' ZAFFAR HUSSAIN MIRZA, J.-The dispute in this case has arisen out of an agreement dated 8-4-1959 between Dr. Jalil Asghar, the appellant herein and Mubarak Ali Ahmed, on behalf of Messrs Atlas Industries and Trading Corporation, respondent No,
1. This agreement as its recitals show related to an order obtained by the said respondent from the Food Ministry, Government of Ceylon, for the export to Colombo of 10,000 (ten thousand) tons of Begmi Rice, which the said party had been allowed to export by the Ministry of Food, Government of Pakistan, Karachi, from whom the said quantity of rice was to be purchased by the said party. The material stipulations of this agreement, upon which the decision of this appeal turns, are as follows :-
(1) That Party No, 2 (the appellant herein) having rendered material assistance in obtaining the abovesaid contract, Party No, 1 (respondent No, 1) has agreed to pay Party No, 2 out of the profits to be derived from the execution of the said contract by Party No, 1 and the said remuneration would be a. Sum of Rs, 1,75,000 subject to the full execution of the contract, that is complete shipment of 10,000 tons of Begmi Rice.
(2) That the said sum of Rs, 1,75,000 shall be paid to Party No 2 in installments payable in proportion to the---actual quantity of rice exported to Colombo as soon as export bonus vouchers in respect of each exported consignment are received.
2. According to the case of the appellant, the said respondent received in all five Bonus Vouchers for the entire quantity of rice, exported in various consignments. In respect of the Bonus Voucher No,.1, the appellant admittedly received a sum of Rs, 38,150 and in respect of Bonus Voucher No, 2 he had received only Rs, 20,000 leaving a balance of Rs, 39,500 outstanding. In respect of the remaining Bonus Vouchers no payment was made by the first respondent, with the result that the total claim of the appellant was for Rs, 1,16,850 from the respondent. For the recovery of this amount the appellant brought Suit No, 214 of 1959 against the respondents on the original side of the Karachi Bench of the erstwhile High Court of West Pakistan.
3. The respondents resisted the suit and in their defence they took the plea of total denial of the execution of the contract, dated .8-4-1959 asserting that the appellant first came to be known to them in April, 1959 and subsequently by means of fraud and misrepresentation obtained the signature of Mubarik Ali Ahmed on the document containing the said agreement, on the assurance that the same was required for the satisfaction of his friends on whom he depends for assisting him in securing a contract from the Portuguese Government for the export of rice to the Portuguese possession of Goa, in which venture he offered a share to the respondents as his partners. The respondents, however, admitted having made payment of various amounts totalling Rs, 58,150 but their plea was that these payments were made, on the representation of the appellant, in connection with the order for export of rice which he was endeavouring to obtain from the portuguese Government, to be adjusted subsequently in the accounts of the proposed partnership concern. The respondents also vehemently denied that the appellant had rendered any material assistance in obtaining the contract by them from the Government of Ceylon., On the same pleas the respondents also filed Suit No, 42 of 1960 against the appellant for recovery of the aforesaid amount of Rs, 58,150.
4. The two suits were tried together by the consent of parties. The learned single Judge, who tried the suits, held that parties had executed the contract dated 8-4-1959 with free consent and full knowledge, that the payments to Dr. Jalil Asghar were made in pursuance of the said contract and that the respondents had failed in proving their pleas in defence. As to the question whether material assistance was rendered by the appellants to the respondents, the conclusion reached by the learned Single Judge was that on the admissions made in the body of the contract and other documentary evidence, consisting of the correspondence exchanged by the parties, it was established that the appellant had given material assistance to the respondents as contemplated by the agreement of parties. Having thus found all the issues in favour of the appellant, the learned Single Judge decreed the suit filed by him and dismissed the one filed by the respondents.
5. While disposing of the Letters Patent Appeal filed by the respondents against the decree passed in the suit filed against them by the appellant, the Division Bench of the High Court undertook an exhaustive review, if I may say so with respect, of the evidence, both oral as well as documentary on the record, and found the latter .a safer basis, in order to come to a decision on the issue of fact raised in the appeal. On this basis the version of Mubarak Ali Ahmed was found "absolutely false".
