JUDGMENT A.P. Sen, J. - 1. This is an appeal by the defendants directed against a decree of the Vth Additional District Judge, Jabalpur, reversing that of the 1st Civil Judge, Class II, Jabalpur. 2. The dispute is over a flour-mill. The parties are rival flour-mill owners. The flour mill of one was situated opposite the flour mill of other. The plaintiff purchased the flour mill of the defendants on condition that they would not run any flour mill from their premises or let out the premises for running that kind of business. The sale with these conditions was for a price of Rs. 1,001. In terms of the sale, the defendants applied for disconnection of the power-metre and power-line fitted to their premises and also handed over a key of the room where the flour mill was installed. The plaintiff alleges, that while she was awaiting the disconnection to remove the flour mill, the defendants effected a forcible entry into room and wrongfully started running the mill. The defendants have admittedly received the entire consideration. On these facts, the plaintiff claimed possession of the flour mill and damages, or in the alternative, refund of the price together with interest thereon. The defendants deny the claim. They say that the transaction was one of exchange. The first Court upheld the defence. The appeal Court held that there was a sale. The plaintiff, accordingly, was given a decree for possession and for damages. 3. While accepting all the findings against him, Shri Ram Kumar Verma, learned counsel for the appellants, urges an entirely new point which was never taken before, namely, the contract between the parties was in restraint of trade, and, by reason of section 27 of the Contract Act, void and, legally unenforceable. In the alternative, he urges that in awarding damages for detention, the Court below applied the wrong principle. 4. In reply, Shri S.L. Jain, learned counsel for the respondent contended that the question whether contract was in restraint of trade involves a pure question of fact which cannot be decided on abstract principles unless we know what was the intention of the parties in entering into the transaction. On the merits of the question, he contended that the restraint was on the running of the particular chattel sold which the plaintiff by virtue of her ownership was entitled to place as a condition of the sale.
On the merits of the question, he contended that the restraint was on the running of the particular chattel sold which the plaintiff by virtue of her ownership was entitled to place as a condition of the sale. He further urged that the terms are severable from the rest of the contract. As regards ascertainment of damages, he said that that basis adopted was the proper basis. 5. The objection that the question cannot be raised, cannot be countenanced. The question depends on a construction of the terms of the deed. The parties are in accord as to the terms. No further investigation into facts is necessary. When a question of law is raised for the first time in a Court of last resort upon the construction of a document or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interests of justice that the question should be allowed to be taken (see M. E. Moolla Sons, Ltd., Vs. Burjorjee (1932) 59 IA 161. This would particularly be so, when the contract sought to be enforced, is said to be illegal in the strict sense of the term. I can do no better than refer to a passage from Cheshire's Law of Contract, 3rd Edition p. 323, which reads: "If the illegality of a contract is pleaded by the defendant, it follows, of course, that the issue must be determined by the Court. Where there is no such plea, but the contract is on the face of it illegal, or if all the relevant facts have been presented and they clearly disclose the illegality, the Court is entitled, indeed bound, to refuse to entertain the action, but where there is no apparent illegality; the Court is not entitled to pronounce upon the legality of the transaction, unless the issue has been raised on the pleadings." I would assume, at the moment, the contract is on the face of it illegal. It then becomes my duty to take notice of it, although not raised in the pleadings. The view of the Court is well settled. (see per J. Sen, J., in Mohanlal Jagannath Vs. Kashiram ILR 1950 Nag. 105, and Kaushalendra Rao, J., in Haji Habib Vs. Bhikamchand ILR 1954 Nag. 514). Following these authorities, I allow the point to be taken in this appeal. 6.
