PETITIONER: IMMANI APPA RAO AND OTHERS Vs. RESPONDENT: GOLLAPALLI RAMALINGAMURTHI AND ORS. DATE OF JUDGMENT: 22/09/1961 BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SINHA, BHUVNESHWAR P.(CJ) DAYAL, RAGHUBAR CITATION: 1962 AIR 370 1962 SCR (3) 739 ACT: Fraud-Benami Conveyance in fraud of creditors-Suit by benamidar for possession-Plea of fraud in defence-If barred by estoppel-Proper approach-Public interest Indian Trusts Act 1882 (2 of 1882) s. 84. HEADNOTE: The conveyance in suit was the result of a collusive plan between respondent 1 and respondent 2 to defraud the latter's creditors. The agreement was that respondent 1 was to act as the benamidar for respondent 2 and his sons, the appellants. The fraud succeeded and the creditors of respondent 2 were in fact defrauded. Thereafter respondent 1 brought the present suit for declaration of title and recovery of possession against respondent 2 and the appellants on the basis or the conveyance. The latter resisted the suit on the ground that the conveyance was fraudulent, unsupported by consideration and passed no title. The High Court in second appeal held that the appellants and respondent 2 were estopped from pleading fraud in the suit and decreed the same. The question was whether the view taken by the High Court was correct and the ostensible owner was entitled to a decree. Held, that there could be no question of estoppel in a case where both the parties were guilty of fraud. 740 Where in a case, such as the present, one of the confederates in fraud seeks a, decree on a conveyance that resulted from such faud and the other takes plea 'of fraud in defence, the matter has to be decided on considerations of public policy. Since one of the parties must succeed in any event, the proper approach for the Court to adopt would be the one that was less injurious to public interest, namely, to allow the plea of fraud to be raised in defence and, if upheld, allow the properties to remain where they were, than to decree a suit based on a fraudulent claim. It could make no difference in such a case if the suit was based on a deed of conveyance and not a contract. Vodiana Kamayya v. Oudisa Kamayya, (1917) 32 M.J.J. 484, Kepula Kotayyar Naidu v. Chitrapur Mahalakshmama, (1933) I.L.R. 56 Mad. 646 and Mutho K.B.A.R.P.L. Arunachalam Chettiar v. Rangaswamy Chettiar, (1936) I.L.R. 59 Mad. 289, disapproved. Berg v. Sadler and Moore, [1937] 2 K.B. 158, T. P. Petherperumal Chetty v. B. Muniandi Servai, (1908) L.R. 35 I.A. 98 and Holman v. Johnson, (1775) 1 Cowper, 34 1, referred to. Deo, Dem. Roberts against Roberts, Widow, (1819) 106 E. R. 401, considered. Case-law reviewed. Section 84 of the Indian Trusts Act is not exhaustive in its provisions and since the present case falls outside of that section, it has to be decided on considerations of general policy. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 76 of 1959.
Appeal from the judgment and decree dated November 16, 1951,
of the Madras High Court in Second Appeal No. 1656 of 1947.
T. V. R. Tatachari, for the appellants.
K. N. Rajagopal Sastri and T. Satyanarayana, for the
respondent No. 1.,
1961. September 22. The Judgment of the Court was
delivered by
GAJENDRAGADKAR, J.-This is an appeal by a certificate
granted by the High Court of Madras against its judgment and
decree in Second Appeal
741
Suit No. 27 of 1939 filed by respondent 1 Gollapalli
Ramalingamurthi against respondent 2 Immani Venkanna and his
four sons appellants 1 to 4. The appellants and respondent 2
are members of an undivided Hindu family. The case for
respondent 1 was that he had purchased the properties
described’ in the Schedule attached to his plaint on April
1, 1936 in a sale held by the Official Receiver in the
insolvency of respondent 2. A registered sale deed was
accordingly issued in favour of respondent 1 (Ex. P. 4) on
September 21, 1936. In pursuance of the said sale
respondent 1 obtained possession and enjoyment of such
properties after partitioning them with Rayudu, the brother
of respondent 2. In October, 1938, however, the appellants
and respondent 2 trespassed on the said properties and so
respondent 1 had to file the present suit claiming a
declaration of his title in regard to the said properties,
and asking for their possession and for past and future
mesne profits. That in brief is the nature of the suit from
which the present appeal arises.
