Allowed

Maya and 3 Others v. Sreekumar and Another

Kerala HC12 Mar 2018RFA/778/2011

Case brief

AI extract

What is this about?

Money paid to secure a teaching appointment in an aided private school was held legally unrecoverable as an unlawful transaction opposed to public policy. Restitution and exceptions to the in pari delicto rule were unavailable. The court allowed the appeal, set aside the judgment and decree, and dismissed the recovery suit.

What did the court decide?

Judgment and decree set aside; recovery suit dismissed. Parties to bear their respective costs throughout.

Maya and 3 Others Vs Sreekumar and Another — Corruption | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN &

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THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI

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MONDAY, THE 12TH DAY OF MARCH 2018 / 21ST PHALGUNA, 1939

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RFA.No. 778 of 2011 (I)

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--------------------

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AGAINST THE DECREE & JUDGMENT DATED 30-03-2011 IN OS 62/2004 of SUB COURT, MAVELIKKARA

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APPELLANTS/DEFENDANTS 1 TO 4:

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1 MAYA, AGED 47 YEARS, W/O.LATE MADHU, MARUTHA NADAYIL, ERUVA EAST, PATHIYOOR VILLAGE.

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2 MANJU, AGED 23 YEARS, D/O.MAYA, DO.

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3 MANUMOL, AGED 21 YEARS,

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D/O.MAYA, DO.

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4 MONU, AGED 18 YEARS, D/O.MAYA, DO.

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BY ADVS.SRI.R.HARIKRISHNAN SRI.N.ASHOK KUMAR SMT.A.SINDHULAKSHMY SRI.R.UMASHANKAR

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RESPONDENT(S)/PLAINTIFF-5TH DEFENDANT:

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1. SREEKUMAR, S/O.GOPALAKRISHNAN NAIR, AGED ABOUT 36 YEARS, RADHA BHAVAN,, PALLERIMANGALAM MURI, THEKKEKKARA VILLAGE, PIN-690 107.

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2. USHA RAMACHANDRAN.S., AGED ABOUT 50 YEARS, MANGALASSERIL, ERUVA EAST, PATHIYOOR,, PIN-690 564.

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R1 BY ADV. SRI.B.MOHANLAL

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THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 14-12-2017, THE COURT ON 12-03-2018 DELIVERED THE FOLLOWING:

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OKB

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[C.R.]

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P.N.RAVINDRAN, J &

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R.NARAYANA PISHARADI, J

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R.F.A.No.778 of 2011

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Dated this the 12^th day of March, 2018

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JUDGMENT

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R. Narayana Pisharadi, J

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Is the money paid as consideration for getting appointment as a teacher in a recognised aided school, legally recoverable from the person to whom it was paid? This is the question which essentially falls for consideration in this appeal.

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The appellants are defendants 1 to 4 in the suit O.S.No.62 of 2004 on the file of the Court of the Subordinate Judge of Mavelikkara. The first respondent in the appeal is the plaintiff and the second respondent is the fifth defendant in the suit.

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One Madhu was the manager of a school. On 13.03.2001, the plaintiff paid Rs.1,75,000/- to Madhu and the fifth defendant as advance towards the amount agreed to be paid by him for appointing him as a drawing teacher in the school. On the same day, Madhu executed an agreement stating that he had borrowed Rs.1,75,000/- from the plaintiff. This agreement was executed as a security for the amount paid by the plaintiff to Madhu. In April, 2001, the plaintiff paid a further amount of Rs.15,000/-. Madhu died on 9^th September, 2001. The first defendant is the wife and defendants 2 to 4 are the children of Madhu. The fifth defendant is his sister. After some months, the plaintiff approached them requesting them

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to arrange the job for him. They did not take any step for appointing him as teacher in the school. They also did not repay the amount paid by him. The plaintiff is entitled to realise the amount of Rs.1,90,000/- with interest at the rate of 12% per annum from the defendants. This is the case of the plaintiff in the suit.

