Gherulal Parakh v Mahadeodas Maiya, AIR 1959 SC 781 Case Analysis

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K. SUBBA RAO, J. – This appeal filed against the judgment of the High Court of Judicature at Calcutta raises the question of the legality of a partnership to carry on business in wagering contracts.

(2) The facts lie in a small compass. They, omitting those not germane to the controversy before us, are as follows: The appellant, Gherulal Parakh and the first respondent, Mahadeodas Maiya, managers of two joint families entered into a partnership to carry on wagering contracts with two firms of Hapur, namely, Messrs. Mulchand Gulzarimull and Baldeosahay Surajmull. It was agreed between the partners that the said contracts would be made in the name of the respondents on behalf of the firm and that the profit and loss resulting from the transactions would be borne by them in equal shares. In implementation of the said agreement, the first respondent entered into 32 contracts with Mulchand and 49 contracts with Baldeosahay and the net result of all these transactions was a loss, with the result that the first respondent had to pay to the Hapur merchants the entire amount due to them. As the appellant denied his liability to bear his share of the loss, the first respondent along with his sons filed O. S. No. 18 of 1937 in the Court of the Subordinate Judge, Darjeeling, for the recovery of half of the loss incurred in the transactions with Mulchand. In the plaint he reserved his right to claim any further amount in respect of transactions with Mulchand that might be found due to him after the accounts were finally settled with him. That suit was referred to arbitration and on the basis of the award, the Subordinate Judge made a decree in favour of the first respondent and his sons for sum of Rs. 3,375. After the final accounts were settled between the first respondent and the two merchants of Hapur and after the amounts due to them were paid, the first respondent instituted a suit, out of which the present appeal arises, in the Court of the Subordinate Judge, Darjeeling, for the recovery of a sum of Rs. 5,300 with interest thereon. Subsequently the plaint was amended and by the amended plaint the respondents asked for the same relief on the basis that the firm had been dissolved. The appellant and his sons, inter alia, pleaded in defence that the agreement between the parties to enter into wagering contracts was unlawful under S. 23 of the Contract Act, that as the partnership was not registered, the suit was barred under S. 69(1) of the Partnership Act and that in any event the suit was barred under O.2, Rule 2 of the Code of Civil Procedure. The learned Subordinate Judge found that the agreement between the parties was to enter into wagering contracts depending upon the rise and fall of the market and that the said agreement was void as the said object was forbidden by law and opposed to public policy. He also found that the claim in respect of the transactions with Mulchand so far as it was not included in the earlier suit was not barred under O. 2, Rule 2, Code of Civil Procedure as the cause of action in respect of that part of the claim did not arise at the time the said suit was filed. He further found that the partnership was between the two joint families of the appellant and the first respondent respectively that there could not be in law such a partnership and that therefore S. 69 of the Partnership Act was not applicable. In the result, he dismissed the suit with costs.

(3) On appeal, the learned Judges of the High Court held that the partnership was not between the two joint families but was only between the two managers of the said families and therefore it was valid. They found that the partnership to do business was only for a single venture with each one of the two merchants of Hapur and for a single season and that the said partnership was dissolved after the season was over and therefore the suit for accounts of the dissolved firm was not hit by the provisions of sub-sections (1) and (2) of S. 69 of the Partnership Act. They further found that the object of the partners was to deal in differences and that though the said transactions, being in the nature of wager, were void under S. 30 of the Indian Contract Act the object was not unlawful within the meaning of S. 23 of the said Act.

(4) In regard to the claim, the learned Judges found that there was no satisfactory evidence as regards the payment by the first respondent on account of loss incurred in the contracts with Mulchand but it was established that he paid a sum of Rs. 7,615 on account of loss in the contracts entered into with Baldeosahay. In the result, the High Court gave a decree to the first respondent for a sum of Rs. 3,807-8-0 and disallowed interest thereon for the reason that as the suit in substance was one for accounts of a dissolved firm, there was no liability in the circumstances of the case to pay interest. In the result, the High Court gave a decree in favour of the first respondent for the said amount together with another small item and dismissed the suit as regards “the plaintiffs other that the first respondent and the defendants other than the appellant”.

