Himachal Pradesh High Court
Bhag Mal vs Ram Krishan on 17 March, 2016
Author: Rajiv Sharma
Bench: Rajiv Sharma
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
RSA Nos. 01 & 41 of 2008
Reserved on: 15.3.2016.
Decided on: 17.3.2016.
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1. RSA No. 01 of 2008
Bhag Mal Versus Ram Krishan
2. RSA No. 41 of 2008
Ram Krishan Versus Bhag Mal.
of
Coram
The Hon'ble Mr. Justice Rajiv Sharma, Judge.
Whether approved for reporting? Yes.
For the appellant(s):rt Mr. Ajay Sharma for appellant in RSA No. 1 of 2008.
Mr. Ashok Kumar Sood, Advocate, for appellant in RSA No. 41
of 2008.
For the respondent(s): Mr. Ashok Kumar Sood, Advocate for respondent in RSA No. 1
of 2008.
Mr. Ajay Sharma, Advocate, for respondent in RSA No. 41 of
2008.
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Justice Rajiv Sharma, J.
Since common questions of law and facts are involved in these appeals, the same were taken up together for hearing and are being disposed of by a common judgment to avoid repetition of evidence.
2. These regular second appeals are directed against the common judgment and decree of the learned Addl. District Judge (FTC), Shimla, H.P. dated 19.11.2007, passed in Civil Appeal No. 102-S/13 of 04/2000 titled as Bhag Mal vs. Ram Krishan and Civil Appeal No. 101-S/13 of 04/2000, titled as Ram Krishan vs. Bhag Mal.
2. Key facts, necessary for the adjudication of these regular second appeals are that the appellant-plaintiff in RSA No. 1 of 2008 has filed a suit against the respondent-defendant (hereinafter referred to as the defendant) in ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 2 respect of land comprised in Kh. No. 1032/927/187, measuring 4 biswas and one storeyed house standing thereon, situated at village Chamiyana (Neri-
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Dhar), Shimla, H.P. (hereinafter referred to as the suit land) for declaration as well as permanent prohibitory injunction. According to the plaintiff, he is a blacksmith (Lohar) by caste and it comes under the definition of Scheduled Caste. The plaintiff had come to Shimla in the year 1958 for earning his livelihood as carpenter and worked at Chamiyana, Shimla. The defendant of had sold suit land in favour of the plaintiff in the year 1974 for consideration of Rs. 2,000/- orally and handed over the possession to him. He constructed rt his house over the suit land in the year 1978. The defendant had received the entire amount of consideration from the plaintiff and assured him to execute sale deed and get it registered in favour of the plaintiff. Since the defendant was not owner at the time of oral sale, the sale deed could not be executed at that time. The defendant avoided the execution of the sale deed with his malifide intention. The defendant advised the plaintiff that he is non-Himachali and sale deed could not be executed in his favour. The plaintiff thereafter moved an application for correction of revenue entries before the A.C. IInd Grade, Shimla, which was rejected on 17.3.1994 on the ground that plaintiff is resident of Village Panwa Ropar (Punjab) and land could not be entered in his favour without the permission from the State Government. The defendant has also raised loan worth Rs. 90,000/- against the suit land. The defendant executed an agreement of sale in the year 1992 in favour of the plaintiff. The plaintiff is owner-in-possession of the suit land alongwith one storyed house and revenue entries in favour of defendant are illegal, wrong, void and inoperative and as such not binding on the plaintiff.
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 3The defendant has no right in the suit land and house existing thereon. The defendant could not create any kind of charge over the suit land after 1974.
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The revenue entries in respect of the suit land in favour of defendant may be declared illegal, void and inoperative against the right of the plaintiff. The plaintiff may be declared owner-in-possession of the suit land alongwith the house existing thereon.
