{"id":109686,"date":"1961-09-22T00:00:00","date_gmt":"1961-09-21T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/immani-appa-rao-and-others-vs-gollapalli-ramalingamurthi-and-on-22-september-1961"},"modified":"2017-10-12T15:38:52","modified_gmt":"2017-10-12T10:08:52","slug":"immani-appa-rao-and-others-vs-gollapalli-ramalingamurthi-and-on-22-september-1961","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/immani-appa-rao-and-others-vs-gollapalli-ramalingamurthi-and-on-22-september-1961","title":{"rendered":"Immani Appa Rao And Others vs Gollapalli Ramalingamurthi And … on 22 September, 1961"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Immani Appa Rao And Others vs Gollapalli Ramalingamurthi And … on 22 September, 1961<\/div>\n
Equivalent citations: 1962 AIR 370, \t\t 1962 SCR (3) 739<\/div>\n
Author: P Gajendragadkar<\/div>\n
Bench: Gajendragadkar, P.B.<\/div>\n
           PETITIONER:\nIMMANI APPA RAO AND OTHERS\n\n\tVs.\n\nRESPONDENT:\nGOLLAPALLI RAMALINGAMURTHI AND ORS.\n\nDATE OF JUDGMENT:\n22\/09\/1961\n\nBENCH:\nGAJENDRAGADKAR, P.B.\nBENCH:\nGAJENDRAGADKAR, P.B.\nSINHA, BHUVNESHWAR P.(CJ)\nDAYAL, RAGHUBAR\n\nCITATION:\n 1962 AIR  370\t\t  1962 SCR  (3) 739\n\n\nACT:\nFraud-Benami  Conveyance  in  fraud  of\t creditors-Suit\t  by\nbenamidar for possession-Plea of fraud in defence-If  barred\nby  estoppel-Proper approach-Public interest Indian  Trusts\nAct 1882 (2 of 1882) s. 84.\n\n\n\nHEADNOTE:\nThe  conveyance in suit was the result of a  collusive\tplan\nbetween\t respondent  1\tand  respondent\t 2  to\tdefraud\t the\nlatter's creditors.  The agreement was that respondent 1 was\nto  act as the benamidar for respondent 2 and his sons,\t the\nappellants.   The  fraud  succeeded  and  the  creditors  of\nrespondent 2 were in fact defrauded.  Thereafter  respondent\n1  brought  the present suit for declaration  of  title\t and\nrecovery   of  possession  against  respondent\t2  and\t the\nappellants  on\tthe  basis or the  conveyance.\t The  latter\nresisted  the  suit on the ground that\tthe  conveyance\t was\nfraudulent,  unsupported  by  consideration  and  passed  no\ntitle.\t The  High  Court in second  appeal  held  that\t the\nappellants  and\t respondent 2 were  estopped  from  pleading\nfraud  in the suit and decreed the same.  The  question\t was\nwhether the view taken by the High Court was correct and the\nostensible owner was entitled to a decree.\nHeld, that there could be no question of estoppel in a case\nwhere both the parties were guilty of fraud.\n740\nWhere\tin  a  case,  such  as\tthe  present,  one  of\t the\nconfederates  in fraud seeks a, decree on a conveyance\tthat\nresulted  from such faud and the other takes plea 'of  fraud\nin  defence, the matter has to be decided on  considerations\nof public policy.\nSince  one  of the parties must succeed in  any\t event,\t the\nproper approach for the Court to adopt would be the one that\nwas less injurious to public interest, namely, to allow the\nplea of fraud to be raised in defence and, if upheld,  allow\nthe  properties to remain where they were, than to decree  a\nsuit based on a fraudulent claim.\nIt  could make no difference in such a case if the suit\t was\nbased on a deed of conveyance and not a contract.\nVodiana\t Kamayya  v. Oudisa Kamayya, (1917) 32\tM.J.J.\t484,\nKepula\tKotayyar  Naidu v. Chitrapur  Mahalakshmama,  (1933)\nI.L.R.\t56  Mad.  646  and  Mutho  K.B.A.R.P.L.\t Arunachalam\nChettiar v. Rangaswamy Chettiar,<\/a> (1936) I.L.R. 59 Mad.\t289,\ndisapproved.\nBerg  v.  Sadler  and  Moore,  [1937]  2  K.B.\t158,  T.  P.\nPetherperumal  Chetty v. B. Muniandi Servai, (1908) L.R.  35\nI.A.  98  and  Holman v. Johnson, (1775)  1  Cowper,  34  1,\nreferred to.\nDeo, Dem.  Roberts against Roberts, Widow, (1819) 106 E.   R.\n401, considered.\nCase-law reviewed.\nSection 84 of the Indian Trusts Act is not exhaustive in its\nprovisions and since the present case falls outside of\tthat\nsection,  it has to be decided on considerations of  general\npolicy.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 76 of 1959.
\nAppeal from the judgment and decree dated November 16, 1951,
\nof the Madras High Court in Second Appeal No. 1656 of 1947.