The claim thus made by respondents 1 was resisted by
respondent 2 and the appellants on several grounds. It was
urged by respondent 2 that the transfer in favour of
respondent 1 was benami and that respondent 1 was not the
real owner of the properties. In support of this case
respondent 2 gave, what according to him, was the antecedent
history of the sale in favour of respondent 1. He alleged
that he had sustained heavy losses in business conducted by
him with the result that he was indebted to the extent of
Rs. 25,000. Apprehending that the suit properties would be
lost to the family at the instance of his creditors he and
his junior mother-in-law Kanthamani Seshamma approached
respondent 1’s father-in-law Suryaprakasa Sastrulu for
advice and on his advice respondent 2 executed a collusive
and nominal mortgage deed for Rs. 1,000 (Ex. P. 9) in
favour of respondent 1 on June 16, 1933. Simi-
742
larly, on the same advice a similar nominal transfer deed
was executed in favour of respondent 1 on August 6, 1939,
(Ex. P. 12) after the properties covered by the said
document had been released from an earlier non-possessory
mortgage (Ex. P. II) which had been executed on July 21,
1930. Thus, according to respondent 2 the documents
executed in favour of respondent 1 were nominal and
collusive and were not supported by any
consideration.
Respondent 2 further alleged that the execution of the said
collusive documents between him and respondent 1 came to the
knowledge of some of his creditors and that led to an
insolvency petition against respondent 2 by one of his
creditors in 1.P. No. 91 of 1933. This petition was filed
in the Court of the Subordinate Judge at Ellore on September
15, 1933, against respondent 2. In these insolvency
proceedings respondent 2 was adjudicated insolvent and the
Official Receiver, appointed to take charge of respondent
2’s properties, brought the said properties to sale subject
to the aforesaid nominal mortgages in favour of respondent
1. Kanthamani Seshamma purchased the said properties with
her own money but benami in the name of respondent 1 on
condition that respondent 1 would reconvey the said
properties to the family of respondent 2 whenever called
upon to do so. The allegation of respondent 1 that he had
obtained possession of the properties was denied, and it was
urged that respondent 1 had no title to the properties and
was entitled to no relief in the suit filed by him. That is
the substance of the pleas raised by respondent 2 and the
appellants joined respondent 2 in making the same pleas by
their separate written statement.
At the trial three issues were tried as preliminary issues;
they were issues 5, 8 and 9. Issues 8, and 9 were in regard
to the court fees payable on the claim made in the plaint
and regarding the pecuniary jurisdiction of the Court. The
Court
743
found that it had jurisdiction to try the suit and it valued
the subject-matter of the suit at Rs. 2,411-7-2 on which
additional court fees was paid by respondent 1. Issue 5 was
as to whether the sale in favour of respondent 1 bound the
shares of the appellants in the family properties. The
learned trial judge answered this issue in favour of the
appellants purporting to follow the Full Bench decision of
the Madras High Court in Ramasastrulu v. Balakrishna Rao
(1). According to the said decision the right of respondent
2 as the father of the appellants and manager of the
undivided Hindu family to sell the shares of his sons for
purposes binding on the family did not vest in the Official
Receiver on his insolvency, and so the sale effected by the
Official Receiver in favour of respondent 1 did not, and
could not, in law bind the shares of the appellants in the
properties conveyed.
After these findings were recorded respondent 1 applied for
the amendment of his plaint and the said amendment was
allowed. By this amendment respondent 1 alleged that the
suit properties were the self-acquired properties of
respondent 2 and so the appellants had no interest therein.
On this alternative plea it was urged by respondent 1 that
the properties sold by the Official Receiver to respondent 1
conveyed the entire properties which belonged to respondent
2 alone. In addition to this alternative claim made by an
amendment respondent 1 also made an alternative prayer that
he should be either given possession of the whole of the
properties or 1/5th of the properties according as the
properties are found to be separate properties of respondent
2 or are held to be properties of the undivided family
consisting of respondent 2 and the appellants. These
alternative grounds taken by respondent 1 by virtue of the
amendment were traversed by respondent 2 and the appellants
in their additional written statements.