3. The suit was contested by the defendant. According to him, the of suit was not properly valued. It was barred by limitation. It was denied that any oral sale transaction took place of the suit land in the year 1974. It was rt pleaded that the suit land was purchased by the defendant from its previous owner in the year 1980 and on persuasion of the plaintiff, the defendant entered into an agreement of sale with the plaintiff in respect of the two biswas of land only for consideration of Rs. 800/-. The plaintiff was put in possession over two biswas of land which falls towards Sanjauli side. The remaining portion of the two biswas of land remained with the defendant till 1992 and the defendant started encroachment in the year 1993. The revenue authority has rightly rejected the application of the plaintiff regarding correction of the revenue entry. The plaintiff is non-agriculturist within the meaning of Section 118 of the H.P. Land Reforms and Tenancy Act, 1971 (hereinafter referred to as the Act). It was averred that the agreement with the plaintiff in respect of two biswas of land be declared null and void as per the prayer made in the counter claim. The defendant is entitled to recover possession of entire suit land from the plaintiff. The oral agreement did not pass any title in favour of the plaintiff when consideration was Rs. 800/-.
The oral agreement could not be enforced under the law. The defendant was ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 4 ready and willing to refund Rs. 800/- if the plaintiff delivers the possession to the defendant.
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4. The replication to the written statement was filed by the plaintiff.
The defendant also filed counter claim in civil suit No. 342/1 of 95/94. The gist of the counter claim of the defendant is that in the year 1980, the plaintiff persuaded to sell two biswas of land out of the suit land in his favour. The defendant agreed to sell the same for consideration of Rs. 800/-.
of Thereafter, the plaintiff has constructed two room single storey over the portion of two biswas of land. The sale deed could not be executed in favour rt of the plaintiff because of bar under Section 118 of the Act. The plaintiff, in good faith, on 20.9.1992 got signed one document. The plaintiff filed written statement to the counter claim wherein preliminary objections were taken.
On merits, it is stated that the defendant was owner of the suit land in the year 1974 and had sold the same in favour of the plaintiff for consideration of Rs. 2000/- with possession. It is further alleged that the defendant with malafide intention had written two biswas instead of 4 biswas in agreement dated 20.9.1992. It was denied that the plaintiff was debarred by Section 118 of the Act and by Town and Country Planning Act to purchase the land in the State of Himachal Pradesh. It was denied that agreement of sale was entered between the parties in the year 1980. It was further averred that oral agreement was translated into writing on 20.9.1992 and now defendant was barred for filing counter claim by Section 53-A of the Transfer of Property Act.
5. The replication was filed. The learned Sub Judge (II), Shimla, H.P., framed the issues on 26.12.1995 and suit of the plaintiff as well as counter claim of the defendant were dismissed on 14.1.2000. Feeling ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 5 aggrieved, the plaintiff and defendant preferred appeals before the learned Addl. District Judge (FTC), Shimla. The learned Addl. District Judge (FTC), .
Shimla, dismissed the appeals vide judgment dated 19.11.2007. Hence, these regular second appeals.
6. The Regular Second Appeal No. 1 of 2008 was admitted on the following substantial questions of law on 27.2.2008:
"1. Whether the learned courts below erred in appreciating the of provisions of law applicable, pleadings of the parties and evidence adduced by them in its right perspective, thereby vitiating the impugned judgments and decrees?
rt
2. Whether the findings as returned by courts below in the impugned judgments and decrees stand vitiated owing to misreading and mis-appreciation of provision of sections 115 and 118 of the H.P. Tenancy and Land Reforms Act?
3. Whether findings returned by the learned courts below in impugned judgments and decrees stand vitiated owing to misread and mis-appreciation of oral and documentary evidence with special reference to the statement of defendant and document Ext. PW-2/A dated 20.9.1992?"
7. RSA No. 41 of 2008 was admitted on 29.2.2008, though without framing substantial questions of law and thus the same would be deemed to have been admitted on all the substantial questions of law framed at pages 14 & 15 of the paper book.
8. Mr. Ajay Sharma, Advocate, on the basis of substantial questions of law framed, has vehemently argued that the Courts below have not properly appreciated the provisions of law applicable to the pleadings of the parties. He also contended that Sections 115 and 118 of the H.P. Tenancy and Land Reforms Act, have not been properly interpreted. He lastly ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 6 contended that the document Ext. PW-2/A dated 20.9.1992 has also been misread. On the other hand, Mr. Ashok Sood, Advocate, has vehemently .
argued that the agreement of sale Ext. PW-2/A was illegal. The plaintiff has not become owner of the suit land by way of adverse possession. He should have filed suit for specific performance. He also contended that the suit land was properly identified and there was no need for preparation of separate tatima.