(5) Before we consider the questions of law raised in the case, it would be convenient at the outset to dispose of questions of fact raised by either party. The learned Counsel for the appellant contends that the finding of the learned Judges of the High Court that the partnership stood dissolved after the season was over was not supported by the pleadings or the evidence adduced in the case. In the plaint as originally drafted and presented to the Court, there was no express reference to the fact that the business was dissolved and no relief was asked for accounts of the dissolved firm. But the plaint discloses that the parties jointly entered into contracts with two merchants between March 23, 1937 and June 17, 1937, that the plaintiffs obtained complete accounts of profit and loss on the aforesaid transactions from the said merchants after June 17, 1937 and that they issued a notice to the defendants to pay them a sum of Rs. 4,146-4-3 being half of the total payments made by them on account of the said contracts and that the defendants denied their liability. The suit was filed for recovery of the said amount. The defendant filed a written-statement on June 12, 1940, but did not raise the plea based on S. 69 of the Partnership Act. He filed an additional written-statement on November 9, 1941 expressly setting up the plea. Thereafter the plaintiffs prayed for the amendment of the plaint by adding the following to the plaint as paragraph 10:

“That even Section 69 of the Indian Partnership Act is not a bar to the present suit as the joint business referred to above was dissolved and in this suit the Court is required only to go into the accounts of the said joint business”.On August 14, 1942, the defendant filed a further additional written-statement alleging that the allegations in paragraph 2 were not true and that as no date of the alleged dissolution had been mentioned in the plaint, the plaintiffs’ case based on the said alleged dissolution was not maintainable. It would be seen from the aforesaid pleadings that although an express allegation of the fact of dissolution of the partnership was only made by an amendment on November 17, 1941, the plaint as originally presented contained all the facts sustaining the said plea. The defendants in their written-statement, inter alia, denied that there was any partnership to enter into forward contracts with the said two merchants and that therefore consistent with their case they did not specifically deny the said facts. The said facts, except in regard to the question whether the partnership was between the two families or only between the two managers of the families on which there was difference of view between the Court of the Subordinate Judge and the High Court, were concurrently found by both the Courts. It follows from the said findings that the partnership was only in respect of forward contracts with two specified individuals and for a particular season. But it is said that the said findings were not based on any evidence in the case. It is true that the documents did not clearly indicate any period limiting the operation of the partnership, but from the attitude adopted by the defendants in the earlier suit ending in an award and that adopted in the present pleadings, the nature of the transactions and the conduct of the parties, no other conclusion was possible than that arrived at by the High Court. If so, S. 42 of the Partnership Act directly applies to this case. Under that section in the absence of a contract to the contrary, a firm is dissolved, if it is constituted to carry out one or more adventures or undertakings, by completion thereof. In this case, the partnership was constituted to carry out contracts with specified persons during a particular season and as the said contracts were closed, the partnership was dissolved.

(6) At this stage a point raised by the learned Counsel for the respondents may conveniently be disposed of. The learned Counsel contends that neither the learned Subordinate Judge nor the learned Judges of the High Court found that the first respondent entered into any wagering transactions with either of the two merchants of Hapur and therefore no question of illegality arises in this case. The law on the subject is well settled and does not call for any citation of cases. To constitute a wagering contract there must be proof that the contract was entered into upon terms that the performance of the contract should not be demanded, but only the difference in prices should be paid. There should be common intention between the parties to the wager that they should not demand delivery of the goods but should take only the difference in prices on the happening of an event. Relying upon the said legal position, it is contended that there is no evidence in the case to establish that there was a common intention between the first respondent and the Hapur merchants not to take delivery of possession but only to gamble in difference in prices. This argument, if we may say so, is not really germane to the question raised in this case. The suit was filed on the basis of a dissolved partnership for accounts. The defendants contended that the object of the partnership was to carry on wagering transactions i.e., only to gamble in differences without any intention to give or take delivery of goods. The Courts, on the evidence, both direct and circumstantial, came to the conclusion that the partnership agreement was entered into with the object of carrying on wagering transactions wherein there was no intention to ask for or to take delivery of goods but only to deal with differences. That is a concurrent finding of fact, and following the usual practice of this Court, we must accept it. We, therefore, proceed on the basis that the appellant and the first respondent entered into a partnership for carrying on wagering transactions and the claim related only to the loss incurred in respect of those transactions.

