NATIONAL LAW INSTITUTE UNIVERSITY

BHOPAL

LAW OF CONTRACTS PROJECT (Trimester 2)

TOPIC: - AGREEMENT OPPOSED AGAINST PUBLIC POLICIES

WITH ENGLISH AND INDIAN CASE LAWS

SUBMITTED TO: - SUBMITTED BY: -

PROF. NEHA SHARMA AJIT JAISWAL
(2019 BALLB 83)

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 ACKNOWLEDGEMENT

The project has been made possible by the unconditional support of many people. I would
like to acknowledge and extend my heartfelt gratitude to Prof. Neha Sharma and for guiding
me throughout the development of this paper into a coherent whole by providing helpful
insights and sharing their brilliant expertise. I would also like to thank the officials of Gyan
Mandir, NLIU for helping me to find the appropriate research material for this study.

I am deeply indebted to my parents, seniors and friends for all the moral support and
encouragement.

AJIT JAISWAL

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This is to certify that the research paper titled “Agreement opposed against public policies
with Indian and English case laws ” has been prepared and submitted by Ajit Jaiswal who
are currently pursuing their B.A.LL.B(Hons.) at National Law Institute University, Bhopal
in fulfillment of Contracts-I course. It is also certified that this is an original research report
and this paper has not been submitted to any other university, nor published in any journal.

Date-

Signature of the student-

Signature of Research Supervisor-

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 TABLE OF CONTENTS

1. INTRODUCTION______________________________________________4

2. CATEGORISATON____________________________________________5
 Trading with Enemy 5
 Trafficking in Public Offices 6
 Interference with Administration

Of Justice 6

 Interference with course

Of justice 6
 Stifling prosecution 7
 Maintenance and Champerty 8
 Marriage Brokerage Contracts 9
 Unfair and Unreasonable Dealing 10

3. CONTRIBUTION____________________________________________11

INTRODUCTION
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According to the sec. 2(g) of the Indian Contracts Act 1872 “An agreement
enforceable by law is a contract”. The contract has to be valid and should have
fulfilled certain requirements before it is called a contract. One of the essentials of a
valid contract is that the consideration and the object should be lawful. Every
agreement of which the object or consideration is unlawful is void1. Section 23 of
the contracts act states the conditions under which a contract is lawful.

If a contract which is formed is against the public policy, the contract is deemed to
be void. If the court regards an agreement as opposed to public policy, the agreement
is void. Public policy is not capable of any precise definition. Public policy means
the policy of the law at a states time. An act which is injurious to the interest of
the society is against public policy.

The courts do play a great role in interpreting whether the agreement is in

consonance with the recognised public policy or not. The laws against public policy
have different notions in different countries like the laws in India and England are
different.

This project is made to categorise these unlawful; laws under different heads and
also to differentiate between the laws in England and India.

Under legality of object the agreement which are void can be categorised under
following heads.

1
Sec. 23. Indian Contracts Act. 1872

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CATEGORISATION

The agreements which are termed to be void or against the public policies are
categorised as under:-

HEADS OF PUBLIC POLICY2 –

1. Trading with enemy;

2. Trafficking in public offices;
3. Interference with administration of justice;
4. Marriage brokerage contracts;
5. Unfair or Unreasonable Dealings.

Some other agreements, which are opposed to public policy, like an agreement in
restraint of marriage3, an agreement in restraint of trade4 have also been declared
void by the Indian Contracts Act.

1. TRADING WITH ENEMY -

When there is a between two countries, it is unlawful and against public
policy that a person should trade with the subject of the enemy country. A
person from one country cannot trade with the people of other country which
is in war with the first country.
Suppose country A is in war with country B, then any person of country A
cannot give effect to any trade or vice versa.5
The reason for such restriction in the field of trade and commerce is that if
such agreements are allowed between countries then it would be taken as if
such transactions between or more countries are done to promote economic
interest to such country and overlook the interest of individuals.