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9. Since all the substantial questions of law are interconnected, all are taken up together for discussion in order to avoid repetition of evidence.
10. rt I have heard the learned Advocates for the parties and gone through the judgments and records of the case carefully.
11. PW-1 Sucha Singh deposed that plaintiff belongs to village Samudri Distt. Ropar, Punjab. He is Scheduled Caste. He is residing at Shimla for the last 35-40 years. In his cross-examination, he deposed that wife and children of plaintiff use to reside earlier at Samudri village and now at Shimla.
12. PW-2 Bhag Mal deposed that he is Lohar (Scheduled Caste). He belongs to village Samudri Distt. Ropar, Punjab. He is at Shimla since 1958 and is doing work of blacksmith at Chamiyana. He was tenant of Balak Ram at Chamiyana. In the year 1974, he purchased 4 biswas of land from the defendant. He paid Rs. 1000/- and has taken possession from the defendant.
He levelled the land and constructed house over the same. Rs. 1000/- was paid to the defendant in the year 1977. He has constructed 7 rooms in the year 1978. He has inducted tenant at the rate of Rs. 250/- per month. He requested defendant to execute the sale deed. Thereafter, he requested the ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 7 defendant to give something in writing. Ext. PW-2/A was entered into between the parties. He also deposed that no one has objected when he .
raised construction. He also filed application for correction of the revenue entries. The defendant has also raised loan over the suit land worth Rs.
90,000/-. His possession over the suit land was open and continuous since 1974. He should be declared owner-in-possession over the suit land. In his cross-examination, he admitted that he has not issued any notice to of defendant to execute the sale deed. He orally requested him but could not tell date, month and year. He also could not tell the name of person in whose rt presence plaintiff was requested to execute the sale deed. He has not got registered document Ext. PW-2/A. He also admitted that Kanungo has recorded his statement Ext. D-1 on 18.6.1993. He mentioned in the application for correction of revenue entry that he has purchased land in the year 1977. Ext. PW-2/A was written at the house of Ram Krishan and Tulsi Ram and Krishan Datt were also present. He never visited the office of Tehsildar for registration of the sale deed. He has no other agricultural land in Himachal except this land. He admitted that non-agriculturist could not purchase land in the State of H.P. He has never resided in any other village of Himachal. He could not say that who had prepared documents Ext. PW-
2/C to PW-2/J and Ext. PW-2/H-1 to Ext. PW-2/H-7. He denied that defendant has sold only two biswas of land. He denied the suggestion that he has made encroachment over the remaining area.
13. PW-3 Ram Rattan deposed that the plaintiff has constructed his house at Neri-Dhar about 20-24 years ago. He belongs to Scheduled Caste.
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 8In his cross-examination, he deposed that he had given statement as instructed by the plaintiff.
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14. PW-4 Tulsi Ram deposed that he remained Pradhan of Gram Panchayat Chamiyana from 1978 to 1985. He knew the parties to the suit.
The plaintiff belongs to Scheduled Caste and is residing at Chamiyana for the last 30 years. He has constructed his house. The plaintiff is in possession of his house and workshop. He had no knowledge about coming of plaintiff of from Punjab to Himachal. He had no knowledge as to how much land was purchased by the plaintiff from the defendant.
15. rt PW-5 Prabhu Ram testified that he knew the parties to the suit and plaintiff has constructed his house of 7 rooms in the year 1970-78.
16. PW-6 Roshan Lal testified that he has seen the possession of the plaintiff over the suit land. In his cross-examination, he testified that he could not say that who has put the plaintiff in possession.
17. PW-7 Sukh Dev testified that the defendant has seen them while raising construction but he has not objected. The D.C. Shimla has initiated proceedings against his father and copy of order is Ext. PW-7/A. In his cross-examination, he stated that they came to Himachal from Punjab in the year 1973. They have purchased the suit land orally in the year 1974 and one document was prepared in this regard in the year 1992.
