Tiruvenkata Mooppanar and another vs Subbiah Mooppanar

Venkatadri, J.—This second appeal arises out of a suit instituted by the respondent for an injunction restraining the appellants from supplying and selling the betel leaves grown by them in the revenue village of Kadayanallur to any one except the respondent till 31st May 1960 and for directing the appellants to pay the respondent Rs. 500 as damages caused by withholding the supply of better leaves to the respondent till the date of the plaint. The respondent''s case is that the parties belong to Senear community whose caste profession is cultivation of betel leaves. It was the custom and usage among the members of the Senear community to entrust all the betel leaves grown in the village to a particular person and not to sell themselves to any other individual. These betel leaves used to be put in auction among the members of the community and the amount fetched at the auction was treated as common fund and utilised for the common benefit of the members of the community. And the highest bidder at the auction was entitled to receive all the betel leaves from the members of the community and no member had a right to sell the betel leaves to any one outside the village. In accordance with this custom and usage, in the year 1959 this right to receive the supply of betel leaves and sell the same was put in public auction by one Veerabadra Moopanar, a prominent member of the community, in the premises of the Bajana Matam, and the respondent was declared to be the highest bidder for a sum of Rs. 645. Thereupon, the respondent paid one-fourth of the amount and obtained a receipt, and also paid the balance of amount in a month''s time. According to the respondent, the appellant, quite contrary to the established usage and custom, began to sell their betel leaves to one Paramasiva Moopanar, and also began to purchase betel leaves from the neighbouring villages and sell them in the village of Kadayanallur. The respondent was put to loss and he gave notice to the appellants and finally filed the suit aforesaid.

The suit is resisted by the appellant that such a condition directing them to sell the leaves to a particular person is a restraint of trade and against public policy and the provisions of the Indian Contract Act. The custom pleaded by the respondent is illegal and unreasonable and not binding on them and that it also offends Art. 19 of the Constitution. The appellants are not aware of any kind of lease to the respondent as alleged by him in his plaint. They have not taken part in the auction held by Veerabadra Moopanar, but even assuming that there was such an auction, it is sot valid and binding on them.

On these pleadings the parties went to trial. The important points to be considered by the trial Court were whether the condition imposed at the auction that all the members of the Senayar community should sell their betel leaves to the highest bidder in the auction was valid and whether the customs pleaded in the plaint was true and valid.

Evidence has been adduced, oral and documentary. Both the Courts below have held that the respondent has not proved the existence of such a caste custom but only the existence of an implied contract by the members of the Senayar community in regard to the sale of the betel leaves for the time being. They have also held that the selling of the betel leaves to the highest bidder in the auction is not a restraint of trade within the meaning of S. 27 of the Indian Contract Act. It has been found that the appellants themselves participated in the auction held in the concerned year and they are bound by it. Finally, holding that the respondent is not entitled to any injunction, the Courts below have awarded damages in a sum of Rs. 56.25. The defendants have preferred this second appeal.

The question of law to be considered in this case is whether there is any restraint of trade. The Court below has relied on Mackenzie v. Sriramaiah 13 Mad. 472 and Sadagopa Ramanjiah v. Mackenzie 15 Mad. 79 where there was contract that the salt manufactured by the defendant should be sold to the plaintiff''s firm for a fixed price, and it was held that such a clause was not invalid. The Court below relying on these decisions has held that there was no restraint on trade. But learned Counsel for the appellants has contended before me that such a clause is a restraint on trade, and to support the stand taken by him, he has cited Sheikh Kallu Vs. Ramsaran Bhagat . In that case, a merchant entered into a contract with a manufacturer of combs that he should sell the combs to him only and not to anybody else. In order to enable him to supply the same to the traders in Calcutta and that if there was to be a breach of the contract then the manufacturer should pay Rs. 100 as damages. The manufacturer subsequently refused to supply combs to the merchant and also sold the goods to another person. In a suit for damages by the merchant, the manufacturer contended that such an agreement was an unlawful restraint on trade. A Division Bench of the Calcutta High Court held that the agreement being in restraint of trade was void and unenforceable.

