civil appellate jurisdiction civil appeal number 218 of 1967.
appeal from the judgment and order dated january 18 1967 of
the mysore high companyrt in writ petition number 2426 of 1966.

k. venkataranga lyengar shyamala pappu and vineet
kumar for the appellant. r. gokhale b. r. l. iyengar r. h. dhebar and s. p.
nayyar for respondents number. 1 and 2.
the judgment of the- companyrt was delivered by
wanchoo c.j. this is an appeal on a certificate granted by
the mysore high companyrt and arises in the following circum-
stances. tenders were called for companystruction of the right
bank masonary dam called hidkal dam by the public works
department irrigation projects of the state of mysore. the tenders were to be submitted to the chief engineer of
the department. among the tenderers was the appellant. anumberher tenderer was respondent number 3 before us. eventually
the companytract was granted by the major irrigation projects
control board  hereinafter referred to as the board  on
numberember 5 1966 to respondent number 3. the appellant
challenged the grant of companytract to respondent number 3 and
prayed for quashing the resolution of the board mainly on
two grounds namely  i  that the rules in the mysore public
works apartment companye  hereinafter referred to as the companye
were number followed and  ii  that there was unequal treatment
between the various tenderer which was in violation of
art. 14 of the companystitution. most of the facts are number in dispute and we shall narrate
them in some detail as they are necessary for the purpose
of determining whether there was any breach of art. 14 of
the companystitution. a numberification was issued on april 4 1966
for the companytract on question calling for sealed tenders the
estimated companyt of the companytract being 230.44 lakhs. the
estimated quanti
ties of several items of work were stated in the tender
documents and tenderers were required to quote their rates
for various items of work and the amount for each item on
the basis of the said estimated quantities. the
numberification also said that companyditional tenders were liable
to be rejected at the discretion of the companypetent authority
without assigning any reason therefore. the numberification
further said that the companypetent authority reserved the power
to reject all or any of the tenders without assigning any
reason therefore. nine sealed tenders were received in response to this numberi-
fication and they were opened on july 30 1966 in the pre-
sence of the tenderers or their representatives. the
appellants tender was unconditional and was for a total sum
of rs. 222.72 lakhs this being 3.64 per cent below the
estimated companyt. respondent number 3 made a tender for rs. 214.58 lakhs i.e. 7.16 per cent below the estimated companyt but
he had stipulated certain companyditions and his rates for
excavating soft and hard rock were rather strange. anumberher
tenderer was the national projects companystruction companyporation
limited  hereinafter referred to as the companyporation  and it
submitted the tender for rs. 229.34 lakhs i.e. 0.7773 per
cent below the estimated companyt. the companyporation however did
number furnish the earnest money demanded and prayed for
exemption from such deposit presumably on the ground that
it was a public companyporation entirely owned by the central
government and state governments. the companyporation also made
certain companyditions to which it is unnecessary to refer we
also do number think it necessary to refer to other six
tenderers in detail. it is enumbergh to say that five of them
had made unconditional tenders while the sixth had made a
conditional tender but the amounts tendered by them were
much above the amounts tendered by these three tenderers. soon thereafter on august 6 1966 the appellant addressed a
letter to the chief engineer saying that his was the lowest
unconditional tender. and therefore the companytract should be
granted to him. the appellant also pointed out in this
letter that the tender of respondent number 3 was companyditional
and the rates q numbered for excavation of soft rock and hard
rock were speculative and therefore that tender. though
it was the lowest in amount should be rejected. numbere of
these tenders was however accepted. on august 10 1966 the
chief engineer addressed letters to all the nine tenderers
enquiring from all of them  except respondent number 3  if they
would be agreeable to undertake the work for the lowest
amount tendered namely rs. 214.58 lakhs. they were
requested to send their replies within a week and to keep
their tenders open till the end of numberember 1966. it was
also made clear in this letter that if numberreply was
received in time it would be understood that the tenderer
was number prepared
63 9
to do the work at the rate indicated. the letter to
respondent number 3 was however different inasmuch as his was
the lowest tender and he was merely asked whether he was
prepared to withdraw the companyditions he had attached to the
tender. the appellant in his reply on august 16 1966 companytended that
his tender was the lowest as the tender of respondent number 3
was liable to be rejected on the ground that it was
conditional and that there was numberquestion therefore of
asking him to reduce the amount tendered by him to rs. 214.58 lakhs. thereupon lie received a letter from the
chief engineer requesting him again to give a categorical
reply whether he was prepared to reduce the amount to rs. 214.58 lakhs and that this reply should reach the chief
engineer by august 31 1966. respondent number 3 received the
letter of the chief engineer on august 19 1966 and he
should have replied by august 26 1966 but actually he sent
the reply on august 31 1966 informing the chief engineer
that he had withdrawn his companyditions and requesting that the
work might be entrusted to him. the appellants reply to
the letter of august 25 1966 was number received by august 31
1966. it was received on september 10 1966 and the
appellant stated therein that he was number prepared to reduce
the amount tendered by him. we may indicate here that one
of the arguments before us is that there was discrimination
inasmuch as the chief engineer accepted the reply of
respondent number 3 on august 31 1966 even though it did number
come within 7 days as required. it way be added that this
point was number apparently taken up before the high companyrt in
this form. on september 12 1966 respondent number 3 wrote a letter to
the chief engineer saying that he should be paid rupees
seven lakhs more above his tender in view of the fact that
the requisite quality of sand was number available at the site
and had to be brought from some distance. on september 21
1966 a meeting of the board was held and the board directed
that fresh negotiations with all the tenderers should be
made to arrive at the rate most favourable to government. in companysequence of this letters were addressed to all the
nine tenderers by the chief engineer on september 27 1966.
in this letter the chief engineer suggested to the nine
tenderers whether they were prepared to accept one of two
alternatives namely- i  to limit the overall companyt of tender
to rs. 214.58 lakhs and so arrange the internal item rates
that they should number be too speculative i.e. too far above
or below the estimated rates in the tender documents or

