What did the Kerala High Court decide?

The agreement aimed to defeat a statutory abkari auction bar. Its object was unlawful under Section 23 ICA, so the agreement was void and no refund could be claimed.

Why was Section 65 not available?

Section 65 restitution is not granted when the agreement’s object is unlawful or against public policy. Money paid under such an agreement is not recoverable.

What rule from Section 23 applies here?

If the consideration or object is forbidden by law or defeats the provisions of law, the agreement is void and courts will not enforce it.

What practical lesson does the case give?

Do not try to sidestep statutory bars through private arrangements. Courts will treat such deals as void and deny recovery.

sundara-gownder-v-balachandran-section-23-unlawful-object-no-restoration

Sundara Gownder v. Balachandran (Section 23 ICA & No Restitution)

Contract Law Kerala High Court 1990 Citation: AIR 1990 Ker 324 Bench: High Court Reading time: ~4–5 min

Author: Gulzar Hashmi | India | Published on 26 Oct 2025

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Quick Summary

Two abkari contractors made a side deal to evade a statutory auction bar. Money changed hands, but the transfer never happened. The Kerala High Court said the agreement’s object was unlawful as it sought to defeat the law. Under Section 23 ICA the agreement was void, and Section 65 restitution was not available. No refund.

Issues

Can the plaintiff recover money when the agreement’s object was to defeat a statutory bar?
Does Section 65 permit restitution for a void agreement with an unlawful object?

Rules

Section 23 ICA: An agreement is void if its consideration/object is forbidden by law or defeats the provisions of law, or is immoral/against public policy.
If the agreement’s object is unlawful, courts will not enforce it, and parties cannot rely on Section 65 to reclaim money.

Tip: Ask—does the deal bypass a statute? If yes, §23 likely voids it; §65 relief usually unavailable.

Facts (Timeline)

Timeline — Sundara Gownder v. Balachandran

Statutory bar: Defaulters to Toddy Welfare Fund cannot bid at abkari auctions until dues are cleared.

Workaround plan: Plaintiff (a defaulter) asked Defendant to bid on his behalf and later transfer shops 17, 19, 20 with authority approval.

Payment: Plaintiff paid ₹22,080 at Town Hall on 1 Mar 1977 after the auction.

Breach: Defendant did not transfer the shops and did not return the money.

Trial Court: Decreed for plaintiff on evidence.

Appeal: Kerala High Court reversed—agreement void for unlawful object.

Arguments

Appellant (Defendant)

Deal aimed to defeat the statute; void under §23.
§65 restitution cannot revive an unlawful bargain.

Respondent (Plaintiff)

Sought money-back as transfer was not done.
Urged equity and trial findings in his favour.

Judgment (Held)

Judgment — unlawful object and no restitution

The Kerala High Court allowed the appeal and reversed the trial decree. The agreement’s object was to bypass the abkari rule. Such an object is unlawful under Section 23. Therefore, the agreement is void and the court cannot order refund under Section 65.

No enforcement and no restitution for a deal that defeats the law.

Ratio Decidendi

Where parties contract to evade a statutory bar, the object defeats the provisions of law. The agreement is void under §23 and §65 restitution is unavailable to recover money paid under such an arrangement.

Why It Matters

Courts will not assist parties to unwind illegal schemes.
Clarifies the limits of §65 restitution.
Protects public policy in regulated auctions and licensing.

Key Takeaways

Unlawful object (defeats statute) → agreement void under §23.
No refund under §65 for money paid in furtherance of such a deal.
Equity does not rescue parties from illegal bargains.

Mnemonic + 3-Step Hook

Mnemonic: “DEFY = Defeats law • Empty claim • Forfeit §65 • Your risk”

Defeats law → §23 void,
Empty claim to enforce,
Forfeit §65 restitution,
Your risk if you try to bypass statute.

3-Step Exam Hook

Identify the statutory bar and the evasion plan.
Apply §23 → unlawful object → void.
Check §65 → no restitution for unlawful-object agreements.

IRAC Outline

Issue

Can money paid under a deal to dodge an abkari auction bar be recovered?

Rule

§23: object defeating law → void. §65: no restitution where the object is unlawful/against public policy.

Application

Agreement intended to bypass the defaulter bar; hence unlawful object. Court will not aid recovery.

Conclusion

Void agreement; no refund under §65; appeal allowed.

Glossary

Unlawful Object: Purpose of an agreement that is forbidden by law or defeats the law; makes the agreement void.
Public Policy: Judicial standard that bars enforcement of agreements harmful to society or legal order.
Restitution (Section 65): Return of benefits when an agreement is void; not granted if the agreement’s object is unlawful.