Holding

The agreements were not opposed to public policy, the power of attorney was valid, the plaintiff was ready and willing to perform, and the High Court decree for specific performance stands.

Summary

The Indian Financial Association of Seventh Day Adventists (the appellant) owned a 30‑cent property containing a church, school and other buildings. It passed a resolution to sell the land and, through a duly executed power of attorney, its representative (defendant No. 2) entered into two sale agreements with the plaintiff, M.A. Unneerikuty, one for Rs 8 lakhs and a later one for Rs 5 lakhs contingent on demolition of the buildings. The plaintiff paid an advance and claimed he was ready to pay the balance, seeking specific performance. The defendants argued that the power of attorney was void, the agreements were contrary to public policy, violated Sections 23 and 24 of the Contract Act, and that the plaintiff had not satisfied Section 16 of the Specific Relief Act. The trial court dismissed the suit; the Kerala High Court reversed, holding the agreements were valid and ordering specific performance. The Supreme Court upheld the High Court, finding no public‑policy violation, confirming the validity of the power of attorney, and concluding that the plaintiff was ready and willing to perform, thus dismissing the appeal.

Issues considered

The agreement for sale executed through a power of attorney is void as opposed to public policy under Section 23 of the Contract Act.
The agreement is void under Section 24 of the Contract Act for having an unlawful consideration (stamp duty and income‑tax evasion).
Whether the plaintiff satisfied the requirement of readiness and willingness under Section 16 of the Specific Relief Act.
Whether specific performance can be granted under Section 20 of the Specific Relief Act.
Whether the power of attorney was valid under the company’s memorandum and articles of association.

Legislation cited

Subjects

Specific performancePublic policyContract voidPower of attorneySection 23 Contract ActSection 24 Contract ActSection 16 Specific Relief ActSection 20 Specific Relief ActSale of immovable propertyStamp duty evasionIncome tax evasion

Judgment

,.
A INDIA FINANCIAL ASSN., SEVENTH [!AY ADVENTISTS
v.
M.A. UNNEERIKUTTY AND ANR.

JULY 20, 2006

B [ARJJJTPASAYAT ANDTARUN CHI\ TTERJEE,JJ.]

Contract Act, 1872-Sections 23 and 24-Aweementfor sale-Through
Power ofAttorney of vendor-Suit for specific pel".J ormance-Dismissal of suit ~ -
c holding that the agreement was opposed to public policy; and that
requirements of Section 16 of Specific Relief Acr was not complied with-
High Court decreed the suit holding that the agreement were not opposed
to Public Policy; that plaintiff was ready and , villing to pay the balance
amount towards sale consideration; and that the1e was no material to show
that Power of Attorney acted in unauthorized mo~ner-On appeal, held: Suit
D liable to he decreed in the facts of the case.

Doctrine:

Doctrine of Public Po/icy-Meaning and 'pplicability of

E Words and Phrases:

'Public Policy'-Meaning of

Plaintiff-respondent No. I, had entered into ~greement with appellant-
defendant No. I through defendant No. 2-its power of Attorney for sale of the
F property in question. Plaintiff filed suit for spt:cific performance of the
agreement for sale. In the plaint it was mentioned that a formal agreement
(Exbt. A-4) for sale was entered into showing co 1sideration as Rs. 8 lakhs
including the sum already paid towards sale price. The price was for 30 cents
of property and all the improvements thereon in eluding Church building,
School building and another building. On the same day another modified
G agreement for sale (Exbt. A-5) was entered into, ref xing the sale consideration
,..
to Rs. 5 lakhs and giving liberty to the defendants-appellants to pull down and
remove the building in the property. Plaintiff sta1 ed that he was ready and
willing to pay the balance amount towards considt ration of Rs. 8 lakhs if the
Church and School buildings in the premises wen: not removed; and that if
H 762
INDIA FINANCIAL ASSN., SEVENTII DAY ADVENTISTS 1•. M.A. UNNEERIKUTIY 763
·\. the Church and School buildings were removed, he was ready to pay the A
balance towards consideration of Rs. 5 Iakhs. The suit was valued at Rs. 5
lakhs.

Defendant No. 1 in its Written Statement stated that the Power of
Attorney was void as contrary and opposed to the Memorandum and Articles
of Association of the Company; that the act of deciding to sell the property B
pursuant to resolution of the Company, were invalid in law and were otherwise
ineffective and void; th.at the agreements were set up and devised by the plaintiff
with objects which were opposed to public policy and were prohibited by Kerala
Stamp Act and Income Tax Act and were void under Section 24 of Contract
Act.
c
Trial court dismissed the suit on the grounds that Exbt. A-5 was executed
to defraud payment of stamp duty and the Income Tax and it was opposed to
public policy in the background of Section 23 of the Contract Act; that in
case of decree of the suit, greater hardship would be caused to the defendants;
and that requirements of Section 16 of Specific Relief Act, 1963 were not D
complied with.

