The article is written by Prasoon Shekhar, from ICFAI Law School, Dehradun.
“Public Policy is a high horse to mount, and is difficult when you have mounted it.”[i]
An agreement is not considered as lawful if it is opposed to public policy. The doctrine of public policy is based on maxim ‘ex turpi causa non oritur actio’ which means agreement against public policy would be void without any effect. The term Public Policy does not have an exhaustive definition as its fluctuating in nature and is highly uncertain. The interpretation of public policy is upon the discretion of the court. The terms of a contract cannot be enforced even if it has been agreed by both the parties if the same is in violation of public policy.
In simple words, Pubic Policy refers to the policies of government for the welfare of society, It can also be said that if any agreement contravenes any developed interest of society or morals of time, it can be said to be as against public policy and the agreement turns to be void. It has been held that an agreement could not be enforced if it was against public good[ii] or in violation with general policy of the law[iii]. In the case of P. Rathinam v. Union of Idnia[iv], the apex court held that the term public policy is open for modification and expansion
In the case of Gherulal Parekh v. Mahadevdas Maiya[v], the apex court observed:
” ‘Public policy’ is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean ‘political expedience’, or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; the written from the statutes; the unwritten or common law from the decisions of our predecessors and of our existing Courts, from text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is the best, in his opinion, for the advantage of the community. Some of these decisions may have no doubt been founded upon the prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade. They have become a part of the recognized law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise.”
Privy Council in the case of Raja Venkata Subhadrayamma Guru v. Sree Pusapathi Venkapathi Raju[vi], held that court can only refuse to enforce such agreements when the court sees that it is not made with a bonafide object or reward seems to be extortionate and held that champerty and maintenance are not illegal in India.
In the case of Veerayya v. Sobhanandri[vii] a person entered into agreement for taking back the charge of S. 420 of Indian Penal Code, 1860 against the accused. It was observed that since the offence was compoundable, permission of court is required and hence the agreement was declared as void. Also, in the case of Ouseph Poulo v. Catholic Union Bank Ltd. [viii], two parties entered into an agreement to discontinue the criminal proceedings on a certain consideration, it was held that these kind of transactions are opposed to public policy.
Illustration 1: A person ‘A’ is convicted of committing murder. His friend ‘P’ goes to judge to make an agreement to give order in favour of ‘A’. The same agreement is void.
Illustration 2: A person ‘A’ is convicted of murder and ‘B’ is the witness. If an agreement is made with ‘B’ to change his statement/ not to appear in court is unlawful and void.
It is clear that the ambit and interpretation of public policy is vast and applicability of this is upon the discretion of the court itself on the grounds of agreement and object. If an agreement is declared to be opposed to public policy then the same turns to be invalid under Section 23 of the Indian Contract Act, 1872. If any agreement is declared invalid as opposed to public policy, he can’t challenge the order on the ground of freedom of citizen to enter into contract. All the agreements affecting or obstructing the administration of justice will be considered invalid under Section 23 of the Indian Contract Act, 1872. The courts must look carefully in the matter before application of doctrine of public policy due to reasons of development of public opinion and morality.
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