18. DW-1 Hari Nand deposed that he had sold 4 biswas of land in favour of Ram Krishan. Copy of sale deed is Ext. DW-1/A. In his cross-
examination, he deposed that he sold this land 25-26 years ago. He admitted that now the possession of the suit land is with Bhag Mal.
19. DW-2 Mohinder Singh did not produce the requisitioned record.
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 920. DW-3 Shiv Singh deposed that khasra girdawari Mark-A-1 to A-4 had not been prepared by him.
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21. DW-4 Amar Chand deposed that electricity meter No. H-266-D and H-153-D are in the name of Sukh Dev.
22. DW-5 Krishan Datt deposed that he knew the parties to the suit.
An agreement to sell has taken place between the parties to the suit vide Ext.
PW-2/A. He signed the same at circle "A". He knew nothing more about this of agreement.
23. DW-6 Balbir Singh deposed that he has visited the spot and has rt prepared report Ext. DW-6/A.
24. The defendant has appeared as DW-7. He testified that he has purchased 4 biswas of land in the year 1979 vide Ext. DW-1/A. He has tendered in evidence jamabandi Ext. DW-7/A to Ext. DW-7/F and Khasra girdawari Ext. DW-7/G to Ext. DW-7/J. He took the possession of the suit land. He orally sold two biswas of land to the plaintiff in the year 1980 for consideration of Rs. 800/- with possession. He signed the writing in the year 1992 without going through the contents of the same. He testified that now the possession has been taken by the plaintiff of the entire suit land. The plaintiff has no right to purchase land being non-agriculturist.
25. The defendant has come to Himachal Pradesh from Distt. Ropar, Punjab. The case of the plaintiff is that he being scheduled caste could purchase land in the State of Himachal Pradesh. Mr. Ashok Kumar Sood, Advocate, has vehemently argued that the plaintiff being non-agriculturist could not purchase land in view of bar imposed under Section 118 of the H.P. Tenancy and Land Reforms Act, 1972.
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 1026. Section 2(1) of the Act defines "agricultural labourer" as a person whose principal means of livelihood is manual labour on land. Section 2(8) of .
the Act defines "landless person" to be a person who, holding no land for agricultural purposes, whether as an owner, or a tenant, earns his livelihood principally by manual labour on land and intends to take the profession of agriculture and is capable of cultivating the land personally. Section 118(2) of the Act provides that nothing in sub-section (1) shall be deemed to prohibit of the transfer of land by any person in favour of.-
"(a) a landless labourer, or
(b) a landless person belonging to a scheduled caste or a rt scheduled tribe; or
(c) a village artisan; or
(d) a land less person carrying on an allied pursuit; or.............."
27. Section 122 of the Act empowers the State Government to frame rules for carrying out the purposes of this Chapter. The State Government has framed the Rules called the H.P. Tenancy and Land Reforms Rules, 1975.
Rule 38 provides that where transfer of land by way of sale, gift, exchange, lease or mortgage with possession, of which registration is not compulsory under the Registration Act, 1908 ( 16 of 1908) in favour of a person, who is not an agriculturist as defined in the Act or comes within the exemptions given in clauses (a) to (g) of sub-section (2) of section 118, such a person intending to secure a transfer of land in his favour shall swear an affidavit before the Revenue Officer, attesting the mutation, to the effect that he is eligible to secure transfer of land in his favour being an agriculturist. There is no tangible evidence placed on record by the plaintiff that he was an agriculturist to come within the ambit of rule 38 of the H.P. Tenancy and Land Reforms Rules, 1975. The Revenue Officer is required to satisfy himself ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 11 about the contents of an affidavit by the aforementioned person and shall attest a mutation only if that person is found to be an eligible person.
