was unable

to pay the £635-12-6 within the prescribed time and

offered to send them a cheque for that sum post-dated

October 10, 1946, and to pay the monthly instalments

of £100 thereafter. On the responde:nts agreeing to

that course, the appellant sent a post-dated cheque to

(1) (1921) 2 K.B. 35'- (2) (1949) 2 All E.R. 452.

(3) [1908) 2 KB. 696. (4) (1908) 24 T.L.R. 272.

(5) (1920) 3 K.B. 451.

...

(2) S.C.R. SUPREME COURT REPORTS 425

them and also enclosed a letter agreeing to pay the

monthly instalments. As the post-dated cheque was

dishonoured

and the appellant failed to pay the entire

amount, the respondents filed a suit claiming the

amount due to them under the subsequent agreement.

The respondents contended that the sum the

appel­

lant had promised to pay was not money won upon a

wager within

the meaning of the second branch of

s. 18, but was money due under a new lawful and

enforceable agreement and that even if the sum was

to be regarded as won on a wager,

the agreement was

outside

the scope of the second branch of s. 18 of the

Gaming Act, 1845. The House of Lords by a majority

of 4 to 3 held that the agreement contained a new

promise

to pay money won upon a wager and that the

second branch of s. 18 applied to all suits brought to

recover money alleged to

have been won on a wager

and therefore the contract was unenforceable. In

coming

to that conclusion, Viscount Simon, one of the

Judges who expressed the majority view, agreed with

Fletcher Moulton, L. J., in holding that the bond consti­

tuted an agreement to pay money won upon a wager,

notwithstanding the new consideration, and was thus

unenforceable under the second limb of s. 18.

In Hyams v. Stuart King(1), the facts of which we

have already given, the suit was filed on the basis of a

subsequent agreement betweeu

the same parties to the

wager. The majority of the Judges held

that the

subsequent agreement was supported by good consi­

deration, while Fletcher Moulton, L. J., dissented from

that view. The basis for the dissenting view is found

at page 712. After reading s. 18 of the Gaming Act,

1845,

the learned Judge proceeded to state: " In my opinion too little attention has been paid

to the distinction between the two parts of this enact­

ment, and the second part has been treated as being

in effect merely a repetition

of the first part. I cannot

accept such an interpretation.

So far as the actual

wagering contract is concerned, the earlier provision

is ample.

It makes that contract absolutely void,

(r) [r908] 2 K.B. 696. 54

1959

Gherulal Parakh

v.

Mahadeodas

Maiya 0-Others

Subba Rao j.

I959

Gherulal Parah/I

v.

Mlahadeodas

Maiya &<Others

Sttbba Rao ].

426 SUPREME COURT REPORTS [1959] Supp.

and it would be idle to enact in addition that no suit

should be brought upon a contract that had thus been

rendered void by

statute. The language of the later

provision is in my opinion much wider. It provides

with complete generality that no action shall be

brought to recover anything alleged to be won upon

any wager, without

in any way limiting the applica­

tion of the provision to the wagering contract itself.

In other words, it provides that wherever the obliga­

tion under a contract is or includes the payment of

money won upon a wager, the Courts shall not be

used to enforce

the performance of that part of the obligation". -

These observations

must be understood in the context

of the peculiar facts of that case. The suit was

between

the parties to the wager. The question was

whether

the second part of the concerned section was

comprehensive enough to

take in an agreement to

recover

the money won upon a wager within the

meaning of that part. Fletcher Moulton, L. J., held

that the second part was wide and comprehensive

enough to

take in such a claim, for the suit was,

though on

the basis of a substituted agreement, for the

recovery of the money won upon a wager within the

meaning of the words of that part of the section. The

second question considered by the learned Judge was

whctl;ier the defendants' firm which was an association

formed for the purpose

of a betting business was a

legal

partnership under the English Law. The learned

Judge relied upon the Gaming Act, 1892, in holding

that it was not possible under the English law to have

any such partnership. At page 718, the learned Judge

observed:

" In my opinion no such partnership is possible

under English law.

Without considering any

·other

grounds of objection to its existence, the language of

the Gaming Act, 1892, appears to me to be sufficient to

establish this proposition.

It is essential to the idea

of a partnership that each partner is an agent of the

partnership and (subject to the provisions of the

part­

nership deed) has authority to make payments on its

behalf for partnership purposes, for which he is entitled

(2) S.C.R. SUPREME COURT REPORTS 427

to daim credit in the partnership accounts and thus

receive, directly or indirectly, repayment. But by the

Gaming Act, 1892, all promises to pay any person any

sum of money paid by him in respect of a wagering

contract are null and void. These words are wide

enough to nullify

the fundamental contract which must

be the basis of a partnership, and therefore in my

opinion no such partnership is possible, and the action

for

this reason

~lone was wrongly framed and should

have been dismissed with costs".

It would be seen from the said observations that

Fletcher Moulton, L. J., laid down two propositions:

(i) The second part of s. 18 of the Gaming Act, 1845,

was comprehensive enough to

take in a claim for the

recovery of money alleged to be won upon a wager

though the said claim was based upon a substituted

contract between the same parties; and (ii) by reason

of the wide terms of the Gaming Act, 1892, even the

fundamental contract, which was the basis of a part­

nership, was itself a nullity. The learned Lord Justice

did not purport to express any opinion on the effect

of a void contract of wager on a collateral contract.