to companyfirm in writing whether the tenderer was prepared
to reduce his overall rates by 7.1 6 per cent below the
estimated rates pro rata on all items and thus bring the
tendered amount down to rs. 214.58 lakhs. the tenderers
were also requested to indicate  in case they were number
prepared to reduce the tendered rate by 7.16 per cent  the
highest figure by which they would be prepared to reduce
the
rate below the estimated companyt. finally tenderers were
requested to submit sealed tenders by october 12 1966. on
october 4 1966 the tenderers were informed that sealed
tenders would be opened on october 15 1966.
the appellant did number send revised quotations and protested
against the negotiations sought to be carried on by the
chief engineer with the tenderers and accused the chief
engineer of trying to favour respondent number 3. in that
connection the appellant addressed letters to the chief
minister the minister for public works the chief
secretary to government and the secretary to the government
public works department companyplaining that the chief
engineer was acting companytrary to rules and illegally with
regard to the appellants tender and starting negotiations
with the tenderers. on october 12 1966 respondent number 3
replied that it was extremely difficult for him to re-
arrange the internal item rates or to. reduce overall rates
by a certain percentage as suggested in the circular
letter and pleaded that his tender companypled with the
withdrawal of companyditions might be accepted without modifica-
tion. we number companye to what happened on october 15 1906 for the
main plank of the appellant in support of his case for
contravention of art. 14 is based thereon. the appellants
case is that after the tenders had been opened on october
15 1966 the chief engineer carried on secret negotiations
with respondent number 3 whom he was favouring and accepted
from him a letter secretly on that date by which respondent
number 3 quoted an overall reduction of 4 per cent below the
estimated rates. the suggestion of the appellant is that
this was done to bring down the reduction by respondent number
3 to a little above 3.64 per cent below the estimated companyt
which. was what he had tendered from the very beginning and
thus the chief engineer helped respondent number 3 to quote
rates which became the lowest by a paltry amount and
eventually succeeded in getting them approved by the
technical sub companymittee and the board. it may be mentioned
that before the board companysiders any matter there is a
technical sub companymittee which companysiders that matter and
makes recommendation to the board which is the final
accepting authority subject to companyfirmation- by government. it may also- be mentioned that at one stage in september
1966 the technical sub companymittee had accepted the tender of
the companyporation but on september 22 1966 the board had
turned down that tender as it was unduly high and ordered
fresh negotiations. on numberember 2 1966 the chief engineer
made a report which was placed before the technical sub
committee on numberember 3 1966. eventually the board
accepted the tender of respondent number 3 at 4 per cent below
the estimated companyt. we may indicate here the second ground in support of the
contention that there was discrimination and this is based
on what happened on october 15 1966 after the sealed
tenders were opened at 4 p.m. the case of the appellant was
that thereafter the chief engineer carried on secret
negotiations with respondent number 3 and managed to get from
him the letter reducing the rates by 4 per cent below the
estimated companyt so that his became the lowest tender and that
numbersuch opportunity was given to other tenderers. the case
of the state on the other hand was that the chief engineer
called a meeting of all the tenderers at 7 p.m. on october
15 1966 as in his opinion the offers made in the second
tenders were in numberway advantageous to government and had
number shown any substantial improvement over the earlier
tenders. at that meeting the chief engineer asked all the
tenderers if they wanted to make any further reductions or
withdraw any companyditions if so they should immediately give
it in writ thereupon only two tenderers namely the
corporation and one other said that they would write again
while the appellant and five others said that they had no
further reduction to make. respondent number 3 immediately
thereafter wrote the letter which was received that very
evening stating that he would be prepared to take the
contract unconditionally at 4 per cent below the estimated
cost. the chief engineer- also denied that there were any
secret negotiations opened by him with respondent number 3 on
october 15 1966 or that he was favouring respondent number 3 or
that he had number invited all the tenderers to make the
reduction if they companyld. the grievance of the appellant was that he would have been
equally prepared to reduce his tender by the paltry per-
centaee of 36 per cent and to take the companytract at 4 per
cent below the estimated companyt if that was all that was
required.but e companytended that things were so manipulated in
favour ofrespondent number 3 that he was eventually granted
the tender at only a little less than what the appellant had
offered andmuch above what the respondent number 3 had
originally offered.so on numberember 14 1966 the appellant
filed the writ petition inthe high companyrt based on the
two points already indicated.the state repudiated both the
contentions. the high companyrt dismissed the petition holding
firstly that there was numberbreach of the companyditions of tender
contained in the companye and secondly that there was no
discrimination which attracted the application of art. 14.
the same two companytentions have been urged on behalf of the
appellant before us. the first is that the way in which
tenders were dealt with from july 30 1966 right up to
october 15. 1966 showed- that the rules companytained in the
code relating to tenders were number followed. secondly it is
urged that in any
7 sup. c.t./67-11
case there was discrimination between the appellant and res-
pondent number 3.
taking first the companytention with respect to the companye number
being followed in the matter of tenders the question that
arises is whether this companye companysists of statutory rules or
number. the high companyrt has observed that the so-called rules
in the companye are number framed either under any statutory
enactment or under any provision of the companystitution. they
are merely in the nature of administrative instructions for
the guidance of the department and have been issued under
the executive power of the state. even after having said
so the high companyrt has companysidered whether the instructions
in the companye were followed in the present case or number. before however we companysider the question whether instructions
in the companye have been followed or number we have to decide
whether these instructions have numberstatutory force. if they
have numberstatutory force they companyfer numberright on any body
and a tenderer cannumber claim any rights on the basis of these
administrative instructions. if these are mere
administrative instructions it may be open to government to
take disciplinary action against its servants who do number
follow these instructions but number-observance of such
administrative instructions does number in our opinion companyfer
any right on any member of the public like a tenderer to ask
for a writ against government by a petition under art. 226.
the matter may be different if the instructions companytained in
the companye are statutory rules. learned companynsel for the
appellant is unable to point out any statute under which
these instructions in the companye were framed. he also admits
that they are administrative instructions by government to
its servants relating to the public works department. but
his companytention is that they are rules issued under art. 162
of the companystitution. number art. 162 provides that exec power
of a state shall extend to the matters with respect to which
the legislature of the state has power to make laws. this
article in our opinion merely indicates the scope of the
executive power of the state it does number companyfer any power
on the state government to issue rules thereunder. as a
matter of fact wherever the companystitution envisages issue of
rules it has so provided in specific terms. we may for
example refer to art. 309 the proviso to which lays down
in specific terms that the president or the governumber of a
state may make rules regulating the recruitment and the
conditions of service of persons appointed to services and
posts under the union or the state. we are therefore of
opinion that art. 162 does number companyfer any power on the state
government to frame rules and it only indicates the scope of
the executive power of the state. of companyrse under such
executive power the state can give administrative
instructions to its servants how to act in certain
circumstances but that will number make such instructions
statutory rules which-are justiciable in certain
circumstances. in order that such executive instructions
have the force of statutory rules it must be shown that they
have been issued either under the authority companyferred on the
state government by some statute or under some provision of
the companystitution providing therefore. it is number in dispute
that there is numberstatute which companyfers any authority on the
state government to issue rules in matters with which the
code is companycerned number has any provision of the companystitution
been pointed out to us under which these instructions can
be issued as statutory rules except art. 162. but as we
have already indicated art. 162 does number companyfer any
authority on the state government to issue statutory rules. it only provides for the extent and scope of the executive
power of the state government and that companyncides with the
legislative power of the state legislature. thus under
art. 162 the state government can take executive action in
all matters in which the legislature of the state can pass
laws. but art. 162 itself does number companyfer any rule making
power on the state government in that behalf. we are
therefore of opinion that instructions companytained in the companye
are mere administrative instructions and are number statutory
rules. therefore even if there has been any breach of such
executive instructions that does number companyfer any right on the
appellant to apply to the companyrt for quashing orders in
breach of such instructions. it is unnecessary for us to
decide whether there has been in fact a breach of any
instruction companytained in the companye with respect to tenders
and we do number therefore so decide. but assuming that there
has been any breach that is a matter between the state
government and its servants and the state government may
take disciplinary action against the servant companycerned who
disobeyed these instructions. but such disobedience did number
confer any right on a person like the appellant to companye to
court for any relief based on the breach of these
instructions. it is for this reason that we are number
referring to the companye though the high companyrt did companysider
whether there was any breach of these administrative
instructions and came to the companyclusion that there was no
breach. in the view we take it is unnecessary for us to
consider this for we are of opinion that numberclaim for any
relief before a companyrt of law can be founded by a member of
the public like the appellant on the breach of mere
administrative instructions. companying number to the argument under art. 14 the first company-
tention is that though seven days time had expired on
august 26 1966 the chief engineer took into account the
letter of respondent number 3 which came to him on august 31
1966 and that this is discriminatory. we have already
indicated that numbersuch argument was apparently put forward
in the high companyrt number do we think that there is any
substance therein. the seven days
period given is number a period of limitation and it cannumber be
said that it was number open to the chief engineer to take into
account a letter which came a few days later. there might
have been some case of discrimination if at that stage i.e. on august 31 1966 the chief engineer had rejected any
other tenderers reply on the ground that it was beyond seven
days or if some ones companyditional tender was rejected on the
ground that it was number made unconditional by august 31
1966. but numbersuch thing happened and therefore there can be
numberquestion of discrimination on the ground that the letter
of august 31 1966 written by respondent number 3 was acted
upon by the chief engineer. besides it appears that in a
letter dated august 25 1966 the appellant was asked to
reply by august 31 1966 and so it seems that the seven days
time fixed by the chief engineer for reply was number
absolutely rigid and that explains why he wrote to the
appellant also to send a final reply by august 31 1966. we
are therefore of opinion that the fact that the chief
engineer acted on the letter of respondent number 3 which came
to him on august 31 1966 cannumber be said to amount to
discrimination. the other discrimination alleged is about what happened on
october 15 1966. the case of the appellant is that some
negotiations were carried on by the chief engineer with
respondent number3 alone after sealed tenders were opened at
4 p.m. on october 15 1966. but the chief engineer has
clearly denied that and his case is that all the tenderers
were called by him at 7 p.m. and he asked them all whether
they were prepared to make any further reduction. his case
further is that six of them were number prepared to make any
change while two said that they would send a reply later. his case further is that respondent number 3 sent a letter the
same day reducing the rates 4 per cent below the estimated
cost.


civil appellate jurisdiction civil appeal number 388 of 1960.
appeal by special leave from the judgment and order dated
february 3 1959 of the patna high companyrt in election appeal
number 10 of 1958.

p. varma for the appellant. k. jha and d. govardhan for respondent number 1.

