FIRM OF PRATAPCHAND NOPAJI versus FIRM OF KOTRIKE VENKATTA SETTY & SONS ETC.

Citation: [1975] 3 S.C.R. 1 · Decided: 12-12-1974 · Supreme Court of India · Bench: M. HAMEEDULLAH BEG · Disposal: Dismissed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
H 
FIRM OF PRATAPCHAND NOPAJl 
v. 
FIRM OF KOTRIKE VENKATTA SETTY & SONS ETC. 
December 12, 1974 
[M. H. BEG, V. R. KRISHNA !YER AND P. K. GOSWAMI, JJ.] 
Indian Co111ract Act (9 of 1872) Section 23, 222 and 224-Scope of-Col-
lateral aweement, whm illegal. 
The appellant firm sued for amounts as due to indemnify it under s. 222 
of the Contract Act, on the strength of payments said to have been made by 
the firm to third parties on behalf of the respondents who were alleged to 
have directed the appellant to enter into 'Badia' transactions for them. 
These 
transactions are contracts for speculation in rise and fall of price of groundnut 
and oilseeds purchased only notionally without any intention to actually deliver 
them to the purchasers. In such a transaction, the purchaser is not at all expected 
to make a demand for actual delivery of goods ostensibly sold. 
Confirming the judgment of the High Court, held that, 
having regard 
to 
the objects of the prohibitio·n imposed by the Central Government on forward 
contracts on groundnut seeds and oilseeds in the interest of general public, so 
that supply at reasonable rates of those essential commodities is not jeopar-
dised; the absolute terms of the prohil)ition; the penalties imposed for its 
infringement; and the careful manner in which only those contracts which are 
for actual delivery and supply to bona fide purchasers are excluded from the 
prohibition; the contracts were tainted with unlawfulness of their object and 
are forbidden by law, and hence are strnck by the provisions of s. 23 of the 
Contract Act. 
[19B-D; 20 D-E} 
( l) If an agreement iE merely collateral to another or constitutes an aid 
facilitating the carrying out of the object of the other agreement which, though 
void, is not in itself prohibited within meaning of s. 23, it may be enforced as 
a collateral agreement. 
If, -Un the other hand, it is part of a mechanism 
meant to defeat what the law has actually prohibited, the courts will not 
countenance a claim based upon the agreement, because, it will be tainted with 
an illegality of the object sought to be achieved which is hit by the section. 
The object of an agreement cannot be said to be forbidden or unlawful merely 
because the agreement results in what is known as a 'void contract'. A void 
agreement when coupled with other facts, may become part of transaction 
which creates legal rights, but this is no so. if the object is prohibited or 'ma/ 
in Jc'. 
[12D-G] 
(2) The question whether the parties through whom the appellant. actually 
alleged carrying out the contracts set up between himself and defendants, could 
-themselves be regarded as principals .or agents of the appellants, will be im-
material if the objects of the contracts are found to be tained with the kind of 
illegality which is struck bv s. 23 of the Contract Act. 
Again, the mere fact 
that the contrad& .were entered into at Kurnool in the State of Andhta Prndesh 
would also not, make any difference in principle if the object of the 
contrJcts 
which were to ·be carried out at Bombay weu; of such a kind as to be hit by 
the section. fl 3A-Cl 
· (3) The contracts between the appellant and the respondents are not wager-
ing contracts, though each party knew that their oblect was to indulge in 
speculation. · [l OC-D] 
Bhagwand9s Parasram v. Burjori Ruttomii Boma1tji 45 I.A. 29, 
33, 
refer-
red to. 
' 
'>':" ·"· 
( 4) But. the forward contracts violated the provisions of two Orders is-
med under s. 2(2) of the Bombay Forward Contrncts Control Act. 1947. 
· 
[!6A-Bl 
2L379Sup.CT (75 
2 
SUPREME COURT REPORTS 
(1975] 3 s.c.R. 
(5) Moreover, s. 17 of the Essential Supplies (Temporary Powers) Act, 
1946 
kept alive the provisions of the Oil-seeds (Forward Contracts Prohibi-
tion i Order, 1943. 
The Central Act is enacted for the control of production, 
supply and distribution of essential commoditie$ and covers food stuffs. 
Under 
s. 2(1:) of the Act food stuffs include edible oilseeds and oils, and s. 7(2) 
makes the contravention of anv Order under s. 3, relating to food stuffs a 
crime and punishable with imprisonment. 
[16E; 17A-DJ 
A 
(6) The Central Government has issued a notification under s. 5 of the 
Oil-seeds (Forward Contracts Prohibition) Order but the two conditions im-
posed for excluding contracts relating the groundnuts are not satisfied in the 
present case. 
They are (al the contracts must be in respect of specifi1:d quali-
ties o

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