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28. It appears from the record that a complaint was made against the plaintiff about the illegal transaction of land in violation of Section 118 of the Act. It was decided by the Collector on 28.11.1995 vide Ext. PW-7/A. The learned Collector has concluded that the plaintiff belongs to Lohar community and earns his livelihood by doing the work of Blacksmith in the of said village, the proceedings were dropped. However, the fact of the matter is that in order to purchase the suit land, he had to sworn in an affidavit before rt the competent authority under Rule 38 of the H.P. Tenancy and Land Reforms Rules, 1975. Moreover, there has to be conclusive proof that the plaintiff was landless labourer, though he belonged to Lohar community, but not of Himachal Pradesh. The plaintiff in his statement has categorically admitted that the non-agriculturist could not purchase land in the State of Himachal Pradesh and he has never resided in any other village of the Himachal Pradesh except the suit land. He has no other agriculture land in Himachal except the suit land. The Collector has not carefully gone through Section 118(2) (a) to (i) of the Act as well as Rule 38 of the Rules framed thereunder. The plaintiff was also required to prove that he was landless scheduled caste.
29. The case of the plaintiff is that the land was sold to him by the defendant on the basis of oral agreement. The consideration was Rs. 2000/-.
He has not filed suit for specific performance of agreement Ext. PW-2/A. The parties could not take advantage of Section 53-A of the Transfer of property Act, 1882 for the simple reason that the sale was not in writing. The case of ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 12 the plaintiff, precisely, is that the cause of action has arisen in his favour in the year 1974. However, the fact of the matter is that the suit was filed for .
declaration and permanent prohibitory injunction only in the year 1994.
Thus, it was barred by limitation. The alleged sale deed was in contravention of Section 118 of the Act. Even suit for specific performance could not be filed for the simple reason that the contract which is illegal cannot be enforced either by granting relief of specific performance or by awarding of damages for its breach. The Court should not give effect to an agreement which is contrary to law.
30. rt The case of the plaintiff is also that he has purchased the land somewhere in the year 1974. However, the fact of the matter is that the defendant has purchased the suit land from DW-1 Hari Nand only in the year 1979. Since the land has been purchased by the defendant in the year 1979, there could not be oral sale deed in the year 1974 with the plaintiff. The case of the defendant is that he has only sold 2 biswas of land and handed over the possession to the plaintiff and thereafter the plaintiff has started encroachment upon remaining 2 biswas of land in the year 1993-94. The plaintiff's case is also that he has handed over the possession of two biswas of suit land in the year 1980. In view of this, the counter claim was not maintainable in the year 1994 in the form of relief of possession. Moreover, the defendant has not proved as to when the encroachment was made by the plaintiff.
31. The defendant has claimed possession of the suit land but he has not led any evidence to identify the same. The land could only be identified by preparing tatima and not by merely general directions.
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 1332. Ext. PW-2/L is copy of jamabandi for the year 1983-84. The land was owned by Hari Nand (DW-1). It was shown in possession of Ram Krishan .
(defendant) as a purchaser. In the jamabandi for the year 1978-79 Ext. DW-
7/C, in the remarks column, a note has been appended with red ink that Sh.
Hari Nand has sold four biswas of land (out of the total land) to Ram Krishan (defendant) and mutation No. 412 has been attested in the name of the purchaser. The defendant in fact has also raised loan of Rs. 90,000/- from of the LIC and mortgaged the land in favour of the LIC.
33. Now, as far as agreement Ext. PW-2/A is concerned, the rt defendant while appearing as DW-7 has admitted his signatures on Ext. PW-
2/A. He has admitted that he has signed the agreement in the presence of witnesses. He has also admitted that on the entire suit land, the plaintiff has raised construction. Thus, it cannot be believed that the defendant was misled by the plaintiff to enter into agreement vide Ext. PW-2/A.
34. The plaintiff has also taken a plea of adverse possession. It is settled law by now that suit for possession cannot be filed by claiming adverse possession. Their Lordships of the Hon'ble Supreme Court in Gurdwara Sahib vs. Gram Panchayat Village Sirthala and another, reported in (2014) 1 SCC 669 have held as under:
"8. There cannot be any quarrel to this extent the judgments of the courts below are correct and without any blemish. Even if the plaintiff is found to be in adverse possession, it cannot seek a declaration to the effect that such adverse possession has matured into ownership. Only if proceedings filed against the appellant and appellant is arrayed as defendant that it can use this adverse possession as a shield/defence."
