GURMUKH SINGH versus AMAR SINGH

Citation: [1991] 1 S.C.R. 885 · Decided: 15-03-1991 · Supreme Court of India · Bench: N.M. KASLIWAL · Disposal: Dismissed

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Judgment (excerpt)

GURMUKH SINGH 
V. 
AMAR SINGH 
MARCH 15, 1991 
[N.M. KASLIWAL AND K. RAMASWAMY, JJ.] 
Indian Contract Act, 1872: Szction 23-Contract opposed to 
)'public policy-What is-Agreement to purchase property in public 
auction and thereafter convey half the property-Specific performance 
of-Whether enforceable. 
The respondent filed a suit for specific performance of an agre~­
ment of sale of land or refund of the money paid to him contending that 
he and the appellant had contracted that the appellant would partici-
pate, on their behalf in a public auction to purchase the evacuee pro-
y perty and the appellant would convey half the property purchased 
thereat and in furtherance of that he had contributed his share, but the 
appellant who became the highest bidder and got a sale certificate 
issued by the custodian of the evacuee property had not performed his 
part. of the contract. 
The appellant resisted the suit, and denied the execution of the 
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)ilgreement. He also pleaded that the contract was illegal and void, being 
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opposed to public policy, and that the relief of specific performance 
being discretionary could not be granted i~ favour of the responden.t. 
The trial court decreed the suit. On appeal by the appellant, both 
the first appellate court and the High Court confirmed the decree. 
Hence the appeal, by special leave. 
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On behalf of the appellant it was contended that the agreement 
·was opposed to public policy since it was to knock out the public pro-
perty on a minimum price and, therefore, void under s.23 of the Con-
tract Act, 1872. 
Dismissing the appeal, this Court, 
)..._ · HELD: 1.1 Section 23 of the Contract Act adumbrates that the 
consideration or object of an agreement is lawful unless it is forbidden 
by law, or is of such a nature that, if permitted, it would defeat the 
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provision of any law; or is fraudulent; or involved or implied injury to 
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SUPREME COURT REPORTS 
[1991] 1 S.C.R. 
the persons or property of another; or the court regards it as immoral"""-
or opposed to public policy. In each of these cases, the consideration or 
object of an agreement is unlawful. Thus, every agreement the consi-
_deration or object of which is unlawful is void. [888F -G] 
1.2 The word "object" would mean the purpose and design 
which is the object of the contracts; it is opposed to public policy if it 
tends to defeat any provision of law or purpose of law, and it becomes-\ 
unlawful and void under s. 23 of the Contract Act. Section 23 is con-
cerned with only the object or consideration of the transaction and not 
the reasons or motive which prompted it. Public policy imposes certain 
limitations upon freedom of contract. Certain objects of contract are·~-­
forbidden or discouraged by law; though all other requisities for the 
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formation of a contract are complied with, yet if these objects are in 
contemplation of the parties when they entered into the agreement, the 
law will not permit them to enforce any rights under it. Most cases Y 
of illegality are of this sort; the illegality lies in the. purpose which 
one· or both parties have in mind. But in some instances the law strikes 
at the agreement itself, and the contract is then by its very nature 
illegal. [888G-H, 889A-B] 
1.3 The public policy is not static. It is variable with the chang-
ing times and the needs of the society. The march of law must match ~ 
with the fact situation. A contract tending to injure public interest or 
public welfare or fraudulent to· defeat the right of the third parties is 
void under s. 23 of the Contract Act. [892F] 
1.4 The object of conducting public sale is to secure as much price 
or revenue as possible to redeem the debt of the debtor or to secure 
maximum price to the exchequer for use of public purpose. If such a 
contract to form a ring aniong the bidders was to peg down the price 
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and to have the property knocked out at a low price it would defeat the ~ 
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above economic interest of the debtor or public welfare. Thereby the 
agreement becomes fraudulent and opposed to public policy and is void 
unders.23. [890E-F] 
In the instant case, the facts demonstrate that the agreement bet-
ween the appellant and the respondent was only a combination to_) 
participate at an auction of the evacuee property. There is no intention 
either to peg down the price or to defraud the Government to knock out 
the sale at a lower price. Thus, the object

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