(7) Now we come to the main and substantial point in the case. The problem presented, with its different facts, is whether the said agreement of partnership is unlawful within the meaning of S. 23 of the Indian Contract Act. Section 23 of the said Act, omitting portions unnecessary for the present purpose, reads as follows:
“The consideration or object of an agreement is lawful, unless- It is forbidden by law, or … the court regards it as immoral, or opposed to public policy.”
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.” Under this section, the object of an agreement, whether it is of partnership or otherwise, is unlawful if it is forbidden by law or the Court regards it as immoral or opposed to public policy and in such cases the agreement itself is void.The learned Counsel for the appellant advances his argument under three sub-heads: (i) the object is forbidden by law, (ii) it is opposed to public policy, and (iii) it is immoral. We shall consider each one of them separately.

(8) Re (i) forbidden by law: Under S. 30 of the Indian Contract Act, agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Sir William Anson’s definition of “wager” as a promise to give money or money’s worth upon the determination or ascertainment of an uncertain event accurately brings out the concept of wager declared void by S. 30 of the Contract Act. As a contract which provides for payment of differences only without any intention on the part of either of the parties to give or take delivery of the goods is admittedly a wager within the meaning of S. 30 of the Contract Act, the argument proceeds, such a transaction, being void under the said section, is also forbidden by law within the meaning of S. 23 of the Contract Act. The question, shortly stated, is whether what is void can be equated with what is forbidden by law. This argument is not a new one, but has been raised in England as well as in India and has uniformly been rejected. In England the law relating to gaming and wagering contracts is contained in the Gaming Acts of 1845 and 1892.

While the Act of 1845 declared all kinds of wagers or games null and void, it only prohibited the recovery of money or valuable thing won upon any wager or deposited with stakeholders. On the other hand, the Act of 1892 further declared that moneys paid under or in respect of wagering contracts dealt with by the Act of 1845 are not recoverable and no commission or reward in respect of any wager can be claimed in a court of law by agents employed to bet on behalf of their principals. The law of England till the passing of the Act of 1892 was analogous to that in India and the English law on the subject governing a similar situation would be of considerable help in deciding the present case. Sir William Anderson in his book on “Law of Contracts” succinctly states the legal position thus, at page 205: “…the law may either actually forbid an agreement to be made, or it may merely say that if it is made the Courts will not enforce it. In the former case it is illegal; in the latter only void; but inasmuch as legal contracts are also void, though void contracts are not necessarily illegal, the distinction is for most purposes not important, and even judges seem sometimes to treat the two terms as inter-changeable.” The learned author proceeds to apply the paid general principles to wagers and observes, at page 212, thus; “Wagers being only void, no taint of legality attached to a transaction, whereby one man employed another to made bets for him; the ordinary rules which govern the relation of employer and employed applied in such a case.” Pollock and Mulla in their book on Indian Contract define the phrase “forbidden by law” in S. 23 thus, at page 158: “An act or undertaking is equally forbidden by law whether it violates a prohibitory enactment of the Legislature or a principle of unwritten law. But in India, where the criminal law is codified, acts forbidden by law seem practically to consist of acts punishable under the Penal Code and of acts prohibited by special legislation, or by regulations or orders made under authority derived from the Legislature.”