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Defendants 2 to 4 were minors at the time of institution of the suit. They were represented in the suit by the first defendant. Defendants 1 to 4 filed a written statement in the suit disputing the claim made by the plaintiff regarding payment of money by him to Madhu. They also contended that the agreement produced by the plaintiff is a forged and fabricated document.

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The fifth defendant filed a separate written statement in the suit denying the claim of the plaintiff regarding payment of money as consideration for appointing him as teacher in the school. The fifth defendant also disputed the execution of any agreement by Madhu.

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The trial court framed necessary issues in the suit. PWs 1 to 4 were examined and Exts.A1 to A6 documents were marked on the side of the plaintiff during the trial of the suit. The first defendant was examined as DW1 and Exts.B1 to B3 documents were marked on her side. On appreciation of the evidence adduced by the parties, the lower court found that Madhu had executed Ext.A1 agreement and that he had received Rs.1,75,000/- from the

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plaintiff as consideration for appointing him as a teacher in the school. The lower court further found that the plaintiff is entitled to realise the aforesaid amount with interest at the rate of 6% per annum from the estate of Madhu inherited by defendants 1 to 4. The lower court also found that the fifth defendant is not liable to pay any amount to the plaintiff and dismissed the suit against her. Aggrieved by the decree passed against them, defendants 1 to 4 have filed this appeal.

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We have heard the learned counsel for the appellants and also the first respondent.

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Learned counsel for the appellants contended that the trial court has misread the evidence in reaching the finding that Ext.A1 is a document executed by Madhu. Learned counsel would submit that the evidence adduced by the plaintiff does not prove the execution of Ext.A1 document by Madhu. Learned counsel would also contend that Ext.A1 document is not an agreement but it is a bond, that it is an insufficiently stamped document and that it was wrongly admitted in evidence by the lower court. He further contended that the transaction alleged by the plaintiff is opposed to public policy, that the consideration for that transaction is illegal and

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that the plaintiff is not entitled to recover the amount, if any, paid by him in such a transaction.

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Per contra, the learned counsel for the first respondent submitted that the plaintiff has been able to prove that Ext.A1 document was executed by Madhu. He has contended that Ext.A1 document is not a bond but it is only an agreement. He has a further contention that the plaintiff had to part with the money to obtain the job of a teacher and that the consideration for Ext.A1 agreement cannot be found to be illegal or unlawful and that the plaintiff is entitled to recover the amount from the estate of the deceased Madhu.

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The appellants are estopped from raising the contention that Ext.A1 document is a bond and not an agreement. The appellants had objected to the admission of Ext.A1 document into evidence in the court below contending that it is a bond and that it is an insufficiently stamped document. The lower court upheld this contention raised by the appellants and found that Ext.A1 document is a bond. The plaintiff then filed W.P.(C) No.6323 of 2010 in this Court challenging the aforesaid finding of the lower court. As per the

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judgment dated 07/06/2010 in W.P.(C) No.6323 of 2010 (Ext.A6), this Court found that Ext.A1 document is not a bond but it is only an agreement. In the light of the finding by this Court, the contention of the appellants that Ext.A1 document is a bond, does not survive for consideration.

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The question now arises whether the plaintiff has been able to prove that Ext.A1 agreement was executed by Madhu. PW2 and PW3 are attestors to Ext.A1 agreement. They have not stated, either in examination-in-chief or in the cross examination, that they saw Madhu affixing his signature in Ext.A1 document. PW4 is the scribe of the document. He has also not given any evidence that he saw Madhu affixing his signature in that document. The evidence of PWs 2 to 4 does not in any way help the plaintiff to prove that Ext.A1 agreement was executed by Madhu.

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However, the evidence of the plaintiff, who was examined as PW1, is sufficient to prove that Ext.A1 agreement was executed by Madhu. PW1 has stated in the affidavit filed in lieu of examination-in-chief that on 13/03/2001 Madhu signed and gave Ext.A1 agreement as security for the amount

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of Rs.1,75,000/- received by him from the plaintiff as advance for arranging the job of a teacher in the school. A suggestion was made to PW1 in the cross examination that Madhu had not signed Ext.A1 agreement and that the signature of Madhu was forged by the plaintiff. PW1 denied this suggestion made to him.

