A borrower asks for ₹5,00,000 expressly to pay someone to kill another person. Knowing and sharing that purpose, a lender advances the money, and the killing is carried out. The lender later sues…
Question and options
A borrower asks for ₹5,00,000 expressly to pay someone to kill another person. Knowing and sharing that purpose, a lender advances the money, and the killing is carried out. The lender later sues for repayment. What is the position under the Indian Contract Act, 1872?
The loan is valid, as the unlawful act was the borrower's, not the lender's
The loan is void, but the lender may recover it under section 65
The loan is void, and the lender cannot recover the sum lent
The loan is void as to interest, but the principal is recoverable
Answer and explanation
The object of the loan, known to and shared by the lender, is forbidden by law and involves injury to the person of another, so the agreement is void under section 23 of the Indian Contract Act, 1872. Section 65 does not help, because it applies where an agreement is discovered to be void or becomes void, not where both parties knew of the illegality from the start (Kuju Collieries Ltd v. Jharkhand Mines Ltd, 1974). The lender's knowledge makes the purpose part of the bargain, and there is no lawful part to sever.
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