Report No. 70
12.72. Other limitation-Calcutta case.-
We have so far dealt with certain special situations in which courts allow or refuse a transferor to recover property illegally transferred.
Are there any other situations in which the transferor can recover? Where the owner of a house lets out the property to the defendant for the immoral purpose of running a brothel, the executors and trustees of the will of the owner, who were not in pari delicto or in particeps criminis, it has been hold1 can sue to eject the defendant on the basis that the transfer is void and the court will accord relief to the claimants.
P.B. Mukerji J. held that Averst v. Jinkins, (1874) 16 Eq 275 had been misapplied and misunderstood in many cases in India.
It is elementary that property can be transferred only by a person who owns it or who, though not owning it is authorised to do so. A transfer by any other person has no legal effect-that is, of course, a rule subject to certain qualifications.2 The general rule is that no man can confer a better title than that which he himself has. However, occasionally, by either accident or design, a testator or transferor gives his own property to a beneficiary and purports to give some of the beneficiary's property to a third party.
In this case, the beneficiary becomes subject3 to a general principle that a person cannot take under a will without conforming to all its provisions4. If, therefore, he is to take the testator's or transferor's, it was held that the principle in that case should not be understood as laying down an invariable and inflexible rule of disqualification for a plaintiff seeking the aid of court. The principle of that case should be understood with the limitation referred to by Lord Selborne himself in that judgment.
The true boundaries of Averst v. Jenkins, when applied in India were rightly indicated by Sir Subramania Ayyar, J. in ILR 28 Mad 413 and Lokur, J. in AIR 1947 Bom 198. Refusal by the courts to grant relief on the basis of such maxims as ex turpi cause non oritur octio or pari delicto or particeps criminis is based on grounds of public policy and therefore if the same or higher public policy demands in a particular context that relief should be given, then such maxims should not be used any more as a bar and the courts should not deny relief.
The rule in Averst v. Jenkins should never be used to (a) defeat statutes like section 6(h)(2) of the Transfer of Property Act, (b) make the plaintiff liable to prosecution, conviction and punishment under such statute as the Bengal Suppression of Immoral Traffic Act, and (c) violate the express prohibition of the Constitution such as Article 23 saying that traffic in human being is prohibited. This rule in any event should not be extended to the class of innocent trustees and executors who are administering the estates under orders of court.
1. Pranballav, AIR 1958 Cal 713, paras. 44, 114, 117 (P.B. Muktherji & R.S. Bachawat, JJ.).
2. e.g. see sections 35, 37, 38, 41, 43, Transfer of Property Act, and certain provisions in the Sale of Goods Act.
3. Mellows Law of Succession, (1973), p. 485.
4. Codrington v. Codrington, 1875 LR 7 HL 854 (861, 862) (Lord Cairns).
12.73. Bachawat, J. agreed, but his reasoning was slightly different. In English law- (a) A completed transfer of property made under an unlawful agreement or for an unlawful purpose is valid at law, (b) The title so acquired is protected and enforced and may be used by the transferee both as a shield and as a weapon of offence, (c) In the absence of some special ground of interference a Court of Equity will not on the ground of illegality set aside a transfer valid at law and will let the estate lie where it falls, (d) Averst v. Jenkins, (1874) 16 Eq. 275 laws down the principles upon which a Court of Equity may or may not set aside such a transfer.
The case of Averst v. Jenkins, (1874) 16 Eq. 275 has no application where the transfer is void.
In Indian law a transfer for an unlawful object or consideration within the meaning of section 23 of the Contract Act is prohibited by section 6(h), clause 2 of the Transfer of Property Act. Such a transfer is void and need not be set aside.
In Indian law the transferee cannot recover the property on the strength of such a transfer.
12.74. In Indian law, according to Bachawat, J., the transferor claiming that the transfer is void may sue to recover the property on the strength of his original title and in general he may be given relief though he is particeps criminis in the following cases:
(a) Where his case falls within one of the three exceptions recognised by section 84 of the Indian Trusts Act, or
(b) (i) Where public interest or the interest of third parties requires that the relief should be given, or (ii) where denial of the relief may defeat a legal prohibition, or (iii) where the transaction is such that it ought to be allowed to stand on grounds of public policy.