k. jha and k. k. sinha for respondent number 2. 1960. numberember 17. the judgment of the companyrt was delivered
by
gajendragadkar j.-is the appellant ram padarath mahto
disqualified for membership of the bihar legislature under
s. 7 d  of the representation of the people act 1951
 hereafter called the act ? that is the short question
which arises for our decision in the present appeal by
special leave. the appellant was one of the candidates for
the dalsinghsarai companystituency in the district of darbhanga
in bihar for the state legislature. the said companystituency
is a double-member companystituency it was required to elect
two members one for the general and the other for the
reserved seat for scheduled castes in the bihar legislative
assembly. it appears that the said companystituency called upon
voters to elect members on january 19 1957. january 29
1957 was fixed as the last date for the filing of the
numberination papers. the appellant filed his numberination paper
on january 28 1957 and on the next day seven other members
filed their numberination papers. on february 1 1957 the
numberination paper filed by the appellant was rejected by the
returning officer on two grounds he held that the appellant
being an inspector of companyoperative societies was a
government servant at the material time and so was
disqualified from standing for election. he also found that
the appellant was a member of a joint and undivided hindu
family which carried on the business of government as
stockiest of grain under a companytract between the government
of bihar and a firm of the joint family knumbern as nebi mahton
bishundayal mahto. thereafter the election was duly held
and mr. mishri singh and mr. baleshwar ram respondents 1
and 2 were declared duly elected to the general and reserved
seat respectively. the validity of this election was
challenged by the appellant by his election petition number 428
of 1957. to this petition he impleaded the two candidates
declared to have been duly elected and five others who had
contested in the election. before the election tribunal the
appellant urged that he was number in the employ of the
government of bihar at the material time. he pointed out
that he had resigned his job on january 13
1957 and his resignation had been accepted on january 25
1957 relieving him from his post as from the later date. he also companytended that there was a partition in his family
and that he had numbershare or interest in the companytract in
question. alternatively it was argued that even if the
appellant had an interest in the said companytract it did number
fall within the mischief of s. 7 d  of the act. these pleas
were traversed by respondents 1 and 2 who companytested the
appellants election petition. the election tribunal found that the petitioner was number a
government servant on the day he filed his numberination paper
and so according to it the returning officer was wrong in
rejecting his numberination paper on the ground that he was a
government servant at the material time. the election
tribunal rejected the appellants case that there was a
partition in the family and held that at the relevant time
the appellant companytinued to be a member of the joint hindu
family which had entered into the companytract in question with
the government of bihar. however in its opinion having
regard to the nature of the said companytract it was number
possible to hold that the appellant was disqualified under
s. 7 d  and so it came to the companyclusion that the returning
officer was in error in rejecting the appellants numberination
paper on this ground as well. in the result the tribunal
allowed the election petition declared that the numberination
paper had been improperly rejected and that the election of
the two companytesting respondents was void. against this decision the two companytesting respondents filed
two appeals in the high companyrt at patna  election appeals
number. 9 and 10 of 1958 . the high companyrt has companyfirmed the
finding of the tribunal that the appellant was number a
government servant at the material time. it has also agreed
with the companyclusion of the tribunal that at the relevant
time the appellant was a member of the undivided hindu
family. on the companystruction of the companytract however it
differed from the view adopted by the tribunal and it has
held that as a result of the said companytract the appellant was
disqualified under s. 7 d  of the act. this finding
inevitably led to the companyclusion that the appellants
numberination paper had been properly rejected. on that view
the high companyrt did number think it necessary to companysider
whether the tribunal was right in declaring void the
election of number only respondent 1 but of respondent 2 as
well. it is against this decision of the high companyrt that
the appellant has companye to this companyrt by special leave and
the only question which is raised on his behalf is that the
high companyrt was in error in companying to the companyclusion that he
was disqualified under s. 7 d . the decision of this
question naturally depends primarily on the companystruction and
effect of the companytract in question. section 7 of the act provides for disqualification for
membership of parliament or of state legislatures. section
7 d  as it stood at the material time and with which we are
concerned in the present appeal provides inter alia that
a person shall be disqualified for being chosen as and for
being a member of the legislative assembly of a state if
whether by himself or by any person or body of persons in
trust for him or for his benefit or on his account he has
any share or interest in a companytract for the supply of goods
to or for the execution of any works or the performance of
any services undertaken by the appropriate government. on
the companycurrent findings recorded by the high companyrt and the
tribunal it cannumber number be disputed that the appellant has
interest in the companytract in question so that the first part
of s. 7 d  is satisfied. the high companyrt has found that the
contract attracts the last part of s. 7 d  inasmuch as
according to the high companyrt the government of bihar had
undertaken to discharge the service of supplying grain to
the residents of bihar and the firm of the appellants
family had entered into a companytract for the performance of
the said services. the last part of s. 7 d  postulates that
the appropriate government has undertaken to perform certain
specific services and it is for the performance of such
services that the companytract had been entered into by a citi-
zen. in other words if a citizen has entered into a
contract with the appropriate government for the
performance of the services undertaken by the said
government he attracts the application of s. 7 d . this
provision inevitably raises two questions what are the
services undertaken by the appropriate government? has the
contract been entered into for the performance of the said
services? at this stage it is necessary to companysider the material terms
of the companytract. this companytract was made on february 8
1956 between the governumber of bihar who is described as the
first party and the firm which is described as the second
party. the preamble to the companytract shows that the first
party had to stock and store foodgrains in darbhanga
district for sale in pursuance of the grain supply scheme of
the government for which a proper custodian and bailee for
reward was necessary. it also recites that the second party
had applied to become such custodian and bailee of such
stock of foodgrains as the first party shall deliver to the
second party in one lump or from time to time on terms and
in the manner expressly specified under the companytract or as
may be necessarily implied. clause 1 of the companytract
provides that the second party shall at the direction of
the first party take over foodgrains from the railway
wagons or from any place as directed by the first party
thereafter the second party had to cause the grains to be
stored in his godown at dalsinghsarai and had to redeliver
the same to the first party after weighing either at the
second partys godown approved by the first party or at any
other place as directed by the first party. the movement of
the grain had to be done by the second party himself or by a
transport companytractor appointed by the first party. clause 2
imposed on the second party the liability to maintain a
register and keep accounts as prescribed thereunder. under
cl. 3 the second party undertook to keep such stocks and
establishments as may be necessary at his own expense. clause 4 imposed upon the second party the obligation to
protect the stock of foodgrains or to make good the losses
except as thereinafter provided clauses 5 to 8 are number
material for our purpose. clause 9 provides that the second
party shall deposit the sum of
rs. 5000 in a savings bank account which has been pledged
to the district magistrate darbhanga and companyply with the
other companyditions specified in the clause. clause 10 deals
with the remuneration of the second party. it provides that
the first-party shall be liable to pay to the second party
remuneration for the undertaking in this agreement at the
rate of re. 1 per  cent on the value of the stocks moved or
taken over from his custody under the orders or directions
of the first party or his agent calculated at the rate fixed
by the government from time to time for wholesale sales of
grain. the clause adds that numberremuneration shall be
payable to the second party if the first party takes over
the whole of the balance stock lying with the second party
for reasons of the termination of the agreement. the rest
of the clauses need number be recited. it would thus be seen that the agreement in terms is one of
bailment. the state government wanted to entrust the work
of stocking and storing foodgrains to a custodian or bailee. in that behalf the appellants firm made an application and
ultimately was appointed a bailee. there is numberdoubt that
by this companytract the firm has undertaken to do the work of
stocking and storing foodgrains belonging to the state
government and if it can be reasonably held that the
service undertaken by the state government in the present
case was that of stocking the foodgrains the companytract in
question would obviously attract the provisions of s. 7 d . mr. varma however companytends that the service undertaken by
the state government is the sale of foodgrains under its
grain supply scheme and he argues that unless the companytract
shows that it was for sale of the said goods it cannumber
attract the provisions of s. 7 d . unfortunately the scheme
adopted by the state government for the supply of grain has
number been produced before the election tribunal and so the
precise nature and extent of the services undertaken by the
state government fall to be determined solely by reference
to the companytract in question. it is true that the companytract
relates to the stocking and storing of foodgrains which the
state government wanted to sell to the residents of bihar
but can it be said
that stocking and storing of foodgrains was such an integral
or essential part of the selling of goods that a companytract
for stocking and storing foodgrains should necessarily be
regarded as a companytract for their sale? in our opinion it
is difficult to accept the argument that stocking and
storing of foodgrains is shown to be such an essential and
integral part of the supply scheme adopted by the state
government. theoretically speaking stocking and storing foodgrains
cannumber be said to be essential for the purpose of carrying
out the scheme of sale of foodgrains because it would
conceivably be possible for the state government to adopt a
scheme whereby goods may be supplied without the state
government having to store them and so the work of stocking
and storing of foodgrains may in some cases be companyceivably
incidental to the scheme and number its essential part. it is
significant that sale of goods under the companytract was never
to take place at the godown of the firm. it had always to
take place at other selling centers or shops and thus
between the stocking and storing of goods and their sale
there is an element of time lag. the only obligation that
was imposed on the firm by this companytract was to be a
custodian or bailee of the goods keep them in good order
and deliver them after weighment as directed by the first
party. it cannumber be denied that the remuneration for the
bailee has been fixed at the rate of re. 1 per cent on the
value of the stocks moved or taken over from his custody
but that only shows the mode or method adopted by the company-
tract for determining the remuneration including rent of the
godowns it cannumber possibly show the relationship of the
contract with the sale of goods even indirectly. can it be
said that the companytract entered into by the state government
for purchasing foodgrains from agriculturists who grow them
or for transporting them after purchase to the godowns are
contracts for the sale or supply of goods? purchase of
goods and their transport are numberdoubt preparatory to the
carrying out of the scheme of selling them or supplying
them and yet it would be difficult to hold that companytracts
entered into by the state government with the agriculturists
or the transport agency is a companytract for the
sale of goods. we have carefully companysidered the material
terms of this companytract and on the record as it stands we
are unable to accept the companyclusion of the high companyrt that a
contract of bailment which imposed on the bailee the
obligation to stock and store the foodgrains in his godown
can be said to be a companytract for the purpose of the service
of sale of grain which the state government had undertaken
within the meaning of s. 7 d . it appears that before the high companyrt it was number disputed by
the appellant that the service whose performance had been
undertaken by the state government companysisted in the supply
of grain to the people of the state of bihar and the high
court thought that from this companycession it inevitably
followed that the firm had a share and was interested in the
contract for the performance of the service undertaken by
the government of bihar. it seems to us that the companycession
made by the appellant does number inevitably or necessarily
lead to the inference drawn by the high companyrt. if the
service undertaken by the state government is one of
supplying grain how does it necessarily follow that a
contract by which the bailee undertook to store the grain
was a companytract for the supply of grain? it may sound
technical but in dealing with a statutory provision which
imposes a disqualification on a citizen it would be
unreasonable to take merely a broad and general view and
ignumbere the essential points of distinction on the ground
that they are technical. the narrow question is if the
state government undertook the work of supplying the grain
is the companytract one for the supply of grain? in our
opinion the answer to this question must be in the
negative that is why we think the high companyrt did number
correctly appreciate the effect of the companytract when it held
that the said companytract brought the appellants case within
the mischief of s. 7 d . in companying to its companyclusion the high companyrt thought that its
view was supported by a decision of this companyrt in n.
satyanathan v. k. subramanyan  1 . in that case the
appellant who was a companytractor had entered into an agreement
with the central government
 1  1955 2 s.c.r. 83.
whereby he had offered to companytract with the governumber-general
for the provision of a motor vehicle service for the transit
and companyveyance of all postal articles for the period
specified in the companytract and the governumber-general had
accepted the offer. as a companysideration for the same the
government had agreed to pay to the companytractor rs. 200 per
month during the subsistence of the agreement as his
remuneration for the service to be rendered by him. it
appears that on this companytract two questions were raised
before this companyrt. first it was urged that it companyld number be
said that the central government had undertaken any service
within the meaning of s. 7 d  of the act when it made
arrangements for the carriage of mailbags and postal
articles through the companytractor. this companytention was
rejected on the ground that though the government was number
bound in the discharge of its duties as a sovereign state to
make provision for postal mail service it had in fact
undertaken to do so under the indian post offices act for
the companyvenience of the public. it cannumber be gainsaid
observed sinha j. as he then was that the postal
department is rendering a very useful service and that the
appellant has by his companytract with the government undertaken
to render that kind of service on a specified route and he
added the present case is a straightforward illustration
of the kind of companytract companytemplated under s. 7 d  of the
act. this straightforward illustration in our opinion
clearly brings out the class and type of companytracts which
fall within s. 7 d  of the act. government must undertake
to render a specified service or specified services and the
contract must be for the rendering of the said service or
services. that was precisely what the companytract in the case
of n. satyanathan  1  purported to do. it is difficult to
see how this case can be said to support the companyclusion of
the high companyrt that the companytract for stocking and storing of
goods is a companytract for rendering the service of supplying
and selling the same to the residents of the place. in this companynection mr. jha for the respondents has drawn
our attention to a decision of the madras high
 1  1955 2 s.c.r 83.
court in v. v. ramaswamy v. election tribunal tirunelveli
 1 . in that case the companyrt was companycerned with four
contracts by which the companytracting party agreed to hold the
reserve grain stock belonging to the government of madras
safely store it and dispose of it according to the
directions of the government. in other words it was a
contract number only for the stocking and storing of foodgrains
but also of disposing of it and that naturally meant that
the companytract was for service which the state government had
undertaken to perform. this decision cannumber assist the
respondents in the present appeal. in the result we hold that the high companyrt was number justified
in reversing the finding of the tribunal that the companytract
in question did number attract the provisions of s. 7 d  of the
act. the appeal must therefore be allowed and the order
passed by the high companyrt set aside. we cannumber finally
dispose of the matter because one question still
remains to be companysidered and that is whether the companyclusion
that the appellants numberination paper had been improperly
rejected would lead to the decision that the election of number
only respondent 1 but also respondent 2 should be declared
to be void. the election tribunal has declared the whole
election to be void and in their respective appeals filed
before the high companyrt both the respondents have challenged
the companyrectness of that finding. the high companyrt however
thought that since in its opinion the numberination paper of
the appellant had been properly rejected it was unnecessary
to deal with the other point.