The learned Judges of the Division. Bench, therefore, concurred with the finding recorded by the learned Judge on the original side, as stated before.
6. However, on examining the contention of the respondents, that the appellant rendered no material assistance, except the use of his friendly connections with the then Foreign Secretary, Government of Pakistan, the conclusions reached by the Court are as under :-- "It would be seen from the above that what Dr. S. Jalil Asghar himself asserted in respect of the material assistance that he gave to Mubarik Ali Ahmed or his firm was that he met the officers of the Ministry of Food Government of Pakistan, the Foreign Secretary to the Government of Pakistan, Mr. S. A. Baig who was his friend, and the High Commissioner of Ceylon in Pakistan. The contention of Mr. Z. H. Lari, the learned counsel for Mubarak Ali Ahmed was that the fact is that except for using his friendly connections with Mr. S. A. Baig, the then Foreign Secretary, to help Mr. Mubarak Ali Ahmed in respect of the procurement of the contract in question Dr. S. Jalil Asghar did nothing else.
This contention has great force. Except for naming the Foreign Secretary Mr. S. A. Baig, Dr. Jalil Asghar did not mention the name of any other official of the Government of Pakistan whom he contacted. So far as the Ceylonese High Commissioner in Pakistan is concerned, it is clear on the record that he did nothing to bring about the contract in suit ; it appears on the contrary that he was not favourably inclined to the import of rice into Ceylon except on Government to Government basis. It would be noticed that the contract was executed after the Ceylonese Food Commissioner came to Pakistan. There could be no doubt that he came to Pakistan because of the efforts made by Mubarak Ali Ahmed in going over to Ceylon and persuading the Ceylonese Government there that the import of rice in that country through private channels would be more beneficial than the import on Government to Government basis. The other officials of consequence that could be concerned in bringing about a change of policy were the Secretaries of the concerned Ministries of the Government of Pakistan and the other officials whom the Ceylonese Food Commissioner met in Pakistan. During the visit of the Ceylonese High Commissioner to Pakistan Dr. Jalil Asghar did nothing except to meet him over a drink in the Faletti's Hotel at Lahore. This is in fact admitted by him. Surely it was Mubarak Ali Ahmed who went alongwith the Ceylonese Food Commissioner from place to place and made all efforts in persuading both the Government of Pakistan and the Ceylonese Government to the export of rice from Pakistan through private channels. It is further clear on the record that the Foreign Secretary of the Government of Pakistan had a great say in the matter. In the words of Dr. Jalil Asghar "the Government of Pakistan were of the view that as they were dealing with a foreign Government, the Ministry of Foreign Affairs of the Government of Pakistan will have the final say in the matter." He admitted that the Ministry of Foreign Affairs had advised the Food Ministry that the Ceylonese Government wanted to buy rice through private parties and the appellants were the parties. On his own showing Mr. S. A. Baig the then Foreign Secretary was on friendly terms with him. The words of Iftikhar Ahmed son of Mubarak Ali Ahmed in his letter to Dr. Jalil Asghar may again be usefully reproduced : "The fact is that my father wished Sikandar Baig to be consulted, after I can go down and talk to Ceylonese High Commissioner."
' We are, therefore, clearly of the view that the letters and telegrams that Mubarak Ali Ahmed then wrote to Dr. Jalil Asghar expressing gratitude were for the use of the friendly contacts that Dr. Jalil Asghar had with the then Foreign Secretary and nothing else, because there is nothing on the record to establish satisfactorily that Dr. Jalil Asghar had done anything beyond it."
7. On finding from the evidence on record that "the material assistance which was the consideration of the contract in suit was nothing else but the use that Dr. Jalil Asghar had made of his friendly connections with the then Foreign Secretary, Mr. S. A. Baig," the Court held the agreement being opposed to public policy and hence void. The objection of the appellant that no such plea having been taken by the respondents and as such, the same could not be taken for the first time in appeal, was rejected on the ground that such a new plea could be raised even at the appellate stage "if it can be founded on the facts already proved on the record." One of the learned members of the Division Bench added :- "Apart from this general proposition, I find that on the specific question of the illegality of the contract on account of its being opposed to public policy the weight of authority appears to be in favour of permitting such a question to be raised for the first time even at the appellate stage, the reason being that no Court should enforce an illegal contract, if the illegality can be deduced from the evidence brought on the record."