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In this context, it is to be noted that there is a specific averment in the plaint that Ext.A1 agreement was executed by Madhu on receiving Rs.1,75,000/- from the plaintiff on 13/03/2001. This averment in the plaint is not specifically denied in the written statement filed by defendants 1 to 4. The averment in the written statement filed by defendants 1 to 4 is only that there was no need for Madhu to execute such an agreement and that the agreement produced by the plaintiff is a forged and fabricated document. It does not amount to a specific denial of the averment in the plaint that Ext.A1 agreement was executed by Madhu. The written statement of defendants 1 to 4 also does not contain a specific plea that the plaintiff had forged the signature of Madhu and created Ext.A1 document. There is a plea in the written

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statement of defendants 1 to 4 that the plaintiff was a total stranger to Madhu. If that be so, it is not explained by the defendants how the plaintiff could have forged the signature of Madhu to create Ext.A1 agreement and what was the motive or need for the plaintiff to create such an agreement and file a case against the wife and children of Madhu.

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When examined as DW1, the first defendant has not given any evidence in examination-in-chief that Ext.A1 agreement does not bear the signature of Madhu. She has also not given any evidence that the plaintiff has forged the signature of Madhu in Ext.A1 agreement. It was only during the cross examination, when Ext.A1 document was shown to her, the first defendant would state that it is not the signature of her husband which it bears.

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If the evidence of PW1 regarding the execution of Ext.A1 agreement by Madhu is appreciated in the aforesaid background, it can be found that there is no sufficient reason to disbelieve his testimony that it is a document signed and given to him by Madhu. The plaintiff has been able to prove that Ext.A1 is a document executed by Madhu.

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Ext.A1 agreement executed by Madhu evidences

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only a loan transaction. What is stated in Ext.A1 agreement is that Madhu has borrowed Rs.1,75,000/- from the plaintiff and that he has agreed to repay that amount to the plaintiff with reasonable interest. Even according to the plaintiff, there was no such loan transaction between him and Madhu. The averment in the plaint is that the plaintiff gave an amount of Rs.1,75,000/- to Madhu as advance for arranging the job of a teacher in the school managed by Madhu and as security for that amount, Madhu executed Ext.A1 agreement. The claim of the plaintiff for realisation of money from the defendants is not based on Ext.A1 agreement. Therefore, the plaintiff is not entitled to recover any amount from the defendants on the basis of Ext.A1 agreement executed by Madhu.

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The question to be considered now is whether the plaintiff had given a total amount of Rs.1,90,000/- to Madhu as consideration for arranging the job of a teacher in the school managed by Madhu. According to the plaintiff, on 1303-2001, he gave Rs.1,75,000/- to Madhu. It is alleged that he subsequently gave a further amount of Rs.15,000/- to Madhu

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in April, 2001. There is no reliable evidence to prove the claim made by the plaintiff that he gave Rs.15,000/- to Madhu in April, 2001. PW2 to PW4 have not given any evidence regarding payment of such amount by the plaintiff to Madhu. If the plaintiff had paid Rs.15,000/- to Madhu in April, 2001, it is not explained why he did not get any document from Madhu acknowledging the receipt of that amount. The plea of the plaintiff that he paid an amount of Rs.15,000/- to Madhu in April, 2001 is not proved.

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PW1 has stated in examination-in-chief that he paid an amount of Rs.1,75,000/- to Madhu on 13/03/2001. His evidence in that regard has not been successfully challenged in the cross examination. His evidence on that aspect is corroborated by the evidence of PW2 and PW3. They have given evidence that they saw Madhu receiving Rs.1,75,000/from the plaintiff. There is no sufficient ground to disbelieve their evidence in this regard. We find that the plaintiff has been able to prove that he paid an amount of Rs.1,75,000/- to Madhu on 13.03.2001 as consideration for appointing him as a teacher in the school, managed by Madhu.

