# r959 The Cominissioncr of Income-tax, llydcrabad- Deccan v. Jt1essrs. Vazir Sultan & Sous Bhagwati ] . r959 March 26

- **Citation:** [1959] Supp. 2 S.C.R. 406
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Bench:** Jafer Imam, A. K. Sarkar, K. SuBBA RAO
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r959-the-cominissioncr-of-income-tax-llydcrabad-deccan-v-jt1essrs-vazir-sultan-1679
- **Pages:** 42

## Headnote

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 V11as \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 respondent would enter into the contracts on behalf of the partnership 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 denying 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. Coulthwaite, (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 Thackoorseydass 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 common 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 undeniable cas~s of harm to the public.
Although theoretically it
was permissible to evolve a new head of public policy in exceptional 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,

## Text

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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 judgment 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 V11as \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 respondent would enter into the contracts on behalf of the partnership 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 denying 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. Coulthwaite, (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 Thackoorseydass 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 common 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 undeniable cas~s of harm to the public.
Although theoretically it
was permissible to evolve a new head of public policy in exceptional 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 Contract 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 gambling 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 contracts.
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 expression" 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 judgment 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 Surajmull. It was agreed between the partners that the
said contracts would be made in the name of the respondents 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 contracts with Mulchand and 49 contracts with Baldeosahay 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 Mulchand. 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 respondent instituted a suit, out of which the present appeal
arises, in the Court of the Subordinate Judge, Darjeeling, for the recovery of a sum of Rs. 5,300 with
interest thereon. Subsequently the plaint was amended 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 partnership 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 respondent 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 merchants 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 dissolved firm was not hit by the provisions of subsections (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 disallowed 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 drafted 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 following 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 business 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 additionn,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 consistent 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
1959
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 disSubba 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 partnership 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 merchants 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 intention 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, therefore, proceed on the basis that the appellant and the
first respondent entered into a partnership for carrying on wagering transactions and the claim related
only to the loss incurred in respect of those transactions.
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, unlessit is forbidden by law, 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 said to be unlawful. Every agreement of which the object or consideration is unlawful
is void."
Under this section, the object of an agreement, whether 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 forbidden 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 uncertain 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 payment 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 forbidden 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, whether 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 sometimes 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 forbidden by law seem practically to consist of acts punishable 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 between 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 defendant for indemnity against the liability incurred by
him and for commission as broker. The Court held
that the plaintiff was entitled to recover notwithstanding 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 transactions 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 recovered 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 authority 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 principal, a similar question arose for consideration. Hawkins, 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 rendered null and void; and not enforceable by any process 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 considered 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 contended 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 statute applies only to the original contract made between the persons betting, and not to such a contract 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 completed, and when it is paid to an agent it cannot be
contended that it is not a good payment for his principal. ........... 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 authorities.
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) Schedule 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.
1959
profession of bookmakers is not a calling within the
h
1- 111 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 lawMaiya 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 between 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 refraining from declaring the defendant a defaulter and
thereby injuring him with his customers, the defendant 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 majority, Fletcher Moulton, L. J., dissenting, held that the
fresh verbal agreement was supported by good consideration 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 intention 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 consistent with the view all along accepted by the Courts
in England. This case raised a new problem, namely,
whether a substituted agreement for consideration between 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 aforesaid decisions establish the proposition that in England a clear distinction is maintained between a contract 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 collateral contract.
The same principle has been applied to collateral.
contracts of partnership also. In Thwaites v. Ooulthwaite (1) the question of legality of a partnership of
bookmaking and betting was raised. There the plaintiff and defendant were partners in a bookmakers and
betting business, which was carried on by the defendant; 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 habitually 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 account 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 defendant 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, corrected the deviation made by Darling, J., in Thomas v.
Day (2 ) and put the case law in line with earlier precedents.
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 represented 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 Thwaites 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 regarded 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 collateral 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 presentation. Darling, J., held that as the plaintiffs formed an
association for the purpose of carrying on a betting
business, the action would not lie.