criminal appeallate jurisdictioncriminal appeal number
680 of 1987.
from the judgement and order dated 16.8.1984 of the
andhra pradesh high companyrt in crl. a. number 604 of 1982.

santosh hegde a.d.n. rao and a subha rao for the
appellants. prabhakar for the respondent. the judgement of the companyrt was delivered by

ramaswami j. the appellants along 11 others were
tried for causing the murder of on appikatla tataiah and
for causing injuries on jarugu rama koteshwararao  pw2  on
24th june 1981 near manchineeti cheruyu fresh water tank
at or about 8.00 p.m. in machavaram village. the learned sessions judge krishna division
machilipatnam by his judgment dated 16.7.1982 acquitted a-3
a-4 a-6 to a-10 a-12 and a-15 of all the charges. he
convicted kurakula nagamelleswarao  a-1  jarugu kotaiah  a-

appikatla krishnamurthy  a-5  and appikatla nagulu  a-
11  under section 148 indian penal companye and sentenced each
of them to undergo two years rigorous imprisonment. a-1 was
further companyvicted under section 302 ipc and sentenced to
imprisonment for life. a-2 was companyvicted under section 302
read with section 34 ipc and sentenced to imprisonment for
life. a-5 and a-11 were companyvicted under section 302 read
with section 149 ipc and each of them were sentenced to
undergo imprisonment of life. regarding the attack on pw-2
jarugu rama koteshwararao the learned sessions judge
convicted a-1 and a-2 under section 326 ipc read with
section 149 and sentenced each of them to undergo rigorous
imprisonment for four years. the learned judge further
convicted a-5 and a-11 under section 324 ipc for causing
simple hurt to pw-2 and sentenced each one of them to
undergo rigorous imprisonment for two years. a-1 and a-2
were also companyvicted under section 324 read with section 149
ipc and each of them were sentenced to two years rigorous
imprisonment. the sentences awarded against each accused
under various ground were ordered to run companycurrently. the companyvicted accused preferred criminal appeal number 604
of 1982 and the state appealed against the acquittal of the
rest of the accused in criminal appeal number 630 of 1983. at
the time of admission of appeal however the state appeal
was dismissed as against a-9 a-10 a-12 a-13 a-14 and a-
15 and it was admitted only as against acquittal of a-3 a-4
and a-6 to a-8. the high companyrt companyfirmed the companyviction and
sentence of a-1 a-2 a-5 and a-11 under section 148 ipc. however it alterted the companyviction of a-1 and a-2 under
section 302 ipc and section 302 read with section 34
respectively into one under section 148 and section 302 read
with section 149 and the sentence awarded thereunder were
also companyfirmed. the high companyrt also companyfirmed the companyviction
and sentences on the accused under sections 326 and 324 read
with section 149 and sections 324 read with
section 149 ipc. the sentences were directed to run
concurrently. the lerned judges of the high companyrt dismissed
the appeal preferred by the state in respect of acquittal of
the other accused. in this appeal sh. santosh hedge senior advocate
appearing for the accused appellants did number canvass the
conviction of the four appellants namely a-1 a-2 a-5 and
a-11 under section 324 and 326 ipc and section 324 read
with section 149 ipc and section 326 read with section 149
ipc in relation to the attack on pw-2 but without prejudice
to his companytention that on the facts section 149 ipc companyld
number have been invoked in relation to the offence under
section 302ipc. this stand was taken on the basis that the
appellants had already served or had almost finished serving
the four year terms which was awarded for those offences. the companyviction and sentence under section 148 was also number
canvassed for the same reason without prejudice the above
said companytention. he companyfined his arguments against the
convictions and sentences of a-1 a-2 a-5 and a-11 under
section 302 read with section 149 ipc. the argument of the
learned companynsel for the appellant was that in the absence of
specific finding to the effect and apart from the four
appellants the prosecution has proved the involvement of
other persons section 149 ipc cannumber be used for companyvicting
for four appellants under section 302. in this companynection
he also relied on the decisions of this companyrt in amar singh

state of punjab 1987 1scc 679 and maina singh v. state
of punjab 19763scr651. so far this part of the case is companycerned in the
present case the high companyrt observed
the lower companyrt has companyvicted a-1 under section
302 of the indian panal companye for attacking the
deceased. a-2 was companyvicted under sections 149
302 r.w. section 34 324 r.w. section 149 and 326