(1) I.L.R. 1943 Mad. 83.
744
When the suit went to trial on the amended pleadings several
issues were framed by the learned trial judge. In addition
to the issues arising on the pleadings the learned trial
judge framed suo motu one more issue 1(a), whether
respondent 1 was the benamidar of the appellants, and if yes
whether the appellants could be allowed to plead the same as
a defence in the suit. The learned trial judge found that
the suit properties were the joint family properties of
respondent 2 and the appellants. Alternatively he held that
even if they were originally the self-acquired properties of
respondent 2 they had been blended with the family
properties and thus became the properties of the undivided
family. He found that the shares of the appellants in the
said properties did not vest in the Official Receiver and so
were not conveyed to respondent 1. He came to the
conclusion that the purchase by respondent 1 from the
Official Receiver was only a benami transaction for the
benefit of the appellants and that respondent 1 had not
obtained possession of the properties at any time.
According to the learned trial judge the sale in favour of
respondent 1 was fraudulent and was brought into existence
to defraud the creditors of respondent 2; and this fraud had
been carried out and the creditors of respondent 2 had been
defrauded. Since the fraud had been carried out, the
learned judge held respondent 2 and the appellants could not
be allowed to plead the same as a defence in the suit. As a
result of this finding the learned judge passed a
preliminary decree in favour of respondent 1 for 1/5th share
in items 1 to 4 and 8 to 10 of the properties described in
the Schedule attached to the plaint. In regard to items 5
to 7 on which the dwelling house of the family was
constructed the learned judge held that respondent 1 was
entitled to monetary compensation. Consistently with the
preliminary decree thus passed as to the share of respondent
1 the learned judge
745
also directed that future mesne profits should be determined
under O. 20, r. 12(c) of the Code of Civil Procedure.
Against this decree respondent 1 preferred an appeal, No.
288 of 1943, in the Court of the Subordinate Judge,, West
Godavari at Ellore. In this appeal he claimed that a decree
should be passed in his favour in respect of the whole of
the properties sold to him by the Official Receiver. The
appellants filed cross-objections and urged that the learned
trial judge was in the error in framing issue 1 (a) suo motu
and challenged his conclusion on it. The appellate Court
agreed with the conclusions of the trial judge and so
dismissed both the appeal and the cross objections.
Against this appellate decree respondent I filed a Second
Appeal, No. 1656 of 1947, and the appellants filed cross-
objections. This appeal came on for hearing before Mr.
Justice Raghava Rao and it was urged before him that since
the Provincial Insolvency (Amendment) Act No. 25 of 1948
which introduced s. 28A had come into operation in the
meanwhile retrospectively the decision of the Courts below
that the Official Receiver could not in law have sold the
appellant’s shares in the family properties could not longer
be sustained. This contention was raised by respondent 1.
It was met by the appellants by their counter-contention
that issue 1(a) had been sprung upon them as a surprise; it
had been framed by the trial court after it had heard
arguments on both sides and that the appellants had no
opportunity to show that in fact the fraud contemplated by
the parties had not been effectively carried out. They
alleged that if the fraud had not been carried out the
principle of estoppel invoked against them could not come
into play. This contention raised by the appellants was
accepted by the High. Court which called for a finding by
the trial co-art on issue 1(a), after giving both the
parties an opportunity to adduce evidence on the
746
question about the completion or otherwise of the fraud
connected with the benami purchase. After remand the trial
court took evidence and made a finding that respondent 2 bad
successfully played fraud on his creditors by getting the
properties purchased by respondent 1 benami for his sons at
the sale held by the Official Receiver. In due course this
finding was submitted by the trial court to the High Court.
Thereupon the appellants filed objections to the said
finding.