(18) The same view was expressed by the Indian Courts in cases decided after the enactment of the Contract Act. An agent who paid the amount of betting lost by him was allowed to recover the same from his principal in Pringle v. Jafar Khan, ILR 5 All. 443. The reason for that decision is given at page 445:
“There was nothing illegal in the contract; betting at horse-races could not be said to be illegal in the sense of tainting any transaction connected with it. This distinction between an agreement which is only void and one in which the consideration is also unlawful is made in the Contract Act. Section 23 points out in what cases the consideration of an agreement is unlawful, and in such cases the agreement is also void, that is, not enforceable at law. Section 30 refers to cases in which the agreement is only void, though the consideration is not necessarily unlawful. There is no reason why the plaintiff should not recover the sum paid by him………….” In Shibho Mal v. Lachman Das, ILR 23 All. 165, an agent who paid the losses on the wagering transactions was allowed to recover the amounts he paid from his principal. In Beni Madho Das v. Kaunsal Kishor, ILR 22 All. 452, the plaintiff who lent money to the defendant to enable him to pay off a gambling debt was given a decree to recover the same from the defendant. Where two partners entered into a contract of wager with a third party and one partner had satisfied his own and his co-partner’s liability under the contract, the Nagpur High Court in Md. Gulam Mustafakhan v. Padamsi, AIR 1923 Nag. 48, held that the partner who paid the amount could legally claim the other partner’s share of the loss. The learned Judge reiterated the same principle accepted in the decisions cited supra, when he said at page 49.
“Section 30 of the Indian Contract Act does not affect agreements or transactions collateral to wagers…” The said decisions were based upon the well-settled principle that a wagering contract was only void, but not illegal, and therefore a collateral contract could be enforced.

(19) Before closing this branch of the discussion, it may be convenient to consider a subsidiary point raised by the learned Counsel for the appellant that though a contract of partnership was not illegal, in the matter of accounting, the loss paid by one of the partners on wagering transactions, could not be taken into consideration. Reliance is placed in support of this contention on Chitty’s Contract, p. 495, para. 908, which reads:
“Inasmuch as betting is not in itself illegal, the law does not refuse to recognize a partnership formed for the purpose of betting. Upon the dissolution of such a partnership an account may be ordered. Each partner has right to recover his share of the capital subscribed, so far as it has not been spent; but he cannot claim an account of profits or repayments of amounts advanced by him which have actually been applied in paying the bets of the partnership.”
In support of this view, two decisions are cited. They are: 1896-1 Ch 496 and Saffery v. Mayer (1901) 1 KB 11. The first case has already been considered by us. There, Chitty J. in giving a decree for account left open the question of the legality of certain transactions till it arose on the taking of the account. Far from helping the appellant, the observations and the actual decision in that case support the respondent’s contention. The reservation of the question of particular transactions presumably related only to the transactions prohibited by the Betting Act, 1853. Such of the transactions which were so prohibited by the Betting Act would be illegal and therefore the contract of partnership could not operate on such transactions. The case of (1901) 1KB 11, related to a suit for recovery of money advanced by one person to another for the purpose of betting on horses on their joint account. The appellate Court held that by reason of the provisions of the Gaming Act, 1892, the action was not maintainable. This decision clearly turned upon the provisions of the Gaming Act, 1892. Smith M.R. observed that the plaintiff paid the money to the defendant in respect of a contract rendered null and void and therefore it was not recoverable under the second limb of that section. The other Lord Justices also based their judgments on the express words of the Gaming Act, 1892. It will be also interesting to note that the Court of Appeal further pointed out that Chitty J. in Thwaites’ case (1896) I Ch. 496, in deciding in the way he did omitted to consider the effect of the provisions of the Gaming Act, 1892, on the question of maintainability of the action before him. The aforesaid passage in Chitty’s Contract must be understood only in the context of the provisions of the Gaming Act, 1892.