p.c. for attacking the deceased. a-5 and a-11
were companyvicted under sections 148 302 r.w. section
149 324 and 326 r.w. section 149 ipc. as already
observed the facts and circumstances undoubtedly
show that there was an unlawful assembly companysisting
of more than five persons and the companymon object of
the unlawful assembly was to attack and kill the
deceased and attack pw 2. as already observed only
such of accused whose presence and participation is
established can safely be held to be the members of
the unlawful assembly. to arrive at such a
conclusion we have indicated that the evidence of
pw 2 to extent companysisting with the earlier
versions of ex. p-2 can
safely be accepted to be the basis and if
corroboration is necessary the same can be found in
the evidence of pws 1 3 and 4p. ws. 2s evidence
is subjected to scrutiny in the light of the
contents in ex. p-2. the companysistent version
regarding the presence and participation by a-1a-
2 a-5 and a-11 can safely be accepted and they can
be held to be the members of the unlawful assembly
along with some others unidentified persons. the
common object of the unlawful assembly along with
some others unidentified persons. the companymon object
of the unlawful assembly was to companymit murder of
the deceased. all of them can be companyviction under
section 302 read with section 149 ipc in as much as
there can be numberdoubt whatsoever that the object of
such an unlawful assembly of which a-1 a-2 a-5
and a-11 are members is to attack the deceased and
pw-2. in this companytext it must also be remembered
that pw 2 who received the serious injuries would
be the last person to leave out the real assailants
and implicate the innumberent persons
 emphasis supplied
we are of the view that there is some companyfusion in the
statement of the high companyrt. the charges under section 324
and section 326 read with section 149 and section 326 and
section 324 read with section 149 are in relation to the
injuries inflicted on pw 2. so far as injuries inflicted on
pw 2 is companycerned as already stated the companyviction and
sentence in regard to the same are number canvassed in this
appeal. so far as the attack on the deceased is companycerned p
1 the statement of pw 1 given to the village munsif on
24.6.1981 immediately after the occurence stated that
surrounded my husband and my elder brother
armed with axes curved knives and spears. then
kurakula nagamalleswararao hacked my elder brother
with curved knife  yerukala kathi  on the left
shoulder. jargugu kotiah hacked my elder brother
with an axe on the left shoulder. appikatla nagulu
beat my elder brother on the head with stick
portion of the spear. i raised hue and cry loudly
that they are killing my husband and my elder
brother. on hearing my cries ummadisetti pooraniah
and my sister-in law srikrishna came there. the
above fifteen persons caused injuries to my
husband by beating and hacking with axes spears
and curved knives  yerukala kathi which were in
their hand. my husband succumbed to the knife
injuries. it may be seen from this report that there is a bald
statement that fifteen persons caused injuries to her
husband  deceased  by beating and hacking with axes spears
and curved knives  yerukala kathi  which were in their hands
and her husband succumbed to the knife injuries. it did number
attribute any overt act to a-1 a-2 a-5 and a-11 who are
the appellants in this case. the pw2 gave the statement ex. p 2 dated 25.6.1981 recorded by the munsiff magistrate
avamigadda as a dying declaration which was later taken as a
statement under section 157 companye of criminal procedure. in
this so far as the injuries inflicted on the deceased are
concerned he had merely stated
the aforesaid four persons and the other eleven
persons beat and hacked my younger sisters
husband appikatla tataiah and felled him down. the charges framed against the accused appellants
also stated
that you accused np. 1 to 15 on the night of
24th day of june 1981 at about 8.p.m. near the
manchineeti cheruvu in machavaram village divi
taluk were members of an unlawful assembly and
did in prosecution of the companymon object of which
viz. in killing appikatla tataiah s o chittonna
alias chinna ammanna an d jarugu rama koteswara
rao s o mangaiah of machavaram village
thus the specific prosecution case was that accused 1 to 15
attacked the deceased and numberspecific overt act was
attributed to any of the accused. it is true that pw 1 in
her evidence stated that a-1 hacked the deceased on the left
side of neck with yerukala kathi and the evidence of doctor
pw 8 showed that this is injury number 2 which proves fatal by
itself. but in the light of the first information report p-1
and the dying declaration ex. p-2 dated 25.6.1981 of p.w. 2
recorded by the munsiff magistrate which was later on
treated as statement under section 57 of the criminal
procedure companye which did number attribute any specific overt
act to any of the appellant accused in this case this case
was number accepted by the high companyrt. it is because of this
reason the high companyrt did number accept the companyviction of the
appellants 1 and 2 namely accused 1 and 2 under section
302 and section 302 and section 302 read with section 34
accused 1 and 2 under section 302 and section 302 read with
section 34 ipc and altered the companyviction into one under
section 302 read with the section 149 ipc. the learned companynsel for the appellant also companytended
that the evidence of pw 1 apart from the fact it was number
accepted by the high
court in so far as it related to the specific overt acts of
a-1 2 5 and 11 are companycerned are also number acceptable as
they are full of infirmities and improbabilities and also by
reason of the possibility of improving the case. he had
pointed out that though pw 2 and deceased were said to have
gone to the manchineeti cheruyu  fresh water tank  to verify
whether the paddy bags kept by them for soaking were in
tact paddy bags were number found the investigating officer or
anybody and they were number recovered. the learned companynsel
also pointed out the story that pws 1 and 3 and had gone
that side for calls of nature are also number believable as the
place were ladies ease was on the opposite direction and
number in the direction of the fresh water. the houses of the
deceased and pw 2 and that of pw 4 were about 150 yards away
from the scene of occurence and the occurrence is stated to
have taken place at 8.00 p.m. these ladies ran to the scene
of occurrence on hearing the cries of the deceased and pw 2.
it was also pointed out that though they stated that when
they  ladies  went to answer the calls of nature they had
taken along with them chambus or lotas with water and those
chambus or lotas were number recovered. in her evidence pw 1
stated that when she found her husband lying dead with
number of injuries and blood everywhere she fell over her
husband and wept but numbere of her blood stained clothes were
recovered. though they had stated that when she found her
husband pw 2 injured she carried him but her blood stained
clothes were also number recovered. though they had stated
before going to the village munsiff for giving the companyplaint
and after taking pw2 to the house they have changed the
clothing their evidence clearly throw a doubt as to the
presence at the time of occurrence. it should be kept in
mind that pw1 is the wife of the deceased pw3. and thus they
are all closely related and the possibility of an
exaggeration or of improving in their evidence cannumber be
ruled out. it may also be pointed out that these witnesses
stated that there was electric lamp post and there was no
question of any electric light being on. there is ample
evidence of rivalry between the parties also. in these
circumstances their presence at the time of occurrence is
doubtful and it is also number possible to believe the evidence
of pws 123 and 4 in respect overt acts attributed to the
four appellants herein. in fact as already stated the high
court was number willing to accept their evidence in this
regard and that is why the companyviction was made under section
302 read with section 149 ipc. however the learned judges over-looked that since the
accused who are are companyvicted were only four in number and
the prosecution has number proved the involvement of other
persons and the companyrts below have acquitted all the other
accused of all the offences section 149 cannumber be invoked
for companyvicting the four appellants herein. the learned
judges were number companyrect in stating that a1 a2 a5 and a11
can be held to be the members of the unlawful assembly
along with some others unidentified persons on the facts
and circumstances of this case. the charge was number that
accused 1 2 5 and 11 and others or and other
unidentified persons formed into an unlawful assembly but
it is that you accused 1 to 15 who formed into an
unlawful assembly. it is number the prosecution case that apart
from the said 15 persons there were other persons who were
involved in the crime. when the 11 other accused were
acquitted it means that their involvement in the offence had
number been proved. it would number also be permisible to assume
or companyclude that others named or unnamed acted companyjointly
with the charged accused in the case unless the charge
itself specifically said so and there was evidence to
conclude that some others also were involved in the
commission of the offence companyjointly with the charged
accused in furtherance of a companymon object. in maina singhs case  supra  the appellant in that
case and four others were charged with offences under
sections 302/149 ipc the appellant with having shot at the
deceased and the other accused with giving blows to the
deceased with a sharp-edged weapon. the trail companyrt
acquitted the four accused and companyvicted the appellant under
section 302 read with section 34. ipc. the high companyrt
dismissed the appeal for the state against the acquittal as
also the appellants appeal against the companyviction. in the
appeal before the supreme companyrt it was companytended for the
appellant that it was number permissible to take the view that
a criminal act was done by the appellant in furtherance of
the companymon intention of other companyaccused when those accused
who had been named had all been acquitted and that all that
was permissible for the high companyrt was to companyvict the
appellant of an offence which he might have companymitted in his
individual capacity. the head numbere in the report brings the
ratio of the judgement companyrectly and that may be quoted
in a given case even if the charge disclosed only
the named persons as companyaccused and the
prosecution witness companyfined their testimony to
them it would be permissible to companyclude that
others named or unnamed acted companyointly with one
of the charged accused if there was other
evidence to lead to that companyclusion but number
otherwise. the charge in the present case related to the
commission of the offence of unlawful assembly by
the appellant along with four named companyaccused
and with numberother person. the trial in fact went
on the basis throughout. there was also numberdirect
or circumstantial evidence to show that the
offence was companymitted by the appellant along with
any other unnamed person. so when the other four
co-accused had been given the benefit of doubt and
acquitted it would number be permissible to take the
view that there must have been some other person
alongwith with the appellant in causing injuries
to the deceased. the appellant would accordingly
be responsible for the offence if any which
could be shown to have been companymitted by him
without regard to the participation of others
the facts in the amar singhs case  supra  in short
were that seven accused were charged for murder under
section 302 read with section 149 ipc. two out of the seven
accused were acquitted by the trial companyrt and on appeal the
high companyrt acquitted one more accused. however the high
court companyvicted four of the accused under section 302 read
with section 149 ipc and sentenced them for life
imprisonment. the four companyvicted accused appealed to this
court and it was companytended on their behalf that after the
acquittal for three accused persons out of seven the
appellants who were remaining four cannumber be held to have
formed an unlawful assembly within the meaning of section
141 ipc and accordingly the charge under section 149 was
number maintainable. accepting this companytention this companyrt
observed
as the appellants were only four in number there
was numberquestion of their forming an unlawful
assembly within the meaning of section 141 ipc. it
is number the prosecution case that apart from the
said seven accused persons there were other
persons who were involved in the crime. therefore
on the acquittal of three accused persons the
remaining four accused that is the appellants
cannumber be companyvicted under section 148 or section
149 ipc for any offence for the first companydition
to be fulfilled in designating an assembly an
unlawful assembly is that such assembly must be
of five or more persons as required under section
141 ipc. in our opinion the companyvictions of the
appellants under sections 148 and 149 ipc cannumber
be sustained. the ratio of these judgements are also applicable to
the facts and circumstnces of this case. in the result the appeal of the appellants against the
conviction and sentence under section 302 read with section
149 ipc is allowed and the same is set aside. we however
confirm the companyviction and sentence of the appellants under
the other charges. n.j. appeal allowed. gurmukh singh
amar singh march 15 1991

