Immani Appa Rao & Ors Vs.
Gollapalli Ramalingamurthi & Ors [1961] INSC 278 (22 September 1961)
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.
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. Simi742 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 crossobjections.
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 expedient 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 action 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 respondent 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 portieres
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 thisex 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.
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