Subordinate Legislation/Statutory Rules Also A ‘Law’ Under Section 23 Contract Act

Case: G.T. Girish Vs Y. Subba Raju (D)

Coram: Justices KM Joseph and PS Narasimha

Case No.: CA 380 OF 2022

Court Observation: “With respect, the principle laid down, does not commend itself to us. We do agree that the illegality cannot be a matter of conjecture nor the purpose divined by the Court from parliamentary debates.”

“What is contemplated under Section 23 of the Indian Contract Act is law, in all its forms, being immunised from encroachment and infringement by a contract, being enforced. Not only would a Statutory Rule be law within the meaning of Article 13 of the Constitution of India but it would also be law under Section 23 of the Indian Contract Act”

“In regard to the Commentary by the very same Author, under the Second Head of “illegal object or consideration” in Section 23 of the Contract Act, viz., if the consideration or object is of such a nature that if permitted, it would defeat the provisions of any law, it is that, this Court took the view that law for the purpose of Section 23 would be, law made by the Legislature. Quite apart from the fact that what is involved in the said case was only a letter, the Judgment of this Court in Gherulal Parakh (supra) and the Commentary from the very same Author, was not noticed by this Court. Therefore, it becomes all the more reason as to why we need not refer the matter to a larger Bench. We may also notice that ‘law’, for the purposes of Clauses (1) and (2) cannot be different. It is very clear that Regulations or Orders made under the Authority derived from the Legislature referred to by this Court, are species of subordinate 95 legislation. Statutory Rules would also, therefore, clearly be law”

“Having regard to the entirety of the evidence and the conduct of the parties, noticing even the admitted stand of the second defendant that the plaint schedule property has a value of Rs.2.5 crores and the plaintiff has paid, in all, a sum of Rs.50,000/, which constituted the consideration for the agreement to sell several years ago, while we dismiss the Suit for Specific Performance, we should direct the appellants to pay a sum of Rs.20,00,000/- in place of the Decree of the Trial Court.”

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