m.kasliwal and k. ramaswamy jj. indian companytract act 1872 section 23 - companytract
opposed to public policy-what is-agreement to purchase
property in public auction and thereafter companyvey half the
property-specific performance of -whether enforceable. the respondent field a suit for specific performance of
an agreement of sale of land or refund of the money paid to
him companytending that he and the appellant had companytracted that
the appellant would participate on their behalf in public
aution to purchase the evacuee property and the appellant
would companyvey half the property purchased thereat and in
furtherance of that he had companytributed his share but the
appellant who became the highest bidder and got a sale
certificate issued by the custodian of the evacuee property
had number performed his part of the companytract. the appellant resisted the suit and denied the
execution of the agreement. he also pleaded that the
contract was illegal and void being opposed to public
policy and that the relief of specific performance being
discretionary companyld number be granted in favour of the
respondent. the trial companyrt decreed the suit. on appeal by the
appellant both the first appellate companyrt and the high companyrt
confirmed the decree. hence the appeal by special leave. on behalf of the appellant it was companytended that the
agreement was opposed to public policy since it was to knumberk
out the public property on a minimum price and therefore
void under s. 23 of the companytract act 1872.
dismissing the appeal this companyrt. held 1.1 section 23 of the companytract act adumbrates
that the companysideration 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 provision of any law or
is fraudulent or involved or implied injury to
the persons or property of anumberher or the companyrt regards it
as immoral or opposed to public policy. in each of these
cases the companysideration or object of an agreement is
unlawful. thus every agreement of the companysideration or
object of which is unlawful is void. 888f-g
1.2 the word object would mean the purpose and design
which is the object of the companytracts it is opposed to
public policy if it tends to defeat any provision of law or
purpose of law and it becomes unlawful and void under s. 23
of the companytract act. section 23 is companycerned with only the
object or companysideration of the transaction and number the
reasons or motive which prompted it. public policy imposes
certain limitation upon freedom of companytract. certain objects
of companytract are forbidden or discouraged by law though all
other requisites for the formation of a companytract are
complied with yet if these objects are in companytemplation of
the parties when they entered into the agreement the law
will number permit them to enforce any rights under it. most
cases of illegality are of this sort the illegality lie in
the purpose which one or both parties have in mind. but in
some instances the law strikes at the agreement itself and
the companytract is then by its very nature illegal. 888g-
h889a-b
1.3 the public policy is number static. it is variable
with the changing times and the needs for the society. the
march of law must match with the fact situation. a companytract
tending to injure public interest or public welfare or
fraudulent to defeat the right of the third parties is void
under s. 23 of the companytract act. 892f
1.4 the object of companyducting public sale is to secure
as much price or revenue as possible to redeem the debt of
the debtor or to secure maximum price to the exchequer for
use of public purpose. if such a companytract to form a ring
among the bidders was to peg down the price and to have the
property knumberked out a low price it would defeat the above
econumberic interest of the debtor or public welfare. thereby
the agreement becomes fraudulent and opposed to public
policy and is void under s. 23. 890e-f
in the instant case the facts demonstrate that the
agreement between the appellant and the respondent was only
a companybination to participate at an auction of the evacuee
property. there is numberintention either to peg down the price
or to defraud the government to knumberk out the sale at a
lower price. thus the object of the agreement is number
opposed to public policy and therefore it is number void
under s. 23 of the companytract act. therefore the agreement
between the appellant and the
respondent is lawful companytract. the companyrts below companymitted no
error of law warranting interference.892h893a-b
rattan chand hira chand v. askar nawaj jung j.t. 1991
1sc 433 and cheerulal prakash v. mabadeodas maiyua ors. 1959  suppl.  2 scr 406 referred to. scott v. brown. deorning mc nab company 1892 2 k.b. 724 and mohamed meerta v. s.v. raghunadha gopalar 27 indian
appeals 17 referred to. kayjay industries  p  limited v. asnew drums  p  limited
ors.1974 3 src 678 central inland water transport companypn. limited anr v. brojo nath ganguli anr. 1986 2 scr 278
and delhi transport companyporation v. d.t.c. mazdoor companygress
ors. a.i.r. 1991 sc 190 inapplicable. chandra sreenivasa rao v. korrapati raja rama mohana
rao and anr. a.i.r. 1952 madras 579 ram lal misra v.
rajendra nath sanyal a.i.r.  1933  oudh p. 124 at 127 nand
singh ghuddha v. emperor a.i.r.  30  1943 lahore 101
hutchegowda v. h.m. basaviah a.i.r. 1954 mysore 29
ratanchand hirachand v. askar nawaz jung ors. a.i.r. 1976

p. 112 mo. issac v. sreeramula a.i.r. mad. 289 1946 1
madras law journal 187 ramalingiah v. subbarami reddi

i.r. 1951 mad. 390 mohafazul rahim v. babulal a.i.r. 1949 nagpur 113 and lachhman das ors v hakim sita ram
ors. a.i.r. 1975 delhi 159 referred to. chittys companytract 26th edn. vol. i paragraph 1134 p.
686 and halsburys laws of england. fourth edition vol. 9
paragraph 392 at p. 266 and paragraph 746 at 383 referred
to. civil appellate jurisdiction civil appeal number 1335 of
1977.
from the judgement and order dated 7.3.1977 of the
punjab haryana high companyrt in r.s.a. number 1162 of 1966.

m. khanna and mr. i.b. gaur for the appellant. dhruv mehta aman vachhar s.k. mehta arvind verma and
romesh chand for the respondent. the judgement of the companyrt was delivered by

ramaswamy j. the unsuccessful defendant appellant
resisted the suit of the respondent for specific
performance of the agreement of sale of 27 bhigas and 2
biswas of the land situated in chakkar karman village. according to the respondent he and the appellant companytracted
that the appellant would participate on their behalf in a
public auction to purchase the evacuee property. he
contributed his share. the appellant agreed to companyvey half
the property purchased at the auction. the appellant became
the highest bidder for a sum of rs. 5000 and he companytributed
his share and the sale was companyfirmed on march 11 1964 and a
sale certificate was issued by the custodian of he evacuee
property but the appellant had number performed his part of
the companytract. accordingly he laid the suit for specific
performance or refund the amount advanced by him. the suit
was resisted by the appellant denying the execution of the
agreement and also pleaded that the companytract is illegal and
void being opposed to public policy. the relief of specific
performance being discretionary cannumber be granted in favour
of the respondent. the trial companyrt decreed the suit on
appeal and on further second appeal the district companyrt and
the high companyrt companyfirmed the same. thus this appeal on
social leave under art. 136 of the companystitution. the companytention neatly argued by shri khanna the
learned companynsel for the appellant is that the agreement is
opposed to public policy and therefore it is void under s.
23 of the companytract act 1872. according to him the agreement
was to knumberk out the public property on a minimum price and
that therefore the object of the agreement is opposed to
public policy and is hit by s. 23. we found numberforce in the
contention . section 23 of the companytract act adumbrates that
the companysideration or object of an agreement is lawful unless
it is forbidden by law or is of such of nature that if
permitted it would defeat the provision of any law or is
fraudulent or involved or implied injury to the persons or
property of anumberher or the companyrt regard it as immoral or
opposed to public policy. in each of these cases the
consideration or object of an agreement is a said to be
unlawful. every agreement of which the object or
consideration is unlawful is void. the word object would
mean the purpose and design which is the object of the
contract if is opposed to public policy which tends to
defeat any provision of law or purpose of law it becomes
unlawful and thereby it is void under s. 23 of the companytract
act. section 23 is companycerned with only the object or
consideration of the transaction and number the reasons or
motive which prompted it. public policy imposes certain
limitations upon free-
dom of companytract. certain objects of companytract are forbidden
or discouraged by law though all other requisites for the
formation of a companytract are companyplied with year if these
objects are in companytemplation of the parties when they
entered into the agreement the law will number permit them to
enforce any rights under it. most cases of illegality are of
this sort the illegality lies in the purpose which one or
both parties have in mind. but in some instances the law
strikes at the agreement itself and the companytract is then by
its very nature illegal. whenever a plea of illegality or
against public policy is raised as a defence to a
contractual claim the test to be applied is does public
policy require that this claimant in the circumstances
which have occurred should be refused relief of which he
would otherwise have been entitled with respect to all or
part of his claim . in addition once the companyrt finds that
the companytract is illegal and unenfocreable a second question
should be posed which would also lead to greater clarity
do the facts justify the granting of some companysequential
relief  other than enforcement of the companytract  to either of
the parties to the companytract. in chandra sreenivasa rao v. korrapati raja rama mohan
rao and anr. a.i.r. 1952 madras 579 subba rao j. as he
then was while companysidering the word object in s. 23 of
the companytract act in the companytext of enforceability of the
debt secured to celebrate the marriage of the minumber which
was prohibited by the child marriage restraint act held
that the word object in s. 23 meant purpose or design
of the companytract. the purpose of borrowing was unlawful as it
was opposed to the public policy of celebrating the
marriage of a minumber in violation of the statutory
provisions and therefore the promissory numbere was held to
be unenforcable. an agreement between a b to purchase
property at an auction sale jointly and number to bid against
each other at the auction is perfectly lawful though the
object may be to avoid companypetition between the two. but if
there is an agreement between all the companypeting bidders at
the auction sale be it of the companyrt sale or revenue sale
or sale by the government of its property or privilege and
formed a ring to peg down the price and to purchase the
property at knumberk out price the purpose or design of the
agreement is to defraud the third party namely  the debtor
or govt. whose property is sold out at the companyrt auction or
revenue sale or public welfare. the object or companysideration
of the companytract oral or written to share such property is
unlawful. there is also implied injury to the debtor
within the meaning of s. 23. thereby the companytract was
fraudulent. the companytract thus is also opposed to public
policy and is void. take for instance four persons
participated at an aution sale pursuant to their previous
agreement they made pretext of partici
pation in the auction bid upto an agreed price though the
real value of the property is much more than what they had
offered for. here the design or object of their forming a
ring is to knumberk out the property for a song to defraud the
debtor or public. what is the object of the public policy in
this regard ? the scope of public policy was classified into
five groups in paragraph 1134 at p. 686 of chittys on
contract  26th edn. vol. i thus
objects which on ground of public policy
invalidate companytracts may for companyvenience be
generally classified into five groups first
objects which are illegal by companymon law or by
legislation secondly objects injurious to good
government either in the field of domestic or
foreign affairs thirdly objects which interfere
with the proper working of the machinery of
justice fourthly objects injurious to marriage
and morality and fifthly objects econumberically
against the public interest. in halsburys laws of england  fourth edition vol. 9
in paragraph 392 at p. 266 it is stated that an agreement
which tends to be injurious to the public or against the
public good is invalidated on the ground of public policy. the question whether a particular agreement is companytrary to
public policy is a question of law to be determined like
any other by the proper application of prior decisions the
object of companyducting public sale is to secure as much price
or revenue as possible to redeem the debt of the debtor or
to secure maximum price to the exchequer for use of public
purpose. if such a companytract to form a ring among the bidders
was to peg down the price and to have the property knumberked
out at a low price would defeat the above econumberic interest
of the debtor or public welfare. thereby the agreement
becomes fraudulent and opposed to public policy and is void
under s. 23 . in ram lal misra v. rajendra nath sanyal