(20) The aforesaid discussion yields the following results: (1) Under the common law of England a contract of wager is valid and therefore both the primary contract as well as the collateral agreement in respect thereof are enforceable: (2) after the enactment of the Gaming Act, 1845, a wager is made void but not illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a collateral agreement is enforceable; (3) there was a conflict on the question whether the second part of S. 18 of the Gaming Act, 1845, would cover a case for the recovery of money or valuable thing alleged to be won upon any wager under a substituted contract between the same parties: the House of Lords in Hill’s Case 1949-2 All ER 452, had finally resolved the conflict by holding that such a claim was not sustainable whether it was made under the original contract of wager between the parties or under a substituted agreement between them; (4) under the Gaming Act, 1892, in view of its wide and comprehensive phraseology, even collateral contracts, including partnership agreements, are not enforceable; (5) S. 30 of the Indian Contracts Act is based upon the provisions of S. 18 of the Gaming Act, 1845, and though a wager is void and unenforceable, it is not forbidden by law and therefore the object of a collateral agreement is not unlawful under S. 23 of the Contract Act; and (6) partnership being an agreement within the meaning of S. 23 of Indian Contracts Act, it is not unlawful, though its object is to carry on wagering transactions. We, therefore, hold that in the present case the partnership is not unlawful within the meaning of S. 23(a) of the Contract Act.

(21) Re (ii) – Public Policy: The learned Counsel for the appellant contends that the concept of public policy is very comprehensive and that in India, particularly after independence, its content should be measured having regard to political, social and economic policies of a welfare State, and the traditions of this ancient country reflected in Srutis, Smritis and Nibands. Before adverting to the argument of the learned Counsel, it would be convenient at the outset to ascertain the meaning of this concept and to note how the Courts in England and India have applied it to different situations. Cheshire and Fifoot in their book on “Law of Contract” and 3rd Edn., observe at page 280 thus:
“The public interest which it is designed to protect are so comprehensive and heterogeneous, and opinions as to what is injurious must of necessity vary so greatly with the social and moral convictions, and at times even with the political views, of different judges, that it forms a treacherous and unstable ground for legal decision…..These questions have agitated the Courts in the past, but the present state of the law would appear to be reasonably clear. Two observations may be made with some degree of assurance. First, although the rules already established by precedent must be moulded to fit the new conditions of a changing world, it is no longer legitimate for the Courts to invent a new head of public policy. A judge is not free to speculate upon what, in his opinion, is for the good of the community. He must be content to apply, either directly or by way of analogy, the principles laid down in previous decisions. He must expound, not expand, this particular branch of the law. Secondly, even though the contract is one which prima facie falls under one of the recognized heads of public policy, it will not be held illegal unless its harmful qualities are indisputable. The doctrine, as Lord Atkin remarked in a leading case, “should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of few judicial minds….. In popular language…..the contract should be given the benefit of the doubt.”

Anson in his Law of Contracts states the same rule thus, at p. 216:
“Jessel, M.R. in 1875, stated a principle which is still valid for the Courts, when he said: ‘You have this paramount public policy to consider, that you are not lightly to interfere with the freedom of contract; and it is in reconciling freedom of contract with other public interests which are regarded as of not less importance that the difficulty in these cases arises….. We may say, however, that the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules. The application of these to particular instances necessarily varies with the conditions of the times and the progressive development of public opinion and morality, but as Lord Wright has said, ‘public policy’, like any other branch of the Common Law, ought to be, and I think is, governed by the judicial use of precedents. If it is said that rules of public policy have to be moulded to suit new conditions of a changing world, that is true; but the same is true of the principles of the Common Law generally.”

In Halsbury’s Laws of England, 3rd Edn., Vol. 8, of the doctrine is stated at p. 130 thus:
“Any agreement which tends to be injurious to the public or against the public good is void as being contrary to public policy…. It seems, however, that this branch of the law will not be extended. The determination of what is contrary to the so-called policy of the law necessarily varies from time to time. Many transactions are upheld now which in a former generation would have been avoided as contrary to the supposed policy of the law. The rule remains, but its application varies with the principles which for the time being guide public opinion.” A few of the leading cases on the subject reflected in the authoritative statements of law by the various authors may also be useful to demarcate the limits of this illusive concept.

(22) Parke B. in Egerton v. Brownlow (1853) 4 HLC 121: which is a leading judgment on the subject, describes the doctrine of public policy thus at p. 123:
“[P]ublic policy is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean ‘political expedience’ or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; written from the statutes; the unwritten or common law from the decisions of our predecessors and of our existing Courts, from text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is the best, in his opinion, for the advantage of the community. Some of these decisions may have no doubt been founded upon the prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade. They have become a part of recognised law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise.”