High Court allowed the appeal of the plaintiff-respondent decreeing the
suit on the ground that the agreement was not opposed to public policy as
there was full disclosure of the advance payments which were made by demand
drafts; and that in the facts of the case Section 20 of the Specific Relief Act, E
1963 was not applicable; and that in view of resolution of appellant No.1,
defendant No. 2 was not acting in unauthorised manner. High Court directed
for payment of the balance Court Fee on the plaint and also in the appeal on
the basis that the consideration for sale was Rs. 8 lakhs and not Rs. 5 lakhs.
Hence the present appeal.
F
Dismissing the appeal, the Court

HELD: 1. In view of the findings recorded by the High Court more
particularly mention of all the relevant details relating to Exhibits A-4 and
A-5 and the evidence clearly establishing that plaintiff had capacity to pay G
and was ready and willing to pay the balance amount and the absence of any
material to show that defendant No.2 was not acting in unauthori7.ed manner
in view of the clear resolution of appellant No.1, the judgment of the High
Court cannot be faulted. [777-C-D]

2.1. The term 'public policy' has an entirely different and more extensive H
764 SUPREME COURT REP )RTS [2006] SUPP. 3 S.C.R.
.(
A meaning from the policy of the law. It does no I remain static in any given
community and varies from generation to ger eration. Judges, as trusted
interpreters of the law, have to interpret it. WI 1ile doing so precedents will
also guide them to a substantial extent. (776-C- l>I

A.C. Arulappan v. Aha/ya Naik (Smt.), (200116 SCC 600; K. Narendra
B v. Riviera Apartments (P) ltd, (199915 SCC 77; Manna/al Khetan and Ors.
v. Kedar Nath Khetan and Ors., (197712 SCC 424 and Aniglase Yohannan v.
Ramlatha and Ors., (20051 7 SCC 534, referred to.

"Interpretation of Statutes" by Maxwell, 1·eferred to.

c 2.2. The doctrine of public policy may be sm nmarized thus: Public policy
or the policy of the law is an illusive concepl: it has been described as
"untrustworthy guide", "variable quality'', "unc1:rtain one", "unruly house",
etc., the primary duty of a Court of law is to e11force a promise which the
parties have made and to uphold the sanctity of c1 mtract which form the basis
D of society, but in certain cases, the Court may relieve them of their duty on a
rule founded on what is called the public policy, but the doctrine is extended
not only to harmful cases but also to harmful tmdencies. This doctrine of
public policy is only a branch of common law, and just like any other branch
of common law it is governed by precedents. The principles have been
crystallized under different heads and though it is permissible for Courts to
E expound and apply them to different situations, it should only be invoked in ·
clear and incontestable cases of harm to the public. (776-G-H; 777-A-B)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4262 of2001.

From the Judgment and Order dated 15.2.2001 of the High Court of
F Kerala at Emakulan in A.S. No. 240/1998(A).

S. Balakrishnan, K.K. Misra, S.N. Jha and ~:ubramonium Prasad for the
Appellant.

Ranjit Kumar, Krishnan V~nugopal and A. R1ghunath for the Respodents.
G
The Judgment of the Court was delivered by

ARJJIT PASAY AT, J. Challenge in this appeal is to the judgment rendered
by a Division Bench of the Kerala High Court allowing the appeal by the
respondent who was the plaintiff. It is to be notec that the suit was dismissed
H by the trial court.
IND!AFINANCIALASSN.,SEVENTHDAY ADVENTISTS 1•. M.A. UNNEERIKUTTY[PASAYAT,l. J 765