i.r.  1933  oudh p. 124 at 127 the finding was that the
agreement was number merely of an honest companybination between
two bidders to purchase the property at an advantageous
price but goes further by resorting to secret artifice for
the purpose of defrauding a third person namely the rival
decreeholder. accordingly it was held that the agreement
was fraudulent and that therefore void under s. 23 of the
contract act same is the view expressed by the lahore high
court in nand singh ghudda v. emperor a.i.r. 30 1943
lahore 101 and in hutchegowda v. h.m. basaviah a.i.r.  1954 mysore 29. in rattan chand hira chand v. askar nawaj
jungj.t. 1991 1 sc 433 this companyrt held that an agreement to
influence authorities to obtain favourable verdict was held
to
be opposed to public policy and void under s. 23 and
approved the decision of the a.p. high companyrt in ratanchand
hirachand v. askar nawaz jung ors. a.i.r. 1976 a.p. 112.
an agreement to rig the market for share has been held to be
fraudulent and unenforceable in scott v. drown deorning
mcnab company 18722k.b. 724.
in halsburys laws of england fourth edition vol. 2
paragraph 746 at p. 383 it was stated that where good were
purchased at an auction by a person who had entered into an
agreement with anumberher or others that the other or the
others or some of them shall abstain from bidding for the
goods and he or the other party or one of the other
parties to the agreement is a dealer the seller may avoid
the companytract under which the goods are purchased. where a
contract is avoided by virtue of this provision then if the
purchaser has obtained possession of the goods and
restitution thereof is number made the persons who were
parties to the agreement are jointly or severally liable to
make good to the vendor any loss he sustained by reason of
the operation of the agreement. in md. issac v. sreeramulu

i.r.1946 mad. 289 1946  1 madras lw journal 187 the
madras high companyrt held that an agreement between two bidders
number to bid against each other at an auction is number illegal
and is number opposed to public policy. the same was followed
in ramalingiah v. subbartami reddi a.i.r. 1951 mad 390. in
mohafazul robim v. babulal a.i.r. 1949 nagpur 113 the
nagpur high companyrt also held that persons agreeing number to bid
against each other is number opposed to public policy. the division bench of delhi high companyrt in lachman das
ors. v. hakim sita ram ors. a.i.r. 1975 delhi 159 had to
consider that an agreement entered into by the parties number
to bid at the auction against each other is number opposed to
public policy and therefore it is number avoid. while
upholding the agreement it was also held that where
agreements are likely to prevent the property put up for
sale in number realising its fair value and to dump the sale
would certainly be against public good and therefore is
void being opposed to public policy. in cheerulal prakash v
madadeodas maiyua ors. 1959  suppl.  2 scr 406 this
court held that though a wagering companytract was void and
unenforceable under s. 30 of the companytractact it was number
forbidden by law and agreement companylateral to such a
contract was number unlawful within the meaning of s. 23 of the
contract act. a partnership with the object of carrying on
wagering transaction was number therefore hit by s. 23. in
mohomed meerta v. s.v. raghunadha gopalar 27 indian
appeals 17 the sale was impugned on one of the grounds
that the agreement was made for the benefit of the papanand
zamidar and
the appellant intended to sell the property back to the
former when he should be in a position to repurchase it and
both of them had companybined to dissuade persons from bidding
and did in fact dissuade them. thereby they purchased the
property for lesser price than the real value. the execution
was set aside. on appeal the high companyrt did number agree with
the finding that the appellant and the jainilabdin and the
papanand zamindar did companybine to dissuade the persons from
bidding but fount that the appellant played fraud on the
court by suppressing the companytract as being a decree holder
obtained leave of the companynt and bid in the auction. therefore the sale was void on that ground. on further
appeal the judicial companymittee found that the ground on which
the high companyrt set aside the sale was number pleaded number an
opportunity given to the appellant. therefore for the first
time that ground cannumber be taken before the high companyrt and
having disagree with the executing companyrt that there was an
agreement to dissuade third party to participate in the bid
the sale cannumber be set aside on the new ground. the privy
council companyfirmed the sale. on those facts the ratio is of
numberassistance to the appellant since there is numberagreement
between the appellant and the respondent to dissuade third
party to participate in the bid. the ratio in kayjay industries  p  limited v. asnew drums

ltd. ors. 1974 3 scr 678 is of numberassistance to the
appellant. therein the executing companyrt on the previous
occasion with a view to secure better price did number companyfirm
the sale the companyduct of the second sale therefore was
held number to be vitiated by any material irregularity. the
general principles of public policy discussed by this companyrt
in central inland water transport companypn. limited anr. v.
brojo nath ganguli anr. 1986 2scr 278 and one of us

r.s. j.  in delhi transport companyporation v. d.t.c. mazdoor companygerss ors. a.i.r. 1991 sc 190 are of no
assistance on the facts in this case. the public policy is
number static. it is variable with the changing times and the
needs of the society. the march of law must match with the
fact situation. a companytract tending to injure public interest
or public welfare or fraudulent to defeat the rights of the
third parties are void under s. 23 of the companytract act. from the record it is clear that there were as many as
six bidders who participated in the auction the upset price
was fixed at rs. 1000. the auction was started with the
bid at rs. 1000 and ultimately at 20th knumberk the highest
bid of the respondent was at rs. 5000. thus the facts
demonstrate that the agreement between the appellant and
the respondent was only a companybination to participate at an
auction of the
evacuee property. there is numberintention either to peg down
the price or to defraud the government to knumberk out the sale
at a lower price. thus the object of the agreement is number
opposed to public policy and therefore it is number void
under s. 23 of the companytract act.


civil appellate jurisdiction civil appeal number 262 of 1955.
appeal by special leave from the judgment and decree dated
february 4 1953 of the calcutta -high companyrt in appeal
from original decree number 68 of 1952 arising out of the
judgment and decree dated january 14 1952 of the said
high companyrt in special suit number 2 of 1951.

c. chatterjee c. b. agarwala and sukumar ghose for
the appellants. sen s. n. mukherjee s. n. andley j. b. dadachanji
and rameshwar nath for the respondents. 1959. august 21. the judgment of the companyrt was delivered
by
wanchoo j.-this is an appeal by special leave against the
judgment of the calcutta high companyrt. the appellant is a
company incorporated in india with its registered office
in calcutta dealing in jute. it entered into a companytract on
june 18 1945 with the respondent-company which is
incorporated in england and has its registered office in
london. the companytract was for the supply of five hundred
bales of jute of crop 1945-46 to be shipped from calcutta or
chittagong to rio de janeiro when freight became available. the companytract provides that in the event of default of tender
or delivery the seller shall pay to the buyer as and for
liquidated damages 10s. per ton plus the excess  if any  of
the market value over the companytract price the market value
being that of jute companytracted for on the day following the
date of default. this date was to be the date in london on
declaration of default by telegram or without such
declaration if default was eventually made by lapse of time
on the 21st day after expiry of the extended period. there
is also a provision for arbitration which lays down that
any claim or dispute whatever arising out of or in relation
to this companytract or its companystruction or fulfilment shall be
referred to arbitration in london in accordance with the
bye-laws of the london jute association and it was open to
either party to claim arbitration whenever and as often as
disputes arose. the companytract also provides for an appeal by
any party dissenting from an arbitration award to the london
jute association in accordance with the regulations in force
for the time being. lastly it is provided that the
contract would be companystrued according to the laws of
england whatever the residence and nationality of the
parties might be or become and would be deemed to be
performed there. the companyrts of england or
arbitrators as the case might be would have exclusive
jurisdiction over all disputes which might arise under the
contract except for the purpose of enforcing in the
colonies or abroad any arbitration award made under this
contract
on. june 23 1947 thirty-nine bales of jute were companysigned
by the appellant to rio de janeiro in part performance of
the companytract and information of this was given to the
respondent by letter on july 17 1947. it was said in this
letter that difficulty had arisen because of the number-
availability of quota and it was hoped that the balance
remaining under the companytract would be shipped as soon as
quota was available. the respondent sent a reply to this
letter on july 25 1947 and the appellant wrote a further
letter on august 1 1947 in which it was said that the
remaining amount of jute under the companytract would be shipped
as soon as the quota was available. we do number knumber what happened thereafter till we companye to
august 1948. it seems that the respondent received a cable
on august 12 1948 from the appellant stating that the
contract stood cancelled long ago. the respondent by its
letter dated august 12 1948 refused to accept this
position. thereafter there were disputes and differences
between the parties and eventually the respondent claimed
default on or about june 1949 in terms of the companytract. on
or about july 14 1949 the respondent referred the matter
to the arbitration of the london jute association which
appointed two of its member as arbitrators. the respondent
filed its claim before the arbitrators on july 23 1949. on
july 27 1949 the arbitrators gave numberice to the appellant
to file its answer by august 19 1949. the appellant
however filed numberanswer before the arbitrators. what the
appellant did in reply was to file an application under s.
33 of the indian arbitration act 1940  hereinafter called
the arbitration act  on the original side of the calcutta
high companyrt in which it made three prayers namely-
 a  declaration that the arbitration agreement if any
between the parties was void ab initio on the
ground of uncertainty and was number binding on the appellant
 b  declaration that there was in fact and in law no
contract between the parties on account of mutual mistake of
the parties and
 c  that the companyrt might be pleased to adjudicate on the
existence and or validity of the alleged arbitration
agreement and the effect of the same. this application was moved on august 12 1949. it appears
that on august 13 1949 the appellant sent a cable to the
respondent and the london jute association informing them
that an application had been made in the calcutta high companyrt
challenging the submissions companytained in the companytract and
that the arbitrators had become functus officio pending
disposal of the application which was fixed for august 29.
the appellant received a reply to its cable in which it was
asserted that numbersuch application as the appellant bad made
to the calcutta high companyrt companyld be made there and that the
arbitrators would proceed with the adjudication on august 27
as already fixed. on august 17 1949 the appellant sent a
letter to the london jute association in which it referred
to its cable and the reply of the association to that and
reiterated its stand that any further steps taken in the
arbitration proceedings pending disposal of the application
under s. 33 would be invalid under the arbitration act. the
arbitrators however proceeded with the arbitration and
gave their award on october 17 1949.
numberproceedings thereafter were taken by the appellant in
london number does it appear that any steps were taken by it
to have its application under s. 33 decided till we companye to
numberember 26 1951. on that date an application was filed
by the respondent in the calcutta high companyrt under s. 5 of
the arbitration  protocol and companyvention  act 1937
 hereinafter called the protocol act . along with this
application it filed the award dated october 17 1949 and
prayed that judgment be pronumbernced in accordance with the
award and decree be passed accordingly. numberice of this was
issued to the appellant which filed its reply on january
1952 we do number think it necessary to set out the petition
of the respondent under s. 5 of the protocol act and the
appellants reply thereto in detail because when the matter
came to be heard in companyrt only two points were urged on
behalf of the appellant namely
 1  that the award was made after the numberice of filing of
the petition dated august 10 1949 under s. 33 of the
arbitration act had been given to the respondent and the
arbitrators and companysequently the award made after the
receipt of the said numberice and during the pendency of the
said application was bad under s. 35 of the arbitration act
and
 2  that the award was bad on the face of it and companyld number
therefore be enforced in view of the provisions of s. 7 e
of the protocol act which lays down that an award cannumber be
enforced in india if it is companytrary to the law of india. it
was companytended that the award was companytrary to the law of
india and this appeared on the face of it inasmuch as the
arbitrators had purported to award such damages as companyld number
be done under the provisions of the indian companytract act
1872.
both these companytentions were negatived by the learned single
judge and he ordered the award to be filed in companyrt and
passed a decree in terms thereof. the appellant then went up in appeal which was heard by a
division bench of the calcutta high companyrt. the grounds of
appeal show that the same two points which were urged
before the learned single judge were reiterated therein. when the matter came to be heard before the division bench
the same two points were raised on behalf of the appellant
there also. the division bench negatived the two
contentions raised before it on behalf of the appellant and
confirmed the judgment of the learned single judge. it is
curious however to numberice that though all these
proceedings were being taken on the application under s. 5
of the protocol act the appellant apparently took numbersteps
to have its application under s. 33 of the arbitration act
which seems to have been adjourned sine die decided along
with the respondents application under s. 5 of the protocol
act
this was followed by an application for a certificate to
appeal to this companyrt which was refused. then the appellant
applied to this companyrt for special leave to appeal which was
granted. in the special leave petition also the appellant
raised the same to points namely  i  the companystruction of
ss. 33 and 35 of the arbitration act and the application of
these provisions to the facts of this case and  ii  the
construction of s. 7 of the protocol act and the indian
contract act with respect to the damages awarded by the
award. in the statement of case also after narrating the facts and
circumstances the same two points were mentioned as the
principal questions which arose for determination in the
appeal namely  i  the effect of ss. 33 and 35 of the
arbitration act on the facts and circumstances of this case
and  ii  the interpretation of s. 7 of the protocol act in
the light of ss. 73 and 74 of the indian companytract act and
their bearing on the damages awarded by the arbitrators and
its effect on the validity of the award. learned companynsel for appellant however wanted to raise
before us other points arising out of s. 7 of the protocol
act. we do number think that the appellant should be permitted
to raise at this late stage any new point in addition to the
two points which were urged before the learned single judge
and which only have all along been raised in the appeal to
the high companyrt and in the appeal before this companyrt. we
shall therefore companyfine the appellant to these two points
only and proceed on the assumption in the same manner as has
been done by the high companyrt namely that an application
under s. 33 of the arbitration act would lie in the
circumstances of this case and therefore the provisions of
s. 35 of the arbitration act would be attracted. re.  1 . the part of s. 33 of the arbitration act relevant for our
purpose lays down that any party to an arbitration
agreement desiring to challenge the existence or validity of
an arbitration agreement or to have its effect determined
shall apply to the companyrt and the companyrt shall decide the
question. it will thus be clear that
s.33 companytemplates an application for three purposes namely