\nT.   V. R. Tatachari, for the appellants.\n<\/p>\n
K.   N.\t Rajagopal  Sastri  and T.  Satyanarayana,  for\t the
\nrespondent No. 1.,
\n1961.\tSeptember  22.\t The  Judgment\tof  the\t Court\t was
\ndelivered by
\nGAJENDRAGADKAR,\t J.-This  is  an  appeal  by  a\t certificate
\ngranted by the High Court of Madras against its judgment and
\ndecree in Second Appeal
\n\t\t\t    741<\/span>
\nSuit  No.  27  of  1939 filed  by  respondent  1  Gollapalli
\nRamalingamurthi against respondent 2 Immani Venkanna and his
\nfour sons appellants 1 to 4. The appellants and respondent 2
\nare  members  of an undivided Hindu family.   The  case\t for
\nrespondent  1  was  that he  had  purchased  the  properties
\ndescribed’  in the Schedule attached to his plaint on  April
\n1,  1936  in  a sale held by the Official  Receiver  in\t the
\ninsolvency  of\trespondent  2. A registered  sale  deed\t was
\naccordingly issued in favour of respondent 1 (Ex.  P. 4)  on
\nSeptember   21,\t 1936.\t In  pursuance\tof  the\t said\tsale
\nrespondent  1  obtained\t possession and\t enjoyment  of\tsuch
\nproperties after partitioning them with Rayudu, the  brother
\nof  respondent 2. In October, 1938, however, the  appellants
\nand  respondent 2 trespassed on the said properties  and  so
\nrespondent  1  had  to\tfile the  present  suit\t claiming  a
\ndeclaration  of his title in regard to the said\t properties,
\nand  asking  for their possession and for  past\t and  future
\nmesne profits.\tThat in brief is the nature of the suit from
\nwhich the present appeal arises.\n<\/p>\n
The  claim  thus  made\tby respondents\t1  was\tresisted  by
\nrespondent 2 and the appellants on several grounds.  It\t was
\nurged  by  respondent  2  that the  transfer  in  favour  of
\nrespondent  1 was benami and that respondent 1 was  not\t the
\nreal  owner  of\t the properties.  In support  of  this\tcase
\nrespondent 2 gave, what according to him, was the antecedent
\nhistory\t of the sale in favour of respondent 1.\t He  alleged
\nthat he had sustained heavy losses in business conducted  by
\nhim  with the result that he was indebted to the  extent  of
\nRs. 25,000.  Apprehending that the suit properties would  be
\nlost  to the family at the instance of his creditors he\t and
\nhis  junior  mother-in-law  Kanthamani\tSeshamma  approached
\nrespondent  1’s\t father-in-law\tSuryaprakasa  Sastrulu\t for
\nadvice\tand on his advice respondent 2 executed a  collusive
\nand  nominal  mortgage\tdeed for Rs. 1,000 (Ex.\t  P.  9)  in
\nfavour of respondent 1 on June 16, 1933.  Simi-\n<\/p>\n
742<\/span><\/p>\n
larly,\ton the same advice a similar nominal transfer\tdeed
\nwas  executed in favour of respondent 1 on August  6,  1939,
\n(Ex.  P. 12) after the properties\tcovered by the\tsaid
\ndocument had been released    from an earlier non-possessory
\nmortgage  (Ex.\tP. II) which had been executed on  July\t 21,
\n1930.\tThus,  according  to  respondent  2  the   documents
\nexecuted  in  favour  of  respondent  1\t were  nominal\t and
\ncollusive  and\twere  not  supported  by\t\t any
\nconsideration.\n<\/p>\n
Respondent 2 further alleged that the execution of the\tsaid
\ncollusive documents between him and respondent 1 came to the
\nknowledge  of  some  of his creditors and  that\t led  to  an
\ninsolvency  petition  against  respondent 2 by\tone  of\t his
\ncreditors  in 1.P. No. 91 of 1933.  This petition was  filed
\nin the Court of the Subordinate Judge at Ellore on September
\n15,   1933,  against  respondent  2.  In  these\t  insolvency
\nproceedings  respondent 2 was adjudicated insolvent and\t the
\nOfficial  Receiver, appointed to take charge  of  respondent
\n2’s properties, brought the said properties to sale  subject
\nto  the aforesaid nominal mortgages in favour of  respondent\n<\/p>\n
1.  Kanthamani Seshamma purchased the said  properties\twith
\nher  own  money but benami in the name of  respondent  1  on
\ncondition   that  respondent  1\t would\treconvey  the\tsaid
\nproperties  to\tthe family of respondent 2  whenever  called
\nupon  to do so.\t The allegation of respondent 1 that he\t had
\nobtained possession of the properties was denied, and it was
\nurged  that respondent 1 had no title to the properties\t and
\nwas entitled to no relief in the suit filed by him.  That is
\nthe  substance of the pleas raised by respondent 2  and\t the
\nappellants  joined respondent 2 in making the same pleas  by
\ntheir separate written statement.\n<\/p>\n
At the trial three issues were tried as preliminary  issues;
\nthey were issues 5, 8 and 9. Issues 8, and 9 were in  regard
\nto  the court fees payable on the claim made in\t the  plaint
\nand regarding the pecuniary jurisdiction of the Court.\t The
\nCourt
\n743<\/span>
\nfound that it had jurisdiction to try the suit and it valued
\nthe  subject-matter  of the suit at Rs. 2,411-7-2  on  which
\nadditional court fees was paid by respondent 1. Issue 5\t was
\nas  to whether the sale in favour of respondent 1 bound\t the
\nshares\tof  the appellants in the  family  properties.\t The
\nlearned\t trial\tjudge answered this issue in favour  of\t the
\nappellants  purporting to follow the Full Bench decision  of
\nthe  Madras  High Court in Ramasastrulu v.  Balakrishna\t Rao
\n(1).  According to the said decision the right of respondent
\n2  as  the  father  of the appellants  and  manager  of\t the
\nundivided  Hindu family to sell the shares of his  sons\t for
\npurposes binding on the family did not vest in the  Official
\nReceiver on his insolvency, and so the sale effected by\t the
\nOfficial  Receiver  in favour of respondent 1 did  not,\t and
\ncould  not, in law bind the shares of the appellants in\t the
\nproperties conveyed.\n<\/p>\n
After these findings were recorded respondent 1 applied\t for
\nthe  amendment\tof  his plaint and the\tsaid  amendment\t was
\nallowed.   By this amendment respondent 1 alleged  that\t the
\nsuit   properties  were\t the  self-acquired  properties\t  of
\nrespondent 2 and so the appellants had no interest  therein.
