Wednesday, November 23, 2011
"An agreement of supply at a rate 20% less than the market rate is not null and void" : SC
While adjudicating in CIVIL APPEAL NO. 2755 OF 2007 between union of India v/s Col. L.S.N. Murthy & others, the Hon. Supreme Court of India has recently set aside the order of Hydrabad High Court and has considered the validity of an impugned agreement in terms of Sec.23 of Indian Contract Act, for a supply on tender at a rate 20% less than market rate with significant observation that " unless the effect of an agreement results in performance of an unlawful act, an agreement which is otherwise legal cannot be held to be void and if the effect of an agreement did not result in performance of an unlawful act, as a matter of public policy, the court should refuse to declare the contract void with a view to save the bargain entered into by the parties and the solemn promises made there under. In Shri Lachoo Mal vs. Shri Radhey Shyam [(1971) 1 SCC 619], this Court held: "What makes an agreement, which is otherwise legal, void is that its performance is impossible except by disobedience of law. Clearly no question of illegality can arise unless the performance of the unlawful act was necessarily the effect of an agreement."
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