' In view of the aforesaid conclusions of fact and law reached by them, the learned Judges of the Letters Patent Bench reversed the decree passed in favour of Dr. Jalil Asghar and allowed the appeal filed by the respondent herein in Suit No, 214 of 1959.
8. Being aggrieved by the aforesaid decision of the Letters Patent Bench of the High Court, Dr. Jalil Asghar, the appellant herein, sought leave to appeal from this Court which was granted in order to examine the contention "that the Letters Patent Bench has travelled outside the pleadings of the respondent in suo motu raising the plea of public policy and that the finding that the contract was hit by the provisions of section 23 of the Contract Act Was neither correct in law nor borne out by the facts established on the record".
9. Mr. Fakhruddin G. Ebrahim, Advocate in support of the appeal, contended that the Court had erred in holding that the agreement in suit offended against public policy and was, therefore, not enforceable at law. He supported this contention on the proposition .That if the contract was ex facie legal outside circumstances showing illegality of contract, can only . Be looked at if pleaded and not otherwise. In the circumstances of this case, therefore, the main point urged on behalf of the appellant is the question whether the Court was right in suo motu striking down the contract as illegal. Mr. Khalid Anwar, learned counsel appearing on behalf of the respondents, on the other hand submitted that since both the Courts, namely, the learned Single Judge in Chambers as well as the Letters Patent Bench had found the defendant's evidence in support of his defence as unreliable, the case must be decided on the plaintiff's own evidence. As strenuously contended that a closer examination of the plaintiff's statement and the documentary evidence submitted by him would itself clearly and unambiguously support the finding reached by the learned Judges of the Division Bench that the sole object intended to be achieved by means of the contract between the parties was to use and exploit the friendly connections of the appellant with the then Foreign Secretary, Government of Pakistan, Mr. S. A. Baig. In this behalf, learned counsel submitted that admittedly Government of Pakistan wanted that the deal with regard to the export of rice to Colombo, should be on Government to Government basis. He submitted that the Government of Ceylon also wanted the deal on that basis. However, in pursuance of the agreement between the parties, the appellant used his good offices and obtained the decision of the Government that the deal be carried out through the private sector. The rationale suggested was that the goods will fetch the same price as would be paid to the Government and, therefore, there will be no loss to it.
According to learned counsel, this was the fraud on the public revenue planned by the parties as the ultimate object of the agreement, so that the respondents would be allowed to export the rice instead of the Government. Further, on the intervention of the Foreign Ministry, the price was also reduced. On the side of the Ceylonese Government, the lure extended by the parties was that the Bonus Vouchers to the extent of 50 per cent of the price to be paid by that Government for the purchase of rice, would be used for import of goods from Ceylon into Pakistan. The learned counsel referred to the statement of the appellant in his evidence that Bonus Vouchers of the value of 86,000 were given to the defendant, which would have otherwise gone to the public exchequer and, therefore, the deal clearly resulted in loss to the Government.
10. With the assistance of the learned counsel, we have gone through the evidence on record and have been taken through a number of documents produced by the plaintiff. The plaintiff's evidence consisted of his oral statement and a large number of documents consisting primarily of the communications 'received by him from Mubarak Ali Ahmed of the respondent's firm and some letters written by him in reply.
11. According to the agreement between the parties dated 8-4-1959, the material terms whereof have been reproduced hereinabove the appellant was to be paid the sums mentioned therein as remuneration for "material assistance in obtaining the abovesaid contract". The agreement clearly spells out that such material assistance had already been rendered by the appellant on the date of the agreement and all that remained to be done was the payment of the amount of remuneration by the respondent in the sum of Rs, 1,75,000 subject, of course, to the full execution of the contract. Learned counsel for the appellant has relied on 16 documents on the record in chronological order bearing Exhs. Nos, 18, 9, 17, 19, 20, 10, 5, 11, 21, 6, 32, 22, 25, 12, 7 and 14 in order to show that the appellant has been admittedly associated by the respondents from 7-2-1959 to 20- 4-1959 at various stages of the developments culminating in the successful award of the contract for the supply of rice to the respondent firm to Ceylon. The learned Single Judge, while examining the plea in defence set 'up by the respondents, on a thorough examination of all this evidence summed up his conclusion in the following words : "The direct trend of the above documents combined with the' contract, in which material assistance of the plaintiff has been finally acknowledged, can neither be explained away by such incredible versions nor by the reiteration of surrounding facts. To my mind there is more than sufficient evidence in the admissions of the defendants that the plaintiff had done his job to their full satisfaction."