\nOn  this alternative plea it was urged by respondent 1\tthat
\nthe properties sold by the Official Receiver to respondent 1
\nconveyed the entire properties which belonged to  respondent
\n2  alone.  In addition to this alternative claim made by  an
\namendment respondent 1 also made an alternative prayer\tthat
\nhe  should  be either given possession of the whole  of\t the
\nproperties  or\t1\/5th  of the properties  according  as\t the
\nproperties are found to be separate properties of respondent
\n2  or  are  held to be properties of  the  undivided  family
\nconsisting  of\trespondent  2  and  the\t appellants.   These
\nalternative  grounds taken by respondent 1 by virtue of\t the
\namendment were traversed by respondent 2 and the  appellants
\nin their additional written statements.\n<\/p>\n
(1)  I.L.R. 1943 Mad. 83.\n<\/p>\n
744<\/span><\/p>\n
When the suit went to trial on the amended pleadings several
\nissues were framed by the learned trial judge.\tIn  addition
\nto  the\t issues arising on the pleadings the  learned  trial
\njudge\tframed\tsuo  motu  one\tmore  issue  1(a),   whether
\nrespondent 1 was the benamidar of the appellants, and if yes
\nwhether the appellants could be allowed to plead the same as
\na  defence in the suit.\t The learned trial judge found\tthat
\nthe  suit  properties were the joint  family  properties  of
\nrespondent 2 and the appellants.  Alternatively he held that
\neven if they were originally the self-acquired properties of
\nrespondent   2\tthey  had  been\t blended  with\tthe   family
\nproperties  and thus became the properties of the  undivided
\nfamily.\t  He found that the shares of the appellants in\t the
\nsaid properties did not vest in the Official Receiver and so
\nwere  not  conveyed  to\t respondent  1.\t  He  came  to\t the
\nconclusion  that  the  purchase by  respondent\t1  from\t the
\nOfficial  Receiver  was only a benami  transaction  for\t the
\nbenefit\t of  the appellants and that respondent\t 1  had\t not
\nobtained   possession  of  the\tproperties  at\t any   time.
\nAccording  to the learned trial judge the sale in favour  of
\nrespondent  1 was fraudulent and was brought into  existence
\nto defraud the creditors of respondent 2; and this fraud had
\nbeen carried out and the creditors of respondent 2 had\tbeen
\ndefrauded.   Since  the\t fraud had  been  carried  out,\t the
\nlearned judge held respondent 2 and the appellants could not
\nbe allowed to plead the same as a defence in the suit.\tAs a
\nresult\t of  this  finding  the\t learned  judge\t  passed   a
\npreliminary decree in favour of respondent 1 for 1\/5th share
\nin  items 1 to 4 and 8 to 10 of the properties described  in
\nthe  Schedule attached to the plaint.  In regard to items  5
\nto  7  on  which  the  dwelling\t house\tof  the\t family\t was
\nconstructed  the  learned judge held that respondent  1\t was
\nentitled  to monetary compensation.  Consistently  with\t the
\npreliminary decree thus passed as to the share of respondent
\n1 the learned judge
\n745<\/span>
\nalso directed that future mesne profits should be determined
\nunder O. 20, r. 12(c) of the Code of Civil Procedure.
\n Against  this decree respondent 1 preferred an appeal,\t No.
\n288  of 1943, in the Court of the Subordinate  Judge,,\tWest
\nGodavari at Ellore.  In this appeal he claimed that a decree
\nshould\tbe passed in his favour in respect of the  whole  of
\nthe  properties sold to him by the Official  Receiver.\t The
\nappellants filed cross-objections and urged that the learned
\ntrial judge was in the error in framing issue 1 (a) suo motu
\nand  challenged his conclusion on it.  The  appellate  Court
\nagreed\twith  the  conclusions of the  trial  judge  and  so
\ndismissed both the appeal and the cross objections.
\nAgainst\t this appellate decree respondent I filed  a  Second
\nAppeal,\t No. 1656 of 1947, and the appellants  filed  cross-
\nobjections.   This  appeal came on for\thearing\t before\t Mr.
\nJustice\t Raghava Rao and it was urged before him that  since
\nthe  Provincial\t Insolvency (Amendment) Act No. 25  of\t1948
\nwhich  introduced  s.  28A had come into  operation  in\t the
\nmeanwhile  retrospectively the decision of the Courts  below
\nthat  the Official Receiver could not in law have  sold\t the
\nappellant’s shares in the family properties could not longer
\nbe  sustained.\tThis contention was raised by respondent  1.
\nIt  was\t met by the appellants by  their  counter-contention
\nthat issue 1(a) had been sprung upon them as a surprise;  it
\nhad  been  framed  by the trial court  after  it  had  heard
\narguments  on  both  sides and that the\t appellants  had  no
\nopportunity  to show that in fact the fraud contemplated  by
\nthe  parties  had not been effectively\tcarried\t out.\tThey
\nalleged\t that  if  the fraud had not been  carried  out\t the
\nprinciple  of estoppel invoked against them could  not\tcome
\ninto  play.   This contention raised by the  appellants\t was
\naccepted  by the High.\tCourt which called for a finding  by
\nthe  trial  co-art  on issue 1(a),  after  giving  both\t the
\nparties an opportunity to adduce evidence on the
\n746<\/span>
\nquestion  about\t the completion or otherwise  of  the  fraud
\nconnected with the benami purchase.  After remand the  trial
\ncourt took evidence and made a finding that respondent 2 bad
\nsuccessfully  played fraud on his creditors by\tgetting\t the
\nproperties purchased by respondent 1 benami for his sons  at
\nthe sale held by the Official Receiver.\t In due course\tthis
\nfinding was submitted by the trial court to the High  Court.