After this finding was received the second appeal was again
placed for bearing by Mr. Justice Ragghava Rao. At the
second hearing the appellants raised the point the amending
Act by which s. 28A was inserted in the Provincial
Insolvency Act was ultra vires. The learned judge overruled
the objections made by the appellants against the finding
submitted by the trail court on the issue remanded to it and
accepted that finding; but in view of the fact that the
vires of the amending Act was challenged he thought it exp-
edient that the second appeal should be heared by a Bench of
two judges. That is how the second appeal came before a
division Bench of the Madras High Court for final disposal.
In its final judgment the High Court has observed that the
argument that Act 25 of 1948 was ultra vires was not pressed
before the High Court, that certain other grounds were
sought to be raised by the appellants but they were not
allowed to be raised; so that in the result the main
argument urged before the High Court was whether having
regard to the fact that the fraud contemplated by respondent
2 and respondent 1 had been effectively carried out it was
open to the appellants to plead that fraud against
respondent 1 in respect of his claim for possession of the
suit properties in the present suit. The High Court
considered the conflicting decisions on this point and
adhered to the view which has prevailed in the said High
Court
747
since the decision in Vodiana Kamayya v. Gudisa. Mamayya
(1) and held that the appellants and respondent 2 were
estopped from setting up the fraud against respondent 1 in
his present suit. In the result respondent 1’s claim in
respect of the whole of the properties conveyed to him by
the Official Receiver has been decreed. It is against this
decree that the appellants have come to this Court with a
certificate granted by the High Court and the principal
point which has been argued before us on their behalf by Mr.
Tatachari is that the High Court was in error in coming to
the conclusion that in a case where both the transferor and
the transferee’ were equal in fraud and where the fraud
contemplated has been carried out it is not, open to the
appellants to plead that fraud in defence against the claim
made by respondent 1 to obtain possession of the properties
conveyed to him benami by the Official Receive Mr. Tatachari
contends that where the parties are equally guilty estoppel
cannot be pleaded against the appellants and the estate must
be allowed to remain where it rests.
The point thus raised lies within a narrow compass and the
material facts which give rise to it are no longer in
dispute. The transaction in favour of respondent 1 is the
result of a fraudulent plan to which both he and respondent
2 agreed. In was effected with the mutual consent of the
vendore and the vendee to defraud the creditors of the
vendor. That being so the transfer is not supported by any
consideration and the transferee agreed to act as the
benamindar until the transferor required him to reconvey the
properties to his sons. The object intended to be achieved
and the fraud initially contemplated by both the parties
have been achieved and the creditors of respondent 2 have
been defrauded. Possession of the properties, however,
remained with respondent 2 and his sons the appellants; and
in the present
748
section respondent 1 seeks to obtain possession of the
properties on the ground that a deed of conveyance has been
passed in his favour by the Official Receiver. Thus both
the parties are confederates in the fraud and are equally
guilty. Respondent 2 and the appellants seek to resist
respondent 1’s claim to recover possession of the properties
conveyed to claim on the ground that the conveyance is void
having been effected for a fraudulent purpose which has been
carried out. They urge that it has not been supported by
any consideration and no title has passed in favour of the
transferee. Respondent 1 sheets this challenge to his title
by pleading that respondent 2 who participated in the fraud
cannot be allowed to plead his own fraud in support of his
refusal to part with the possession of the properties, and
he urges that there is a conveyance duly executed in his
favour on which the Court must act without permitting
respondent 2 to challenge its validity. The High Court his
upheld the plea of respondent 1 and has not allowed either
respondent for the appellants to plead the fraud in support
of their defence. Is this decision right? That is the
question which falls to be decided in the present appeal.
Reported decisions bearing on this question show that
consideration of this problem often gives rise to what may
be described as a battle of legal maxims. The appellants
emphasised that the doctrine which is preeminently
applicable to the present case is ex dolo malo non oritur
action or ex turpi causa non oritur actio. In other words,
they contended that the right of action cannot arise out of
fraud or out of transgression of law; and according to them
it is necessary in such a case that possession should rest
where it lies in pari delicto potior est conditio
possidenties; where each party is equally in fraud the law
favors him who is actually in possession, or where both
parties are equally guilty the estate will lie where it
falls. On the other hand, respondent 1 argues that the
proper maxim to apply is nemo allegans suam turpitudinum
audiendumest,
749
whoever has first to plead turpitudinum should fail; that
party fails who first has to allege fraud in which he
participated. In other words, the principle invoked by
respondent 1 is that a man cannot plead his own fraud. In
deciding the question as to which maxim should govern the
present case it is necessary to recall what Lord Wright, M.’