Background facts in a nutshell are as follows : A
The plaint schedule property belonged to the appellant No. I i.e. Indian
Financial Association of Seventh Day Adventists, a Company incorporated
under the Companies Act, 1956. The Company was impleaded as defendant
No.I in the suit and the defendant No.2 was its Power of Attorney. A school
was being run in the property and there were also two other buildings in the B
property used by the Company. On 15.4.1985, the defendant No. I Company
passed a resolution deciding to sell the property. A Power of Attorney was
executed in favour of defendant No.2 conferring on him the right to negotiate,
enter into an agreement to sell, and sell and dispose of the property for a price
acceptable to the Power of Attorney. It may be noted that this Power of C
Attorney, defendant No.2, was the Chairman of the North Kerala Section of
the defendant No. I Company and he had control and management over 70
churches. Thus, defendant No.2, who was constituted the Power of Attorney,
was a prominent person in the defendant No. I company and in the Association
for whose welfare the company had been incorporated. Defendant No.2
negotiated with the plaintiff for the sale of the property. Negotiations were D
done with the help of Mr. P.V. George, who was attached to the school run
by defendant No. I and who was a member of the Association. Defendant
No.2, for and on behalf of defendant No. I, agreed to sell the property to the
plaintiff for a price of rupees eight lakhs. On 17 .5.1985 a sum of Rs. I 0,000/-
was paid as a token of the coming into existence of the agreement and receipt E
was issued. The receipt was admittedly signed by defendant No.2 and the
witnesses to it are one Sarathchandra and P. V. George referred to earlier. The
receipt reads as follows:-

"Received a sum of Rupees ten thousand (Rs. I0,000/-)as earnest
money from Mr. M.A. Uneerikutty, Calicut towards the advance of the F
sale of land bearing R.S. No. 27/I having 30 cents of extent which
costs 8 lakhs of rupees."

This was followed by another agreement dated 21.5.1985, executed by
defendant No.2, in his capacity as the Power of Attorney Holder of the
defendant No. I, and the plaintiff. In that agreement, after reciting the title of G
the defendant No.I- Company represented by its Power of Attorney, it was
stated that it had been decided to sell the property to the plaintiff for a
consideration of Rupees Eight Lakhs and the plaintiff had agreed to purchast:
the same. The document also recites that on that day, the defendant No. I
acting through its Power of Attorney, had received a sum of Rupees Three
Lakhs as advance towards the sale price. The document was to be registered H
766 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A on or before 30.9.1985. The Company was o hand over all the title deeds
relating to the property, including the encurabrance certificate, within one
month before registration of the sale deed. A II expenses for registration had
to be met by the plaintiff and ifthe Company fiiiled to complete the registration
of the sale deed within the agreed period, the plaintiff had the power to take
B the necessary legal steps for getting the sa e deed registered and in that
event, the Company would be liable for the expenses and loss incurred in that
behalf. The sum of Rupees Three Lakhs paid as advance was liable 'to be
recovered as charge on the property. If the p aintiff fails to pay the balance
consideration of Rupees Five Lakhs to the Company within the agreed period,
the plaintiff was liable to the Company for 111 the losses incurred and the
,.
C company had the full power to recover all the losses from the plaintiff. As
noticed supra, the Power of Attorney signed this agreement on behalf of the
defendant No. I company and the witnesses to this agreement were also the
same two witnesses who had signed as witr.es ;es in the receipt. On the same
day, another agreement was also executed by the parties. This agreement
D indicated that the company would sell and the plaintiff would purchase the
property for a price of Rupees Five Lakhs or the price to be adjusted as per
the approved survey of the property. The sak was subject to clear title and
free from all encumbrances. The agreement ·ecites that the purchaser, the
plaintiff, had paid a sum of Rs. I0,000/- by cash and a sum of Rs.40,000/- by
way of cheque dated 31.5.1985 as advance, the receipt of which the Company
E and the Power of Attorney acknowledged. Th: balance sale price was to be
paid on or before 30.9.1985. The agreemen: stated that time was of the
essence of the contract. Clause 5 of this agreement stated that the Company
and its Power of Attorney were to demolish the existing buildings in the
schedule property, salvage the same and deliv :r possession of the land only
to the plaintiff at the time of registration of th1: sale deed. The company was
F to obtain the Clearance Certificate in terms of S1 ~ction 230A of the Income Tax
Act, 1961. The cost ofregistration was to be b1 >me by the plaintiff and in the
event of default on the part of the company to ~ell the schedule property after
complying with the conditions, the company was liable to return the advance
of Rs.50,000/- as liquidated damages to the pl 1intiff. In the event of default
G on the part of the plaintiff to buy the schedule property as per the conditions
set out, the plaintiff was to forfeit the advance c.fRs.50,000/- to the company.
Thereafter, the company was free to deal with the property as it pleased. It
was also provided that either party was entitled t l enforce specific performance
of the contract. It is seen that on the same day, there is a letter said to have
been signed by defendant No.2. In that letter, it was stated, after referring to
H Clause 5 of the other agreement that the Powc:r of Attorney, defendant No.
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS r. M.A. UNNEERIKUTTY[PASA YAT,J. J767

f
2 agrees to demolish only the church building and the school building and A
retain building No.6/64A. There is no dispute that pursuant to the agreement
for sale entered into with the plaintiff, the prior documents of title of the
Company were handed over to the plaintiff.

