JUDGMENT
1. On behalf of defendant No. 1, who has presented this appeal, the first point taken by learned Counsel is that the lower appellate Court was erroneous in giving a decree to the plaintiff with regard to the sum of Rs. 2,614 and odd. being the price of standard cloth supplied by the plaintiff to the defendant for being sold at their shop, namely, Swadeshi Vastralaya. The argument of learned Counsel is that the plaintiff had license under the Bihar Cotton Cloth and Yarn Dealers (Licensing and Control) Order, 1944, which was promulgated and came into force on 14-1-1944. The defendant had no license for selling standard cloth which is defind in Section 2(10) of the Control Order to mean “cloth stamped as such and issued for sale from godown of the District Magistrate”, Section 3 of the Control Order is as follows :
“3. Save as provided in Clause 12, no persons shall after the commencement of this Order, carry on business as a dealer except under and in accordance with the terms and conditions of a license in Form B issued by the Licensing Authority under this Order .
Provided that any license issued under the Bihar Cotton Yarn (Control of Distribution) Order, 1942, or the Bihar Cotton Cloth and Yarn Dealers Licensing Order; 1943, shall, until the 31st March, 1944 or such earlier date by which a fresh license is granted under this Order to the dealer concerned, be deemed to have been granted under this Order,”
Sections 4 and 5 of the Order provide for making an application for grant of a license and the conditions under which the Licensing Authority may grant such a license. Section 4 is to the following effect:
“4. (1) Every application for license under this Order shall be made to the licensing authority concerned in form A for each shop or place of business in the case of wholesale dealers and retail dealers and for each area in the case of hawkers, whether or not the shop or place of business or area is in the same town or village or in different towns or villages.
(2) A fee of Rs. 5 shall be charged for wholesale dealer’s license, of Rs. 2 for a retail dealer’s license and of Re. 1 for a hawker’s license, and the Treasury challan showing deposit of the fee shall be sent along with the application for a license. A similar fee shall be payable yearly by deposit in the Treasury for renewal of the license in the succeeding years.”
Section 5 is to the following effect:
“5 (1) On receipt of an application in form A, the licensing authority may, if he finds that the application is in order, grant a license in form B and such license shall remain in force until the 31st day of December of the year in which it is granted.
(2) The licensing authority may for sufficient reason issue a duplicate, on payment of Re. 1 by deposit in the Treasury, with the word “duplicate” prominently appearing thereon.
(3) The license shall be renewable every year and the renewal, if allowed, shall be endorsed by the licensing authority on the license or, as the case may be, on the duplicate.”
It is the admitted position in this case that the defendant had no license for selling standard cloth and it is also the admitted position that during the material period, that is to say March, 1944, to September, 1944, the Bihar Cotton Cloth and Yarn Dealers (Licensing and Control) Order, 1944 was in force. The point taken by learned Counsel for the appellant is, therefore, that the claim of the plaintiff is based upon an illegal contract and the Court cannot give assistance to the plaintiff to enforce that illegal contract.
To this contention it was replied on behalf of the respondent, in the first place, that there was payment of Rs. 7,855/- and odd by the defendant and
the plaintiff had appropriated a portion of this payment towards the price of standard cloth which had been previously supplied. There is no substance in this contention of the respondent because the appropriation by the plaintiff of the payment to an illegal contract is prohibited by Section 60 of the Contract Act, which is in the following terms ;
“60. Where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it, at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.”
Since the amount due as the price of standard cloth t is not a lawful claim made by the plaintiff, the appropriation of a portion of the payment by the defendant towards the price of standard cloth is also not permissible in the eye of law. In our opinion, this portion of the plaintiff’s claim, namely Rs. 2,614 and odd, which was the price of standard coth supplied by the plaintiff to the defendant cannot be decreed in favour of the plaintiff. The other point taken on behalf of the respondent was that the illegality of this transaction was not pleaded by the defendant in the written-statement.
We do not think there is any substance in this argument also because it is well settled that, if the illegality of a transaction is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality, then the Court will not enforce the illegal contract or allow itself to be made an instrument to enforce an obligation arising out of that illegal contract. It matters not whether the defendant has pleaded the illegality or whether he has not. In the present case evidence was adduced to prove the illegality, and the point was taken both in the trial Court and the lower appellate Court. It is immaterial, therefore, in our opinion, that the point was not specifically pleaded by the defendant in the written-statement.
This view is borne out by the decision of this
High Court in the Dominion of India v. Bhikraj Jaipuria, 1957 Pat LR 198 : ((S) AIR 1957 Pat 586). A
Similar argument advanced there was rejected by the
High Court. This view is also supported by English
authorities which are Holman v. Johnson, (1775) 1
Cowp 341 and Scott v. Brown, Doering, McNab and
Co., (1892) 2 Q.B. 724 and which were quoted by
Aikman J. in Alice Mary Hills v. William Clarke, ILR
27 All 266 at p. 273. In (1775) 1 Cowp 341. Mans
field, LJ. said :
“If from the plaintiffs own stating or otherwise the cause of action appears to arise exturpi causa or the transgression of a positive law of this country then the Court says he has no right to be assisted.”
In the case of 1892-2 QB 724 Lindley L.J. says:
“No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality. It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality, the Court will not assist him.”
On the basis of these authorities Leake in his well known book on contracts. 4th Edition, page 551, has summarised the law in the following way :
“The facts showing illegality either by statute or common law must be pleaded, but when the illegality appears from the plaintiff’s own evidence, it is the duty of the Court to take judicial notice of the fact, and to give judgment for the defendant, although the illegality is not raised by the pleadings.”
We agree with the learned Counsel for the appellant that even if there be no pleading by the defendant the Court is entitled to consider the question of legality of a contract, and if it is found that the contract is illegal, the Court must not enforce any obligation arising put of that illegal contract.
2. In our opinion, therefore, the claim of the plaintiff with regard to the sum of Rs. 2,614 and odd cannot be decreed by the Court.
3. The other point taken by learned Counsel on behalf of the appellant is that the case of the defendant with regard to the payment of Rs. 3,500 has not been investigated by the lower appellate Court, which came to the conclusion that that transaction was independent of the transaction upon which the plaintiff had based his suit. Having heard learned Counsel for both the parties we are satisfied that the case of the defendant with regard to the payment of Rs. 3,500 was a different version of the same transaction upon which the plaintiff has based his claim. It was, therefore, incumbent on the lower appellate Court to have investigated the case of the defendant with regard to the payment of Rs. 3,500 and give a definite finding on that point.
We do not accept the contention of the learned Counsel for the respondent that the defendant’s case with regard to the payment of Rs. 3,500 is an independent transaction and has no connection with the claim of the plaintiff. It is, therefore, necessary that the case should go back to the lower appellate Court for investigating the case of defendant No. 1 that there was payment of Rs. 3,500, and after coming to a finding on this point, he should proceed to decide the appeal in accordance with law.
4. For these reasons, we allow this appeal, set
aside the judgment and decree of the lower appellate
Court and remand the case for being reheard and re-
determined in accordance with law. Costs will abide
the result of the appeal after remand.