1. CASE: GHERULAL PARAKH vs. MAHADEODAS MAIYA AND ORS.

(29 January 2013) FACTS:

Plaintiff and defendant entered into Partnership agreement with object of entering into
wagering transactions with obligation to bear equal loss or profit arising out of such
partnership. When plaintiff asked for reimbursement of half of money paid by him to
discharge losses of partnership, defendant alleged that the agreement made between them
was illegal and unenforceable on account of S.23 ISSUE: Whether the alleged Partnership
agreement was either forbidden by law, or opposed to public policy or immoral so as to
render it void abolition? HELD: (i) Void agreements cannot be equated with illegal
agreements. The law may actually forbid an agreement to be made or it may merely refuse
to enforce an agreement. In former case, it is illegal in latter it is merely void, in as much as
all illegal agreements are void but not all void agreements are illegal or forbidden by law.
S.30 of ICA is based on provisions of Gaming Act, 1845 in England which rendered both
primary agreements of wagering and any substituted agreement for recovery of money
alleged to be won on any wager as void but, secondary agreements in respect thereof
enforceable. Therefore any wagering agreement though is void and unenforceable but is not
forbidden by law, therefore the object of any collateral agreement upon wagering isn’t
unlawful within the ambit of S.23 of ICA, hence is valid and subsisting between the parties.
In present case, parties had no interest to take delivery of the goods rather were only
dealing with difference in prices such that they mutually intended the transaction to be of
the nature of wager. Though wagers are void u/s 30 of ICA but cannot be considered as
forbidden by law u/s 23 for a person entering into wagering transactions does no legal
wrong but only fails to get protection of law in enforcing those transactions. Hence any
collateral agreement with the object of wagering cannot be declared to be void due to
‘object forbidden by law’ u/s 23, and is subsisting between the parties. (ii) Any agreement
which tends to be injurious to/against interest or conscience of public at large is said to be
opposed to public policy. It is a branch of common law and unless a particular principle of
public policy is recognized by that law, Courts cannot invent a new head of public policy. The
ordinary function of Court is to rely on the well settled heads of public policy and to apply
them to varying situations unless harm to public interest is substantially incontestable.

2. 17. The policy of law in India is to sustain the legality of wagers, as in common law, though
rendering them void and unenforceable. Not even in a single case, SC said, had Courts in
India pr in England struck down any wagering contract as ‘opposed to public policy’. Indeed
some of the gambling transactions are a perennial source of income to the state. Hence, it
cannot be said that wagering is opposed to public policy and therefore, partnership
agreement formed with object of wagering was not unlawful for its object being opposed to
public policy u/s 23. SC further remarked, “Even if it is permissible for Courts to evolve a new
head of public policy under extraordinary circumstances giving rise to incontestable harm to
society, wager isn’t one of such instance of exceptional gravity for it has been tolerated by
public and state alike.” (iii) Immorality u/s 23 should be confined to cases of sexual
immorality like agreements for concubinage, sale or hire of things to be used in a brothel,
marriage for consideration; agreements facilitating divorce, etc. are all immoral in nature.
This limitation on meaning of word ‘immoral’ as in S.23 is because of reasons: Firstly, its
juxtaposition with equally wide concept of ‘public policy’ in S.23 highlights legislative intent
to give it a narrow meaning otherwise it will lead to overlapping of two concepts; secondly,
 the phrase “Courts regard it as immoral” as in S.23 highlights immorality is also a branch of
common law and must be confined to principles recognized and settled by Courts; Thirdly,
case law in England and in India confines its operation to sexual immorality. Since present
case revolves around wagering which cannot be regarded as sexually immoral, hence, it is
not under realm of immorality as given u/s 23 of ICA. Therefore partnership agreement
formed with the object of entering into wagering transactions is enforceable, valid and
subsisting for its object of wagering isn’t unlawful u/s 23 because it is neither forbidden by
law, nor opposed to public policy, and nor immoral.

3. 18. Agreements Collateral to Wagering Agreements: Contract collateral to a wagering

agreement is not necessarily unenforceable. Section 30 of the ContractAct is based upon the
provisions of S. 18 of the (English) Gaming Act 1845, and though a wager is void and
unenforceable, it is not forbidden by law. Therefore the object of a collateral agreement is
not unlawful under s 23 of the contract act. But it is otherwiseunder the (English) Gaming
acts of 1845 and 1892, theacts being wider and more comprehensivein phraseology,
because they expressly render void even collateral transactions. As a result, though an
agreement by way of wager is void, contract collateral to it or in respect of a wagering
agreement is not void except in Bombay state. There is nothing illegal in the strict sensein
making bets. They are merely void and there would be no illegality in paying them or giving a
cheque, but payment cannot be compelled. But an arbitration clausein a wagering contractis
a part of the contract and not collateral to it and cannot therefore be enforced. A collateral
agreement is not unlawfulunder s 23 of the contractact. Apart from Bombay enactment,
there is no statute declaring void agreements collateral to wagering contract. Nor is there
anything in the presentsection to render such agreements void. The policy of law in India has
been to sustain the legality of wagers and not to hit at collateral contracts. Ithas accordingly
been held that a broker or an agent may successfully maintain a suit against his principal to
recover his brokerage, commission, or the losses sustained by him, even though contracts in
respectof which the claim is made are contracts by way of wager. The Supreme Courthas
held that if agreement collateral to another or of aid in facilitating the carrying outof the
object of the other agreement, which though void, is not in itself prohibited within the
meaning of s 23 of the contract act, may be enforced as collateral agreement. If on the other
hand it is part of a mechanismto defeat what the law has actually prohibited, courts will not
countenance a claim based upon the agreement because it will be tainted with an illegality
of the object soughtto be achieved, which is hit by s 23 of the contract act. An agreement
cannot be said to be forbidden or unlawfulmerely because it

4. 19. results in a void contract. A void agreement when coupled with other facts may become
part of a transaction which creates legal rights but this is not so if the object is prohibited. In
England also, agreements collateral to wagering contracts werenot void before the
enactment of the gaming act 1892. Thus in Read v Anderson a betting agent, at the request
of the defendant, made bets in his own name on behalf of the defendant. After the bets
were made and lost, the defendant revoked the authority to pay conferred upon the betting
agent. Notwithstanding the revocation, the agent paid the bets, and sued the defendant
having empowered the agent to bet in his name, the authority was irrevocable, and that the
agent was entitled to judgment. The statute of 1892, passed in consequenceof this decision,
is almost to the same effect as the Bombay act. It is interesting to note that the statute was
 not passed until 27 years after the Bombay act. Itis hoped that in future, the revision of the
contract act will corporate provisions of the Bombay act in the presentsection, so as to
render the law uniformon this subject in the whole of India.

5. 20. CONCLUSION : As section 30 of the Indian Contract Act 1872 reads about agreements by
way of wager, void. Further The Contract Act does not define what constitutes a wager or a
wagering agreement. It only mentions that such agreements will be void and unenforceable
and no action can lie to either recover anything that is due under a wager or for
performance of a contract that is in the nature of a wager. A wager is in the nature of a
contingent contract but is prevented from being enforceable by Section 30.

6. 21. BIBILOGRAPHY I have completed this project with the reference of following online
resources : www.lawjustice.com www.Indiancaselaws.wordpress.com
www.Indiancaselaws.org www.legalserviceindia.com elearning.sol.du.ac.in