The view of the Court is well settled. (see per J. Sen, J., in Mohanlal Jagannath Vs. Kashiram ILR 1950 Nag. 105, and Kaushalendra Rao, J., in Haji Habib Vs. Bhikamchand ILR 1954 Nag. 514). Following these authorities, I allow the point to be taken in this appeal. 6. The intention of the parties must be ascertained from the document itself. The words of the parties are clear and unequivocal. The offensive words in the covenant are: ^^,d gtkj ,d :i;k ikdj csp fn;k Åij fy[kk lkeku mlh oDr vkidks lkSai fn;k rFkk uhps fy[kh ckrsa r; gqbZ gSaA 1& ikoj fMiktV okil ikus dh nj[kkLr vkrs gh fctyh /kjesa dj nwaxkA pwafd vc ls edku uaŒ 610] mijsuxat esa vkVk pDdh ugha pykÅaxk blfy;s ikoj gkml dh ykbu dk ikoj eksVj fudyok nwaxkA 2& eSa viuk ;g edku fdlh dks fdjk;s ls okLrs vkVk pDdh pykus ds fy;s u nwaxkA^^ The covenant ought to receive that construction which its language will admit, which will best effectuate the intention or the parties. The words literally read together, intended restraint in trade, and speak of an absolute restraint, and not a partial one. 7. That such was the intention is clear from the testimony of the plaintiff's son Rajamohan (P.W. 1) who explains the terms in these words ^^vkt ls pDdh ugha pykÅaxk % and ^^fdlh dks fdjk;s ls okLrs vkVk pDdh pyus dks ugha nwaxk**A These words are not susceptible of any other construction than that they were intended to place an absolute restraint on trade. There is thus no warrant for the submission that the contract was not "in restraint of trade". The further contention that the restriction was merely on the running of the particular chattel sold which the plaintiff by virtue of her ownership was entitled to place as a condition of sale, is equally unfounded. 8. A contract, which has for its object a restraint of trade, is prima facie void. Section 27 of the Contract Act is general in terms, and unless a particular contract can be distinctly brought within Exception (1), there is no escape from the prohibition. We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act and put upon the meaning which they appear plainly to bear.
We have nothing to do with the policy of such a law. All we have to do is to take the words of the Contract Act and put upon the meaning which they appear plainly to bear. This view of the section was expressed by Couch C. J., in Madhavchundev Vs. Rai Koornar Doss (1874) 14 BLR 74. The agreement in question is not a "good-will of business" type of contract, and, therefore, does not fall within the exception. If the agreement on the part of the defendants was void, there was no consideration for the agreement on the part of the plaintiff to pay money, and the whole contract must be treated as one which cannot be enforced. 9. The learned counsel for the respondent, however, contends that the illegal stipulation can be severed from the rest of the contract, In Pickering Vs. Ilfracombe Railway Co. (1868) LR 3 CP 235 at p. 237, Willes, J. stated: "The general rule is that, where you cannot sever the illegal from legal part of a covenant, the contract is altogether void; but, where you can sever them, whether the illegality be created by statute or by the common law, you may reject the bad part and retain the good." For the application of the doctrine of severance certain principles are well settled. In the first place, the illegal portion of the contract must be capable of being separated from the remainder of the agreement. This is generally known as "blue pencil" rule, i.e., the severance can be effected with a blue pencil without effecting the meaning of the part remaining. (See, Mulla's Contract Act, 8th Edition, p. 232). Secondly, the illegal promise must not form the whole or part consideration of the contract. Thirdly, the Court will not sever the terms so as to alter the entire scope and intention of the agreement. On the construction of the agreement, it is clear that the stipulation is not capable of being severed from the rest of the agreement for the reason that there was one consideration for the entire contract, including the covenant not to carryon any competitive trade. The agreement cannot be broken up into two parts, that is, it is impossible to resolve the agreement into its component parts, and to say that so much of the sum of Rs.
The agreement cannot be broken up into two parts, that is, it is impossible to resolve the agreement into its component parts, and to say that so much of the sum of Rs. 1001/- was for assignment of the flour mill and the balance for the promise to abstain from rivalry in trade. The result is that the whole agreement must be void. 10. It is well settled that unlike contracts which are illegal in the strick sense of the terms, that is, void in toto, contracts in restraint of trade are not wholly void. The effect of illegality and invalidity is thus stated in Anson's Law of Contract, 22nd Edition, p. 336. "Certain contracts are illegal in severe sense; the Courts will not only treat them as void but will refuse to facilitate a party implicated in the illegality in any way. Other contracts are 'merely void' and the parties to them will not so completely be denied a remedy by the Court. Money transferred under a merely void contract may sometimes be recovered in an action for money had and received, and transactions collateral to a merely void contract are not tainted with invalidity." There is clear authority for the view that the contract in restraint of trade is not so tainted with illegality as to bring into operation the maxim "ex turpi cause orltur non actio" and, therefore, money paid or property transferred by one party to the other is recoverable. (See, Cheshire's Law of Contract, 3rd Edition, pp. 316-7). 11. The defendants, therefore, cannot escape all liabilities on the ground that the agreement is found to be void. The case is clearly one where they have received an advantage under the agreement and they must restore it. The plaintiff has been deprived of a large sum of money and the defendants must in equity restore the money with interest at 4 per cent per annum from 28th March 1957 till realization. 12. In the result, the appeal succeeds and is allowed in part. The judgment and decree of the lower appellate Court are set aside and it is hereby ordered and decreed that the defendants shall pay Rs. 1001/- together with interest at 4 per cent per annum thereon from 28th March 1957 till realisation. The costs of this litigation shall be borne by the parties as incurred throughout.