Govinda Menon, J.@mdashExhibit A-1 dated 27-7-1947 is a charcoal licence agreement between defendant 1 and plaintiff 1 on behalf of the
plaintiffs in O. S. No. 8
of 1949 on the file of the Sub Court, Dindigul, by which it was agreed that plaintiff 1 shall be at liberty to cut at his own cost for a period of two
years from the date of the document the trees in the forest described in the schedule to the document and belonging to defendant 1 except a few
varieties of wood specified therein for manufacturing charcoal and for the purpose of removing the charcoal from the place of manufacture
defendant 1 was to issue a pass from time to time. .
It was also stipulated that plaintiff 1 was to pay to defendant 1 at the rate of Re. 0-7-0 per bag of charcoal removed by him from the place of
manufacture. A sum of Rs. 3000 was paid to defendant 1 as advance.
It was agreed that for every bag of charcoal Re. 0-3-6 should be deducted out of the sum of Rs. 3000 paid by way of advance and only Re. 0-3-
6 per bag would be paid to defendant 1. It was also provided that plaintiff 1 before the 5th of every month shall make an account of the charcoal
bags taken as per the agreement and shall pay at the rate of Re. 0-3-6 per bag in cash and that the balance of the amount should be adjusted out
of the advance amount.
If plaintiff 1 has not been able to adjust the entire advance amount by manufacturing charcoal and its removal from the place of manufacture within
two years from the date of the agreement any balance of the advance amount remaining unadjusted and outstanding shall belong to defendant 1.
According to this agreement plaintiff 1 cut the trees, ""manufactured charcoal and removed a number or bags from the place of manufacture.
''Exhibit A-3 dated 26-9-1947 shows that 1087 1/2 bags were manufactured and removed and the price paid at the rate of Re. 0-7-0 per bag
and a sum of Rs. 475-12-6 has been paid over to defendant 1. Similarly Ex. A-4 shows that from 27-9-1947 to 25-10-1947, 431 bags of
charcoal were removed and at the rate of Re. 0-7-0 per bag, a sum of Rs. 188-9-0 had been paid.
While matters were at this stage the Government issued a notice on 8-11-1947 to the Manager of the firm of the plaintiffs under the Madras Act
18 of 1946 that trees were being cut from the forest and charcoal manufactured out of the same without the permission of the Collector and that if
the same was continued any further prosecution will be launched under that Act. An application was made, to the Collector for permission to fell
the trees and convert them into charcoal in accordance with the agreement but under Ex. A-7 the permission sought for was refused.
It is alleged that defendant 1 did not take any steps to obtain permission from the Collector for the felling of trees and converting them into
charcoal, and, therefore, the suit out of which the present second appeal arises was filed for refund of the balance out of the sum of Rs. 3000 paid
by way of advance after deducting the amount due at the rate of Re. 0-3-6 per bag on the number of charcoal bags removed and for damages
incurred by the plaintiffs by way of loss and interest on the balance of the advance amount.
Both the lower Courts have dismissed the suit mainly on the ground that the contract was illegal u/s 23, Indian Contrast Act and hence the balance
of the advance amount cannot be refunded. -(2) It is urged in this second appeal that the contract in question is not a forbidden one as
contemplated u/s 23, Contract Act because the consideration or the object of the agreement was not forbidden by law; nor is it of such a nature
that if permitted it would defeat the provisions of any law and the contract certainly does not come within any other prohibitions contained in
Section 23 of the Act. Such being the case the provisions of Section 65, Contract Act have to be attracted and that the person who has received
the advantage under the agreement or contract is hound to restore it or to make compensation for it to the person from whom he has received it.
The contract was discovered to be void or he-came void not at the very inception but only when the Collector prohibited the further cutting of
trees. Viewed in this light there is no obstacle to the application of Section 65, Contract Act.
Section 3, Sub-section (2) of the Madras Act 18 of 1946 is in the following terms:
No owner of any forest or any person claiming under him whether by virtue of a contract, licence or any other transaction entered into before or
after the commencement of this Act or any other person shall without the previous permission of the District Collector cut trees or do any act likely
to denude the forest or diminish its utility as a forest.
What is prohibited by this sub-section is the cutting of trees or doing acts likely to denude the forest or diminish its utility as a forest, without the
permission of the Collector and such being the case it is argued that after the contract was entered into it was possible for the parties to get the
permission from the Collector to cut trees in which case there was nothing to make the contract impossible of performance. There should be a
contract between the parties for the cutting of trees and it is only thereafter that the Collector can he approached for the purpose of obtaining
permission for the felling of trees.
The fact that subsequently the Collector either granted permission or refused it would not make the anterior contract in any way illegal. It is also
argued that there is nothing prohibiting in entering into a contract if the parties expect that the Collector would grant permission. It is therefore a
case where the contract becomes void after it was entered into or it was found to be void sometime thereafter in which case Section 65, Contract
Act would be applicable.