Relief may be given upon such terms as the justice of the case may require. It is an open question whether the transferor should be given relief under other circumstances also.
12.75. According to Bachawat, J., further when an instrument is void on account of illegality not appearing on the face of it and the transaction is such that it cannot stand on grounds of public policy, the Court will decree its cancellation at the suit of the particeps criminis on equitable terms.
The power of the Court to decree cancellation of void instruments of transfer must be exercised in accordance with sections 39 to 41 of the Specific Relief Act. The power of the Court to decree cancellation and rescission of unlawful contracts in writing is regulated by sections 35(b), 38 and 39 to 41 of the Specific Relief Act. Reasons or public policy allow the defendant to take the plea of particeps criminis. Greater reasons of public policy may allow the plaintiff to repel the plea.
12.76. It would appear that the decision in the Calcutta case should be confined to the special facts of the case. There were several extraordinary features. Illegality in this case was represented by conduct which, if not rectified, might have involved innocent parties in a criminal prosecution. There was also the constitutional directive and further the fact that the executors did make their repudiation at the earliest possible opportunity available to them.
12.77. Section 24, Contract Act.-
It may be stated that the Transfer of Property Act contains no provision corresponding to section 24 of the Contract Act, and judicial decisions on the subject do not lead to a very definite position,1 in this regard. Where, therefore, a transaction comprises two transfers for one consideration and the consideration is lawful but the "object" of one of the transfers is void, it does not necessarily follow that the transfers are all void.
In the Allahabad case, Mukherjee, J. has discussed at length the applicability of section 24 of the Contract Act to section 6(h) of the Transfer of Property Act and has taken the view that section 24 does not apply. He has criticised the contrary view taken in an earlier case.2 In the same case, Suleman, J. agreed with him.
1. Dip Narain v. Nageshar, AIR 1930 All 1.
2. Kanhai v. Tilak, (1912) 16 Indian Cases 542.
12.78. No change.-
Having considered all aspects of the matter, we have come to the conclusion that the clause does not need any amendment, and it may be expected that the provisions of law-statutory and the non-statutory-which should be read along with the section will be kept in mind by those concerned with illegal transfers.
12.79. Section 6(h)(3).-
This takes us to section 6(h)(3), under which a person who is disqualified to be a transferee cannot be a transferee-really a self evident proposition which has been enacted only in order to make the section complete as far as possible. The question who can be a transferor is dealt with in section 7. The question who can be a transferee is not dealt with in a general way in the Act, except that certain persons are prohibited from purchasing actionable claims. The answer to this question must therefore be sought elsewhere.
Even other legislative measures do not comprehensively deal with the subject, though the Code of Civil Procedure has certain provisions restricting purchases in execution of a decree at the instance of specified persons. Legal disqualifications in regard to being a transferee might be imposed either in order to protect the interest of a transferee who is deemed not to be competent enough to look after his interest, or in order to prevent a conflict of interest with duty, or in order to prevent trafficking in litigation or for certain other reasons of policy.
The question has often been discussed how far a minor can be a transferee. The correct position seems to be this-that a minor, though he cannot transfer property, can receive benefits under a transfer. Where therefore there is no contractual obligation undertaken by the transferee, a minor can be a transferee. Cases, however, where the transferee undertakes an obligation-e.g., the case of a lease-stand on a different footing. A minor cannot sign such instruments. The position is the same as regards other persons incompetent to contract.
12.81. Some of the statutory provisions prohibiting the purchase of property by specific persons, contained in the Act1 or in the Code of Civil Procedure,2 are based on specific reasons. Chancellor Kent, adopting Blackstone's definition says,3 that it is a principle common to the laws of well governed countries that no encouragement should be given to litigation by the introduction of parties to enforce those rights which others are not disposed to enforce. It is called "maintenance" because one man gives or delivers to another-plaintiff or defendant in an action-a sum of money or other things to maintain his plea, or takes great pains for him when he has nothing to do therewith4
1. Section 136.
2. Order 21, rule 78.
3. Kent's Commentaries, Part VI, Lecture 76, quoted in Bradlaugh v. Newdegate, (1883) 11 QBD 1 (5, 6).
4. Adapted from Terms de La Ley, as quoted in Bradlaugh v. Newdegate, (1883) 11 QBD 1 (5, 6).