35. Mr. Ashok Kumar Sood, Advocate has also placed strong reliance upon Section 65 of the Contract Act, 1882 to claim possession. His client ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 14 cannot be permitted to take advantage since he knew from the very beginning that the agreement was illegal.
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36. Their lordships of the Hon'ble Supreme Court in the case of Kuju Collieries Ltd. vs. Jharkhan Mines Ltd. and others, reported in AIR 1974 SC 1892, have held that where a mining lease in favour of the plaintiff was contrary to the provisions of the Mines and Minerals (Regulation and Development) Act, 1948 and the Mineral Concession Rules, 1949 and void ab of initio and there was proof to show that the plaintiff could not have been in ignorance of the legal position, it was held that this was not a case to which rt Section 65 applied and the plaintiff was not entitled to claim refund of the sum paid in pursuance of the lease, under that Section. Their lordships have further held that where even at the time when the agreement is entered into both the parties knew that it was not lawful and, therefore, void, there was no contract but only an agreement and it is not a case where it is discovered to be void subsequently. It has been held as follows:
"6. We are of the view that s. 65 of the Contract Act cannot help the plaintiff on the facts and circumstances of this case. Section 65. reads as follows :
"When an agreement is discovered to Be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it".
The section makes a distinction between an agreement and a contract. According to s. 2 of the Contract Act an agreement which is enforceable by law is a contract and an agreement which is not enforceable by law is said to be void. Therefore, when the earlier part of the section speaks of an agreement being discovered to be void it means that the agreement is not enforceable and is, therefore, not a contract. It means that it was void. It may- be that the parties or one of the parties to the agreement may not have, when they entered into the agreement, ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 15 known that the agreement was in law not enforceable. They might have come to know later that the agreement was not enforceable. The second part of the section refers to a contract becoming void. That refers to a case where an agreement which .
was originally enforceable and was, therefore, a contract,.
becomes void due to subsequent happenings. In both these cases any person who has received any advantage under such agreement or contract is bound to restore such advantage, or to make compensation for it to the person from whom he received it.
But where even at the time when the agreement is entered into both the parties knew that it was not lawful and, therefore, void, there was no contract but only an agreement and it is not a case where it is discovered to be void subsequently. Nor is it a case Of of the contract becoming void due to subsequent happenings. Therefore, s. 65 of the Contract Act did not apply.
12. The further question is whether it could be said that this contract was either discovered to be void or became void. The rt facts enumerated above would show that the contract was void at its inception and this is not a case where it became void subsequently. Nor could it be said that the agreement was discovered to be void after it was entered into. As pointed out by the Trial Court the plaintiff was already in the business of mining and had the advantage of consulting its lawyers and solicitors. So there was no occasion for the plaintiff have been under any kind of ignorance of law under the Act and the Rules. Clearly, therefore this is not a case to which s. 65 of the Contract Act applies. Nor is it a case to which s. 70 or s. 72 of the Contract Act applies. The payment of the money was not made lawfully, nor was it done under a mistake or under coercion."
37. The Division Bench of the Andhra Pradesh High Court in the case of Kanuri Sivaramakrishnaiah vs. Vemuri Venkata narahari Rao (died), reported in AIR 1960 AP 186, has held that in order to invoke Section 65, the invalidity of the contract or agreement should be discovered subsequent to the making of it. This cannot be taken advantage of by the parties who knew from the beginning the illegality thereof. It only applies to a case where one of the parties enters into an agreement under the belief that it was a legal agreement i.e. without the knowledge that the agreement is forbidden by law or opposed to public policy and as such illegal. It has been held as follows:
::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 16"14. It is manifest that in order to invoke this section, the invalidity of the contract or agreement should be discovered subsequent to the making of it. This cannot be taken advantage of by parties who knew from the beginning the illegality thereof. It only applies to a case where one of the parties enters into an agreement under the belief that it was a legal agreement, i.e., without .
the knowledge that the agreement is forbidden by law or opposed to public policy and as such illegal.