In Hill's

case (1) the only question that arose was

whether the second part of s. 18. was a bar to the

maintainability of a suit under a substituted agree­

ment for the recovery of money won upon a wager.

The majority accepted the view of Fletcher Moul­

ton, L.

J., on the first question. The second question

did

nut arise for consideration in that case. The House

of Lords neither expressly nor by necessary implica­

tion purported to hold that collateral contract of either

partnership or agency was illegal ; and that the long

catena of decisions already referred to by us were

wrongly decided.

This judgment does not therefore

support the contention of the learned Counsel for the

appellant.

The legal position in India is not different. Before

the Act for Avoiding Wagers, 1848, the law relating

to wagers that was in force in British India was the

common law of England. The Judicial Committee in

Ramlall Thackoorseydass v. Soojumnull Dhondmull (2)

(1) (1921) 2 K.B. 351. (2) (1848) 4 M.I.A. 339.

• I959

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao

].

I959 •

Gherulal Parakh

v.

Mahadeodas

M

aiya

&-Others

Subba Rao ].

428 SUPREME COURT REPORTS [1959] Supp.

expressly ruled

that the common law of England was

in force in

India and under that law an action might

be maintained on a wager. The wager dealt with in

that case was upon the average price

·which opium

would fetch at the next Government sale at Calcutta.

Lord Campbell in rejecting the plea that the wager

was illegal observed at.page 349:

"The Statute, 8 & 9 Viet. c. 109, does not extend

to India, and although both parties on~ the record are

Hindoos, no peculiar Hindoo law is alleged to exist

upon the subject; therefore this case must be decided

by the common law of England".

It is a direct decision on the point now mooted before

us

and it is in favour of the respondents. Again the

Privy

Council considered a similar question in Doolub­

dass Pettamberdass

v. Ramlall Thackoorseydass and

others

(1 ). There again the wager was upon the price

that the Pa.tna opium would fetch at the next Govern­

ment sale at Calcutta. There the plaintiff instituted

a suit in the Supreme Court of Bombay in .January,

1847, to recover the money won on a wager. After

the suit was filed, Act 21 of 1848 was passed by the

Indian Legislature w hereunder all agreements whether

made in speaking, writing, or otherwise, by way of

gaming or wagering, would be null and void and no

suit would be allowed

in any

Court of Law or Equity

for recovering any sum of money or valuable thing

alleged to be won on any wager. This section was

similar

in terms to that of s. 18 of the Gaming Act,

1845.

Their Lordships held that the contract was

not void and the Act

21 of 1848 would not invalidate

the contracts entered into before the Act came into

force. Adverting to the next argument that under

Hindu Law such contracts were void, they restated

their view expressed in Ramlall Thackoorseydass v.

Soojumnull Dhondmull (') thus at page 127 :

"Their Lordships have already said that they

are not satisfied from the authorities referred to, that

such is the law among the Hindoos .... "

The Judicial Committee again restated the law m

similar

terms in Raghoonauth

Sahoi Ohotayloll v.

(1) (1850) 5 M.I.A. 109. (2) (1848) 4 M.I.A. 339.

(2) S.C.R. SUPREME COURT REPORTS 429

Manickchund and Kaisreechund (1). There the Judi­

cial Committee held that a wagering contract in

India upon the average price opium would fetch at a

future Government sale, was legal and enforceable be­

fore the passing of the Legislative Act, No. 21 of

1848.

The aforesaid three decisions of the Privy Council

clearly establish the legal position in India before the

enactment of the Act 21 of 1848, namely, that wager­

ing contracts were governed by the common law of

England and were not void and therefore enforceable

in Courts. They also held that the Hindu Law did

not prohibit any such wagers.

The same view was expressed by the Indian Courts

in cases decided after the enactment of the Contract

Act. An agent who paid the amount of betting lost

by him was allowed to recover the same from his

principal in Pringle v. Jafar Khan (

2

). The reason

for

that decision is given at page 445 : "There was nothing illegal in the contract; bet­

ting at horse-races could not be said to be illegal in

the sense of

tainting any transaction connected with

it.

This distinction between an agreement which is

only void

and one in which the consideration is also

unlawful is

made in the

Contract Act. Section 23

points out in what cases the consideration of an agree­

ment is unlawful, and in such cases the agreement is

also void,

that is, not enforceable at law.

Section 30

refers to cases

in which the agreement is only void,

though the consideration is not necessarily unla,wful.

There is no reason why the

·plaintiff should not reco­

ver the sum paid by him...... "

In Shibho Mal v. Lackman Das (

3

)

an agent who paid

the losses on the wagering transactions was allowed to

recover

the amounts he paid from his principal. In

Beni Madho Das v. Kaunsal K ishor Dhusar (

4

)

the

plaintiff who lent money to the defendant to enable

him to pay off a gambling debt was given a decree

to recover the same from the defendant. Where two

partners entered into a contract of wager with a third

(r) (1856) 6 M.I.A. 25r.

(3) (1901) I.L. R. 23 All. 165.

(2) (1883) I.L.R. 5 All.

443·

(4) (1900) I L.R. 22 All. 452.

c959

Gherulal Parakh

v.

Mahadeodas

M

aiya

& Others

Subba Rao

].

430 SUPREME COURT REPORTS [1959] Supp.

£959

Gherulal Parahh

v.

-M ahadeodas

M

aiya

& OJhers

Subba Rao

party and one partner had satisfied his own and his

co-partner's liability

under the contract, the Nagpur

High

Court; in Md. Gulam Mustafakhan v. Padamsi (1)

held that the partner who paid the amount could

legally claim

the other partner's share of the loss.