\nThereupon  the\tappellants  filed  objections  to  the\tsaid
\nfinding.\n<\/p>\n
After this finding was received the second appeal was  again
\nplaced\tfor  bearing by Mr. Justice Ragghava  Rao.   At\t the
\nsecond hearing the appellants raised the point the  amending
\nAct  by\t which\ts.  28A\t was  inserted\tin  the\t  Provincial
\nInsolvency Act was ultra vires.\t The learned judge overruled
\nthe  objections made by the appellants against\tthe  finding
\nsubmitted by the trail court on the issue remanded to it and
\naccepted  that\tfinding; but in view of the  fact  that\t the
\nvires of the amending Act was challenged he thought it\texp-
\nedient that the second appeal should be heared by a Bench of
\ntwo  judges.  That is how the second appeal  came  before  a
\ndivision Bench of the Madras High Court for final disposal.
\nIn  its final judgment the High Court has observed that\t the
\nargument that Act 25 of 1948 was ultra vires was not pressed
\nbefore\tthe  High  Court, that certain\tother  grounds\twere
\nsought\tto  be raised by the appellants but  they  were\t not
\nallowed\t to  be\t raised;  so that in  the  result  the\tmain
\nargument  urged\t before the High Court\twas  whether  having
\nregard to the fact that the fraud contemplated by respondent
\n2  and respondent 1 had been effectively carried out it\t was
\nopen   to  the\tappellants  to\tplead  that  fraud   against
\nrespondent  1 in respect of his claim for possession of\t the
\nsuit  properties  in  the  present  suit.   The\t High  Court
\nconsidered  the\t conflicting  decisions on  this  point\t and
\nadhered\t to  the view which has prevailed in the  said\tHigh
\nCourt
\n747<\/span>
\nsince  the decision in Vodiana Kamayya v.  Gudisa.   Mamayya
\n(1)  and  held\tthat the appellants and\t respondent  2\twere
\nestopped  from setting up the fraud against respondent 1  in
\nhis  present  suit.  In the result respondent 1’s  claim  in
\nrespect\t of the whole of the properties conveyed to  him  by
\nthe Official Receiver has been decreed.\t It is against\tthis
\ndecree\tthat the appellants have come to this Court  with  a
\ncertificate  granted  by the High Court\t and  the  principal
\npoint which has been argued before us on their behalf by Mr.
\nTatachari  is that the High Court was in error in coming  to
\nthe conclusion that in a case where both the transferor\t and
\nthe  transferee’  were equal in fraud and  where  the  fraud
\ncontemplated  has  been carried out it is not, open  to\t the
\nappellants to plead that fraud in defence against the  claim
\nmade by respondent 1 to obtain possession of the  properties
\nconveyed to him benami by the Official Receive Mr. Tatachari
\ncontends that where the parties are equally guilty  estoppel
\ncannot be pleaded against the appellants and the estate must
\nbe allowed to remain where it rests.\n<\/p>\n
The  point thus raised lies within a narrow compass and\t the
\nmaterial  facts\t which\tgive rise to it\t are  no  longer  in
\ndispute.   The transaction in favour of respondent 1 is\t the
\nresult of a fraudulent plan to which both he and  respondent
\n2  agreed.  In was effected with the mutual consent  of\t the
\nvendore\t and  the  vendee to defraud the  creditors  of\t the
\nvendor.\t That being so the transfer is not supported by\t any
\nconsideration  and  the\t transferee agreed  to\tact  as\t the
\nbenamindar until the transferor required him to reconvey the
\nproperties to his sons.\t The object intended to be  achieved
\nand  the  fraud initially contemplated by both\tthe  parties
\nhave  been achieved and the creditors of respondent  2\thave
\nbeen  defrauded.   Possession of  the  properties,  however,
\nremained with respondent 2 and his sons the appellants;\t and
\nin the present
\n748<\/span>
\nsection\t respondent  1\tseeks to obtain\t possession  of\t the
\nproperties on the ground that a deed of conveyance has\tbeen
\npassed\tin his favour by the Official Receiver.\t  Thus\tboth
\nthe  parties are confederates in the fraud and\tare  equally
\nguilty.\t  Respondent  2 and the appellants  seek  to  resist
\nrespondent 1’s claim to recover possession of the properties
\nconveyed to claim on the ground that the conveyance is\tvoid
\nhaving been effected for a fraudulent purpose which has been
\ncarried\t out.  They urge that it has not been  supported  by
\nany  consideration and no title has passed in favour of\t the
\ntransferee.  Respondent 1 sheets this challenge to his title
\nby pleading that respondent 2 who participated in the  fraud
\ncannot\tbe allowed to plead his own fraud in support of\t his
\nrefusal\t to part with the possession of the properties,\t and
\nhe  urges  that there is a conveyance duly executed  in\t his
\nfavour\ton  which  the Court  must  act\t without  permitting
\nrespondent 2 to challenge its validity.\t The High Court\t his
\nupheld\tthe plea of respondent 1 and has not allowed  either
\nrespondent for the appellants to plead the fraud in  support
\nof  their  defence.  Is this decision right?   That  is\t the
\nquestion which falls to be decided in the present appeal.