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The defendants have got a case that Madhu was not

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the real Manager of the school in which the job of a teacher was offered to the plaintiff. It has come out in evidence that there was a dispute between Madhu and the fifth defendant regarding the management of the school. But, it is immaterial whether Madhu was really the manager of the school or not. What is relevant and material is the fact that Madhu had obtained money from the plaintiff on the promise that he would arrange the job of a teacher in the school.

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Learned counsel for the appellants has contended that the transaction alleged by the plaintiff is illegal and contrary to law and opposed to public policy and that the plaintiff is not entitled to recover the amount paid by him in such a transaction.

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There is no specific plea in the written statement that the transaction alleged by the plaintiff is opposed to public policy. But, the absence of a plea that the agreement or contract is opposed to public policy does not prevent the court from taking notice of the illegality of the transaction.

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22. In Surasaibalini Devi v. P. M. Majumdar: AIR 1965

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SC 1364, the Supreme Court has held as follows:

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“First as to the point that in the absence of a pleading the defendant was not entitled to rely on the taint of illegality in the

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transaction for persuading the Court to refuse relief to the plaintiff: I see force in the submission of learned counsel for the appellant on this question. The law on this point as to pleading is quite clear and has been stated in decision of the highest authority on several occasions and it is sufficient to summarise the underlying principles. Where a contract or transaction ex facie is illegal there need be no pleading of the parties raising the issue of illegality and the Court is bound to take judicial notice of the nature of the contract or transaction and mould its relief according to the circumstances”.

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23. In Immani Appa Rao v. Gollapalli Ramalingamurthi :

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AIR 1962 SC 370 , the Supreme Court has quoted the following passage from 'Law of Evidence' by Taylor:

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"Although illegality is not pleaded by the defendant nor sought to be relied upon by him by way of defence, yet the Court itself, upon the illegality appearing upon the evidence, will take notice of it, and will dismiss the action Ex turpi cause not oritur actio. No polluted hand shall touch the pure fountain of Justice".

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Where a contract or transaction is illegal, there need be no pleading of the parties raising the issue of illegality. The

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Court is bound to take judicial notice of it. Pure questions of law, though not pleaded, unless waived by the parties, can be permitted to be raised even at the appellate stage. The mere fact that such a question of law was not raised earlier in the pleadings or before the trial court, may not always be a proper

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guideline to shut out a litigant from pressing into service such a question at the appellate stage. Failure of any party to raise the question as to the enforceability of a contract on the ground of its being void, unlawful or illegal, being contrary to public policy or any statute would not prevent the court, nor absolve it from its obligation, to determine for itself that question.

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In the instant case, the written statement filed by the defendants did not contain a plea that the transaction alleged by the plaintiff is contrary to law or opposed to public policy. However, such a plea was raised by the counsel for the defendants at the time of the final hearing of the suit. This plea was negatived by the trial court.

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Section 23 of the Indian Contract Act, 1872 (hereinafter referred to as “the Act”) reads as follows:

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“What consideration and objects are lawful, and what

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not. -- 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 provisions of any law; or is fraudulent; or involves or implies, injury to the person 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 said to be unlawful.

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Every agreement of which the object or consideration is unlawful is void.”

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Illustration (f) to Section 23 of the Act reads as

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follows:

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"A promises to obtain for B an employment in the public service, and B promises to pay 1,000 rupees to A. The agreement is void as the consideration for it is unlawful."

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The illustration to Section 23 of the Act mentioned above clearly shows that money paid for obtaining employment in the public service constitutes illegal consideration and that such transaction is void. It cannot be said that when such act is unlawful with regard to public service it would be lawful for private sector. Such transactions are not in the interests of the society and they are opposed to public policy.