R. observed about these maxims in Berg v. Sadler and Moore
(1). Referring to the maxim ex turpi causa non oritur actio
Lord Wright observed that “this maxim, though veiled in the
dignity of learned language, is a statement of a principle
of great importance; but like most maxims it is much too
vague and much too general to admit of application without a
careful consideration of the circumstances and of the
various definite rules which have been laid down by the
authorities”. Therefore, in deciding the question raised in
the present appeal it would be necessary for us to consider
carefully the true scope and effect of the maxims pressed
into service by the rival parties and to enquire which of the maxims
would be relevant and applicable in the
circumstances of the case. It is common-ground that the
approach of the Court in determining the present dispute
must be conditioned solely by considerations of public
policy. Which principle would be more conducive to, and
more consistent with, public interest, that is the crux of
the matter. To put it differently having regard to the fact
that both the parties before the Court are confederates in
the fraud, which approach would be less injurious to public
interest. Whichever approach is adopted one party would
succeed and the other would fail, and so it is necessary to
enquire as to which party’s success would be less injurious
to public interest.
Out of the two confederates in fraud respondent 1 wants a
decree to be passed in his favour and that means he wants
the active assistance of the Court in reaching the
properties possession of
(1) [1937] 2 K. B. 158, 162.
750
which has been withheld from him by respondent 2 and’ the
appellants. Now. if the defense raised by the appellants is
shut out respondent 1 would be entitled to a decree because
there is an ostensible deed of conveyance which purports to
convey title to him in respect of the properties in
question; but, in the circumstances’, passing a decree in
favour of respondent 1 would be actively assisting respon-
dent 1 to give effect to the fraud to which he was a party
and in that sense the Court would be allowed to be used as
an instrument of fraud and that is clearly and patently
inconsistent with public interest.
On the other hand, if the Court decides to allow the plea
of’ fraud to be raised the Court would be in a position to
hold an enquiry on the point and determine whether it is a
case of mutual fraud and whether the fraud intended by both
the parties has been effectively carried out. If it is
found that both the parties are equally guilty and that the
fraud intended by them has been carried out ‘the position
would be that the party raising the defence is not asking
the Court’s assistance in any active manner; all that the
defence suggests is that a confederate in fraud should not
be permitted to obtain a decree from the Court because the
document of title on which the claim is based really conveys
no title at all It is true that as a result of permitting
respondent 2 and the’ appellants to prove their plea they
would incidentally be. assisted in retaining their
possession; but this assistance is of a purely passive
character and all that the Court is doing in effect is that
on the facts proved it proposes to allow possession to rest
where it lies. It appears to us that this latter course is
less injurious to public interest than the-former.
There can be no question of estoppel in such a case for the
obvious reason that the fraud in question was agreed by both
the parties and both parties have assisted ‘each other’ in
carrying out the fraud. When it is said that a person
cannot
751
plead his own fraud it really means that a person cannot be
permitted to go to a Court of Law to seek for its assistance
and yet base his claim for the Court’s assistanceon the
ground of his fraud. In this connection it would be
relevant to remember that respondent 1 can be said to be
guilty of a double fraud; first he joined respondent 2 in
his fraudulent scheme and participated in the commission of
fraud the object of which was to defeat the creditors of
respondent 2, and then he committed another fraud in
suppressing from the Court the fraudulent character of the
transfer when he made out the claim for the recovery of the
properties conveyed to him. The conveyance in his favour is
not supported by any consideration and is the result of
fraud; as such it conveys no titile to him. Yet, if the
plea of fraud is not allowed to be raised in defence the
Court would in substance be giving effect to a document
which is void ab initio. Therefore, we are inclined to hold
that the paramount consideration of public interest requires
that the plea of fraud should be allowed to be raised’ and
tried, and if it is upheld the estate should be allowed to
remain where it rests. The adoption of this course, we
think, is less injurious to public interest than the
alternative course of giving effect to a fraudulent
transfer.
