Vikas, a businessman from Delhi, entered into an agreement with Reddy, a trader from Hyderabad, to smuggle a large consignment of gold into India in violation of customs laws. As per the terms, Reddy would arrange the smuggling operation, while Vikas promised to provide financial support and safe storage facilities. Both agreed to share the profits equally. The agreement also stated that Reddy would invest a portion of his profit in Vikas’s legitimate textile business, which was a lawful activity. After the first successful operation, a dispute arose between the parties. \nVikas received the smuggled gold but refused to share the profits, arguing that the agreement was unlawful. Reddy filed a suit for enforcement, claiming that at least the lawful portion of the agreement relating to the textile business should be upheld. Decide whether the agreement is enforceable under the Indian Contract Act, 1872?

Section 23 of the Indian Contract Act, 1872 provides that the consideration or object of an agreement is unlawful if it is (a) forbidden by law, (b) defeats the provisions of any law, (c) fraudulent, (d) involves injury to person or property, (e) immoral, or (f) opposed to public policy. Any agreement with such an object is void. \nSmuggling of gold is expressly prohibited by Customs Law in India and is a criminal offence. Therefore, any contract to undertake smuggling is not only unlawful but also opposed to public policy, since Courts will not enforce agreements that encourage illegal trade. \nSection 24 further provides that if any part of a single consideration or object is unlawful, the entire agreement is void. Only when the lawful and unlawful parts can be separated may the lawful portion be enforced. If the two are inseparable, the entire contract fails. \nIn this case, the main object of the agreement between Mr. Vikas and Reddy was to smuggle gold, which is forbidden by law and opposed to public policy. This makes the primary agreement void. Even though the agreement also included a clause that profits from smuggling would later be invested in Mr. Vikas’s legal textile business, the lawful part is not separable from the unlawful part because the investment depended entirely on the profits derived from the illegal act.\nHence, the agreement between Mr. Vikas and Reddy is void under Sections 23 and 24 of the Indian Contract Act, 1872. The object of the contract (smuggling) is forbidden by law and opposed to public policy, and the lawful portion (investment in textiles) cannot be separated from the unlawful part. Therefore, Reddy cannot enforce either the smuggling profits or the investment clause. In law, no rights or obligations can arise out of an unlawful agreement.