Complaining that the defendants were attempting to sell the property to
another, the plaintiff filed a suit, O.S. 102of1985, in the Court of Subordinate B
Judge, Calicut for perpetual injunction restraining the defendant No. I Company
from alienating the said property to any other person. It may be noted that
the last day for performance of.the agreement was 30.9.1985. It was after the
' filing of the earlier suit for injunction, that the plaintiff filed the present suit
O.S. 188 of I985 on I6. I 1.1985 in the Court of Subordinate Judge, Kozhikode C
for specifically enforcing the agreement for sale. The prayer in the plaint was
to direct the defendants to specifically perform the contract sued on by
executing and duly registering a sale deed in respect the plaint schedule
property in favour of the plaintiff after receiving the balance sale consideration
due to them and for possession pursuant to such conveyance. Conveyance
was sought of the kanom, impr'lvement and possessory rights of the D
defendants. There is no specific reference to any building in the plaint
schedule.

In the plaint, after setting out details of the agreement between the
parties, payment and receipt of Rs. I0,000/- as advance, it was stated that on
21.5.I985 a formal agreement for sale was entered into showing the E
consideration as Rupees Eight Lakhs including the sum of Rs.3, I0,000/- already
paid towards the sale price. The plaint further stated that the total price of
Rupees Eight Lakhs was for 30 cents of property and all the improvements
thereon, including a Church building, a school building and another building.
It was stated that the church and the school were being shifted by the p
defendant No. I from those buildings to some other premises. The plaint
further proceeded to state that for reasons best known to them, the defendants
wanted modification of the deed by re-fixing the sale consideration to Rupees
Five Lakhs and giving liberty to the defendants to pull down and remove the
buildings existing in the property, so that the material could be used to build,
at another site proposed to be purchased by the defendant No. I Company. G
This agreement was also entered into on the same day and this was the latter
agreement and the second agreement. It was asserted that the total
consideration paid by the plaintiff to the first defendant as advance came to
Rs.3,50,000/-. If the defendants were to be permitted to remove the buildings
and take away the materials, the balance amount payable by the plaintiff to H
768 SUPREME COURT REPl)RTS [2006] SUPP. 3 S.C.R.

A the first defendant company would be Rs. l,50,0CO/-. If on the other hand, the
defendants did not want to remove the school building and the church.
building and would have them retained in the property, the plaintiff was ready
and willing to pay a further sum of Rs.4,50,000/- ti, make the total consideration
of Rupees Eight Lakhs for sale of the entire property including all the
B improvements. It was pleaded that while drafting the second agreement, it was
mistakenly stated in Clausi: 5 that the vendor shall demolish the existing
buildings in the schedule property, salvage the ;ame and deliver possession
of the land to the vendee. According to the pl tint, if this is understood to
imply that the land only had been agreed to be ::old by the defendants to the
plaintiff, that was not correct and to clarify th': position arising out of the
C unclear clause, defendant No.2 wrote a letter to :he plaintiff on the same day.
According to the plaint, that letter was intended to make it clear that building
No. 6/64A was included in the sale and that :he church building and the
school building were to be demolished and removed by the defendants.
According to the plaintiff since he found that c.efendant No.2 and the other
D representatives of defendant No.I, namely Santhchandra and P.V. George
who were witnesses to the agreement, were highly educ£ted respectable
persons, he did not think it necessary to have a formal agreement drawn up.
The plaintiff had no reason to believe that the defendants would go back on
their promise. The plaintiff came to know that the defendants have the intention
to retract from the agreement. It was in this con :ext that he filed the suit O.S.
E 102 of 1985 seeking to restrain the defendants from alienating the property.
The plaintiff was ready and willing to pay the bal:tnce amount due for execution
of the sale deed. The plaintiff was always reac y and willing to perform his
part of the contract. In case the defendants d) not agree to demolish and
remove the church building and the school building, the plaintiff was ready
and willing to pay the. further sum of Rupees three lakhs to make the total
F consideration of Rupees Eight Lakhs for ihe en tire property including all the
improvements. Thus, the plaintiff was entitled tc a specific performance of the •
agreement for sale. He valued the suit at Rupe :es Five Lakhs under Section
42 of the Kerala Court Fees and Suits Valuatio1 Act (in short the 'Valuation
Act') being the consideration for the sale.
G In its written statement the defendant No. I admitted the receipt and the
two agreements for sale. It also admitted ti .at defendant no.2 had been
constituted as the Power of Attorney of the company. It was, however,
pleaded that Power of Attorney was void as contrary and opposed to the
Memorandum and Artkles of Association of th~ Company. The conditions of
H Article l 9A(i) of the Articles and Memorandum of Association had not been
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS 1·. M.A. UNNEERIKUTTY[PASAYAT,J. J769