As a general rule, an agreement in unreasonable restraint of trade is illegal and void, as being contrary to public policy, but it must be shown that is manifestly injurious to the public welfare, since it is also the policy of the law to hold persons to their contracts. A contract in reasonable restraint of trade is valid. The law in regard to the restraint of trade is in India, codified. Therefore, a contract to be a valid agreement in India, must neither be opposed to public policy nor amount to restraint of trade within the meaning of the section. But at the same time, a contract which is in restraint of trade may be reasonable between the parties and consistent with the interests of the public. To arrive at a proper decision, covenants of the contract have to be studied, with a view to determine whether the primary object of the parties is in the sale or in the respective covenant, or whether the case is one of respective covenant in the sale; if so, is the restriction, having regard to all the facts and circumstances, reasonable. The test of the validity of a contract in restraint of trade is its reasonableness. In Sanjiva Rao''s Indian Contract Act, 5th Ed. Volume I, page 516, the learned editor has deduced the following tests from an analysis of the judgment in Nordenfelt v. Maxim Nordenfelt Guns Co. 1894 A. C. 535.

The generality of the covenant whether as to time or space, may render it unreasonable; that is, a covenant is not necessarily valid, because restricted as to time, but may be void because it is not so restricted.

Different degrees of protection are reasonable in different cases.

The reasonableness of the restriction must be judged by the character and the nature of the business or of its customers.

From decided cases, the learned Editor has deduced that an agreement by the seller of the goods with a purchaser not to sell certain kinds of goods to anyone else in the same town, a contract to sell a brand of cigars to no one in the city but the defendant so as to give him the exclusive agency for such sale, an agreement between two traders that the first will sell the other all his commodities and that the second will buy from the first alone, an agreement that the defendant shall for a certain number of years consign exclusively to the plaintiff all the blankets of his manufacture, an agreement by a dentist to purchase artificial teeth of a manufacturer on condition that the latter will not sell such teeth to any person in the town where the dentist resides, an agreement by a manufacturer to prepare for his purchaser a certain number of barrels of lime within a given time at a certain price and not to sell to any other persons any lime during the continuance of the agreement, and an agreement not to sell a certain medical preparation to any one but the plaintiff within a definite territory have all been sustained by the Courts. Therefore, if the Court is satisfied that the restraint is reasonably necessary to protect the interests of the merchant and was not inimical to the interests of the public, then it will treat it as valid. It is very dangerous to apply the principle of public policy for each and every contract, because, as Mr. Justice Burrough says in Richardson v. Mellish (1824) 2 Bing. Rep. 229 at 232, that public policy is very unruly hose and when you once get astride it you never know where "it will carry you and that public policy does not admit of definition and is not easily explained. While speaking on Public Policy, Sir David Hughes Parry in his Hamlyn Lecturers, 10th series, on the Sanctity of Contracts in English Law, observes at page 59 :

Another criticism of it (public policy) is that it must inevitably be a variable quantity- influenced by the Judge''s training, outlook and philosophy, varying with the prevailing fashions in moral, economic or social principles, or even with changing economic or social practices. As Lord Wright observed in Pender v. Mildlway 1938 A.C. 1 ''certain rules of public policy have to be moulded to suit new conditions of a changing world.

In the instant case, it is not possible for me to say that it is a restraint of trade which can be brought within the mischief of S. 27 of the Indian Contract Act. If we analyse the facts in this case, the appellants themselves have participated in the auction which was held in the concerned year and were also signatories of the bidders'' list. Thus the appellants were a consenting party in regard to the supply and sale by the respondent of the betel leaves grown by them. This form of contract cannot be said to be any restraint of trade. It is unnecessary for me to consider whether the custom alleged by the respondent is valid or not. The Courts below have come to the correct conclusion that the respondent is entitled to damages, for breach of the conditions of the contract by the appellants. For the foregoing reasons, I dismiss the second appeal. But there will be no order as to costs. No leave.