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True, in Francis Mathew vs State of Kerala :

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2005 (3) KLT 288 , this Court has held that when money is received by a person for arranging employment in a private company, it cannot be termed as bribe and that the transaction is not opposed to public policy. It was a case under Section 138 of the Negotiable Instruments Act, 1881, and the

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cheque issued by the accused was for repayment of the amount which he had received from the complainant for securing employment in the company. The facts of the present case are different and distinguishable. The evidence adduced by the parties in the present case indicates that it was in a Government aided private school that the job of a teacher was offered to the plaintiff. There is evidence to the effect that appointment of a teacher in that school needed approval by the District Education Officer. The amount was paid by the plaintiff to secure employment in an aided school where the Kerala Education Act, 1958 and the Kerala Education Rules, 1959 are applicable.

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Yet another decision on the point is Sassendra Varma Raj v. State of Kerala : 2008 (3) KHC 271: 2008 (3) KLT 740 . It was also a case under Section 138 of the Negotiable Instruments Act, 1881. In that case, when the complainant enquired with the accused whether his son could get a teacher's post in any of the high schools in the area, the accused made him believe that his family has got the right to appoint qualified hands to a teacher's post in one of the

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schools and demanded Rs.1,75,000/- as donation to the management of the school. He also insisted that a sum of Rs.75,000/- shall be given as advance. Accordingly, the complainant advanced a sum of Rs.75,000/-. Since the accused could not arrange the teacher's post as promised by him, the complainant demanded the money back. Thereupon, the accused issued two cheques to the complainant for repayment of the amount received by him from the complainant. It was contended by the accused that the amount was given by the complainant for securing employment to the post of a teacher in an aided school and the said amount can only be termed as bribery for procuring employment in the school and such an agreement is void ab initio since the consideration for the same is opposed to public policy within the meaning of Section 23 of the Act and that the complainant was not entitled to recover the amount covered by the cheques. This Court repelled the aforesaid contentions and held that it was not a case where the original agreement entered into between the complainant and the accused was sought to be enforced. This Court held that it was a case where

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the complainant demanded the money back and the accused agreed to return the money and the agreement to return the money was not in any way tainted by any illegality and the act of the accused was an act of undoing an illegality by another agreement, the consideration for which was not illegal or opposed to public policy. On the other hand, in the instant case, what the plaintiff wants is recovery of the amount paid by him in an illegal transaction.

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31. In Gherulal Parakh v. Mahadeodas Maiya : AIR

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1959 SC 781 , the Supreme Court has summarized the doctrine of public policy as under:

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“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", "uncertain 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 contracts 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 something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents; the principles have

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been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public”.

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32. In Central Inland Water Transport Corporation

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Ltd v. Brojo Nath Ganguly : AIR 1986 SC 1571 , the

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Supreme Court has held as follows:

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“Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a well recognized head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. There are two schools of thought "the narrow view" school and "the broad view" school. According to the former, courts cannot create new heads of public policy whereas the latter countenances judicial law making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well established by authorities. ... .. It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and

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oppressive to public conscience. If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy”.

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There can be no doubt with regard to the fact that appointment of a teacher in a school on receiving money from the candidate is a transaction which is injurious to publc interest and harmful to society. Where, it appears to the court from the case put forward by the plaintiff that the claim is illegal and that it would be contrary to public policy to entertain it, the court shall refuse to do so. A contract that tends to promote or encourage corruption in public life has to be considered as opposed to public policy.

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It is well settled that contracts made with the object of influencing appointments to public offices are illegal and void. Public policy forbids that a public office be made the subject of contracts. The contrary view would inevitably tend to corrupt practices. A contract to appoint a person to a public office or involving the sale of a public office is opposed to public policy and is consequently void. When the contract, which is the foundation of the suit, is based on an unlawful

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consideration, it is opposed to public policy and void. When the illegality of the contract has been made to appear, the law will not extend its aid to either of the parties, who will be left to suffer the consequences of their own acts. Where the contract is against public policy, an action cannot be maintained to enforce it directly or to recover the value of the services rendered or the money paid under it. In the instant case, if the Court is to assist the plaintiff to recover his money, it would have the effect of encouraging bribery and corruption. Every person in the position of the plaintiff would be tempted to offer bribe to get employment which he could do with impunity and without risk of loss if he secures the appointment and if he does not, he can sue to recover the money. A court of law shall not assist such a person.