complied with. All actions pursuant to the resolution of the Company dated A
15.4.1985 deciding to sell the property were invalid in law and were otherwise
ineffective and void. The agreements referred to in the plaint were thus void
ab initio and were not enforceable under law. It transpires that the sale
agreements referred to in the plaint were drawn up at the same time and place
as parts of the same transaction with the plaintiff conspiring with Mr. P.V. B
George, who was at that time attached to the school of the defendan< No. I.
There was a conspiracy to commit fraud and to cheat the defendant No. I and
deprive the State Government of the legitimate stamp duty payable. The sale
agreements were set up and devised by the plaintiff with objects which were
opposed to public policy and were prohibited by statutes like Kerala Stamp
Act and Income Tax Act, 1961 and were void under Section 24 of the Indian C
Contract Act, 1872 (in short the 'Contract Act'). The three buildings in the
property were solid constructions. The demolition of the buildings was
inconceivable and defendant No.2 was never authorized to demolish or consent
to demolition of the buildings. The alleged agreements to take the property
after demolition of the buildings was a transaction devised by the plaintiff for
infringing law and hence could not be enforced. The two agreements referred D
to in the plaint were brought into existence on account of the undue influence,
• coercion and fraud played by the plaintiff and George. The truth as gathered
from defendant No.2 was that at the time of the two agreements. Rupees
Three lakhs was made over in cash by the plaintiff to George, who managed
to obtain three demand drafts, each for a sum of Rupees one Lakh, from the E
Malabar Gramin Bank, Kozhikode, where the school run by the first defendant
company had its accounts. The paying of Rupees Three Lakhs in cash
violated the provisions of the Income Tax Act, 1961. The clause about
demolition of the building was fraudulently introduced into the agreement
where the consideration for sale was fixed at Rupees Five Lakhs. The
agreements were vitiated by fraud and were void and unenforceable. The case F
of the plaintiff that the earlier agreement was modified by the subsequent
agreement was not supported by the recitals in the subsequent agreement.
Defendant No. l did not intend to sell the property and .did not take any steps
to sell the property and the filing ofO.S .. 102of1985 was wholly ill-conceived.
The plaintiff has come to court with unclean hands. Defendant No. I had no G
intention to retain the monies received. Defendant No. I was willing to refund
all the monies received in conformity with any condition that may be imposed
by the Court. The suit was speculative. The frame of the suit was not proper.

.. Defendant No.2, in addition to adopting the written statement filed on
· behalf of defendant No. I stated that he bonafide believed that the conditions H
770 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A prescribed in the Articles and Memorandum of Association of the defendant
No. I Company for sale of the property had bee11 duly complied with. He was
completely misled by P.V. George to enter intc two agreements on the same
day as part of the same transaction. He had alre idy requested defendant No. I
to refund to the plaintiff all the amounts receiv !d from the plaintiff. The suit
B was liable to be dismissed.

The High Court held that the view of the t :ial court that Exhibit A-5 was
executed to defraud paym1!nt of Stamp duty ai1d the Income Tax and it was
opposed to public policy in the background on.ection 23 of the Contract Act,
is not tenable. It was noted that the suit was m1e for specific performance of
C contract and there was full disclosure of both Exhibits A-4 and A-5 in the
plaint. It was noted that there was no case o' inadequacy of price, on the
facts, Section 20 of the Specific Relief Act, 1963 (in short 'Specific Relief Act')
was not applicable. The agreement was for sal1: of the property for a price of
Rs.8 lakh and the substantial portion of the amount has been paid as advance.
The evidence clearly established that the pli.intiff was already ready and
D willing to pay the balance. The sui< for specifi: performance of contract was
decreed. Direction was also given for p11yment of the balance court fee on the
plaint as well as in the appeal on the basis thilt the consideration for sale is ,.
Rs.8 lakh and not Rs.5 lakhs.