The effect of Section 65 is that, in such a situation, it enables a person not in pari delicto to claim restoration since it is not based on an illegal contract but dissociated from it. That is permissible by reason of the section because the action is not founded on dealings which are contaminated by illegality. The party is only seeking to be restored to the status quo ante.
18 Coming now to Section 65 of the Contract Act, we feel that it also does not of recognise the distinction between a contract being illegal by reason of its being opposed to public policy or morality or a contract void for other reasons. The section is couched in wide language and talks of void contracts in general. There does not seem to be any ground for differentiating one contract from the Other in regard to the applicability of that section.
rt The only principle recognised is that agreements or contracts, which are forbidden by law, could not be enforced as Courts will not extend their aid to persons attempting to defeat the object o the Legislature by trying to carry out illegal contracts.
At the same time, Courts will not render assistance to persons who induce innocent parties to enter into contracts of that nature by playing fraud on them to retain the benefit which they obtained by their wrong.
20. We are forfeited in our view regarding this differentiation by some of the decided cases. In Hughes v. Liverpool Victoria Legal Friendly Society, (1916) 2 KB 482, an agent of the defendant Insurance Company induced the plaintiff to take up policies which were effected on the lives of third parties by another person and which policies were not kept alive by reason of the insurer ceasing to pay the premiums, on the representation that everything would be all right.
When it was discovered that the policies were not effectual and illegal for want of insurable interest, the plaintiff sued for recovery of the money paid in premium on the lives of third persons alleging that it was money obtained by fraud or alternatively paid on consideration that failed. Scnitton, J., dismissed the suit in the view that the plaintiff could not recover even if the premiums had been obtained by fraudulent misrepresentation as the Assurance Companies Act 1909, had prohibited under penalty the issue of such policies."
This was reversed by the Court of Appeal on the ground that the plaintiff's right was not affected by the Assurance Companies Act, which imposed a penalty upon a Friendly Society issuing such a policy as the parties were not in pari delicto. We may here mention that this illustrates the principle that even agreements, the performance of which are attended with penal consequences, are not outside the scope of Section 65 of the Contract Act."
38. In the instant case, it has come in the statements of plaintiff as well as defendant that they knew that agreement could not be entered into in ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 17 view of Section 118 of the H.P. Tenancy and Land Reforms Act, 1972 and despite that agreement was entered into. Thus, it cannot be said that the .
illegality was discovered by one of the parties subsequently.
39. In the case of Joginder Singh vs. The Asstt. Registrar Co-
operative Societies Jammu and others, reported in AIR 1965 J & K 39, the Division Bench of the J & K High Court has held that Section 65 does not apply to a case where parties know it to be void at the time of entering into it.
of It has been held as under:
"22. Our attention was drawn to S. 65 of the Contract Act which reads :-
rt ''When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for . if, to the person from whom he received it."
It was argued and rightly so by the learned counsel for the respondent that that section has no application to the faces of this case because when the parties entered into this contract it was a contract which they knew to be void to start with. This section deals with two matters : an agreement which is discovered to be void and a contract which becomes void. The first matter is concerned with an agreement which never amounted to a contract because it was void ab initio the fact of its being void being discovered at a later stage. The word 'discovered' in the first part of the section is used in contradistinction to the word 'becomes' in the second part. The word 'discovered' connotes the pre-existence of that which is discovered. The second matter deals with a contract (i. e., with an agreement enforceable at law) which was good at its inception and which becomes void at some later stage by reason of some supervening circumstance. (See Sanjiva Row's Indian Contract Act, Vol.1, 1959 edn page 882). The following authorities state the law on the subject : AIR 1959 S. C. 490 ; AIR 1959 All. 681 ; AIR Kerala 239 ; AIR 1959 J & K 10 ; AIR 1960 All. 72."