This question has been the subject matter of judicial
decisions in most of our High Courts; and it appears that
the consensus of judicial opinion with the exception of the
Madras High Court is in favour of the view which we have
taken. In Bombay the principle that in dealing with a
contest between two participants in fraud posses. sion
should be allowed to remain where it rests appears to have
been consistently accepted until Chief Justice Sir Lawrence
Jenkins struck a note of dissent in Sidlingappa Bin
Ganeshappa v. Hirwa Bin Tukasa (1). Thereafter the
correctness of
(1) (1907) 1. L. R. 31 Bom. 405.
752
this judgment was sometimes doubted in the subsequent
decisions of the said High Court [Vide : Lakshman Balvant
Khisti V. Vasudev Mohoniraj Pande(1)] and finally the Full
Bench of the said High Court reversed the said decision of
Sir Lawrence Jenkins in Guddappa Chikkappa Kurbar v. Balaji
Ramji Dange (2). Since then the decision of the Full Bench
has been consistently followed in the Bombay High Court.
The same view has been accepted by the Calcutta, Allahabad,
Nagpur and Patna High Courts [Vida : Preomath Koer v. Kazi
Mahomed Shazid(3). Emperor v. Abdul Sheikh(4), Vilayat
Husain v. Misran (5), Nawab Singh v. Daljit Singh (6), Qader
Baksh v. Hakim (7), Bishwanath g/o Karunashanker Shukla v.
Surat Singh alias Chhuttu Singh s/o Bhabhut Singh (s), and
J. C. Field Electric Supply v. K. Agarwala (9) (Case of
illegal contract)].
In Madras the earlier decisions of the High Court appear to
have, taken the same view [Vide: Venkataramana v. Viramma
(10), Yaramati Krish. nayya v. Chundru Papayya (11) and
Ragha. valu Chetty v. Adinarayana Chetty (12)]. In the case
of Vodiana Kamayya v. Gudisa Mamayya (13), however, a
Division Bench of the Madras High Court upheld the view that
a person who has conveyed property benami to another for the
purpose of effecting a fraud on his creditors cannot, where
the fraud has been effected, set up the benami character of
the transaction by way of defence in a suit by the
transferee for possession under the conveyance. Since then
this view has prevailed in the Madras High Court [vide :
Keppula Kotayyar Naidu v. Chitrapu Mahalak8hmamma (14) and
Muthu K. R. A. R. P. L. Arunarhalam Chettiar v. Bangaswamy
Chettiar (1.5)]. In our opinion
(1) (1930) 33 Bom. L.R. 356.
(2) I. L. R 1941 Bom. 575.
(3) (1903-4) 8 C. W. M. 620.
(4) A. I. R. 1920 Cal. 90.
(5) (1923) I. L. R. 45 All. 396.
(6) (1936) 1. L. R. 58 All. 842.
(7) (1932) 1. L. R. 13 Lab. 713.
(8) A.I. R. 1943 Nag. 11 3.
(9)(1951) 1. R. 30 Pat. 137.
(10) (1887) 1. L. R.10 Mad. 17.
(11) (1 897) 1. L. R. 20 Mad. 326
(12) (1 909) 1. L. R. 32 Mad. 323.
(13) (1917) 32 Mad. L. J. 484.
(14) (1933) I. L. R. 56 Mad. 616.
(15) (1936) I. L. R. 59 Mad. 289.
753
the view taken by these subsequent decisions of the Madras
High Court does not represent the true and correct approach
to the question.
In this connection we may incidentally refer to the
observations made by the Privy Council in T. P. Petherpermal
Chetty v. R. Muntandi Servai In that case the Privy
Council has no doubt dealing with the question on the basis
that the purpose of the fraudulent conveyance had been
defeated and so different principles naturally came into
play. While discussing the problem in its broad aspect,
however, Lord Atkinson, who delivered the judgment of the
Board, cited with approval the observations made in Mayne’s
Hindu Law which clearly support the view that we have taken.