The learned

Judge reiterated the same principle acce-

J. pted in the decisions cited supra, when he said at

page 49:

" Section 30 of the Indian Contract Act does not

affect agreements or transactions collateral to

'vagers...... ... "

The said decisions were based upon the well-settled

principle

that a wagering contract was only void, but

not illegal, and therefore a collateral contract could

be enforced.

Before closing

this branch of the discussion, it may

be convenient to consider a subsidiary point raised by

the learned

Counsel for the appellant that though a

contract of partnership was not illegal, in the matter

of accounting, the loss paid by one of the partners on

wagering transactions, could

not be taken into

consi­

deration. Reliance is placed in support of this con­

tention on Chitty's Contract, p. 495, para. 908, which

reads:

" Inasmuch as betting is not in itself illegal, the

law does not refuse to recognise a partnersllip formed

for

the purpose of betting.

Upon the dissolution of

such a partnership an account· may be ordered. Each

partner has a right to recover his share of the capital

subscribed, so far as it .has not been spent; but he

cannot claim an account of profits or repayments of

amounts advanced by him which have actually been

applied in

paying the bets of the

partnership."

In support of this view, two decisions are cited. They

are: Thwaites v. Ooulthwaite (') and Saffery v.

Mayer (

3

). The first case has already been considered

by us. There, Chitty, J., in giving a decree for

account left open the question of the legality of certa­

in transactions till it arose on the taking of the

(1) A.LR. (1923) Nag. 48. (2) (1896) l Ch. 496.

(3) L.R. (1901) I K.B. II.

(2) S.C.R. SUPREME COURT REPOR'l'S 431

account. Far from helping the appellant, the obser­

vations and the actual decision in that case support

the respondents' contention. The reservation of the

question Of particular transact.ions presumably relat­

ed only to the transactions prohibited by the Betting

Act, 1853. Such

of the transactions which were so

prohibited by the Betting Act would be illegal and

therefore the contract of partnership could not

ope­

rate on such transactions. The case of Saffery v.

Mayer (

1

)

related to a suit for recovery of money

advanced by one person to another for the purpose of

betting on horses on their joint account. The

appel­

late Court held that by reason of the provisions of the

Gaming Act, 1892, the action was not maintainable.

This decision clearly turned upon the provisions of the

Gaming Act, 1892. Smith, M. R., observed that the

plaintiff paid the money to the defendant in respect

of a contract rendered null and void and therefore it

was not recoverable under the second limb of that

section. The other Lord Justices also based their

judgments on the express words of the Gaming Act,

1892.

It will be also interesting to note that the

Court

of Appeal further pointed out that Chitty, J., in

Thwaites' Oase(

2

) in deciding in the way he did omit­

ted to consider the effect of the provisions of the

Gaming Act, 1892, on the question of maintainability

of the action before him. The aforesaid passage in

Chitty's Contract must be understood only in the con­

text of the provisions of the Gaming Act, 1892.

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 Gam­

ing 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 collateral

agreement

is enforceable ; (3) there was a conflict on

the question whether the second part of s. 18 of the

Gaming Act, 1845, would cover a case for the recovery

of money or valuable thing alleged to be won upon

(I) L.R.

(I90I) I K.B. II. (2) (I896) I Ch. 496.

I959

Gherulal Parakh

v.

Mahadeodas

M aiya & Others

Subba Rao ].

1959

Gherulal Parakk

v.

Mahadeodas

Maiya & Others

Subba Rao ].

432 SUPREME COURT REPORTS [1959] Supp.

any wager under a substituted contract between the

same parties: the House of Lords in Hill's Gase (

1

)

bad 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) s.

30 of the Indian Contract Act is

based upon

the provisions of s. 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 s. 23 of

the

Contract; Act; and (6) partnership being an agree­

ment within the meaning of s. 23 of the Indian Con­

tract 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 unlaw­

ful within the meaning of s. 23(A) of the Contract

Act.

Re. (ii}--Public

Policy: The learned

Counsel for the

appellant contends that the concept of public policy is

very comprehensive

and that in India, particularly

after independence, its content should be measured

having regard to political, social and economic

poli­

cies of a welfare State, and the traditions of this

ancient country reflected in Srutis, Smritis and

N ibandas. Before adverting to the aFgument of the

learned Counsel, it would be convenient at the outset

to ascertain the meaning of this concept and to note

how

the

Courts in England and India have applied it

to different situations. Cheshire and Fifoot in their

book on "Law of Contract", 3rd Edn., observe at

page 280 thus :

"The public interests which it is designed to pro­

tect are so comprehensive and heterogeneous, and

opinions as to what is injurious must of necessity vary

so greatly with the social and moral convictions, and

at times even with the political views, of different

judges,

that it forms a treacherous and unstable

(1)

(1921) 2 K.B. 35I.

(2) S.C.R. SUPREME COURT REPORTS 433

ground for legal decision. . ........... These questions

I95!J

have agitated the Courts in the past, but the present

state of the law would appear to be reasonably clear.

Two observations may be made with some degree of

assurance ..

G hernial Parakh

First, although the rules already established by

precedent must be moulded to fit the new conditions

of a changing world, it is no longer legitimate for the

Courts to invent a new head of public policy. A

judge is

not free to speculate upon what, in his

opinion, is for

the good of the community. He must

be content to apply, either directly or by way of ana­

logy, the principles laid down in previous decisions.