Learned counsel for the appellant questioned correctness of the
E judgment rendered by the Division Bench on lhe ground that the agreements
were pre-planned and executed simultaneousl; • as one integrated inseverable
transaction. Stamp papers were purchased on the same day. The defendant
No. 2 though an employee of the appellant N >.I - Institution was a party to
the illegal transaction. Obvious intention wa; to declare only the reduced
F amount of Rs.5 lakhs as the apparent sale price and to pay Rs.3 lakhs as
uncounted money. In the meantime to hav1: hold on each other another
agreement was prepared declaring the actua. price of Rs. 8 lakhs. It was
further urged that Section 23 read with Section 24 of the Contract Act rendered
the agreements void. The High Court should rnve noted that the agreements
were immoral or opposed to public policy. Tl1is is the essence of Section 23
G of the Contract Act. Similarly, Section 24 postilates that the agreement would
be void if the considerations and the object are unlawful in part. Closing
down a well-running school managed by dedicated missionaries and closing
a functional church would cause comparatively more hardships as against the
•
specific. performance of a tainte.d transaction. Same cannot be enforced in a
H suit for specific performance of contract.
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS 1•. M.A. UNNEERIKUTIY(PASA YAT, J.] 77 J

. ;.
In reply learned counsel submitted that the trial court proceeded for A
three reasons to dismiss the suit; first was that the plaintiff was not ready
and willing and, therefore, requirements of Section 16 of the Specific Relief
Act were not complied with. This was a case where greater hardship would
be caused to the defendants if the suit is decreed and in any event the
agreement was opposed to public policy. On the other hand the High Court B
had noted that there was full and frank disclosure and the payment of Rs.3
lakhs was accounted for in books of account and the payments were made
by demand drafts. There was no question of a~reement being opposed to
public policy in view of the aforesaid fact. There was really no evidence
' regarding the shifting of the building and, therefore, two agreements were
entered into. The draft deed was not required to be prepared by the plaintiff C
as was wrongly noted by the trial court. There was a resolution for sale of
the land and the defendant No.2 purchased the stamp papers of the proposed
agreements. As is evident from the materials on record, there was no dispute
that the plaintiff had the capacity to pay and in the written statement filed
in the suit the stand taken was not disputed. Therefore the trial court should
not have concluded any undue hardship on the same being executed. It was D
clearly stated in the plaint about the statement in the earlier written statement.
If there was any dispute amongst the members of the Association, the plaintiff
is not a party to the same and that cannot be a ground to deny the decree
for specific performance of the contract. Trial Court disbelieved the evidence
of DWI who was the defendant No. 2 and if that evidence is kept out of E
consideration, nothing further was brought on record by the defendants.

Principles relating to enforcement of a tainted transaction have been
dealt with by this Court in various cases.

In A.C. Arulappan v. Aha/ya Naik (Smt.), [2001] 6 SCC 600 it was noted F
as follows :

"In Parakunnan Vee till Joseph's Son Mathew v. Nedumbara
Kuruvila 's Son & Ors., [1987] Supp. SCC 340 this Court cautioned and
observed as under:
G
"Section 20 of the Specific Relief Act, 1963 preserves judicial discretion
to Courts as to decreeing specific performance. The Court should
meticulously consider all facts and circumstances of the case. The
Court is not bound to grant specific performance merely because it is
lawful to do so. The motive behind the litigation should also enter in
the judicial verdict. The Court should take care to see that it is not H
772 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.
~
A used as an instrument of oppression to have an unfair advantage to
the plaintiff'.

In Gobind Ram v. Gian Chand, (2000) 7 SCC 548, it was observed in
paragraph 7 of the judgment that grant of a decree for specific
performance of contract is not automatic and is one of the discretions
B of the court and the court has consider whether it would be fair, just
and equitable. The court is guided by the principles of justice, equity
and good conscience.

Granting of specific performance is an equitable relief, though the
same is now governed by the statutory provisions of the Specific
c Relief Act, 1963. These equitable principles are nicely incorporated in
Section 20 of the Act. While granting a decree for specific performance,
these salutary guidelines shall be in the forefront of the mind of the
court. The trial court which had the added advantage of recording the
evidence and seeing the demeanour of the witnesses considered the
relevant facts and reached a conclusion. The appellate court should
D
not have reversed that decision disregarding these facts and, in our
view, the appellate court seriously flawed in its decision. Therefore,
we hold that the respondent is not entitled to a decree of specific ,.
performance of the contract."

E Earlier in K. Narendra v. Riviera Apartments (P) Ltd., (1999) 5 SCC 77
it was noted as follows :