(23) The doctrine of public policy may be summarized thus: Public policy or the policy of the law is an illusive concept; it has been described as “untrustworthy guide”, “variable quality”, “uncertain one”, “unruly horse”, etc; the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public policy; for want of better words Lord Atkin describes that something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies; this doctrine of public policy is only a branch of common law, and, just like any other branch of common law, it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days.

(24) This leads us to the question whether in England or in India a definite principle of public policy has been evolved or recognized invalidating wagers. So far as England is concerned, the passages from textbooks extracted and the decisions discussed in connection with the first point clearly establish that there has never been such a rule of public policy in that country. Courts under the common law of England till the year 1845 enforced such contracts even between parties to the transaction. They held that wagers were not illegal. After the passing of the English Gaming Act. 1845 (8 and 9 Vict. c. 109) such contracts were declared void. Even so, the Courts held that though a wagering contract was void, it was not illegal and therefore an agreement collateral to the wagering contract could be enforced. Only after the enactment of the Gaming Act 1892 (55 Vict. c. 9) the collateral contracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions cited supra the question of public policy was specifically raised and negatived by Court: See 1878-4 QBD 685, 1908-2 KB 696; and 1921-2 KB 351. It is therefore abundantly clear that the common law of England did not recognize any principle of public policy declaring wagering contracts illegal.

(25) The legal position is the same in India. The Indian Courts, both before and after the passing of the Act 21 of 1848 and also after the enactment of the Contract Act, have held that the wagering contracts are not illegal and the collateral contracts in respect of them are enforceable. We have already referred to these in dealing with the first point and we need not cover the ground once again except to cite a passage from the decision of the Judicial Committee in 4 Moo Ind App 339 (PC), which is directly on point. Their Lordships in considering the applicability of the doctrine of public policy to a wagering contract observed at p. 350:

“We are of opinion, that, although, to a certain degree, it might create a temptation to do what was wrong, we are not to presume that the parties would commit a crime; and as it did not interfere with the performance of any duty, and as if the parties were not induced by it to commit a crime, neither the interests of individuals or of the Government could be affected by it, we cannot say that it is contrary to public policy.” There is not a single decision after the above cited case, which was decided in 1846, up to the present day wherein the Courts either declared wagering contracts as illegal or refused to enforce any collateral contract in respect of such wagers, on the ground of public policy. It may, therefore, be stated without any contradiction that the common law of England in respect of wagers was followed in India and it has always been held that such contracts, though void after the Act of 1848, were not illegal. Nor the legislatures of the States excepting Bombay made any attempt to bring the law in India in line with that obtaining in England after the Gaming Act, 1892. The Contract Act was passed in the year 1872. At the time of the passing of the Contract Act, there was a Central Act, Act 21 of 1848, principally based on the English Gaming Act, 1845. There was also the Bombay Wagers (Amendment) Act 1865, amending the former Act in terms analogous to those later enacted by the Gaming Act 1892. Though the Contract Act repealed the Act 21 of 1848, it did not incorporate in it the provisions similar to those of the Bombay Act; nor was any amendment made subsequent to the passing of the English Gaming Act, 1892. The legislature must be deemed to have had the knowledge of the state of law in England, and, therefore, we may assume that it did not think fit to make wagers illegal or to hit at collateral contracts. The policy of law in India has therefore been to sustain the legality of wagers.

(26) The history of the law of gambling in India would also show that though gaming in certain respects was controlled, it has never been absolutely prohibited. These Acts do not prohibit gaming in its entirety, but aim at suppressing gaming in private houses when carried on for profit or gain of the owner of occupier thereof and also gaming in public. Gaming without contravening the provisions of the said Act is legal. Wherever the State intended to declare a particular form of gaming illegal, it made an express statute to that effect: See S. 29- A of the Indian Penal Code. In other respects, gaming and wagering are allowed in India. It is also common knowledge that horse races are allowed throughout India and the State also derives revenue therefrom.