He must expound, not expand, this particular branch

of the law.

Secondly, even though

the contract is one which

prima f acie falls under one of the recognized heads of

public policy,

it will not be held illegal unless its harm­

ful qualities are indisputable.

The doctrine, as Lord

Atkin remarked in a leading case,

"should only be

invoked

in clear cases in

whiph the harm to the public

is

substantially incontestable, and does not depend

upon

the idiosyncratic inferences of a few judicial

minds. ..

.......... In popular language ... the contract

should be given

the benefit of the

doubt"."

Anson in his Law of Contract states the same rule

thus, at p. 216:

"Jessel, M. R., in 1875, stated a principle which

is still valid for

the Courts, when he said : ' You have

this Raramount public policy to consider, that you are

not lightly to interfere with the freedom of contract' ;

and it is in reconciling freedom of contract with other

public interests which are regarded as of not less im-

portance that the difficulty in these cases arises ........ . . We may say, however, that the policy of the law

has,

on certain subjects, been worked into a set of

tolerably definite rules. The application of these to

particular instances necessarily varies with the condi­

tions

of the times and the progressive development of

public opinion

and morality, but, as Lord Wright has

said,

'public policy, like any other branch of the

Com­

mon Law, ought to be, and I think is, governed by

SS

v.

Mahadeodas

M aiya & Others

Subba Rao

].

434 SUPREME COURT REPORTS [1959] Supp.

'959 the judicial use of precedents. If it is said that rules

Gkernlal Parakk of public policy have to be moulded to suit new con-

v. ditions of a changing world, that is true; but the

Mahadeodas same is true of the principles of the Common .Law

Maiya & Others generally." .

In Halsbury's Laws of England, 3rd Edn., Vol. 8, the

5

"bba Rao J. doctrine is stated at p. 130 thus:

"Any agreement which tends to be injurious to

the public or against the public good is void as being

contrary to public policy. . .............. It seems, how-

ever,

that this branch of the law will not be extended.

The determination of what is contrary to the so-called

policy

of the law necessarily varies from time to time.

Many transactions are upheld now which in a former

generation would

have been avoided as contrary to

the supposed policy of the law. The rule remains,

but its application varies with the principles which

for

the time being guide public

opinion."

A few of the leading cases on the subject reflected in

the authoritative statements of law by the various

authors may also be usefol to demarcate the limits of

this illusive concept.

Parke, B., in Egerton v. Brownlow('), which is a

leading

judgment on the subject, describes the doc­

trine of public policy thus at p. 123 : " ' Public policy ' is a vague and unsatisfactory

term, and calculated to lead to uncertainty and error,

when applied to

the decision of legal rights; it is

capable

of being understood in different senses; it

may, and does, in its ordinary sense, mean 'political

expedience', or that which is best for the common

good

of the community ; and in that sense there may

be every variety of opinion, according to education,

habits, talents, and dispositions of each person, who

is to decide

whether an act is against public policy or

not.

To allow this to be a ground of judicial decision,

would

lead to the greatest uncertainty and confusion.

It is the province of the statesman, and not the law­

yer,

to discuss, and of the Legislature to determine,

what is best for the public good, and to provide for it

by proper enactments. It is the province of the judge

(1) 4 H.L.C. '· 123; IO E.R. 359, 408.

(2) S.C.R. SUPREME COURT REPORTS 435

to expound the law only; the written from the statu- I959

tes; the unwritten or common law -from the decisions

f d d f

· t' C t f' Ghernlal Parakh

o our pre ecessors an o our ex1s mg our s, rom

text writers of acknowledged authority, and upon the Mah;deodas

principles to be clearly deduced from them by sound Maiya & Others

reason and just inference; not to speculate upon what

·is the best, in his opinion, for the ad vantage of the Subba Rao f.

community. Some of these decisions may have no

doubt been founded upon the .,prevailing and just

opinions

of the public good; for instance, the illega-

lity of covenants in restraint of marriage or trade.

They have become a part of the recognised law,

and

we are therefore bound by them, but we are not there-

by authorised to establish as law everything which

we

may think for the public good, and prohibit every-

thing whi.ch we think

otherwise."

In Janson v. Driefontein Consolidated Mines, Ltd. {1)

an action raised against British underwriters in

respect of insurance of treasures against capture

during its transit from a foreign state to Great Britain

was r!'lsisted by the underwriters on the ground that

the insurance was against public policy. The House

of Lords rejected the plea. Earl of Halsbury, L.C., in

bis speech

made weighty observations, which may

usefully be extracted. The learned Lord says at page

491:

.

"In treating of various branches of the law

learned persons

have analysed the sources of the

la\v,

and have sometimes expressed their opinion that such

and such a provision is bad because it is contrary to

public policy; but I deny that any Court can invent a

new

head of public policy ; so a contract for marriage

brokerage,

the creation of a perpetuity, a contract in

restraint of trade, a gaming or wagering contract, or,

what is relevant here; the assisting of the King's

ene­

mies, are all undoubtedly unlawful things; and you

may say that it is because they are contrary to public

policy

they are unlawful; but it is becaus.e these

things have been either enacted or assumed to be by

the common law unlawful, and not because a judge or Court have a right to declare that such and such

(r) (1902) A.C. 484.

1959

Gherulul Parakh

v.

Mahadeodas

M aiya & Others

Subba Rao].