\nReported  decisions  bearing  on  this\tquestion  show\tthat
\nconsideration  of this problem often gives rise to what\t may
\nbe  described as a battle of legal maxims.   The  appellants
\nemphasised   that   the\t doctrine  which   is\tpreeminently
\napplicable  to the present case is ex dolo malo\t non  oritur
\naction or ex turpi causa non oritur actio.  In other  words,
\nthey contended that the right of action cannot arise out  of
\nfraud or out of transgression of law; and according to\tthem
\nit  is necessary in such a case that possession should\trest
\nwhere\tit  lies  in  pari  delicto  potior   est   conditio
\npossidenties;  where each party is equally in fraud the\t law
\nfavors\thim  who is actually in possession,  or\t where\tboth
\nparties\t are  equally guilty the estate will  lie  where  it
\nfalls.\t On  the other hand, respondent 1  argues  that\t the
\nproper\tmaxim  to apply is nemo allegans  suam\tturpitudinum
\naudiendumest,
\n749<\/span>
\nwhoever\t has first to plead turpitudinum should\t fail;\tthat
\nparty  fails  who  first has to allege\tfraud  in  which  he
\nparticipated.\tIn  other words, the  principle\t invoked  by
\nrespondent  1 is that a man cannot plead his own fraud.\t  In
\ndeciding  the question as to which maxim should\t govern\t the
\npresent case it is necessary to recall what Lord Wright, M.’
\nR.  observed about these maxims in Berg v. Sadler and  Moore
\n(1).  Referring to the maxim ex turpi causa non oritur actio
\nLord Wright observed that “this maxim, though veiled in\t the
\ndignity\t of learned language, is a statement of a  principle
\nof  great  importance; but like most maxims it is  much\t too
\nvague and much too general to admit of application without a
\ncareful\t consideration\tof  the\t circumstances\tand  of\t the
\nvarious\t definite  rules which have been laid  down  by\t the
\nauthorities”.  Therefore, in deciding the question raised in
\nthe present appeal it would be necessary for us to  consider
\ncarefully  the true scope and effect of the  maxims  pressed
\ninto  service by the rival parties and to enquire  which  of the  maxims
\nwould  be  relevant  and  applicable  in   the
\ncircumstances  of  the case.  It is common-ground  that\t the
\napproach  of  the Court in determining the  present  dispute
\nmust  be  conditioned  solely by  considerations  of  public
\npolicy.\t  Which\t principle would be more conducive  to,\t and
\nmore  consistent with, public interest, that is the crux  of
\nthe matter.  To put it differently having regard to the fact
\nthat  both the parties before the Court are confederates  in
\nthe fraud, which approach would be less injurious to  public
\ninterest.   Whichever  approach is adopted one\tparty  would
\nsucceed and the other would fail, and so it is necessary  to
\nenquire as to which party’s success would be less  injurious
\nto public interest.\n<\/p>\n
Out  of the two confederates in fraud respondent 1  wants  a
\ndecree\tto be passed in his favour and that means  he  wants
\nthe   active  assistance  of  the  Court  in  reaching\t the
\nproperties possession of
\n(1)  [1937] 2 K. B. 158, 162.\n<\/p>\n
750<\/span><\/p>\n
which  has been withheld from him by respondent 2  and’\t the
\nappellants.  Now. if the defense raised by the appellants is
\nshut out respondent 1 would be entitled to a decree  because
\nthere is an ostensible deed of conveyance which purports  to
\nconvey\ttitle  to  him\tin  respect  of\t the  properties  in
\nquestion;  but, in the circumstances’, passing a  decree  in
\nfavour\tof respondent 1 would be actively assisting  respon-
\ndent 1 to give effect to the fraud to which he was a  party
\nand  in that sense the Court would be allowed to be used  as
\nan  instrument\tof fraud and that is  clearly  and  patently
\ninconsistent with public interest.\n<\/p>\n
On  the other hand, if the Court decides to allow  the\tplea
\nof’  fraud to be raised the Court would be in a position  to
\nhold  an enquiry on the point and determine whether it is  a
\ncase of mutual fraud and whether the fraud intended by\tboth
\nthe  parties  has been effectively carried out.\t  If  it  is
\nfound that both the parties are equally guilty and that\t the
\nfraud  intended by them has been carried out  ‘the  position
\nwould  be that the party raising the defence is\t not  asking
\nthe  Court’s assistance in any active manner; all  that\t the
\ndefence\t suggests is that a confederate in fraud should\t not
\nbe  permitted to obtain a decree from the Court because\t the
\ndocument of title on which the claim is based really conveys
\nno  title at all It is true that as a result  of  permitting
\nrespondent  2 and the’ appellants to prove their  plea\tthey
\nwould\tincidentally   be.  assisted  in   retaining   their
\npossession;  but  this\tassistance is of  a  purely  passive
\ncharacter and all that the Court is doing in effect is\tthat
\non the facts proved it proposes to allow possession to\trest
\nwhere it lies.\tIt appears to us that this latter course  is
\nless injurious to public interest than the-former.
