Bapna, J. - (1.) THIS is a first appeal by the plaintiff in a suit for recovery of damages for breach of contract.
(2.) THE appellant sued the respondent in the court of Thikana Auwa on 19th July, 1946, on the allegations that, under a contract dated Baisakh Sudi 12 St. 2001, the defendant had taken four bars of silver Nos. 476, 462, 40, and 3023 weighing in all 11610 9/16 tolas on Baisakh Sudi 15th St. 2001, and deposited by way of security Rs. 15209/14/6 the price thereof at the rate of Rs. 131/- per hundred tolas, and it was stipulated between the parties that the defendant would redeliver the aforesaid four bars of silver on Jeth Badi 5th St. 2002, and in the meantime the defendant would pay to the plaintiff Rs. 200/- per month for the use of the silver bars. It was alleged that the defendant had paid Rs. 1200/- for the use of the bars for six months, but had stopped further payment and did not return the bars as stipulated. THE plaintiff claimed Rs. 1600/- for the use of the bars for the period in excess of six months, and also Rs. 8000/- by way of damages at the rate of Rs. 69/- per hundred tolas for non-return of the bars on the due date. The defendant pleaded inter alia that he had made a purchase of four bars from the plaintiff at a price of Rs. 131/- per hundred tolas, and the payment of Rs. 15,209/14/6 to the plaintiff was not by way of security, but as price of the bars and that the payment of Rs. 200/- per month was stipulated in connection with the dealing in option, and the option lay with the defendant to sell four bars of silver to the plaintiff at Rs. 131/-at any time up to Jeth Badi 5th St. 2002; but owing to various factors the defendant did not think it necessary to exercise that option. It was alleged that this purchase of option was mentioned in a document which the defendant had executed on receiving the four bars of silver. A further plea was raised that the contract relied upon by the plaintiff amounted to an agreement to sell bullion at a date beyond 12 days from the date of the contract, and was illegal according to Rule 90c of the Defence of India Rules as applied to Jodhpur State. The defendant claimed refund of Rs. 1200/- paid by him in pursuance of the illegal contract. The defendant paid court fees on the set-off claimed by him. Owing to various administrative changes the case came for decision before the Civil Judge of Pali. As many as eleven issues were raised in the case; but it is unnecessary to consider all of them as the contract was held to be illegal in view of Notification of the Government of Jodhpur dated 3rd June, 1943, enacting Rule 90 C of the Defence of India Rules, as applied to Jodhpur. The claim for the plaintiff was dismissed; but he. was held liable to repay Rs. 1200/- in view of the interpretation put by that Court on sec. 65 of the Contract Act. The plaintiff has filed this appeal not only against the dismissal of his suit, but also as against the decree passed in favour of the defendant respondent for repayment of Rs. 1,200/ -. Learned counsel urged that the agreement dated Baisakh Sudi 12th St. 2001, which forms the basis"of the suit, did not fall within the mischief sought to be prevented by rule 90 C of the Defence of India Rules as applied to Jodhpur, and that the lower court had erred in coming to a contrary conclusion. As the case hinges upon the interpretation of the contract dated Baisakh Sudi 12th St. 2001, it is necessary to examine it closely. That document is Ex. P-l, and the relevant portion translated in simple English is as follows : - "this document is executed by Lalchand Siremal in favour of Maharaj Himmat Ram Daulatram. We have agreed to take four bars of silver from you which we will take from you on Baisakh Sudi 15th, and will give you at the rate of Rs. 131/- (for 100 tolas), and we will give back to you four bars on Jeth Badi 5th S. 2002, and for the Badla we will give you every month at the rate of Rs. 200/- per month, and we will give you the bars on Jeth Badi 5th St. 2002 at the same rate at which we are taking from you, and we will take back from you the same amount of money as we will give you. Sd/- Lalchand Baisakh Sudi 12th St. 2001. " The relevant portion of the Notification of the 3rd June, 1943, is that "'no person shall enter into any forward contract or option in bullion," and if anybody contravenes the provision of this rule, he shall be liable to imprisonment for a term which may extend to 5 years or with fine or both. The "forward contract" is defined in the Notification to be a contract for the delivery of bullion at a future date, such date being later than 12 days from the date of the contract. Contract was again defined as a contract made or to be performed in whole or in part in Marwar relating to the sale or purchase of bullion and included an option in bullion. It was urged by learned counsel for the appellant that the above contract was not for the purchase or sale of bullion, but for the loan of four bars of bullion