Applicability of principle of restitution in a contract partly performed.

Exhibit A-1, dated 27th July, 1947, is a charcoal licence agreement between the first defendant and the first plaintiff on behalf of the plaintiffs in O.S. No.8 of 1949 on the file of the Sub-Court, Dindigul, by which it was agreed that the first plaintiff shall be at liberty to cut at his own cost for a period of two years from the date of the document the trees in the forest described in the schedule to the document and belonging to the first defendant except a few varieties of wood specified therein for manufacturing charcoal and for the purpose of removing the charcoal from the place of manufacture the first defendant was to issue a pass from time to time. It was also stipulated that the first plaintiff was to pay to the first defendant at the rate of Rs.0-7-0 per bag of charcoal removed by him from the place of manufacture. A sum of Rs.3,000 was paid to the first defendant as advance. It was agreed that for every bag of charcoal Re. 0-3-6 should be deducted out of the sum of Rs.3,000 paid by way of advance and only Rs.0-3-6 per bag would be paid to the first defendant. It was also provided that the first plaintiff before the 5th of every month shall make an account of the charcoal bags taken as per the agreement and shall pay at the rate of Rs.0-3-6 per bag in cash and that the balance of the amount should be adjusted out of the advance amount. If the first plaintiff has not been able to adjust the entire advance amount by manufacturing charcoal and its removal from the place of manufacture within two years from the date of the agreement any balance of the advance amount remaining unadjusted and outstanding shall belong to the first defendant. According to this agreement the first plaintiff cut the trees, manufactured charcoal and removed a number of bags from the place of manufacture. Exhibit A-3 dated 26th September, 1947, shows that 1087½ bags were manufactured and removed and the price paid at the rate of Re.0-7-0 per bag and a sum of Rs.475-12-6 has been paid over to the first defendant. Similarly Exhibit A-4 shows that from 27th September, 1947, to 25th October, 1947, 431 bags of charcoal Were removed and at the rate of Re. 0-7-0 per bag, a sum of Rs.188-9-0 had been paid. While matters were at this stage the Government issued a notice on the 8th November, 1947, to the Manager of the firm of the plaintiffs under the Madras Act XVIII of 1946 that trees were being cut from the forest and charcoal manufactured out of the same without the permission of the Collector and that if the same was continued any further prosecution will be launched under that Act. An application was made to the Collector for permission to fell the trees and convert them into charcoal in accordance with the agreement but under Exhibit A-7 the permission sought for was refused. It is alleged that the first defendant did not take any steps to obtain permission from the Collector for the felling of trees and converting them into charcoal, and, therefore, the suit out of which the present second appeal arises was filed for refund of the balance out of the sum of Rs.3,000 paid by way of advance after deducting the amount due at the rate of Re. 0-3-6 per bag on the number of charcoal bags removed and for damages incurred by the plaintiffs by way of loss and interest on the balance of the advance amount. Both the lower Courts have dismissed the suit mainly on the ground that the contract was illegal under section 23 of the Indian Contract Act and hence the balance of the advance amount cannot be refunded.

It is urged in this second appeal that the contract in question is not a forbidden one as contemplated under section 23 of the Contract Act because the consideration or the object of the agreement was not forbidden by law ; nor is it of such a nature that if permitted it would defeat the provisions of any law and the contract certainly does not come within any other prohibitions contained in section 23 of the Act. Such being the case the provis