2. TRAFFICKING IN PUBLIC OFFICES –

2
Singh, Avtar. “Law of Contract and Specific Relief”. Lucknow : Eastern Book Company, ed. 5, 2009.
3
Sec. 26 Indian Contracts Act.
4
Sec 27 Indian Contracts Act.
5
Case Janson v. Driefontein Consolidated Mines, (1902) A.C. 484

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 An agreement by which it is intended to induce a public officer to act
corruptly is termed as a contract which is against public policy. For example,
in Parkinson v. College of Ambulance case6 an agreement by which a sum of
money was provided to a charity for the procurement of knight in return
was deemed to be a void agreement. The aforesaid case is a precedent in
English case law.
According to Indian case law, in the case of Kuju Colleries Ltd v. Jharkhand
Mines Ltd.7 , money paid to a public officer to procure a mining right was
not permitted to be recovered.
Such law is prevalent in Indian and English laws.

3. INTERFERENCE WITH ADMINISTRATION OF JUSTICE –

A contract whose object is interfere with the administration of justice is void
in the eyes of law as it is opposed to the public policy. With reference to
such administration this heading can be categorised further as -
 Interference with the course of justice – Any agreement which
obstructs the ordinary process of justice is void. An agreement to delay
the execution of a decree and a promise to give money to induce a
person false evidence, have been held void.

ILLUSTRATION
In N.V. P. Pandian v. M. M. Roy8 case, the respondent paid a sum of
Rs. 15,000 to the appellant and the appellant in return promised to use
his influence with the selection committee in order to get a seat for
the respondent’s son in Madras Medical College. The respondent’s son
could not have the seat and she filed a suit against the appellant
claiming back the sum of Rs. 15,000 paid by her. It was held that the
agreement tended to injure public service and was against public policy

6
[1925] 2 KB 1.
7
AIR 1974 SC 1892.
8
AIR 1979 Mad. 42

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 and therefore, the same was void. Hence, she was held not entitled to
claim the refund of Rs. 15,000.9

 Stifling prosecution – An agreement to stifle prosecution has been

regarded as opposed to public policy. Under criminal law it is been
termed as non – compoundable offence. In other words, by accepting
some consideration to make a compromise in a criminal case, one is
deemed to have accepted bribe, i.e., a crime under I. P. C.
A case is been discussed so as to explain this category as per Indian
law –
In case of Ouseph Poulo v. Catholic Union Bank10, some goods had
been pledged with the respondent bank as a security for a loan. On an
inspection it was found that there was a deficiency in the quantity of
good with the consideration of the goods. It was thought that either the
goods were fraudulently removed from the place or there was no
pledge taken to deliver such goods.
As a result there was a complaint lodged with the police about the
said deficiency of the goods. As promised by the appellant before the
complaint was lodged they now executed two hypothecation deeds in
favour of the bank. As a result the complaint was withdrawal by the
appellant. Then the appellant sought the cancellation of the
hypothecation deeds on the ground that the same was done to stifle
criminal prosecution. It was held that such hypothecation was valid as
such was contemplated before the complaint was lodged.
In this case SC said –

“It is well settled that agreements which are made for stifling
prosecution are opposed to public policy and as such, they cannot be
enforced. The basis for this position is that the consideration which
supports such agreement is itself opposed to public policy.”11

9
Bangia, R. K. “Indian Contract Act”. Allahabad : Allahabad Law Agency, ed. 12, 2005.
10
AIR 1965 S.C. 166.
11
Ouseph Poulo v. Catholic Union Bank, AIR 1965 SC 166.

