V. NARASIMHA RAJU versus V. GURUMURTHY RAJU AND OTH.T£RS

Citation: [1963] 3 S.C.R. 687 · Decided: 22-08-1962 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

3 S.C.R. 
SUPREME COURT REPORTS 
687 
V. NARASIMHA RAJU 
v. 
V. GURUMURTHY RAJU AND OTH.t£RS 
(P. B. GAJENDRAGADKAR, K. 0. DAS GUI'TA and 
RAGHUBAR DaYAL, JJ.) 
Arbitration-Agreement of ref erence-Oonsideratiori found 
unlawful-Legality af the award-Agreement for arbitration on 
withdrawal of criminal case-Public policy-Indian Oontract 
Act, 1872 (9 of 1872); s.23. 
In respect of a business which the appellant and the 
first respondent were carrying on in partnership along with 
others till September 15,1942, the first respondent demanded 
that the account should be made and the profits divided 
between the partners. Disputes arose when dividing the 
profits that whereas the first respondent claimed for himself 
alone the amount due to him and the fourth respondent, the 
latter demanded that the said amount should be divide·d half 
and half between them. The first respondent then proceeded 
to file a criminal complaint in the 
Magistrate's 
court 
against the partners including the appellant in which he 
alleged that the accused 
persons had corn mi tted offences 
under ss. 420,'465, 468 and 477 read with ss. 107 and 120-B 
of The Indin Penal Code. The charge levelled by the first 
respondent was that the accounts of the partnership had been 
fraudulently altered with a 
view to show tf.::c the fourth 
respondent was entitled to share equally the profits with the 
first respondent. Process was issued on the complaint and the 
. matter stood adjourned for hearing to December 30,1943. 
On that date the first' respondent and the 'accused persons 
entered into an agreement under which the dispute between 
the appellant and others and the first respondent was to be 
referred to a named arbitrator on the first respondent agreeing 
to withdraw 
his 
criminal 
complaint. 
Accordingly 
after the complaint was dismissed on the first respondent 
intimating to the Court that he had no evidence to support 
his case, the agreement signed by the parties was handed over 
to the ar_bitrator. In due course, the arbitrator pronounced his 
award and the first respondent took steps to have a decree 
passed in terms of the award. Thereupon the appellant filed 
an application under the provisions of the Arbitration Act, 
1940, for setting aside the award on the ground that the consi-
deration for the arbitration agreement was unlawful as it was 
1062 
Augiut 22. 
1941 
V. JV n1asim1aa 
/laju 
v. 
Y. GurumwliJJ Raju 
688 
SUPREME COURT REPOR'fS [1963) 
the promise by 'the first respondent not to prosecute his comp-
laint which involved a non-compoundable offence and, there-
fore, the agreement was invalid under s.23 of the Indian 
Contract Act, 1872. 
Held, that the arbitration agreement executed by the par-
ties on December 30, 1943, was invalid 
under s. 23 of the 
Indian Contrac.t Act, 1872, 
because its consideration was 
opposed to public policy. Consequently the award could not 
be enforced. 
Blwwanipur 
Banking Corporation Ltd, v. Sreemati 
DurgeshNandini Dassi, A,I.R. 1941 P. C. 95, Kami11i Kuma• 
Basu & Ors. v. Birendra Nath Basu & Anr., L. R. 57 I. A. 117 
and Sudhindra Kumar v. Ganesh Chandra (1939)1 Cal. 241, 
relied on. 
ClvIL APPELATE J:uRisDICTION : Civil Appeals 
Nos. 494 and 4;115 of 1957. 
· 
Appeals from the Judgment and decree dated 
March 5, 1954, of the Orissa High Court in Mios. 
Appeals Nos. 25 and :16of19411. 
A. V. Viswanatka Sastri and T. V. R. Tatachari, 
for the appellant. 
· 
M. S. K. Sastri for respondent No. I. 
1962 August 22. The Judgment of the Court 
was delivered by 
· 
GAJENDRAGADKAR, J.- The short question 
which arises in these two appeals is whether the 
Muchalika (Agreement of Reference) whioh was 
executed by the appellant and the four respondents 
in favour of Tanguda 
Narasimhamurty on the 
30th of December, 1943, is invalid because its consi-
deration was opposed to public policy under s. 23 
o( the Indian Contract Act. Both the trial Court 
and the High · Court of Orrisa have answered this 
question in the negative, and .. the appellant, who "' 
has come to this Court with a certificate granted 
':-
-
.. 
,-
... 
3 S.C.R. . 
SUi'REME COURT REPORTS 
689 
by the High Court under Art. 133 of the Constitu-
tion, contends that the said conclusion is contrary 
to law. 
· 
Y. N arosimha lloju 
y, 
P'. Gurumurth;J Raju 
It l\ppears that th~ ~ppellant took a lease of 6aJmdra1adkar J. 
the Parlakipiedi Samasthanam Rice and Oil Mill 
1 . 
for three years from 194:1 to 1944 under a registered 
lease-deed o

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