436 SUPREME COURT REPORTS [1959] Supp.

things are in his or their view contrary to public

policy. Of course, in the application of the principles

here insisted on,

it. is inevitable that the particular

case must be decided by a judge ; he must find the

facts, and he must decide whether the facts so found

do or do

not come within the principles which I have

endeavoured to describe-that is, a principle of public

policy, recognised by

the law, which the suggested

contract is infringing, or is supposed to infringe.

"

These observations indicate that the doctrine of

public policy is only a branch of common law and un­

less the principle of public policy is recognised by that

law, Court cannot apply it to invalidate a contract.

Lord Lindley in his speech

at p.

507 pointed out that

public policy is a very unstable and dangerous founda­

tion on which to build until made safe by decision. A

promise made

by one spouse, after a decree nisi for

the dissolution of the marriage has been pronounced,

to

marry a third person after the decree has been

made absolute is

not void as being against public

policy: see

Fender v.

St. John-Mildmay (

1

). In that •

case Lord Atkin states the scope of the doctrine thus

at p. 12:

"In popular language, following the wise apho­

rism of Sir George Jessel cited above, the contract

should be given the benefit of the doubt.

But there is no doubt that the rule exists. In cases

where

the promise to do something contrary to public

policy which for

short I will call a harmful thing, or

where the consideration for the promise is the doing

or

the promise to do a harmful thing a judge, though

he is on slippery ground, at any rate has a chance of

finding a footing. .. .... But the doctrine does not

extend only to harmful acts, it has to be applied to

harmful tendencies. Hero the ground is still less safe

and more treacherous

".

Adverting to the observation of Lord Halsbury in

Janson v. Driefontein Consolidated Mines Ltd.(')

Lord Atkin commented thus, at page 11 :

" ............... Lord Halsbury indeed appeared to

decide

that the categories of public policy are closed,

(1) (1938) A.

C. i. (2) (1902) A,C, 484.

(2) S.C.R. SUPREME COURT REPORTS 437

and that the principle could not be invoked anew un-x959

less the case could be brought within some principle Gherulal Parakh

of public policy already recognised by the law. I do v.

not find, however, that this view received the express Mahadeodas

assent of the other memberi:i of the House; and it Maiya <!>Others

seems to me, with respect, too rigid. On the other

hand, it fortifies the serious warning illustrated by the Subba Rao f.

passages cited above that the doctrine should only be

invoked in clear cases in which

the harm to the public

is substantially incontestable,

and does not depend

upon

the idiosyncratic inferences of a few judicial

minds".

Lord Thankerton summarised his view in the follow­

ing terms, at p. 23:

" In the first place, there can be little question as

to the proper function of the Courts in questions of ·

public policy. Their duty is to expound, and not to

expand, such policy. That does not mean that they

are precluded from applying an existing principle of

public policy to a new set of circumstances, where

such circumstances are clearly within the scope

of the

policy. Such a case might well arise in the case of

safety of the State, for instance. But no such case is

suggested here.

Further, the

Courts must be watchful

not to be influenced by their view of what the princi­

ple of public policy, or its limits, should be".

Lord Wright, at p. 38, explains the two senses in

which

the words

"public policy" are used:

"In one sense every rule of law, either common

law or equity, which has been laid down

by the Courts, in that course of judicial legislation which

has evolved

the law of this country, has been based

on considerations

of public interest or policy. In that

sense

Sir George Jessel, M. R., referred to the para­

mount public policy that people should fulfil their

contracts. But public policy in the narrower sense

means

that there are considerations of public interest

which require

the

Courts to depart from their primary

function of enforcing contracts, and exceptionally to

refuse

to enforce them. Public policy in this sense is

disabling

".

1959

Gherulal F'ara!d1

v.

AJ ahadeodas

Alaiya & Others

Subba Rao ].

438 SUPREME COURT REPORTS [1959] Supp.

Then the noble Lord proceeds to lay down the follow­

ing principles on which a judge should exercise this

peculiar and exceptional jurisdiction: (1) It is clear

that public policy is not a branch of law to be extend­

ed; (2) it is the province of the judge to expound the

law only; (3) public policy, like any other branch of

the common law, is governed by the judicial use of

precedents; aml (4) Courts apply some recognised

principles

to the new conditions, proceeding by way

of analogy and according to logic and convenience,

just as

Courts deal with any other rule of the common

law.

The learned Lord on the basis of the discussion

of case law

on the subject observes at p. 40:

"It is true that it has oeen observed that certain

rules of public policy have to be moulded to suit new

conditions

of a changing world : but that is true of the

principles of common law generally. I find it difficult

to conceive

that in these days any new head of public

policy could be discovered

".

The observations of the aforesaid Law Lords define

the concept of public policy and lay down the limits

of its applica~ion in the modern times. In short, they

state that the rules of public policy are well-settled

and the function of the Courts is only to expound them

and apply them to varying situations. While Lord

Atkin does not accept Lord Halsbury's dictum that the

categories of public policy are closed, he gives a warn­

ing that the doctrine should be invoked only in clear

cases in which

the harm to the public is substantially

incontestable, Lord Thankerton and Lord

Wright seem

to suggest

that the categories of public policy are

well-settled and what the

Courts at best can do is only

to

apply the same to new set of circumstances.

Neither of them

excludeB the possibility of evolving a

new

head of public policy in a changing world, but

they could not conceive that under the existing

circumstances

any such head could be discovered.