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  AGREEMENT OF MAINTENANCE AND CHAMPERTY -
Maintenance as per law is, aiding a party in civil proceeding by
providing financial or other assistance without lawful justification. In
other words, of a person intermediates in the proceedings of a case of
any two parties without having any interest is termed to be an
unlawful interference by the third party.
Champerty is a kind of maintenance in which the person assisting in
the proceedings is to receive a share in the gain made in the
proceedings is to receive a share in a gain made in proceedings
maintained by him.
In the country of England, the offences of maintenance and champerty
were considered to be obsoleteand were abolished by the Criminal Law
Act, 1967.
The English law or the common law have no application in the Indian
laws because of the peculiarity in the Indian system.
As per Indian laws, the Indian courts tend to see whether the party
which provided with the assistance took the advantage of the
helplessness of the other party to enter into the case with such
assistance, if the party had taken any such advantage then such type of
assistance is termed as champerty. If the party which has intervened in
any such proceedings have no such selfish interest then such type of
agreements are valid in the eyes of law.
For example, in the case of Ram Sarup v. Court of Wards12 the
decision was that
“if the agreement stipulates that the financier is to bear all the
expenses of litigation, and in return he is to get 3 anna(3/16) share
of the property recovered if the suit terminates at the High Court
level, and 4 anna(4/16) share if the case goes upto the Privy Council,
such an agreement has been held to be valid, by the Privy
Council.”13

12
AIR 1940 P.C. 19
13
ibid.

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 ILLUSTRATION
Taking the case of Khaja Moinuddin v. S.P. Ranga Rao®14 into view
as another illustration for the same law in Indian context.
[In this case there was an agreement according to which the plaintiff
agreed to finance defendant’s litigation and in return the defendant
agreed to pay 40% of the total compensation to be paid to suit
scheduled land in case of its acquisition or in the alternative 40% of
the sale proceeds of land property, if sale was by private negotiation.
This was in addition to the repayment of the amount agreed to be
advanced. The agreement was held to be unconscionable and
extortionate in nature. It was held that the said agreement was
champertous in nature and void ab initio under Sec. 23 of Indian
Contracts Act.]15

4. MARRIAGE BROKERAGE CONTRACT –

Marriage brokerage contracts mean such contracts under which a person
agrees to procure a marriage between two persons on some consideration.
Such agreements are opposed to public policy and are void.
As per Indian laws marriages are those sacre ceremonies which should be
commenced by both the parties independently agreeing to form such relation
rather than by involving intermediaries who try to procure such marriages for
their own selfish motives.
The common law governing the English law forms precedent for the Indian
law as well under this rule.
A popular in English law forms precedent in Indian law.
The case is Hermann v. Charlesworth16, in this case Charlesworth promised to
introduce young men to Miss Hermann and in return she was to pay 52
pounds in advance and 250 pounds on the day of marriage. He was

14
AIR 2000 A.P. 344.
15
Bangia, R. K. “Indian Contract Act”. Allahabad : Allahabad Law Agency, ed. 12, 2005.

16
(1905) 2 KB 123

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 unsuccessful to procure the marriage, so Miss Hermann who had paid the
advance, brought an action against Charlesworth to recover back the money
which she paid in advance, and she was successful.

5. UNFAIR OR UNREASONABLE DEALINGS –

When the parties are not economically on equal footing with respect to the
bargaining power of the two parties and one party is in a position to exploit
the other party and the other party is vulnerable in such respect then the
agreement is termed to be as opposed to the public polcy and may be termed
to be void in the eyes of law.
In the case of Central Inland Water Transport Corpn v. Brojo Nath
Ganguly17 case, the decision was that, a Government Corporation imposing
upon a needy employee a term that he can be removed just by three months
notice or pay in lieu of notice and without any grounds is an exploitation
and such ruthless exploitation is against public policy.
While on the other hand if the bargaining power of the two parties are fairly
matched then and al the clauses has been duly signed then the law will
presume such contract to be fair.

17
AIR 1986 SC 1571

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 CONTRIBUTION

The research paper made on the topic “agreements against public policy with respect
to Indian and English laws” contains the categories under which this law is
distributed and the cases which have formed milestones in the development of this
law.

My contribution to this research paper is that I tried to elaborate this law under al
the headings and tried to discuss all the milestone cases which have formed the
precedents in the recent past. I have gone through the books written by great authors
like Mr. R. K. Bangia and Avtar Singh and tried to bring out, where possible the
common law which has formed precedents in the Indian law.

I tried to discuss the cases of the common law and cases of the Indian law
separately and tried to draw out how they formed the counterparts of each other by
discussing the decision passed by the court.

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