\nThere can be no question of estoppel in such  a case for the
\nobvious reason that the fraud in question was agreed by both
\nthe  parties and both parties have assisted ‘each other’  in
\ncarrying  out  the  fraud.  When it is said  that  a  person
\ncannot
\n 751<\/span>
\nplead his own fraud it really means that a person cannot  be
\npermitted to go to a Court of Law to seek for its assistance
\nand  yet  base his claim for the  Court’s  assistanceon\t the
\nground\tof  his\t fraud.\t  In this  connection  it  would  be
\nrelevant  to  remember that respondent 1 can be said  to  be
\nguilty\tof a double fraud; first he joined respondent  2  in
\nhis fraudulent scheme and participated in the commission  of
\nfraud  the  object of which was to defeat the  creditors  of
\nrespondent  2,\tand  then  he  committed  another  fraud  in
\nsuppressing  from the Court the fraudulent character of\t the
\ntransfer when he made out the claim for the recovery of\t the
\nproperties conveyed to him.  The conveyance in his favour is
\nnot  supported\tby any consideration and is  the  result  of
\nfraud;\tas  such it conveys no titile to him.  Yet,  if\t the
\nplea  of  fraud is not allowed to be raised in\tdefence\t the
\nCourt  would  in substance be giving effect  to\t a  document
\nwhich is void ab initio.  Therefore, we are inclined to hold
\nthat the paramount consideration of public interest requires
\nthat  the plea of fraud should be allowed to be raised’\t and
\ntried,\tand if it is upheld the estate should be allowed  to
\nremain\twhere  it rests.  The adoption of  this\t course,  we
\nthink,\tis  less  injurious  to\t public\t interest  than\t the
\nalternative   course  of  giving  effect  to  a\t  fraudulent
\ntransfer.\n<\/p>\n
This  question\thas  been the  subject\tmatter\tof  judicial
\ndecisions  in most of our High Courts; and it  appears\tthat
\nthe consensus of judicial opinion with the exception of\t the
\nMadras\tHigh  Court is in favour of the view which  we\thave
\ntaken.\t In  Bombay  the principle that in  dealing  with  a
\ncontest\t between  two  participants in\tfraud  posses.\tsion
\nshould\tbe allowed to remain where it rests appears to\thave
\nbeen consistently accepted until Chief Justice Sir  Lawrence
\nJenkins\t struck\t a  note  of  dissent  in  Sidlingappa\t Bin
\nGaneshappa   v.\t Hirwa\tBin  Tukasa  (1).   Thereafter\t the
\ncorrectness of
\n(1)  (1907) 1. L. R. 31 Bom. 405.\n<\/p>\n
\t\t\t    752<\/span><\/p>\n
this  judgment\twas  sometimes\tdoubted\t in  the  subsequent
\ndecisions  of the said High Court [Vide :  Lakshman  Balvant
\nKhisti V. Vasudev Mohoniraj   Pande(1)] and finally the Full
\nBench of the said High\t Court reversed the said decision of
\nSir Lawrence Jenkins in Guddappa Chikkappa Kurbar v.  Balaji
\nRamji Dange (2).  Since then the decision of the Full  Bench
\nhas  been  consistently followed in the Bombay\tHigh  Court.
\nThe same view has been accepted by the Calcutta,  Allahabad,
\nNagpur\tand Patna High Courts [Vida : Preomath Koer v.\tKazi
\nMahomed\t Shazid(3).   Emperor v.  Abdul\t Sheikh(4),  Vilayat
\nHusain v. Misran (5), Nawab Singh v. Daljit Singh (6), Qader
\nBaksh v.  Hakim (7), Bishwanath g\/o Karunashanker Shukla  v.
\nSurat  Singh alias Chhuttu Singh s\/o Bhabhut Singh (s),\t and
\nJ.  C.\tField Electric Supply v. K. Agarwala  (9)  (Case  of
\nillegal contract)].\n<\/p>\n
In Madras the earlier decisions of the High Court appear  to
\nhave,  taken the same view [Vide: Venkataramana\t v.  Viramma
\n(10),  Yaramati\t Krish. nayya v. Chundru  Papayya  (11)\t and
\nRagha. valu Chetty v. Adinarayana Chetty (12)].\t In the case
\nof  Vodiana  Kamayya  v. Gudisa\t Mamayya  (13),\t however,  a
\nDivision Bench of the Madras High Court upheld the view that
\na person who has conveyed property benami to another for the
\npurpose of effecting a fraud on his creditors cannot,  where
\nthe fraud has been effected, set up the benami character  of
\nthe  transaction  by  way  of  defence\tin  a  suit  by\t the
\ntransferee for possession under the conveyance.\t Since\tthen
\nthis  view  has prevailed in the Madras High Court  [vide  :
\nKeppula\t Kotayyar Naidu v. Chitrapu Mahalak8hmamma (14)\t and
\nMuthu  K. R. A. R. P. L. Arunarhalam Chettiar v.  Bangaswamy
\nChettiar<\/a>  (1.5)]. In our opinion
\n(1) (1930) 33 Bom. L.R. 356.\n<\/p>\n
(2) I. L. R 1941 Bom. 575.\n<\/p>\n
(3) (1903-4) 8 C. W. M. 620.\n<\/p>\n
(4)  A. I. R. 1920 Cal. 90.\n<\/p>\n
(5) (1923) I. L. R. 45 All. 396.\n<\/p>\n
(6)  (1936) 1. L. R. 58 All.  842.\n<\/p>\n
(7) (1932) 1. L. R. 13 Lab. 713.\n<\/p>\n
(8) A.I. R. 1943 Nag. 11 3.\n<\/p>\n
(9)(1951) 1. R. 30 Pat. 137.\n<\/p>\n
(10)  (1887) 1. L. R.10 Mad. 17.\n<\/p>\n
(11) (1 897) 1. L. R. 20 Mad. 326
\n(12)  (1 909) 1. L. R. 32  Mad. 323.\n<\/p>\n
(13) (1917) 32 Mad. L. J. 484.\n<\/p>\n
(14) (1933) I. L. R. 56 Mad.  616.\n<\/p>\n
(15) (1936) I. L. R. 59\t Mad. 289.\n<\/p>\n
753<\/span><\/p>\n
the  view taken by these subsequent decisions of the  Madras
\nHigh Court does not represent the true and correct  approach
\nto the question.\n<\/p>\n
In this connection we may incidentally refer to\t  the
\nobservations made by the Privy Council in T. P. Petherpermal
\nChetty v. R. Muntandi Servai In\t   that\t  case\t the   Privy
\nCouncil has no doubt dealing with the question on the  basis
\nthat  the  purpose  of the fraudulent  conveyance  had\tbeen
\ndefeated  and  so different principles naturally  came\tinto
\nplay.\tWhile  discussing the problem in its  broad  aspect,
\nhowever,  Lord Atkinson, who delivered the judgment  of\t the
\nBoard, cited with approval the observations made in  Mayne’s
\nHindu Law which clearly support the view that we have taken.