Asquith,

L. J., in JJ!fonkland v. Jack Barclay Ltd.(')

restated the law crisply at p. 723:

"The Courts have again and again said, that

where a contract does not fit into one or other of these

• (1) (1951) 1 All E.R. 714.

(2) S.C.R. SUPREME COURT REPORTS 439

pigeon-holes but lies outside this charmed circle, the

courts should use extreme reserve in holding a contract

to be void as against public policy, and should only

do so when

the contract is incontestably and on any

view inimical to the public

interest".

The Indian cases also adopt the same view. A division

bench

of the Bombay High

Court in Shrinivas Das

Lakshminarayan

v. Ram Chandra Ramrattandas

(1)

observed at p. 20:

"It is no doubt open to the Court to hold that the

consideration or object of an agreement is unlawful on

the ground that it is opposed to what the Court re­

gards as public policy. This is laid down in section 23

of the Indian Contract Act and in India therefore it

cannot be affirmed as a matter of law as was affirmed

by Lord Halsbury in Janson v. Driefontein Consolidat­

ed Mines, Limited (1902 A. C. 484 at p. 491) that no

Court can invent a new head of public policy, but the

dictum of Lord Davey in the same case that" public

policy is

always an unsafe and treacherous ground for

legal decision

" may be accepted as a sound cautionary

maxim in considering the reasons assigned by the

learned Judge for his decision ".

The same view is confirmed in Bhagwant Genuji Girme

v. Gangabisan Ramgopal (

2

)

and Gopi Tihadi v. Gokhei

Panda

(3). The doctrine of public policy may be

summarized thus : Public policy or the policy of the

law is an illusive concept; it has been described as

"untrustworthy guide ", "variable quality'', "un­

certain 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 con­

tracts 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; for

want of better words Lord Atkin describes that some­

thing done contrary to public policy is a harmful

thing, but the doctrine is extended not only to

harm­

ful cases but also to harmful tendencies ; this doctrine

of public policy is only a branch of common law, and,

(1) I.L.R. (1920) 44 Born. 6. (2) I.L.R. 1941 Born. 7r.

(3) I.L.R. 1953 Cuttack 558.

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao J.

r959

,

Gherulal Parakh

v.

Mahadeodas

Maiya & Others

Subba Rao }.

440 SUPREME COURT REPORTS [1959] Supp.

just like any other branch of common law, it is govern­

ed by precedents; the principles have been crystallized

under different heads and though it is permissible for

Courts to expound and apply them to different situa­

tions, it should only be invoked in clear and incontest­

able cases of harm to the public; though the heads are

not closed and though theoretically it may be permis­

sible to ev;olve a new head under exceptional circum­

stances of a changing world, it is advisable in the

interest of stability of society not to make any attempt

to di~cover new heads in these days.

This leads us to the question whether in England or

in India a definite principle of public policy has been

evolved

or recognized 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 h;i,s

never been such a rule of public policy in that coun­

try. 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 & 9 Viet. c.

109), such contracts

were declared void. 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 Viet. c. 9), the

collateral 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 Thacker v. Hardy (

1

); Hyams v.Stuart

King('); and Michael Jeffrey & Company v. Bam­

ford ('). It is. therefore abundantly clear that the

common law of England did not recognize any prin­

ciple of public policy declaring wagering contracts

illegal.

The legal position is the same in India. The Indian

Courts, both before and after the passing of the Act

(1) (1878) L.R. 4 Q.B. 685. (2) (1908] 2 K.B. 696.

(3) (r949) 2 All E. R. 452. •

(2) S.C.R. SUPREME COURT REPORTS 441

21 of 1848 and also after the enactment of the Con- '959

tract Act, have held that the wagering contracts are -

'jj d h JI j · · f Gh81ulal Parakh

not i egal an t e co atera contracts -m respect o

them are enforceable. We have already referred to Mah;deodas

these in dealing with the first point and we need not· Ma;ya & Others

cover the ground once again, except to cite a passage

from

the decision of the Judicial

Committee in Ram-Subba Rao J.

loll Thackoorseydass v. Boojumnull Dhondmull ('),

which is directly in point. -Their Lordships in con-

sidering

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 inter­

ests 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 singl!l decision after the above cited

case, which was decided in 1848,

up to the present

day wherein the

Courts either declared wagering con­

tracts 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

al ways 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.

The Contract Act was passed in the year 1872. 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 enact­

ed by the Gaming Act, 1892. Though the Contract

(1) (1848) 4 M.I.A. 339·

56

442 SUPREME COURT REPORTS [1959] Supp.

· '959 Act repealed the Act 21 of 1848, it did not incorporate -

Gherulal'-Parakl• in it the provisions similar to those of tlie Bombay

v. Act; nor was any amendment made subsequent to the

Mahadeodas passing of the English Gaming Act, 189~. The legis­

Maiya <>-Othors· lature must be deemed to have had the knowledge of the

state' of law in England, and, therefore, we may

Subba Rao J. 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. ,

The history of ~he law of gambling in India would

also show

that though gaming in certain respects was

controlled,

it has never been absolutely prohibited.