Reliance is also placed on the illus. (e) of Section 58, Contract Act where it is stated that if A contracts to act at a theatre for six months in
consideration of a sum paid in advance by B and on several occasions A is too ill to act then the contract to act on those occasions becomes void.
Mr. Gopalaswami Aiyangar for the appellant further urged that the contract is an executory one and therefore with regard to such portions of the
contract as have not been performed it becomes void in which case Section 65, Contract Act is applicable. A number of cases has been cited in
support of this contention.
In the decisions in -- P.R. Srinivasa Aiyar Vs. A. Sesha Aiyar and Another, and -- ''Gulab Chand v. tulbai'', 33 Bom 411 (B) the contracts were
marriage brokerage contracts which were ab initio void. 1 do not think that the principles laid down in those cases can have application to the facts
of the present case. The next case on which reliance was placed is --''Petheperumal Chetti v. Muniandy Servai'', 35 Cal 551 (C), where the
parties entered into a fraudulent document and it was held that the purpose of the fraud not having been effected there was nothing to prevent the
plaintiff from repudiating the transaction as being benami and recovering possession of the property.
The case in -- ''Madura Municipality v. Alaghi-sami Naidu AIR 1939 Mad 957 (D), related to a contract entered into by the Municipal Council on
behalf of the Municipality which did not hind the Municipality u/s 69(2), District Municipalities Act because it was entered into m contravention of
the provisions of Section 68(2) of the Act and hence there was no valid contract between the parties. In such a case the High Court held that
compensation could be recovered u/s 65, Indian Contract Act.
The case in -- ''Harnath Kuwar v. Indar Bahadur Singh'', AIR 1922 PC 403 (E) related to a contract which was ''ab initio'' void as the vendor in
that case had only an expectancy and therefore u/s 65, Contract Act the purchase money was recoverable with interest from the date of the suit.
My attention has also been invited to the judgment of the Calcutta High Court in -- Ram Nagina Singh Vs. Governor-General in Council, , where
the principles underlying Section 65, Indian Contract Act have been discussed. The learned Judge held that Section 65, Indian Contract Act
applies only to a case where benefit or advantage is derived under an agreement before it is discovered to be void. If the benefit is received after
the agreement is discovered to be void then it is clear that advantage cannot be said to have been received under the agreement.
It was further held that though an agreement may be void from its inception there may yet be circumstances in which it may be held that the
discovery took place long after the date of the agreement and therefore Section 65 embodying the principle of restitution applies to the case where
an agreement entered into between the parties is void by reason of non-compliance with the express statutory provision. Relief u/s 65 has not been
forbidden by any law and it cannot be legitimately argued that in trying to secure such reliefs there is any attempt to do indirectly what has been
forbidden by law to do directly, ""and that the principle of restitution enunciated in Section 65 should bo liberally construed in order to do equity
and justice between the parties.
The decision in -- Hadibandhu Behera Vs. Gopal Sahu and Others, and -- Jharia Coal-field Electric Supply Co. Ltd. Vs. Kaluram Agarwala, ,
were also brought to my notice but I do not think that these decisions do apply to the present case, because the principle of compensation on
account of frustration of con-tract does not apply to a case where the contract has been part performed. The most authoritative decision on the
subject is the one contained in --''Fibrosa Spolka Akcyjna v. Fairbaim Lawson Combe Barbour Ltd.'', 1943 AC 32 (I).
There are observations of the various law Lords at pages 46, 49, 51, 52 and 56. See also the decisions in -- ''Sankaran v. District Board, Malabar
AIR 1934 Mad 85 (I); -- President of the District Board Vs. G. Santhappa Naik and Another, and -- The Secretary of State for India in Council
Vs. Tatyasaheb Yeshwantrao Holkar, . In AIR 1934 Mad 85 (J), what happened was the District Board sued the licensees of the toll-gate for
balance of the rentals and it was contended on behalf of the licensees that because of heavy floods bridges had broken down resulting in the
suspension ot traffic and therefore the contract became incapable of performance.
The learned Judges held that the occurrence which renders a contract incapable of execution must be of a kind not within the contemplation of the
Parties when the contract is entered into. The learned Judges further held that the contract having been part performed Section 65, Contract Act
would not apply. In this view the principle applicable to the present case is the same.
Mr. Gopalaswami Aiyangar relics upon certain observations of Cheshire on Law of Contracts, at pp. 376 and 377, where the decision in 1943
AC 32 (I) has been discussed.
I do not think that that discussion is of much, help to the appellant''s case.
3. It seems to me that since the contract has been performed in part the principle of frustration does not come in and Section 65, Contract Act
cannot be invoked. The second appeal fails and is dismissed but in the circumstances of the case each party will bear his costs throughout. No
leave.