(27) The next question posed by the learned Counsel for the appellant is whether under the Hindu Law it can be said that gambling contracts are held to be illegal. The learned Counsel relies upon the observations of this Court in State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699. The question raised in that case was whether the Bombay Lotteries and Prize Competition Control and Tax (Amendment) Act of 1952 extending the definition of “Prize Competition” contained in S. 2(1)(d) of the Bombay Lotteries and Prize Competition Control and Tax Act, of 1948, so as to include prize competition carried on through newspapers printed and published outside the State, was constitutionally valid. It was contended, inter alia, that the Act offended the fundamental right of the respondents, who were conducting prize competitions, under Art. 19(1) (g) of the Constitution and also violated the freedom of inter-State trade under Art. 301 thereof. This Court held that the gambling activities in their very nature and essence were extra- commercium and could not either be trade or commerce within the meaning of the aforesaid provisions and therefore neither the fundamental right of the respondents under Art. 19(1)(g) or their right to freedom of inter-State trade under Art. 301 is violated. In that context Das C. J. has collected all the Hindu Law texts from Rigveda. Mahabharata, Manu, Brihaspati, Yagnavalkya etc., (at pp. 719-720 of AIR). It is unnecessary to restate them here, but it is clear from those texts that Hindu sacred books condemned gambling in unambiguous terms. But the question is whether those ancient textbooks remain only as pious wishes of our ancestors or whether they were enforced in the recent centuries. All the branches of the Hindu Law have not been administered by Courts in India; only questions regarding succession, inheritance, marriage, and religious usages and institutions are decided according to the Hindu Law, except in so far as such law has been altered by legislative enactment. Besides the matters above referred to, there are certain additional matters to which the Hindu Law is applied to the Hindus, in some cases by virtue of express legislation and in others on the principle of justice, equity and good conscience. These matters are adoption, guardianship, family relations, will, gifts and partition. As to these matters also the Hindu Law is to be applied subject to such alterations as have been made by legislative enactments; See Mulla’s Hindu Law, para. 3 – p. 2. In other respects the ancient Hindu Law was not enforced in Indian Courts and it may be said that they became obsolete. Admittedly there has not been a single instance in recorded cases holding gambling or wagering contracts illegal on the ground that they are contrary to public policy as they offended the principles of ancient Hindu Law. In the circumstances, we find it difficult to import the tenets of Hindu Law to give a novel content to the doctrine of public policy in respect of contracts of gaming ad wagering.

(28) To summarize: The common law of England and that of India have never struck down contracts of wager on the ground of public policy; indeed they have always been held to be not illegal notwithstanding the fact that the statute declared them void. Even after the contracts of wager were declared to be void in England, collateral contracts were enforced till the passing of the Gaming Act of 1892, and in India, except in the state of Bombay, they have been enforced even after the passing of the Act 21 of 1848, which was substituted by S. 30 of the Contract Act. The moral prohibitions in Hindu Law text against gambling were not only not legally enforced but were allowed to fall into desuetude. In practice, though gambling is controlled in specific matters, it has not been declared illegal and there is no law declaring wagering illegal. Indeed, some of the gambling practices are a perennial source of income to the State. In the circumstances it is not possible to hold that there is any definite head or principle of public policy evolved by Courts or laid down by precedents which would directly apply to wagering contracts. Even if it is permissible for Courts to evolve a new head of public policy under extraordinary circumstances giving rise to incontestable harm to the society, we cannot say that wager is one of such instances of exceptional gravity, for it has been recognized for centuries and has been tolerated by the public and the State alike. If it is has any such tendency, it is for the legislature to make a law prohibiting such contracts and declaring them illegal and not for this Court to resort to judicial legislation.