The following are some of the gambling Acts in

India: The

Public Gambling Act (III of 1867)·; The

Bengal Public Gambling Act (II of 1867); The Bom­

bay Prevention of Gambling Act (IV of 1887);

Madhya Bharat Gambling Act (LI of 1949); Madhya

Pradesh Public Gambling Act; Madras Gaming Act

(III of 1930); The Orissa, Prevention of Gambling Act

(XVII of 1955); the Punjab Public Gambling Act

(III of 1867); the Rajasthan Public Gambling Ordi­

nance (Ordinance XL VIII of 1949) and the U.P. Pub­

lic Gambling Act. These Acts do not prohibit gaming

in its entirety, but aim at suppressing gaming in

private houses when carried on for profit or gain of

the owner or occupier thereof and also gaming in

public. Gaming

without contravening the provisions

of the said Acts is legal. Wherever the State intended

to declare a

particular form of gaming

illegil'l, it made

an express statute to that effect : See s. 2~A of the

Indian Penal Code. In other respects, gaming and

wagering are allowed in India. It is also common

knowledge that horse races are allowed throughout

India and the State also derives revenue there­

from.

The next question posed by the learned Counsel for

the appellant is whether under the Hindu Law it can

be said that gambling contracts are held to be illegal.

The learned Counsel .relies upon the observations of

this Court in The State of Bombay v . .R. M. D. Ohamar-·

baugwala (

1

). The question raised in that case was

(1) [1957] S.C.R. 874.

(2) S.C.R. SUPREME COURT REPORTS 443

whether the Bombay Lotteries and Prize Competition •959

Control and Tax (Amendment) Act of 1952 extending c;

1

~ hh

the definition of "prize competition" contained in "rn ".. "'"

s. 2(1)(d) of the Bombay Lotteries and Prize Competi-Mailad•odas

tion Control and Tax Act of 1948, so as to include Maiya ~Others -

prize competition carried on through newspapers

printed and published outside the State, was constitu-Subaa Rao J.

tionally valid. It was-contended, inter alia, that the

Act offended the fundamental right of the respond-

ents, who were conducting prize competitions,

under

Art. 19(1) (g) of the

Constitution· and also violated the

freedom of inter-State trade .under Art. 301 thereof.

This Court held that the gambling activities in their

very nature and essence were extra commercium and

could not either be trade or commerce within the

meaning of the aforesaid provisions and therefore

neither the fundamental right of the respondents

under Art. 19(1)(g) or their right to freedom of inter-

State trade under Art. 301 is violated. In that context

Das, C. J., has collected all the Hindu Law texts from

Rig V:eda, Mahabharata, Manu, Brihaspati, Yagna-

valkya, etc., at pp. 922-923. It is unnecessary to restate

them here, but it is clear from those texts that Hindu

sacred books condemned gambling in unambiguous

terms.

But the question is whether those ancient

<­

text-books remain only as pious wishes of our ances-

tm:s or whether they were enforced in the recent centu-

ries. All

the branches of the Hindu Law have not

been administered by

Courts in India ; only questions

regarding succession, inheritance, marriage, and

religious usages and institutions are decided according

to

the Hindu Law, except in so far as such law has

been altered by legislative enactment. Besides the

matters above referred to, there are certain additional

matters to which the Hindu Law is applied to the

Hindus, in some cases by virtue of express legislation

and in others on the principle of justice, equity and

good conscience. These matters are adoption, guar-

dianship, family relations, wills, gifts and partition.

As to these matters also the Hindu Law is to be applied

subject to such

alterations

as have been made by

legislative

enactments:

See Mulla's Hindu Law, para.

444 SUPREME COURT REPORTS [1959] Supp.

r

9

s9 3, p. 2. _In other respects the ancient Hindu Law

Ghemlal Parako was not enforced in Indian Courts and it may be said

v. that they became obsolete. Admittedly there has not

Mahadeodas been a sirigle instance in recorded cases holding gam­

Maiya & Others bling or w;igering contracts illegal on the ground that

subba Rao

1

.

they are contrary to public policy as they offended

the

pri:µciples of ancient Hindu Law. In the circum­

stances, we find it difficult to import the tenets of

Hindu Law to give a novel content to the doctrine of

public policy

in respect of

c01itracts of gaming and

wagering. •

To summarize: The common law of England and

that of India have never struck down contracts of

wager on the ground of public policy ; indeed they

have always been held to be not illegal notwith­

standing the fact that the statute declared them void.

Even after the con tracts of wager were declared to be

void in

England, collateral contracts were enforced

till

the passing of the Gaming Act of 1892, and in

India, except in the

State .of Bombay, they have

been enforced even after the passing of the Act 21 of ·

1848, which was substituted by s. 30 of the Contract

Act. The moral prohibitions in Hindu Law texts

against gambling were not only not legally enforced

but were allowed to fall into desuetude. In practice,

though gambling is controlled in specific matters, it

has not been declared illegal and there is no law dec­

laring wagering illegal. Indeed, some of the gambling

practices are a perennial source

of income to the State.

In the circumstances it is not possible to hold that

there is any definite head or principle of public policy

evolved by

Courts or laid down by precedents which

would directly (Lpply to wagering contracts. Even if

it is permissiblff for Courts to evolve a new head of

public policy under extraordinary circumstances giv­

ing rise to incontestable harm to the society, we cannot

say that wager is one of such instances of exceptional

gravity, for it has been recognized for centuries and

has been tolerated by the public and the State alike.

Jf it has any such tendency, it is for the legislature

to

make a law prohibiting such contracts and

declar­

ing them illegal and not for this Court to resort to

judicial legislation.