Says Mayne: 1 ‘The, fact that A has assumed the name of B in
order to cheat X can be no reason whatever why a Court
should assist or permit B to cheat A. But if A requires the
help of the Court to get the estate back into his own
possession, or to get the title into his own name, it may be
very material to consider whether A has actually cheated X
or not. If he has done so by means of his alias, then it
has ceased to be a mere mask and has become a, reality. It
may be very proper for a Court to say that it will not allow
him to resume the individuality which he has once cast off
in order to defraud others. If, however, he has not
defrauded any one there can be no reason why the Court
should punish his intention by giving his estate away to B,
whose roguery is. even more complicated than his own This
appears to be the principle of the English decisions……
But where the fraudulent or illegal purpose has actually
been effected by means of the colorable grant then the maxim
applies In pari delicto potior est conditio possidentis.
The Court will help neither party and let the estate lie
where it falls (2)”. Lord Atkinson has observed that this
statement of the law is correct and in that sense
(1) (1908) L. R. 35 1. A. 98.
(2)Mayne’s Hindu Law, 7th Ed,p. 595 para 446(35 I.A.p 102)
751
the view that we have taken may be said to be consistent
with the opinion expressed by the Privy Council by approving
the statement of the law made by Mayne.
In support of the contrary view reliance is usually placed
on an early English decision in Doe, Dem. Roberts against
Roberts, Widow (1). In that case it was held that “ro man
can be allowed to allege his own fraud to avoid his own
deed; and, therefore, where a deed of conveyance of an
estate from one brother to another was executed, to give the
latter a colorable qualification to kill game. The document
was as against the parties to it valid and so sufficient to
support an ejectment for the premises”. In dealing with the
question raised. Bayley, J. observed “by the production of
the deed, the plaintiff established a prima facie title; and
we cannot allow the defendent to be heard in a Court of
Justice to say that his own deed is to be avoided by his own
fraud;” and Holroyd, J., added that “‘a deed may be avoided
on the ground of fraud, but then the objection must come
from a person neither party nor privy to it, for no man can
allege his own fraud in order to invalidate his own deed”.
This decision has, however, been commented on by Taylor in
his “Law of Evidence”. According to Taylor “it seems now
clearly settled that a party is not estopped by his deed
from avoiding it by proving that it was executed for a
fraudulent, illegal or immoral purpose (2)”. The learned
Author then refers to the case of Roberts (1) and adds “in
the subsequent case of Prole v. Wiggins (3) Sir Nicholas
Tindal observed that this decision rested on the fact that
the defence set up was inconsistent ‘with the deed”. Taylor
then adds that “,the case, however, can scarcely be
supported by this circumstance, for in an action of
ejectment by the grantee of an annuity to recover premises.
(1) (1819) 106 E. R. 401.
(2) Taylor’s “Law of Evidence”, Vol.I, 11th Ed. p. 97,
paragraph 93.
(3) (1837) 3 Bing. N. C. 2 35; 6 L J. C.P. 2; 43 R. R.
621.
755
on which it was secured, the grantor was allowed to show
that the premises were of less value than the annuity, and
consequently, that the deed required enrollment, although he
had expressly covenanted in the deed that the premises were
of greater value…………. According to the learned
author “the better opinion seems to be that where both
parties to an indenture either know, or have the means of
knowing, that it was executed for an immoral purpose, or in
contravention of a statute, or of public policy, neither of
them will be estopped from proving those facts which render
the instrument void ab initio; for although a party will
thus in certain cases be enabled to take advantage of his
own wrong, yet this evil is of a trifling nature in
comparison with the flagrant evasion of the law that would
result from the adoption of an opposite rule” (P. 98).
Indeed, according to Taylor, although illegality is not
pleaded by the defendant nor sought to be relied upon by him
by way of defence, yet the Court itself, upon the illegality
appearing upon the evidence, will take notice of it, and
will dismiss the action Ex turpi causa non oritur actio. No
polluted hand shall touch the pure fountain of Justice” (P.
93).