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As per Section 2(c)(xii) of the Prevention of Corruption Act, 1988, any person who is an office - bearer or an employee of an educational institution, in whatever manner established, receiving or having received any financial assistance from the Central Government or any State Government, or local or other public authority is a public

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servant. Explanation 1 provides that such a person is a public servant whether appointed by the Government or not. Explanation 2 states that every person who is in actual possession of the situation of a public servant, whatever legal defect there may be in his right to hold that situation, shall be considered to be a public servant. As per Section 7 of the Prevention of Corruption Act, 1988, whoever, being, or expecting to be a public servant, accepts or obtains or agrees to accept or attempts to obtain from any person, for himself or for any other person, any gratification whatever, other than legal remuneration, as a motive or reward for doing or forbearing to do any official act or for showing or forbearing to show, in the exercise of his official functions, favour or disfavour to any person, commits an offence. As per Section 8 of the Prevention of Corruption Act, 1988, whoever accepts or obtains, or agrees to accept, or attempts to obtain, from any person, for himself or for any other person, any gratification whatever as a motive or reward for inducing, by corrupt or illegal means, any public servant, whether named or otherwise, to do or to forbear to do any official act, or in the

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exercise of the official functions of such public servant to show favour or disfavour to any person commits an offence. An offence under Section 7 of the Prevention of Corruption Act can be committed by a public servant and also by a person expected to be a public servant. Any person can be an accused of an offence under Section 8 of the Prevention of Corruption Act. Such person need not be a public servant. Such an offence can be committed by a public servant or by a private person or by a combination of the two (See C.B.I v. Jitender Kumar Singh : AIR 2014 SC 1169). In the instant case, the plaintiff paid money to Madhu for securing employment as a teacher in an aided school. It was an act forbidden by law. At least, it was an act which would defeat the object of the provisions of the Prevention of Corruption Act. It was an act encouraging corruption among public servants and those who are in the administration or management of aided schools. The transaction is opposed to public policy and void.

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In this context, it is also to be noted that the Manager of a private school, whether under individual or corporate management, which receives or has received aid or

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grant from the Government under the Kerala Education Act, 1958 and the rules made thereunder is a “public man” as per the definition given in Section 2(j)(ix)of the Kerala Public Men's Corruption (Investigations and Inquiries) Act, 1987. This Act was repealed by the Kerala Lok Ayukta Act, 1999. The Manager of a private school, whether under individual or corporate management, which receives or has received aid or grant from the Government under the Kerala Education Act, 1958 and the rules made thereunder is a “public servant” as per the definition given in Section 2(o)(x) of the Kerala Lok Ayukta Act, 1999. It is also to be noted that as per Section 2(e) of the Kerala Lok Ayukta Act, 1999, “corruption” includes every thing made punishable under Chapter IX of the Indian Penal Code or under the Prevention of Corruption Act, 1988.

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This Court has consistently held that a suit for recovery of property or money given as dowry is maintainable and that relief in such a suit cannot be denied on the ground that payment of dowry is prohibited under the Dowry Prohibition Act, 1961 (See Abbas v. Kunhipathu: 1975 KLT 604, Mary v. Cherchi : 1980 KLT 353 and Kunhu Moideen v.

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Sayed Mohammed : 1985 KLT 516). The lower court has relied upon these decisions to reach the finding that the transaction in the instant case is not opposed to public policy. It is to be noted that the dictum laid down in the aforesaid decisions with regard to maintainability of a suit for recovery of property or money given as dowry rests on Section 6 of the Dowry Prohibition Act, 1961, which provides that whoever receives dowry shall transfer it to the woman in connection with whose marriage it is given and that till the time of such transfer he shall hold it in trust for the woman. The decisions in these cases do not support the case of the plaintiff that he is entitled to recover the money paid by him as consideration for securing employment as a teacher in an aided school.