(29) Re. Point 3 – Immorality: The argument under this head is rather broadly stated by the learned Counsel for the appellant. The learned Counsel attempts to draw an analogy from the Hindu Law relating to the doctrine of pious obligation of sons to discharge their father’s debts and contends that what the Hindu Law considers to be immoral in that context may appropriately be applied to a case under S. 23 of the Contract Act. Neither any authority is cited nor any legal basis is suggested for importing the doctrine of Hindu Law into the domain of contracts. Section 23 of the Contract Act is inspired by the common law of England and it would be more useful to refer to the English Law than to the Hindu Law texts dealing with a different matter. Anson in his Law of Contracts states at p. 222 thus:
“The only aspect of immorality with which Courts of Law have dealt is sexual immorality……” Halsbury in his Laws of England, 3rd Edn. Vol. 8, makes a similar statement, at 138:
“A contract which is made upon an immoral consideration or for an immoral purpose is unenforceable, and there is no distinction in this respect between immoral and illegal contracts. The immorality here alluded to is sexual immorality.”
In the Law of Contracts by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279:
“Although Lord Mansfield laid it down that a contract contra bonos mores is illegal, the law in this connection gives no extended meaning to morality, but concerns itself only with what is sexually reprehensible.”
In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157:
“The epithet “immoral” points in legal usage, to conduct or purposes which the State, though dispproving them, is unable, or not advised, visit with direct punishment.”
The learned authors confined its operation to acts which are considered to be immoral according to the standards of immorality approved by Courts. The case law both in England and India confines the operation of the doctrine to sexual immorality. To cite only some instances: settlements in consideration of concubinage, contracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession, agreements to pay money for future illicit cohabitation, promises in regard to marriage for consideration, or contracts facilitating divorce are all held to be void on the ground that the object is immoral.

(30) The word “immoral” is a very comprehensive word. Ordinarily it takes in every aspect of personal conduct deviating from the standard norms of life. It may also be said that what is repugnant to good conscience is immoral. Its varying content depends upon time, place and the stage of civilization of a particular society. In short, no universal standard can be laid down and any law based on such fluid concept defeats its own purpose. The provisions of S. 23 of the Contract Act indicate the legislative intention to give it a restricted meaning. Its juxtaposition with an equally illusive concept, public policy, indicates that it is used in a restricted sense; otherwise there would be overlapping of the two concepts. In its wide sense what is immoral may be against public policy, for public policy covers political, social and economic ground of objection. Decided cases and authoritative textbook writers, therefore, confined it, with every justification, only to sexual immorality. The other limitation imposed on the word by the statute, namely, “courts consider immoral,” brings out the idea that it is also a branch of the common law like the doctrine of public policy, and, therefore, should be confined to the principles recognised and settled by Courts. Precedents confine the said concept only to sexual immorality and no case has been brought to our notice where it has been applied to any head other than sexual immorality. In the circumstances, we cannot evolve a new head so as to bring in wagers within its fold.

(31) Lastly it is contended by the learned Counsel for the appellant that wager is extra- commercium and therefore there cannot be in law partnership for wager within the meaning of S. 4 of the Partnership Act; for partnership under that section is relationship between persons who have agreed to share the profits of a business. Reliance is placed in respect of this contention on the decision of this Court in AIR 1957 SC 699. This question was not raised in the pleadings. No issue was framed in respect of it. No such case was argued before the learned Subordinate Judge or in the High Court; nor was this point raised in the application for certificate for leave to appeal to the Supreme Court filed in the High Court. Indeed, the learned Advocate appearing for the appellant in the High Court stated that his client intended to raise one question only, namely, whether the partnership formed for the purpose of carrying on a business in differences was illegal within the meaning of S. 23 of the Contract Act. Further this plea was not specifically disclosed in the statement of case filed by the appellant in this Court. If this contention had been raised at the earliest point of time, it would have been open to the respondents to ask for a suitable amendment of the plaint to sustain their claim. In the circumstances, we do not think that we could with justification allow the appellant to raise this new plea for the first time before us, as it would cause irreparable prejudice to the respondents. We express no opinion on this point.
[For the foregoing reasons, the court held that the suit partnership was not unlawful within the meaning of S. 23 of the Indian Contract Act. In the result, the appeal failed].