\nSays Mayne: 1 ‘The, fact that A has assumed the name of B in
\norder  to  cheat  X can be no reason whatever  why  a  Court
\nshould assist or permit B to cheat A. But if A requires\t the
\nhelp  of  the  Court to get the estate\tback  into  his\t own
\npossession, or to get the title into his own name, it may be
\nvery  material to consider whether A has actually cheated  X
\nor  not.  If he has done so by means of his alias,  then  it
\nhas ceased to be a mere mask and has become a, reality.\t  It
\nmay be very proper for a Court to say that it will not allow
\nhim  to resume the individuality which he has once cast\t off
\nin  order  to  defraud\tothers.\t If,  however,\the  has\t not
\ndefrauded  any\tone  there can be no reason  why  the  Court
\nshould punish his intention by giving his estate away to  B,
\nwhose  roguery is. even more complicated than his  own\tThis
\nappears\t to be the principle of the English  decisions……
\nBut  where  the fraudulent or illegal purpose  has  actually
\nbeen effected by means of the colorable grant then the maxim
\napplies\t In  pari delicto potior est  conditio\tpossidentis.
\nThe  Court  will help neither party and let the\t estate\t lie
\nwhere  it falls (2)”.  Lord Atkinson has observed that\tthis
\nstatement of the law is correct and in that sense
\n(1) (1908) L. R. 35 1. A. 98.\n<\/p>\n
(2)Mayne’s Hindu Law, 7th Ed,p. 595 para 446(35 I.A.p 102)
\n751<\/span>
\nthe  view  that we have taken may be said to  be  consistent
\nwith the opinion expressed by the Privy Council by approving
\nthe statement of the law made by Mayne.\n<\/p>\n
In  support of the contrary view reliance is usually  placed
\non  an early English decision in Doe, Dem.  Roberts  against
\nRoberts,  Widow (1).  In that case it was held that “ro\t man
\ncan  be\t allowed to allege his own fraud to  avoid  his\t own
\ndeed;  and,  therefore,\t where a deed of  conveyance  of  an
\nestate from one brother to another was executed, to give the
\nlatter a colorable qualification to kill game.\tThe document
\nwas as against the parties to it valid and so sufficient  to
\nsupport an ejectment for the premises”.\t In dealing with the
\nquestion raised.  Bayley, J. observed “by the production  of
\nthe deed, the plaintiff established a prima facie title; and
\nwe  cannot  allow the defendent to be heard in\ta  Court  of
\nJustice to say that his own deed is to be avoided by his own
\nfraud;” and Holroyd, J., added that “‘a deed may be  avoided
\non  the\t ground of fraud, but then the objection  must\tcome
\nfrom a person neither party nor privy to it, for no man\t can
\nallege his own fraud in order to invalidate his own deed”.
\nThis  decision has, however, been commented on by Taylor  in
\nhis  “Law of Evidence”.\t According to Taylor “it  seems\t now
\nclearly\t settled  that a party is not estopped by  his\tdeed
\nfrom  avoiding\tit  by proving that it was  executed  for  a
\nfraudulent,  illegal or immoral purpose (2)”.\tThe  learned
\nAuthor\tthen refers to the case of Roberts (1) and adds\t “in
\nthe  subsequent\t case of Prole v. Wiggins (3)  Sir  Nicholas
\nTindal\tobserved that this decision rested on the fact\tthat
\nthe defence set up was inconsistent ‘with the deed”.  Taylor
\nthen  adds  that  “,the\t case,\thowever,  can  scarcely\t  be
\nsupported  by  this  circumstance,  for\t in  an\t action\t  of
\nejectment by the grantee of an annuity to recover premises.
\n(1)  (1819) 106 E. R. 401.\n<\/p>\n
(2)  Taylor’s  “Law  of Evidence”, Vol.I, 11th\tEd.  p.\t 97,
\nparagraph 93.\n<\/p>\n
(3)  (1837)  3 Bing.  N. C. 2 35; 6 L J.  C.P. 2; 43 R.\t R.\n<\/p>\n
621.
\n755<\/span>
\non  which  it was secured, the grantor was allowed  to\tshow
\nthat  the premises were of less value than the annuity,\t and
\nconsequently, that the deed required enrollment, although he
\nhad expressly covenanted in the deed that the premises\twere
\nof  greater  value………….\t According  to\tthe  learned
\nauthor\t“the  better  opinion seems to be  that\t where\tboth
\nparties\t to an indenture either know, or have the  means  of
\nknowing, that it was executed for an immoral purpose, or  in
\ncontravention of a statute, or of public policy, neither  of
\nthem will be estopped from proving those facts which  render
\nthe  instrument\t void ab initio; for although a\t party\twill
\nthus  in certain cases be enabled to take advantage  of\t his
\nown  wrong,  yet  this\tevil is\t of  a\ttrifling  nature  in
\ncomparison  with the flagrant evasion of the law that  would
\nresult\tfrom  the  adoption of an opposite  rule”  (P.\t98).