To the same effect is the opinion of Story:(1) “In general,
where parties are concerned in illegal agreements or other
transactions, whether they are mala prohibita or mala in se,
Courts of Equity following the rule of law as to
participators hi a common crime will not interpose to grant
any relief, acting upon the known maxim In pari delicto
potior est conditio defendentis et posidentis The old cases
often gave relief, both at law and inequity, where the party
would otherwise derive an advantage from his inequity. But
the modern doctrine has adopted a more severely just and
probably politic and moral rule, which is to leave the
parties where it finds them giving no relief and no
countenance to claims of this sort”‘.
(1) Story’ s Equity Jurisprudence, Vol.I. s. 421; English
edition by Randell, 1920, S. 298.
756
In judicial decisions where this question has been
considered a passage from the judgment of Lord Mansfield, C.
J., in Holman v. Johnson (1) is often quoted. If we may say
so with respect the said passage very succinctly and
eloquently brings out the true principles which should
govern the decision of such cases. Said Lord Mansfield, C.
J., “the objection that a contract is immoral or illegal as
between plaintiff and defendant sounds at all times very ill
in the mouth of the defendant. It is not for his sake,
however, that the objection is ever allowed; but it is
founded in general principles of policy which the defendant
has the advantage of, contrary to the real justice, as
between him and the plaintiff, by accident, if I may say so.
The principle of public policy is this- ex dolo malo non
oritur actio. No Court will lend its aid to a man who
founds his cause of action upon an immoral or an illegal
act. If, from the plaintiff’s own stating or otherwise the
cause of action appears to arise ex turpi causa or the
transgression of a positive law of this country, there the
court says he has no right to be assisted. It is upon that
ground the Court goes; not for the sake of the defendant,
but because they will not lend their aid to such a
plaintiff”.
On behalf of the respondents it was urged that the
principles on which the appellants rely are applicable to
contracts and not to conveyances. A conveyance, it is
argued, rests on a different basis from a contract, and so
the English decisions can. not be pressed into service by
the appellants. We are not impressed by this argument.
Even if respondent 1 has based his case on a conveyance the
position still remains that as a result of the facts proved
by respondent 2 and the appellants the conveyance is void ab
initio. It is a document fraudulently executed and as such
it conveys no title to the transferee at all. That being so
we do not think that in giving effect to the considerations
of
(1) (1775) 1 Cowrer 341.
757
public interest or policy it makes any difference that the
deed on which the present suit is brought is one of
conveyance.
It is then contended that in deciding the point raised by
the appellants we must look to the provisions of s. 84 of
the Indian Trusts Act and nothing else. The Indian Trusts
Act is a comprehensive code and it is only in cases failing
under s. 84 that it would be permissible to the Court to
apply the equitable principles or to invoke considerations
of public policy as the appellants purport to do. Section
84 provides that where the owner of property transfers it to
another for an illegal purpose and such purpose is not
carried into execution, or the transferor is not as guilty
as the transferee, or the effect of permitting the
transferee to retain the property might be to defeat the
provisions of any law, the transferee must hold the property
for the benefit of the transferor. We do not see how this
section is material or can give any assistance in the
decision of the point before us. In the present case the
transferee is not in possession of the properties and the
present case is not one of the three categories of cases
contemplated by the section. If the argument assumes that
the only cases where equitable principles can be invoked are
cases falling under s. 84 and s. 84 is exhaustive in that
sense, we have no difficulty in rejecting the said argument.
Since the present case is entirely outside s. 84 it
inevitably falls to be considered on considerations of
general policy, and as we have already held, judged in the
light of such considerations it must be held that the public
interest would be less injuriously affected if the property
is allowed to remain where it lies. Therefore, we must hold
that the High Court was in error in not giving effect to the
finding recorded by the trial court that the fraud mutually
agreed upon and contemplated by respondents 1 and 2 had been
effectively carried out and that in the
758
carrying out of the fraud both the parties were equally
guilty.
The appeal must, therefore, be allowed and the suit
instituted by respondent 1 must be dismissed. In the
circumstances of this case we direct that the parties should
bear their own costs, throughout.
Appeal allowed.