' The learned Judges of the Letters Patent Bench also did not hold that the appellant had done nothing in the nature of material assistance contemplated in the contract between the parties.
However, as already stated, in their_ view, the material assistance rendered by the appellant consisted only of the use of his friendly connections with Mr. S. A. Baig in the procurement of the contract in question. The larger issue of tact whether the appellant rendered material assistance in the procurement of the deal for the supply of rice, therefore, stands concluded by the concurrent finding on the original side as well as in the Letters Patent Appeal.
12. The questions that require consideration, however, are firstly, whether the finding of the Letters Patent Bench is borne out by the facts established on the record that the contract was for an illegal object, namely, "inducing a public officer to act with partiality or for corrupt motives or to bias him in the discharge of his official duty." The second important question that requires to be determined is whether in the circumstances of this case, the Court was justified in raising the question of illegality of the contract as a ground for its unenforceability, suo motu without there being such a plea in the pleadings of the respondents. In order to resolve these questions, it will be useful first to refer to the principles of law governing this subject.
13. Section 23 of the Contract Act, 1872, inter alia, provides that the consideration or object of an agreement is lawful, unless the Court regards it as immoral or opposed to public policy. The agreement of which the object or consideration is unlawful has been declared by this provision of law to be void. The Contract Act is very largely based on the principles of English Law and the Courts in the sub-continent have generally followed the decisions of the English Courts in interpreting its provisions and applying them to the questions raised before them. Anson in his book "Principles of the English Law of Contract" (22nd Edition 1964), while dealing with the effect of illegality or invalidity of a contract has pointed out the fundamental 'principles upon which the Courts will act as laid down long ago by Lord Mansfield "The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed ; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this ; ex dolo malo non oritur actio. No Court will lend its aid to .a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the Court says he has no right to be assisted. It is upon that ground the Court goes ; not for the sake. Of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it ; for where both are equally in fault, potior est conditio defendentis."
No suit may be brought to enforce an illegal contract, nor will the " Courts recognise any cause of action founded upon it."
' Chitty on Contracts (22nd Edition) has emphasized that the presumption of law is in favour of the legality of the contract ; and, therefore, if it be reasonably susceptible of two meanings or two modes of performance, one which will support it and give it operation ; and it lies upon the party seeking to set aside a contract for illegality to prove it. But if the contract on the face of it shows an illegal intention, the onus lies upon the party supporting the contract to show the legality of the intention. As to the pleading of the illegality he observed. : "Where a contract is ex facie illegal, the Court will not enforce it, whether the illegality is pleaded or not ; secondly, where the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded ; thirdly, where unpleaded facts, which, taken by themselves, show an illegal object, have been put in evidence (because, perhaps, no objection was raised or because they were adduced for some other purpose), the Court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it ; fourthly, where the Court is satisfied that all the relevant facts are before it and it can clearly see from them that the contract had an illegal object, it may not enforce the contract, whether the facts were pleaded or not."
' Similarly, Cheshire and Fifoot in their "Law of Contract" (Tenth. Edition) have laid down the following rules of evidence that govern the proof of illegality, whether the contract is illegal by statute or at common law : "Firstly, where the contract is ex facie illegal, the Court takes judicial notice of the fact and refuses to enforce the contract, even though its illegality has not been pleaded by the defendant.
' Secondly, where the contract is ex facie lawful, evidence of external circumstances showing that it is in fact illegal will not be admitted, unless those circumstances have been pleaded.