(2) S.C.R. SUPREME COURT REPORTS 445

· Re. Point 3-Immorality: The argument under

this head is rather broadly stated by the learned Coun­

sel for the appellant. Tbe learned counsel attempts

to draw an analogy from the Hindu Law relat­

ing to the doctrine of pious obligation of sons to

discharge their father's debts and contends that what

the Hindu Law considers to be immoral in that con­

text may appropriately be !l>pplied to a case under s. 23

of the Contract Act. Neither any authority is cited

nor any legal hasis is suggested for importing the doc­

trine of Hindu Law into the domain of contracts. Sec­

tion 23 vf the Contract Act is inspired by tlre common

law

of England and it would be more useful to refer to

the English Law than to the Hindu Law texts dealing

with a different matter. Anson in his Law of

Con­

tracts states at p. 222 thus:

"The only aspect of immorality with.which Courts

of Law have dealt is sexual immorality............. ."

Halsbury in his Laws of England, 3rd Edn., Vol. 8,

makes a similar

statement, at p. 138:

·

"A contract which is made upon an immoral con.

sidera.tion or for an· immoral purpose is unenforceable,

and there is no distinction in this respect between im.

moral and illegal contracts. The immorality here. al­

luded to is sexual immorality."

In the Law of Contract by Cheshire and Fifoot, 3rd

Edn., it is stated at p. 279:

"Although Lord Mansfield laid it down that a

contract contra bonos mores is illegal, the law in this

connection gives no extended meaning to morality,

but concerns itself only with what is sexually repre­

hensible." In the book on the Indian Contract Act

by Pollock and Mulla it is stated at p. 157:

" The epithet" immoral " points, in legal usage,

to conduct or purposes which

the

State, though disap.

proving them, is unable, or not advised, to visit with

direct punishmllnt."

The learned authors confined its operation to acts

which are considered to be immoral according to the

standards of immorality approved by Courts. The

case 1aw both in England and India confines the ope­

ration of the doctrine to sexual immorality. To cite

'959

Gherulal Parak!J

v.

Mahadeodas

Maiya & Others

Subba Rao ].

r959

Gherulal Parakh

v.

Mahadeodas

P.1 aiya G Others

Subba Rao ],

446 SUP.REME COURT REPORTS [1959] Supp.

only some

instances: settlements in consideration of

concubinage, contracts of sale or hire of things to be

used in a brothel or by a

prostitute for purposes

inci­

dental to her profession, agreements to pay money for

future illicit cohabitation, promises

in regard to

marriage for consideration, or contracts facilitating

divorce are all held to be void on the ground that the

object is immoral.

The .word

"immoral" is a very comprehensive, word.

Ordinarily it takes in every aspect of personal conduct

deviating from the standard norms of life. It may_·

also be said that what is repugnant to good conscience

is immoral. Its varying content depends upon time,

place and-the stage of civilization of a particular

society. In short, no uni versa! standard can be laid

down and any law based on such fluid concept defeats

its own purpose_. The provisions of s. 23 of the Con­

tract Act indicate the legislative intention to give it a

restricted meaning.

Its juxtaposition with an equally

illusive concept, public policy, indicates that it is used

in a restricted sense; otherwise there would be

over­

lapping of the two concepts. In its wjde sense what

is immoral may be against public policy, for public

policy covers political, social

and economic ground of objection. Decided cases and authoritative text. book

writers, therefore, confined it,

with every justification,

only

to sexual immorality. The other limitation

im­

posed on the word by the statute, namely, "the court

regards it as immoral", brings out the idea that it is

also a

branch of the common law like the doctrine of

public policy, and, therefore, should be confined to the

principles recognized and settled by

Courts. Prece­

dents confine the said concept only to sexual immora­

lity and no case has been brought to our notice where

it has been applied to any head other than sexual im­

morality. In the circumstances, we cannot evolve a

now

head so as to bring in wagers within its fold.

Lastly it is contended by the learned

Counsel for

the appellant that wager is extra-commercium and

therefore there cannot be iu law partnership for wager

within

the meaning of s. 4 of the Partnership Act; for

partnership nnder that section is relationship between

(2) S.C.R. stJ:PR.:tnMm COttR'r Rit:Po:R'l's 447

persons who have agreed to share the profits of a busi­

ness. Reliance is placed in respect of this contention

on the dec'ision of this Court in The State of Bombay v.

R. M. D. Qhamarbaugwala ('). This question was not

raised in the pleadings. No issue was framed in res­

F~ct of it. No such case was argued before the learn­

ed Subordinate Judge or in the High Court; nor was

this point raised in· the '11pplication for certificate for

leave to

appeal to the Supreme

Court filed in the.High

Court. Indeed, the learned Advocate appea,ring for

the appellant in the High Court stated that his client

intended to raise one question only, namely, whether

the partnership formed for the purpose of carrying on

a business in differences was illegal within the mean­

ing of s. 23 of the Contract Act. Further this plea was

not specifically disclosed in the statement of case filed

by

the appellant in this

Court. If this contention had

been raised at the earliest point of time, it would have

been open to the respondents to ask for a suitable

amendment of the plaint to sustain their elaim. In

the circumstances, we do not think that we could with

justification allow

the appellant to raise this new plea

for

the first

time before us, as it would cause irrepar­

able prejudice to the respondents. We express no

opinion on

this point ..

For the foregoing reasons we must hold that the

suit partnership was not

,unlawfol within the meaning

of s. 23 of the Indian Contract Act.

In the result, the appeal fails and is dismissed with

costs.

Appeal dismissed.

(•) (1957] s.c.R. 874.

I959

Gherulal _Parakh

v.

Mahadeodas

Maiya &-Ot/ie,s

Si1bba Rao j.