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The lower court has also found that it is common for private school managements to receive money from job aspirants as donation for development of the school and construction of school buildings and such transactions are not prohibited by any law. The plaintiff has no case that he paid the money as donation for any such purpose. His specific case is that he paid the money as consideration for appointing him

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as a teacher in the school.

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Where a contract, express or implied, is expressly or by implication forbidden by statute, no Court will lend its assistance to give it effect. A contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void, because such a penalty implies a prohibition. It is well established that a contract which involves in its fulfillment the doing of an act prohibited by statute is void. What is done in contravention of the provisions of an Act of the Legislature cannot be made the subject of an action (See Mannalal Khetan v. Kedar Nath Khetan : AIR 1977 SC 536).

¶152

The provisions contained in Section 65 of the Act do not assist the plaintiff to recover the money paid by him in a void and unlawful transaction. Section 65 of the Act lays down that when an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. This provision relates to the obligation of

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a person who has received an advantage under an agreement which is discovered to be void or under a contract which becomes void. The case before us is, however, not that of an agreement "discovered" to be or "becoming" void. The transaction is void on the face of it. It was void ab initio . Section 65 of the Act can only be aptly applied in such cases where an agreement which is subsequently found to be void on account of some latent defect or of circumstances unknown on the date of the agreement or when an agreement which was lawful is afterwards made void by circumstances which supervene. The object of Section 65 of the Act is not to make a new contract between the parties when the contract entered into between them has been discovered to be void, but only to restore the advantage received by one party thereunder to the other.

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The law stated in Section 65 of the Act is one touching the principle of restitution. The Section visualises two contingencies. The first one, after a benefit has been received by one party, the agreement is discovered to be void later. The second one, the contract becomes void by subsequent

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happenings. The provision is intended to prevent unjust enrichment. The expression 'discovered to be void' means an agreement though void ab initio, but not known to be so by the parties.

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The decision of the Apex Court in Kuju Collieries Ltd. v. Jharkhand Mines Ltd : AIR 1974 SC 1892 throws considerable light on the interpretation of Section 65 of the Contract Act. It reads as follows:

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"The section makes a distinction between an agreement and a contract. According to Section 2 of the Contract Act an agreement which is enforceable by law is a contract and an agreement which is not enforceable by law is said to be void. Therefore, when the earlier part of the section speaks of an agreement being discovered to be void it means that the agreement is not enforceable and it, therefore, not a contract. It means that it was void. It may be that the parties or one of the parties to the agreement may not have, when they entered into the agreement, known that the agreement was in law not enforceable. They might have come to know later that the agreement was not enforceable. The second part of the section refers to a contract becoming void. That refers to a case where an agreement which was originally enforceable and was, therefore, a contract, becomes void due to subsequent happenings. In both these cases any person who has received any advantage under such agreement or contract is bound to restore such advantage, or to make compensation for it to the person from whom he received it. But where even at the time

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when the agreement is entered into both the parties knew that it was not lawful and, therefore, void, there was no contract but only an agreement and it is not a case where it is discovered to be void subsequently. Nor is it a case of the contract becoming void due to subsequent happenings. Therefore, S.65 of the Contract Act did not apply."

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Section 65 of the Act is inapplicable where the object of the agreement was illegal to the knowledge of both the parties at the time it was made. In such a case the agreement would be void ab initio and there would be no room for subsequent discovery of that fact. In the instant case, the plaintiff has no case that when he gave money to Madhu for securing a job for him, he had no knowledge of the illegality of the transaction. It is not a case where the agreement relating to the transaction was discovered to be void or it became void by subsequent happenings. The provision contained in Section 65 of the Act does not come to the rescue of the plaintiff to recover the illegal gratification paid by him for securing a job in an aided school.

