- (1.) The three consolidated appeals before us by grant of special leave are directed against a common, Judgment of the High Court of Andhra Pradesh, by which the plaintiff's appeals in three suits, filed on similar facts were dismissed. They can be decided by us on the question whether the contracts set up by the plaintiff appellant were struck by the provisions of Section 23 of the Contract Act. The section reads as follows: " 23. The consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, it permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another ; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void". The appellant, firm of Pratapchand Nopaji, is the plaintiff in all the three suits, but the defendants of each suit the respondents before us, are different. The plaintiff claimed Rs. 78.201/15 ans, in original suit No. 106 of 1954, Rs,13,978/4 ans, in original suit No. 107 of 1954 and Rupees 91,697/4 ans. in original suit No. 114 of 1954, as amounts due to indemnify him under Section 222 of the Contract Act on the strength of Payments said to have been made by the plaintiff to third parties on behalf of the defendants who are alleged to have directed the plaintiff to enter into "badla" transactions for them. Three other suits, claiming amounts alleged to have been borrowed, also filed by the same plaintiff, were tried together with these three suits; but, we are not concerned here with the other three suits from the dismissal of which no appeal was preferred.
(2.) The character of the contract set up in each case is brought out by paragraph 3. of the original suit No. 106 of 1954 where the plaintiff said: "The defendants are big merchants and have been carrying on trade outside Dhone, even in places like Bombay. They wanted to do the business of purchasing and selling groundnut seeds and oil seeds in Bombay market and for this purpose engaged the plaintiffs as commission agents to contact with Bombay Commission Agents, who were entering into contracts with customers for purchasing or selling groundnut seeds and custom oil seeds, according to the orders of the defendants which the plaintiffs were communication to them. The Bombay commission agents used to give intimation to the plaintiffs of the fact of having executed the orders (the contracts of sale or purchase) and the terms, the rate etc., of the contracts. The plaintiffs were immediately communicating the information to the defendants. The business was according to the custom prevailing in the Bombay Market, viz the custom of Badla. The defendants not only agreed in general to abide by the custom of Badla, but specifically consented to every such Badla. At the request of the defendants the transactions were settled after undergoing a few badlas. Such settlement were beneficial to the defendants as the market was falling and delay would have meant greater loss: when the market was falling the Bombay agents were pressing for cash settlement on pain of declaring them as defaulters which will result in a disability to do any further business. The defendants knew this state of affairs and the realised that a settlement was the only course beneficial to them. So they specifically told the plaintiffs that they must at any cost preserve their reputation in the Bombay market and with plaintiffs. The defendants hence agree to pay the amount and on their request and on their behalf the plaintiffs paid all amounts due to the Bombay Commission Agents according to the Patties sent by the Bombay Agents in respect of the transactions relating to the defendants. The defendants also agreed to pay to the plaintiff interests on the amounts so advanced by the plaintiffs for payment to the Bombay agents. The Bombay Commission agents were sending patties of transaction to plaintiffs. As already stated , at the request of the defendants to repay all such amounts to the plaintiffs with interest. The extracts of the accounts filed with this plaint show the transaction and the amount paid by the plaintiffs at the request of and on behalf of the defendants."
(3.) The plaintiff's case was that the authority to engage in Badla transactions on forward contracts, which are contracts for the delivery of specified goods on future dates, implied what is known as "continuation or "carrying over" in the terminology of the Stock Exchange. The meaning of such a transaction is given, in Hals bury's Laws of England- 3rd Edn. Vol 36 at p. 547 (para 842) as follows: "If a purchaser of securities during a dealing period does not wish to complete his purchase during the next following settlement period he may arrange to resell for the current account the securities which he has agreed to buy for that account and to purchase for the new account. Conversely, a seller of securities during a dealing period when does not wish to deliver during the next following settlement period may arrange to repurchase for the current account the securities which he has agreed to sell, and to sell for the new account. Such an agreement is known as a continuation or carrying over. This is explained further and distinguished from a loan (at page 548 - para 845) : "Continuation or carrying- over is in form and in law a sale and repurchase, or a purchase and resale, as the case may be. It is a new contract, and not merely getting further time far the performance of the old contract. A continuation being a contract of sale and repurchase and not a loan, the original seller becomes again the absolute owner of the securities carried over, and is not bound to redeliver the identical securities but an equal amount of similar securities. If, therefore, he sells the securities taken in by him and makes a profit thereon, he may retain it to his own use. In the case of a loan, however, if the lender sells the securities deposited, the borrower may charge him with the price obtained for them if he finds it to his interest to do so." Under the Defence of India Rules, the definition of Badla provides that, it "includes a Contango and a backwardation and any other arrangement whereby the performance of any obligation under a contract to take or give delivery of securities within a stipulated period is postponed to some future date in consideration of the other charges.";