Section 24 of the Indian Contract Act, 1872 – Doctrine of Partial Illegality and Severability

Section 24 of the Indian Contract Act, 1872: Doctrine of Partial Illegality and Severability

Introduction

Section 24 of the Indian Contract Act, 1872 (ICA) addresses the validity of agreements in which the consideration or object is only partly unlawful. It provides that where any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. The provision converts classical common-law principles of illegality into a codified rule that pre-empts enforcement of composite bargains whose lawful and unlawful elements are inseparable. This article offers a doctrinal and jurisprudential analysis of Section 24, drawing upon leading authorities such as Oudh Cocogem, Saundatti Yellama Municipality, and Life Insurance Corporation v. Devendrappa Bujjappa Kadabi, while situating the discussion within the broader statutory framework of Indian contract law.

Statutory Framework

Sections 23 and 24 operate in tandem. Section 23 identifies categories of unlawful consideration or object (forbidden by law, defeating the provisions of any law, fraudulent, injurious, immoral, or opposed to public policy). Section 24 then prescribes the legal consequence where such unlawfulness contaminates only a portion of the bargain. The legislative scheme therefore requires a two-step inquiry: (i) determine unlawfulness under Section 23; (ii) apply Section 24 to assess severability and consequent voidness.

Textual Anatomy of Section 24

  • Limb 1: Unlawfulness infects any part of a single consideration for one or more objects.
  • Limb 2: Unlawfulness infects any part of any one of several considerations for a single object.

In both limbs the statutory command is uncompromising: the agreement is void. Collateral arrangements remain untouched unless similarly tainted.

Judicial Elaboration

1. Oudh Cocogem and Provision Stores v. CIT (1968)

The Allahabad High Court clarified the conceptual difference between consideration and object, holding that Section 24 is confined to the former (lawfulness of object being governed by Section 23).[1]

2. Saundatti Yellama Municipality v. Shripadbhat Joshi (1932)

A lease authorised the lessee to collect both lawfully-imposed tolls and an ultra vires pilgrim tax. Because the unlawful impost formed part of a single, inseverable consideration, the Bombay High Court voided the entire contract under Section 24.[2]

3. LIC v. Devendrappa Kadabi (1986)

The Karnataka High Court distinguished situations where all consideration is tainted (attracting Section 23 directly) from those of partial illegality (Section 24), and emphasised the principle of inseverability.[3]

4. Kathu Jairam Gujar v. Vishvanath Javadekar (1925)

An advocate’s fee comprised cash plus transfer of suit property, the latter contingent on full success in litigation. Viewing this as an indivisible bargain that offended professional ethics, the Bombay High Court invalidated the entire agreement under Section 24.[4]

5. Sheo Narain Dube v. Raj Kumar Rai (1929)

A mortgage prohibited by statute rendered both the security and the personal covenant void; inseverability once again attracted Section 24.[5]

Doctrinal Themes

A. Severability (“Blue-Pencil” Test)

Where lawful and unlawful promises are reciprocal and distinct, courts may sever and enforce the lawful segment (cf. Section 57 ICA). However, a single consideration or single object frustrates such severance, compelling total invalidation, as illustrated in Saundatti Yellama Municipality.

B. Executed Transfers

In Dip Narain Singh v. Nageshar Prasad the Allahabad High Court limited Section 24 to executory agreements, but later cases (e.g., Devendrappa Kadabi) accept that even completed conveyances may be impeached where the entire consideration is inseverably unlawful, though often via Section 23 rather than Section 24.

C. Restitutionary Consequences

When an agreement is void under Section 24, Section 65 obliges an advantaged party to restore benefits, unless the parties are in pari delicto. The Privy Council’s decision in Harnath Kuar v. Indar Bahadur Singh underpins this equitable remedy.

Intersections with Other Contractual Doctrines

  • Wagering Agreements: Gherulal Parakh v. Mahadeodas Maiya holds that void wagers are not illegal; Section 24 is therefore inapposite unless the consideration is itself unlawful.[6]
  • Public Policy in Employment: In Central Inland Water Transport Corp. the Supreme Court invalidated an unconscionable termination clause under Section 23; had only a portion of the consideration been oppressive, Section 24 would have been the logical corollary.
  • Penalty & Forfeiture: Fateh Chand v. Balkishan Dass demonstrates that excessive penalties attract Section 74. If the penalty clause served an unlawful object (e.g., defeating stamp duty), Section 24 would nullify the bargain in its entirety.

Policy Considerations and Drafting Implications

Contemporary commercial transactions often bundle regulatory undertakings, intellectual property licences, and non-compete covenants into a single instrument. Section 24’s rigidity underscores the need for drafting precision: parties should allocate discrete (and independently priced) consideration for each promise, include express severability clauses, and ensure compliance with statutory mandates to avoid wholesale invalidation.

Conclusion

Section 24 of the ICA serves as a statutory filter that invalidates agreements partially tainted by illegality when lawful and unlawful elements are indivisible. Judicial application has balanced contractual autonomy against public policy, upholding bargains wherever severance is possible and denying relief where it is not. For practitioners, the provision is a reminder that meticulous structuring of consideration and objects is indispensable to preserve enforceability.

Footnotes

  1. Oudh Cocogem and Provision Stores v. Commissioner of Income-Tax, U.P., AIR 1968 All 162.
  2. Saundatti Yellama Municipality v. Shripadbhat Sheshabhat Joshi, AIR 1933 Bom 132.
  3. Life Insurance Corporation v. Devendrappa Bujjappa Kadabi, 1986 SCC OnLine Kar 320.
  4. Kathu Jairam Gujar v. Vishvanath Ganesh Javadekar, 1925 SCC OnLine Bom 224.
  5. Sheo Narain Dube v. Raj Kumar Rai, AIR 1931 All 382.
  6. Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781.