\nIndeed,\t according  to Taylor, although\t illegality  is\t not
\npleaded by the defendant nor sought to be relied upon by him
\nby way of defence, yet the Court itself, upon the illegality
\nappearing  upon\t the evidence, will take notice of  it,\t and
\nwill dismiss the action Ex turpi causa non oritur actio.  No
\npolluted hand shall touch the pure fountain of Justice”\t (P.\n<\/p>\n
93).\n<\/p>\n
To the same effect is the opinion of Story:(1) “In  general,
\nwhere  parties are concerned in illegal agreements or  other
\ntransactions, whether they are mala prohibita or mala in se,
\nCourts\t of  Equity  following\tthe  rule  of  law   as\t  to
\nparticipators hi a common crime will not interpose to  grant
\nany  relief,  acting upon the known maxim  In  pari  delicto
\npotior est conditio defendentis et posidentis The old  cases
\noften gave relief, both at law and inequity, where the party
\nwould otherwise derive an advantage from his inequity.\t But
\nthe  modern  doctrine has adopted a more severely  just\t and
\nprobably  politic  and\tmoral rule, which is  to  leave\t the
\nparties\t where\tit  finds  them\t giving\t no  relief  and  no
\ncountenance to claims of this sort”‘.\n<\/p>\n
(1) Story’  s  Equity Jurisprudence, Vol.I. s. 421;  English
\nedition by Randell, 1920, S. 298.\n<\/p>\n
756<\/span><\/p>\n
 In   judicial\tdecisions  where  this\tquestion  has\tbeen
\nconsidered a passage from the judgment of Lord Mansfield, C.
\nJ., in Holman v. Johnson (1) is often quoted.  If we may say
\nso  with  respect  the\tsaid  passage  very  succinctly\t and
\neloquently  brings  out\t the true  principles  which  should
\ngovern the decision of such cases.  Said Lord Mansfield,  C.
\nJ., “the objection that a contract is immoral or illegal  as
\nbetween plaintiff and defendant sounds at all times very ill
\nin  the\t mouth of the defendant.  It is not  for  his  sake,
\nhowever,  that\tthe  objection is ever allowed;\t but  it  is
\nfounded in general principles of policy which the  defendant
\nhas  the  advantage  of, contrary to the  real\tjustice,  as
\nbetween him and the plaintiff, by accident, if I may say so.
\nThe  principle\tof public policy is this- ex dolo  malo\t non
\noritur\tactio.\t No  Court will lend its aid to\t a  man\t who
\nfounds\this  cause of action upon an immoral or\t an  illegal
\nact.  If, from the plaintiff’s own stating or otherwise\t the
\ncause  of  action  appears to arise ex turpi  causa  or\t the
\ntransgression  of a positive law of this country, there\t the
\ncourt says he has no right to be assisted.  It is upon\tthat
\nground\tthe Court goes; not for the sake of  the  defendant,
\nbut  because  they  will  not  lend  their  aid\t to  such  a
\nplaintiff”.\n<\/p>\n
On  behalf  of\tthe  respondents  it  was  urged  that\t the
\nprinciples  on which the appellants rely are  applicable  to
\ncontracts  and\tnot  to conveyances.  A\t conveyance,  it  is
\nargued,\t rests on a different basis from a contract, and  so
\nthe  English decisions can. not be pressed into\t service  by
\nthe  appellants.   We are not impressed\t by  this  argument.
\nEven if respondent 1 has based his case on a conveyance\t the
\nposition still remains that as a result of the facts  proved
\nby respondent 2 and the appellants the conveyance is void ab
\ninitio.\t It is a document fraudulently executed and as\tsuch
\nit conveys no title to the transferee at all.  That being so
\nwe do not think that in giving effect to the  considerations
\nof
\n(1)  (1775) 1 Cowrer 341.\n<\/p>\n
757<\/span><\/p>\n
public\tinterest or policy it makes any difference that\t the
\ndeed  on  which\t the  present suit  is\tbrought\t is  one  of
\nconveyance.\n<\/p>\n
It  is then contended that in deciding the point raised\t by
\nthe  appellants we must look to the provisions of s.  84  of
\nthe  Indian Trusts Act and nothing else.  The Indian  Trusts
\nAct is a comprehensive code and it is only in cases  failing
\nunder  s.  84 that it would be permissible to the  Court  to
\napply  the equitable principles or to invoke  considerations
\nof  public policy as the appellants purport to do.   Section
\n84 provides that where the owner of property transfers it to
\nanother\t for  an  illegal purpose and such  purpose  is\t not
\ncarried\t into execution, or the transferor is not as  guilty
\nas   the  transferee,  or  the\teffect\tof  permitting\t the
\ntransferee  to\tretain the property might be to\t defeat\t the
\nprovisions of any law, the transferee must hold the property
\nfor  the benefit of the transferor.  We do not see how\tthis
\nsection\t is  material  or can give  any\t assistance  in\t the
\ndecision  of the point before us.  In the present case\tthe
\ntransferee  is not in possession of the properties  and\t the
\npresent\t case  is not one of the three categories  of  cases
\ncontemplated  by the section.  If the argument assumes\tthat
\nthe only cases where equitable principles can be invoked are
\ncases  falling under s. 84 and s. 84 is exhaustive  in\tthat
\nsense, we have no difficulty in rejecting the said argument.
\nSince  the  present  case  is  entirely\t outside  s.  84  it
\ninevitably  falls  to  be considered  on  considerations  of
\ngeneral\t policy, and as we have already held, judged in\t the
\nlight of such considerations it must be held that the public
\ninterest would be less injuriously affected if the  property
\nis allowed to remain where it lies.  Therefore, we must hold
\nthat the High Court was in error in not giving effect to the
\nfinding recorded by the trial court that the fraud  mutually
\nagreed upon and contemplated by respondents 1 and 2 had been
\neffectively carried out and that in the
\n758<\/span>
\ncarrying  out  of the fraud both the  parties  were  equally
\nguilty.\n<\/p>\n
The  appeal  must,  therefore,\tbe  allowed  and  the\tsuit
\ninstituted  by\trespondent  1 must  be\tdismissed.   In\t the
\ncircumstances of this case we direct that the parties should
\nbear their own costs, throughout.\n<\/p>\n
Appeal allowed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Immani Appa Rao And Others vs Gollapalli Ramalingamurthi And … on 22 September, 1961 Equivalent citations: 1962 AIR 370, 1962 SCR (3) 739 Author: P Gajendragadkar Bench: Gajendragadkar, P.B. 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. 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