"In our opinion, there has been a default on the part of the respondents
in performing their obligations under the contract. The period lost
between 25.7.1972 (the date of the agreement) and the years 1979 and
F 1980 when the litigation commenced, cannot be termed a reasonable
period for which the appellant could have waited awaiting performance
by the respondents though there was not a defined time limit for
•
performance laid down by the agreement. The agreement contemplated
several sanctions and clearances which were certainly not within the
power of the parties and both the parties knew it well that they were
G the respondents who were being depended on for securing such
sanctions/clearances. Part of the land forming subject matter of the
agreement was an excess land within the meaning of ULCRA and
hence could not have been sold. Part of the land has been acquired
by the State and to that extent the agreement has been rendered
~
H incapable of performance. The feasibility of a multi-storeyed complex
C!:
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS 1•. M.A. UNNEERIK UTTY[PASA YAT, J.] 773

as is proposed and planned by the respondents appears to be an A
impracticality. If the respondents would not be able to construct and
deliver to the appellant some of the flats as contemplated by the
novated agreement how and in what manner the remaining part of
consideration shall be offered/paid by the respondents to the appellant
is a question that defies answer on the material available on record.
Added to all this is the factum of astronomical rise in the value of the B
land which none of the parties would have fore contemplated at the
time of entering into the agreement. We are not in the least holding
that the consideration agreed upon between the parties was inadequate
on the date of the agreement. We are only noticing the subsequent
event. Possession over a meagre part of the property was delivered C
by the appellant to the respondents, not simultaneously with the
agreement but subsequently at some point of time. To that extent, the
recital in the agreement and the averments made in the plaint filed by
the respondents are false. On a major part of the property, the appellant
has continued to remain in possession. As opposed to this, the
respondents have neither pleaded nor brought material on record to D
hold that they have acted in such a way as to render inequitable the
denial of specific performance and to hold that theirs would be a case
of greater hardship over the hardship of the appellant. Upon an
evaluation of the totality of the circumstances, we are of the opinion
that the performance of the contract would involve such hardship gn E
the appellant as he did not foresee while the non performance would
not involve such hardship on the respondents. The contract though
valid at the time when it was entered, is engrossed into such
circumstances that the performance thereof cannot be secured with
precision. The present one is a case where the discretionary jurisdiction
to decree the specific performance ought not to be exercised in favour F
of the respondents. During the· course of hearing the learned senior
counsel for the respondents time and again emphasized and appealed
to the court that respondents were builders of repute and in the event
of the specific performance being denied, they run a grave risk of
losing their reputation as their proposed building plan "Gimar" would G
not materialise and they will not be able to show their face to their
prospective flat buyers. This is hardly a consideration which can
weigh against the several circumstances which we have set out herein
above. If a multi-storeyed complex cannot come up on the suit property,
the respondents' plans are going to fail in any case.
H
774 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A In Manna/al Khetan and Ors. v. Kedar Nath Khetan and Ors., (1977]
2 sec 424 it was noted as follows:

"In Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur, (1965]
I SCR 1970 this Court referred to various tests for finding out when
a provision is mandatory or directory. The purpose for which the
B provision has been made, its rom reading the provision one way or
the other, the relation of the particular provision to other provisions
dealing with the same subject and the language of the provision are
all to be considered. Prohibition and negative words can rarely be
directory. It has been aptly stated that there it is one way to obey the f
command and that it is completely to refrain from doing the forbidden
c act. Therefore, native, prohibitory and exclusive words are indicative
of the legislative intent when the statute is mandatory (See Maxwell
on Interpretation ofStatutes, I Ith Ed., p. 362 seq.; Crawford Statutory
Construction, Interpretation of Laws, p. 523 and Seth Bikhraj Jaipuria
v. Union of India, AIR (1962) SC 113).
D
The High Court said that the provisions contained in Section I08 of
the Act are directory because non-compliance with Section 108 of the
Act is not declared an offence. The reason given by the High Court ,..
is that when the law does not prescribe the consequences or does not
lay down penalty for non-compliance with the provision contained in
E Section I 08 of the Act the provision is to be considered as directory.
The High Court failed to consider the provision contained in Section
629(A) of the Act. Section 629(A) of the Act prescribes the penalty
where no specific penalty is provided elsewhere in the Act. It is a
question of construction in each case whether the legislature intended
to prohibit the doing of the act altogether, or merely to make the
F
person who did it liable to pay the penalty.

Where a contract, express or implied, is expressly or by implication
forbidden by statute, no court will lend its assistance to give it effect.
(See Mellis v. Shirley L. B., ( 1885) 16 QBD 446 : 55 LJQB 143 : 2 TLR
360). A contract is void if prohibited by a statute, under a penalty,
G
even without express declaration that the contract is void, because
such a per:alty implies a prohibition. The penalty may be imposed with
intent merely to deter persons from entering into the contract or for
the purposes of revenue or so that the contract shall not be entered
into so as to be valid at law. A distinction is sometimes made between
H contracts entered into with the object of committing an illegal act and
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS 1·. M.A. UNNEERIK\JITY(PASAYAT,J.] 775

contracts expressly or impliedly prohibited by statute. The distinction A
is that in the former class one has only to look and see what acts the
statute prohibits; it does not matter whether or not it prohibits a
contract; if a contract is made to do a prohibited act, that contract will
be unenforceable. In the latter class, one has to consider not what act
the statute prohibits, but what contracts it prohibits. One is not
concerned at all with the intent of the parties, if the parties enter into B
a prohibited contract, that contract is unenforceable. (See St. John
Shipping Corporation v. Joseph Rank, ([1957] I QB 267)) (See also
Halsbury's Laws of England, Third Edition, Vol. 8, p. 141.)