' Thirdly, when the contract is ex facie lawful, but facts come to light in the course of the trial tending to show that it has an illegal purpose, the Court takes judicial notice of the illegality notwithstanding that these facts have not been pleaded. But it must be clear that all the relevant circumstances are before the Court."
' Both sides at the bar have cited a large number of cases on the principles with reference to the effect of illegality of a contract. However, it is not necessary to discuss the judgments cited by the learned counsel in detail as the above quotations from the authoritative commentators on the Law of Contract have summarised these principles which have been relied upon in most of the cases cited. There can, therefore, be no dispute with regard to the correct position of law on the subject in the foregoing quotations. G Reference may, however, be made to some important decisions. In North Western Salt Company Limited v. Electrolytic Alkali Company Limited (1) it was laid down that "where an action is brought on contract which is ex facie illegal, the Court will decline to enforce the contract, irrespective!, of whether illegality is pleaded or not ; but, where the question or illegality depends upon surrounding circumstances, as a general rule, the Court will not entertain the question unless it is raised by the pleadings." In Edler v. Auerbach (2), the Court found on the evidence that came on the record during the trial without objection by the affected party that the
(1) 1914 A C 461 (2) (1949) 2 A E R 692 contract was illegal. The objection that such evidence on a plea not raised in the pleadings could not be made the basis of the decision, the learned Judges held that public policy requires that the Court should not ignore an illegality brought to its attention and refused to allow the party to enforce the agreement. In this case the evidence referred to had fully brought out the circumstances showing illegality. Reference in this case was made to the leading case of North- Western Salt Company Limited, already referred to above.
14. I shall now proceed to examine the contract in suit and tie, evidence on record in the light of the well-settled principles of law, as' discussed above, on the two questions requiring to be determined. Now on a plain reading of the textual contents of the contract in question, there appears no indication of any illegal object to be achieved by the parties. To my mind the contract appears to be perfectly innocent and innocuous. The essential and substantial stipulation in the contract was by the respondent to pay to the appellant the agreed sum of money, for the j latter "having rendered material assistance in obtaining the above said contract," and this amount was promised to be paid "out of the profits to be derived from the execution of the said contract." The contract, therefore, cannot be said to be ex facie illegal, so that the Court could take judicial notice of such illegality and refuse to enforce it, even in the absence of a plea to that effect. It was also not contended by the learned counsel for the respondent that the contract is on the face of it illegal.
His submission, as reproduced earlier, was that the object underlying the agreement of the parties was to obtain a change of policy on the part of the Government, by abusing the influence of Dr. Jalil Asghar, so that instead of a deal on Government to Government basis, the transaction be given in private hands, which resulted in a loss to the Government in the shape of bonus vouchers.
There is nothing on the record that the export of rice was entirely taken out from the private sector.
It is in the evidence of Dr. Jalil Asghar that the Government of Pakistan had already announced that bonus vouchers were to be issued to those who earned foreign exchange by exporting certain commodities from Pakistan and that these commodities include rice. Reference in this behalf was made by him to the Notification in the Gazette of Pakistan dated 16-1-1959. The fact that the appellant directed his efforts at inducing the relevant authorities in the Government by persuasion to change their decision, ipso facto is not sufficient to lead to an inference that the appellant was K instrumental to the change of the decision by resort to dubious methods which vitiated the entire transaction. The learned counsel for the respondent has referred to certain passages from the evidence of the appellant in support of his contention that the object behind the agreement between the parties was to unfairly exploit his connections with the then Foreign Secretary.
Reference was made to the appellant's efforts to meet officers of the Food Ministry of the Government of Pakistan and the High Commissioner for Ceylon. Emphasis was laid on the meeting of the appellant with the Foreign Secretary of the. Government of Pakistan for the purposes of including him to the parties' proposal for export of rice through private sources. In this connection appellant elucidated what he had stated to the Foreign Secretary, namely, that the private parties would accept the botheration of keeping themselves informed of the arrivals and departures of ships. Further, the appellant guaranteed that they would not sell the goods at a higher price than that at which they would purchase it from the Government.