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The plaintiff cannot also recover the money paid by him on the ground that the parties were not in equal position. The doctrine or rule of pari delicto is the embodiment of the

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principle that the courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud. The Apex Court has explained the principle “in pari delicto” in Sita Ram v. Radhabai : AIR

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1968 SC 534 as follows:

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“The principle that the Courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud is expressed in the maxim in pari delicto potior est conditio defendantis. But as stated in Anson's 'Principles of the English Law of Contracts', 22nd Ed., p. 343: "there are exceptional cases in which a man will be relieved of the consequences of an illegal contract into which he has entered cases to which the maxim does not apply . They fall into three classes (a) where the illegal purpose has not yet been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it (b) where the plaintiff is not in pari delicto with the defendant: (c) where the plaintiff does not have to rely on the illegality to make out his claim." ...... It is settled law that "Where the parties are not in pari delicto, the less guilty party may be able to recover money paid, or property transferred, under the contract. This possibility may arise in three situations. First, the contract may be of a kind made illegal by statute in the interests of a particular class of persons of whom the plaintiff is one .....Secondly, the plaintiff must have been induced to enter into the contract by fraud or strong pressure .... Thirdly, there is some authority for the view that a person who is under a fiduciary duty to the plaintiff will not be allowed to retain property, or to refuse to account for moneys received, on the ground that the property or the

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moneys have come into his hands as the proceeds of an illegal transaction''.

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The decision of the Apex Court in Sita Ram`s case mentioned above shows that there are three exceptional cases where the illegality of the transaction does not matter. They are : (a) where the illegal purpose has not yet been substantially carried into effect before it is sought to recover the money paid or the goods delivered in furtherance of it (b) where the plaintiff is not in pari delicto with the defendant and (c) where the plaintiff does not have to rely on the illegality to make out his claim. If the facts of the present case are examined, it would be immediately clear that it does not fall in any of the abovementioned three classes of cases. The first class of cases deals with situations or agreements where the object is unlawful. In the present case -- securing a job in an aided school -- is not an unlawful object. What is unlawful is the consideration paid for it. The consideration having already been paid, the illegality stood completed on the part of the plaintiff. Since the plaintiff has to rely upon this illegality to make out his claim his case does not also fall within the third class of cases mentioned above. This leaves us with the

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second class of cases where the parties are not in pari delicto.

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It is not a case where the transaction is illegal for the

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reason that it offends a statute which is intended to protect a class of persons to whom the plaintiff belongs to. The transaction here offends a statute which is intended to curb the menace of corruption in the society. Payment of money to secure a job in an aided school offends the provisions contained in the Prevention of Corruption Act, 1988. A case of bribery is clearly covered by Section 23 of the Act (See Gulabchand v. Kudilal : AIR 1966 SC 1734). The person who

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received the money from the plaintiff was also not obliged to keep it in trust for the plaintiff. The plaintiff has also no case that he was a victim of exploitation. He had voluntarily paid the money for securing the job. He has no case that he was under strong pressure from Madhu to pay the money. The plaintiff has no case that he was acting under compulsion of circumstances and that he was obliged to succumb to the will of another person who was in a dominating position. In any event, the parties in the present case were in pari delicto.

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In the light of the discussion above, we have no

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hesitation to reach the conclusion that the money paid by the plaintiff as consideration for securing appointment as a teacher in an aided private school is not legally recoverable. The claim of the plaintiff is based on a transaction which is opposed to public policy.

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In the result, the appeal is allowed and the judgment and decree of the lower court are set aside and the suit O.S.No.62 of 2004 on the file of the Court of the Subordinate Judge of Mavelikkara is dismissed. Considering the facts and circumstances of the case, we direct the parties to suffer their respective costs throughout.

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Sd/- (P.N.Ravindran, Judge)

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Sd/- (R. Narayana Pisharadi, Judge)

//True Copy//

P.A. To Judge

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The case before us is not however of that type. Even where the contract is not ex facie legal "if the facts given in evidence clearly disclose the illegality the Court is bound to take notice of this fact even if not pleaded by the defendant".

Maya and 3 Others v. Sreekumar and Another

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Maya and 3 Others v. Sreekumar and Another

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