to be returned after a particular period, and was consequently not hit by the provisions of the Notification. There is no force in this argument. The contract does not contemplate the return of the same specific bars to the plaintiff. Neither did the contract contemplate the delivery of any particular bars to the defendant. The plaintiff has admitted in his statement as a witness that he had given the four bars of silver for purposes of trade to the defendant, who could have sold them in the market and got benefit out of it, and that he had not given the bars by way of Amanat. It is obvious from this statement that the delivery was not of four particular bars and their specific return. It is agreed between the parties that the rate of silver on Baisakh Sudi 15th was Rs. 131/- for 100 tolas, and that the plaintiff had received the full price of the bars calculated at the above rate. The plaintiff concedes that he had agreed to take from the defendant four bars on Jeth Badi 5th St. 2002 at the identical rate of Rs. 131/- for 100 tolas of silver, whatever may have been the rate on that date, and had covered himself for the risk in the fall of price in the meantime by the stipulation to receive Rs. 200/- per month from the defendant. Bereft of superfluities, the agreement can be divided into two parts. The first is a sale of four bars by plaintiff to defendant on Baisakh Sudi 15th at the rate of Rs. 131/- for 100 tolas of silver. The second part is an agreement by the plaintiff to purchase four bars of silver on Jeth Badi 5th St. 2002 at the rate of Rs. 131/- for 100 tolas, and consideration for the purchase by the plaintiff at the specified rate was Rs. 200/- per month to be paid by the defendant to the plaintiff. Normally it is difficult to understand why a person should buy at a particular rate on a specific day and again sell the same goods at a subsequent date at the same rate. But it appears that the market of silver was fluctuating heavily in those days, and different persons expected different reactions in the market, and while the defendant might have been under the impression of a steep fall in the price, the plaintiff may not have expected any fall or may have even expected a rise. The first part of the contract had been performed by delivery of the four bars by the plaintiff to the defendant on receipt of their price amounting to Rs. 15,209/14/6 on Baisakh Sudi 15th. The second part of the contract forms the subject of the present suit and it appears to us that it is clearly hit by the Notification of 3rd June, 1943. It is a contract to be performed in Marwar for the purchase of bullion by the plaintiff from the defendant at a date later than 12 days from the date of contract. The contract being forbidden by law at the time when it was made, it was illegal, and the suit for damages for breach thereof is not maintainable. Learned counsel next contended that if the contract be held to be illegal, the defendant also was not entitled to recover Rs. 1200/- which he had paid in furtherance of the contract. The lower court allowed the defendant to recover Rs. 1200/- paid by him under the agreement by reference to sec. 65 of the Contract Act. Sec. 65 however only applies to contracts which are void, but not to those which are illegal. The sec. can have no application where the parties are presumed to have known at the time of its inception that the contract was void or illegal The reason for this rule is that when a contract is void or illegal to the knowledge of the parties, it cannot be said that such a contract was discovered to be void or illegal Dhanna Munda and another vs. Mst. Kosila Banian (1) (A. I. R. 1941 Pat. 510.) Sm. Durgesh Nandini Dassi vs. The Bhowanipur Banking Corporation Ltd. (2) (43 C. W. N. 260. ). In the present case the Notification prohibiting forward contracts in bullion was issued on the 3rd of June, 1943, by the government of Jodhpur, and published in the War Supplement to the Jodhpur Government Gazette, dated 12th June, 1943. The Contract was entered into on Baisakh Sudi 12th St. 2001, corresponding to 23rd May, 1945. It would be presumed that the parties to the contract, who are residents of Marwar, knew at the time of its inception that the contract was illegal. Chitty on Contracts (12th Edn.) says at page 470 that where both parties contracting on equal footing are aware of the illegal nature of the contract, whether it be on its face illegal or whether the common intention be to carry out the contract in an illegal manner, neither party can recover anything paid there-under. The lower court has erred in passing a decree in favour of the defendant for return of Rs. 1200/- by the plaintiff. The [appeal is therefore partly accepted. While the decree disallowing the plaintiff's claim is maintained, the decree for recovery of Rs. 1200/- from the plaintiff to be paid to the defendant is set aside. The parties will pay and receive costs according to success and failure in both courts. . ;