40. The learned Single Judge of Rajasthan High Court in the case of Inderjit Singh vrs. Sunder Singh, reported in AIR 1969 Rajasthan 155, has held that the parties knew that even though the permit for plying the bus ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 18 was in the name of the defendant and they were not going to get it transferred in their names, they effected its transfer to themselves in proportion to their .
respective shares, along with the transfer of the ownership of the vehicle covered by the permit in the same proportion to their respective shares and hence, the agreement could not be said to have been discovered to be void after its execution, and that it was void to the knowledge of the parties ab initio. Besides the parties were obviously in pari lelicto and they cannot claim of restitution for that reason also. It has been held as follows:
"24. As has been shown, the transaction was not honest from the rt inception because the parties knew that even though the permit for plying the bus was in the name of the defendant and they were not going to get it transferred in their names, they effected its transfer to themselves in proportion to their respective shares, along with the transfer of the ownership of the vehicle covered by the permit in the same proportion, and also entered into an arrangement by which each of them acquired the right to use the vehicle in the manner authorised by the permit for their joint benefit even though such a right vested exclusively in Sunder Singh. I would therefore unhesitatingly hold that the agreement cannot be said to have been discovered to be void after its execution, and that it was void to the knowledge of the parties ab initio. The plaintiff is not therefore entitled to the benefit of Section 65 of the Contract Act.
Besides the parties were obviously in pari lelicto and they cannot claim restitution for that reason also. There is no question of locus poenitentiae because it has been admitted in the plaint that the parties implemented the agreement and actually plied the vehicle covered by the permit for some time and it was only when the defendant became recalcitrant that a dispute arose between them resulting in the present litigation. The plaintiff has also not pleaded any other circumstance like oppression or fraud land he has not established his right or title to the money paid by him without relying on the illegal agreement (Ex. 1). The general rule that money paid or property transferred under an illegal agreement cannot be recovered, would therefore apply. The claim for restitution was therefore not enforceable and should have been dismissed. In taking a contrary view and in giving the benefit of Section 65 of the Contract Act to the plaintiff the ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 19 learned Judge of the lower appellate court committed a serious error of law and that error has to be corrected."
41. The learned Single Judge of the Madras High Court in the case of .
The life Insurance Corporation of India madras vs. K. A. Madhava Rao, reported in AIR 1972 Madras 112, has held that a person procuring insurance business before he is issued licence to act as an insurance agent is not entitled to commission on the business so procured even if he has been of promised such commission on such business by any officer of the Life Insurance Corporation. The learned Single Judge has further held that Section 65 states that when an agreement is discovered to be void, or when a rt contracts becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. It is well established that the said Section 65 cannot be invoked when the agreement or contract was known to the parties to be void ab initio and that it applies to cases in which the contract is discovered to be void or becomes void after the agreement had been entered into. It has been held as follows:
"10. The learned counsel for the respondent then contends that even if the agreement to pay commission is held to be void, the respondent is entitled to the benefit of Section 65 of the Contract Act and therefore, entitled to commission for the work done by him to the petitioner. Section 65 states that when an agreement is discovered to be void, or when a contracts becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. It is well established that the said Section 65 cannot be invoked when the agreement or contract was known to the parties to be void ab initio and that it applies to cases in which the contract is discovered to be void or becomes void after the agreement had been entered into. In this case both the parties were aware that the contract is prohibited by law or will defeat the statutory provisions of the Insurance Act. I therefore hold that Section 65 of the Contract Act cannot be ::: Downloaded on - 15/04/2017 19:56:16 :::HCHP 20 invoked in this case. Taking all the facts and circumstances of the case, I hold that the decisions of the courts below are erroneous. They are therefore set aside and the respondent's suit will stand dismissed. There will, however, be no order as to .
costs."
42. The Courts below have correctly appreciated all the documents including Ext. PW-2/A dated 20.9.1992 and the oral evidence led by the parties. The Courts below have also correctly interpreted Sections 115 and 118 of the Act. The plaintiff, being non-agriculturist, without taking recourse of to the procedure laid down under the Act and rules framed thereunder, could not purchase the suit land. The substantial questions of law are answered accordingly.
rt
43. Consequently, there is no merit in these appeals and the same are dismissed, so also the pending application(s), if any.
March 17, 2016, ( Rajiv Sharma ),
(karan) Judge.
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