15. Reference was also made to the statement of the appellant admitting, that he had seen Mr. Baig and that the latter had informed him that he had consulted the Ceylonese High Commissioner and advised the Ministry of Food of the Pakistan Government that the export should be made not as between Government to Government but in the private sector. On the basis of the aforesaid statements of the appellant, the learned counsel for the respondents contended that it is clear that the object of the contract in suit was to use the connections of the appellant with the then Foreign Secretary to procure the contract after obtaining the modification of the Government policy to itself export rice to the purchasers. On behalf of the appellant, however, it was forcefully argued that the only suggestion made to the appellant in his cross-examination was that he did not see any other officer of the Government and that no suggestion was made that the appellant used his influence with the Foreign Secretary.
16. The learned Judges of the Letters Patent Bench, as would appear from the cited portion of their judgment, rejected the assertion of the appellant that besides the Foreign Secretary, he had also met officers of the Ministry of Food Government of Pakistan, on the ground that the names of the other officers mentioned by the appellant were not disclosed by him. However, they were of the view that the other officials of consequence that could be concerned for bringing about a change of policy were the Secretaries of the concerned Ministries of the Government of Pakistan but there was nothing on the record to show that the appellant met officers of this level. As against that; it was stated, the Foreign Secretary had a great say in the matter and since the appellant was admittedly on friendly terms with him, the learned Judges inferred that the crucial decision, which seemed to them to be the object underlying the contract in suit, was obtained through his good offices.
17. But the important question is whether the Letters Patent Bench was justified to give an affirmative finding on the basis of the circumstances enumerated above that the assistance rendered by the appellant in terms of the contract was tainted with dishonest intentions of obtaining a decision against public interest. In my opinion, there is no such basis for a reasonable inference of that nature to be drawn from the mere fact that the appellant had friendly connections with Mr. Baig the then Foreign Secretary. It would not be right for the Court to hold affirmatively that there was here dishonesty which would affect the contract, whatever it was, with illegality. I would be inclined to agree that the deal may be highly suspicious but to hold that a public officer of the rank of the Foreign Secretary would divert the course of official policy on the basis of a me friendship, without more in the nature of corrupt motives having been brought on record, would be tantamount to equating suspicion with proof. With all respect for the learned Judges, I am unable to agree that there I any evidence on record that the crucial decision was motivated or founded on corrupt or shady considerations. This is particularly so in view of the general presumption of law that all official acts are to be considered to have been done regularly.
It is pertinent to refer to the case of Ferguson v. Dawson (1). The question before the Court in this case was somewhat
(1) (1976) 3 A E R 817 ' similar, whether in absence of either party raising the question as to possible illegality in the transaction before it, the Court ought to raise the question on its own initiative. In this connection Megaw L. J. Observed : "However, I think counsel for the plaintiff is justified in his submission that, however suspicious the facts may appear, and they are indeed gravely suspicious-it would not be right for this Court to hold affirmatively that there was here dishonesty which would affect the con tract, whatever it was, with illegality. Counsel for the plaintiff stresses that the plaintiff has not been given the opportunity to answer any questions suggesting such dishonesty. He was not cross-examined on that topic.
The defendants did not seek to raise it. The Judge asked no questions about it. In those circumstances, we did not think it necessary to consider further arguments which counsel for the plaintiff would have wished to present f t In my considered opinion the observations quoted above are pertinent and highly appropriate to the present case. As would appear from the well-established principles of law, the contract not being ex facie illegal, the Court would have been justified to take suo motu cognizance of the illegality of the contract, had all the material facts come to light in the course of the evidence to show that the contract had an illegal purpose. However, that is not the position here, inasmuch as, the true circumstances which were instrumental to the change of policy by the Government Departments and the reasons assigned in support thereof, as contained in the official record or otherwise have not come on record. Thus on principle as well as o facts, no case of the illegality of the contract can possibly be set up at this stage. Therefore, there being a concurrent finding in favour of the appellant that he had rendered material assistance in the procurement of the contract, the learned Single Judge was right in decreeing the suit in his favour.
18. In the result, I would allow this appeal, set aside the judgment of the Letters Patent Bench and restore the decree passed by the single Judge in favour of the appellant. There being important questions of law involved in this appeal, the parties are left to bear their own costs.