It is well established that a contract which involves in its fulfillment C
the doing of an act prohibited by statute is void. The legal maxim A
pactis privatorum publico juri non derogatur means that private
agreements cannot alter the general law. Where a contract, express or
implied, is expressly or by implication forbidden by statute, no court
can lend its assistance to give it effect. What is done in contravention
of the provisions of an Act of the legislature cannot be made the D
subject of an action."

In a recent case in Aniglase Yohannan v. Ramlatha and Ors., [2005]
7SCC 534 it was noted as follows:

"In order to appreciate the rival submissions Section 16(c) needs E
to be quoted along with the Explanations. The same reads as follows:
"16. Personal bars to relief
(a)
(b) F
(c) who fails to aver and prove that he has performed or has always
been ready and willing to perform the essential terms of the
contract which are to be performed by him, other than terms of
the performance of which has been prevented or waived by the
defendant. G
Explanation-For the purpose of clause (c}-

(i) where a contract involves the payment of money, it is not essential
for the plaintiff to actually tender to the defendant or to deposit
in Court any money except when so directed by the Court;
H
776 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A (ii) the plaintiff must aver performance of, or readiness and
willingness to perform, the contract accordingly to its true
construction."

The basic principle behind Section 16(c) read with Explanation (ii) is that
any person seeking benefit of the specific performance of contract must
B manifest that his conduct has been blemishless throughout entitling him to
the specific relief. The provision imposes a personal bar. The Court is to grant
relief on the basis of the conduct of the person seeking relief. If the pleadings
manifest that the conduct of the plaintiff entitles him to get the relief on
perusal of the plaint he should not be denied the relief."

C Section 23 of the Contract Act lays down that the object of an agreement
becomes unlawful if it was of such a nature that, if permitted, it would defeat
the provisions of any law.

The term 'public policy has an entirely different and more extensive
D meaning from .the policy of the law. Winfield defined it as a principle of judicial
legislation or interpretation founded on the current needs of the community.
It does not remain static in any given community and varies from generation
to generation. Judges, as trusted interpreters of the law, have to interpret it. ,..
While doing so precedents will also guide them to a substantial extent.

E The following passage from Maxwell "Interpretation of Statutes", may
also be quoted to advantage here:-

"Everyone has a right to waive and to agree to waive the advantage
of a law or rule made solely for the benefit and protection of the
individual in his private capacity which may be dispensed with without
F infringing any public right or pubic policy. Where there is no express
prohibition against contracting out of it, it is necessary to consider
whether the Act is one which is intended to deal with private rights '
only or whether it is an Act which is intended as a matter of public
policy.. "

G The doctrine of public policy may be summarized thus: Public policy or
the policy of the law is an illusive concept: it has been described as
"untrustworthy guide", "variable quality", "uncertain one", "unruly house", ..
etc., the primary duty of a Court of a law is to enforce a promise which the
parties have made and to uphold the sanctity of contract which form the basis
H of society, but in certain cases, the Court may relieve them of their duty on
INDIA FINANCIAL ASSN., SEVENTH DAY ADVENTISTS 1-. M.A. UNNEERIKUTTY[PASAYAT,J.] 777

a rule founded on what is called the public policy, but the doctrine is extended A
not only to harmful cases but also to harmful tendencies. This doctrine of
public policy is only a branch of common law, and just like any other branch
of common law it is governed by precedents. The principles have been
crystallized under different heads and though it is permissible for Courts to
expound and apply them to different situations, it should only be invoked in B
clear and incontestable cases of harm to the public.

Section 24 provides that if any part of a single consideration for one
or more objects, or any one or any part of any one of several considerations
for a single object, is unlawful, the agreement is void.

In view of the findings recorded by the High Court more particularly c
mention of all the relevant details relating to Exhibits A-4 and A-5 and the
evidence clearly establishing that plaintiff had capacity to pay and was ready
and willing to pay the balance amount and the absence of any material to
show that the defendant No.2 was not acting in unauthorized manner in view
of the clear resolution of the appellant No. I, the judgment of the High Court D
cannot be faulted, The appeal is, therefore, dismissed without any order as
to costs .
•
KK.T. Appeal dismissed.