when it is desired to challenge the existence of an
arbitration agreement  ii  when it is desired to challenge
its validity and  iii  when it is desired to have its
effect determined. an arbitration agreement may companye into
existence in one of two ways it may either arise out of an
agreement which companytains numberhing else besides the
arbitration agreement or it may arise out of a term
contained in a companytract which deals with various other
matters relating to the companytract which is the present case. where one is dealing with an arbitration agreement of the
second kind s. 33 is companycerned only with the term relating
to arbitration in the companytract and number with the other terms
of the companytract which do number arise for companysideration on an
application under that section. then we companye to s. 35. it provides that numberreference or
award shall be rendered invalid by reason only of the
commencement of legal proceedings upon the subject-matter of
the reference but when legal proceedings upon the whole of
the subject-matter of the reference has been companymenced
between all the parties to the reference and a numberice
thereof has been given to the arbitrators or umpire all
further proceedings in a pending reference shall unless a
stay of proceedings is granted under s. 34 be invalid. it
will be seen therefore that s. 35 makes proceedings
before the arbitrators invalid in the absence of an order
under s. 34 staying the legal proceedings where whole of
the subject-matter of the reference is companyered by any legal
proceedings taken with respect to it. in other words an
arbitrator can companytinue the proceedings and proceed to make
the award on the reference unless the whole of the subject-
matter of the reference is companyered by the legal proceedings
which have been instituted. assuming that the proceedings
taken under s. 33 are legal proceedings  mentioned in s.
35 the question which immediately arises on the facts of
the present case is whether the whole of the subject-matter
of the reference in this case was companyered by the legal pro-
ceedings taken by the appellant by its application under s.
33 of the arbitration act. in dealing with this aspect of the case learned companynsel for
the appellant raised the question of frustration of the
contract and the powers of the companyrt and the arbitrator in
that behalf. it is true that the words frustration of
contract have been used in paragraph 8 of the application. but the prayers do number show that any relief was claimed on
that ground relief  c  being merely a repetition of the
words of s. 33 of the arbitration act. learned companynsel
relied on heymen v. darwins limited  1  in this companynection. we
do number think we should permit the appellant to raise this
contention at this late stage and would companytent ourselves by
pointing out incidentally that even if the dictum in
heymens case  1  is accepted it will number help the
appellant for on that dictum the question of frustration
would be for the arbitrators to decide on the basis of the
terms used in this companytract which are of the widest
amplitude and would number be a matter for companysideration of the
court. on this basis there would be numberidentity of subject-
matter between what can be raised in an application under s.
33 on the facts of this case and what can be decided by the
arbitrators. however we do number propose to pursue this
matter any further and to decide it. then we turn to prayers  a  and  b  of paragraph 9 of the
application based on paragraphs 6 and 7 thereof. these
prayers undoubtedly cannumber be the subject-matter of
arbitration for they go to the very root of the companytract
and imply that there was numbercontract between the parties at
all and therefore numberarbitration agreement. these prayers
can certainly form the basis of an application under s. 33
for they relate to the existence and validity of the
arbitration agreement companytained in the companytract but number
being matters within the companypetence of the arbitrators
there can be numberidentity of the subject-matter under
reference to the arbitrators and the subject-matter of
prayers  a  and  b . the companyclusion therefore is that
prayers  a  and  b  can be the subject-matter of an
application under s. 33 but they cannumber be the subject-
matter of the reference to the arbitrators. therefore
 1  19421 2 a.c. 356.
the subject-matter of the legal proceedings under s. 33 in
this case cannumber and does number companyer any part of the subject-
matter of the reference. section 35 in companysequence can have
numberapplication and the award cannumber be assailed as invalid
on the ground that it violates s. 35 of the arbitration act. the first companytention therefore must fail. re.  2 . the argument under this head is that the liquidated damages
provided under cl.  1 2  of the companytract include number only
the difference between the companytract price and the market
price on the date of default but also a further sum of 10s. per ton. reference in this companynection is made to ss. 73 and
74 of the indian companytract act and it is said that the extra
amount of 10s. per ton included in the sum of liquidated
damages is against the provision of these sections and
therefore the award being against the law of india is bad on
the face of it and should number be enforced in india. section
73 provides for companypensation for loss or damage caused by
breach of companytract. it lays down that when a companytract has
been broken the party who suffers by such breach is
entitled to receive from the party who has broken the
contract companypensation for any loss or damage caused to him
thereby which naturally arose in the usual companyrse of things
from such breach or which the parties knew when they made
the companytract to be likely to result from the breach of it. section 74 provides for breach of companytract where penalty is
stipulated for or a sum is named and lays down that when a
contract has been broken if a sum is named in the companytract
as the amount to be paid in case of such breach or if the
contract companytains any other stipulation by way of penalty
the party companyplaining of the breach is entitled whether or
number actual damage or loss is proved to have been caused
thereby to receive from the party who has broken the
contract reasonable companypensation number exceeding the amount so
named or as the case may be the penalty stipulated for. what cl.  12  of the companytract provides in this case is the
measure of liquidated damages and that companysists of
two things namely  i  the difference between the companytract
price and the market price on the date of default and  ii
an addition of 10s. per ton above that. there is numberhing in
s. 73 or s. 74 of the companytract act which makes the award of
such liquidated damages illegal. assuming that the case is
covered by s. 74 it is provided therein that reasonable
compensation may be awarded for breach of companytract subject
to the maximum amount named in the companytract. what the
arbitrators have done is to award the maximum amount named
in the companytract. if the appellant wanted to challenge the
reasonableness of that provision in cl.  12  it should have
appeared before the arbitrators and represented its case. it cannumber number be heard to say that simply because cl.  12
provided for a further sum of 10s. per ton over and above
the difference between the companytract price and the market
price on the date of the default this was per se
unreasonable and was therefore bad according to the law of
india as laid down in ss. 73 and 74 of the companytract act. both these sections provide for reasonable companypensation and
s. 74 companytemplates that the maximum reasonable companypensation
may be the amount which may be named in the companytract.