# State of Bihar v. Lt. Col. K. S. R. Swami Das Gupta]

- **Citation:** [1962] 3 S.C.R. 739
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** B. P. Sinha, P. B. GAJllJNDRAGADKAR, Raghubar Dayal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-bihar-v-lt-col-k-s-r-swami-das-gupta-2474
- **Pages:** 20

## Headnote

,_
~raud--R•nami Conveyance in fraud of creditor.-Suit by
b•n,am•dar for posseS!ion-Plea ~f.fraud in defence-If barred by
••loppel--Proper approach-Public inter'81-lndian Trusts Act
1882 (2 of 1882) s. 84.
_..-
The conveyance in mit was tI.e result of a collusive plan
between respondent I and respondent 2 to defraud the latter's
creditors.
The a.izreement was that respondent I was to act as
the benamidar for respl)ndent 2 and hfa sons, the appellants.
The fraud succeeded and the creditors of respondent 2 were in
_... fact defrauded. Thereafter respondent I brought the present
suit for declaration of title and recovery of possession against
respondent 2 and the appellants on the basis of the conveyance.
The latter resisted the suit on the ground that the conveyance
wa. fraudulent, unmpported by consideration and passed no
title. The High Court in oecond 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 bv the High Court was correct and the
~stensible owner was entitled to a decree.
Held, that there could be no question of estoppel in a case
where both the parties were gu!ity of fraud
1961
State of Bihar
v.
Lt. Col. K. S. R.
Swami
Das Gupta],
1961
September 22.
1961
lmmlllli AH• Raa
v.
Gol/apal/i
R""'ali111amvrthi
740
SUPREME COURT REPORTS
[1962]
Where in a case, •Uch as
the present, one of the
confederates in fraud seeks a
decree on a conveyance that - •
resulted from roch faud and the other takes pica of fraud in
defence, the matter has to be decided on considerations of
public policy.
Since o~ of the panie1 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 rat.cd in defence and, if upheld, allow the
properties to remain \vhcre they were, than to dercee a suit
based on a fraudulent claim.
It could make no difference in such a case if the •uit was
based on a deed of conveyance and not a contract.
Vodiana Kamayya v. Gudiaa Kamayya, (1917) 32 M.J.J.
~84, Kep1'la Kotayyar Naidu v.
Chi:rapur Maha/ak•hmama,
( 1933) I.LR. 56
Mad. 646 and Mutho K .R.A.R.P.L.
Arunachalam Clvdtiar v.
Ranga•wamy Chettiar, (1936) I.L.R.
59 Mad. 289, disapproved.
Jlef"g v.
Sadler a1td
Moor<, [19371 2 K.B. 158, T. P.
Petherperumal Chttly v. R. Muniandi Seri<Ji, ( 1908) L.R. 35
I.A. 98 and llolman v.JohMOn, (1775) l Cowper, 341, referred
to.
D.a, Dem. RobPrl~ again.I Robtrt., Widow, (1819) 106
E. R. 401, considered.
Case.Jaw reviewed.
Section 84 of the Indian Trusts Act ;, 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 APPELLATY. JmusDICTIO::>: Civil Appeal
No. 76 of 1959.
Appeal from the judgment and decree dated
Nov()mbor 1(\, 1951, of the Madras High Court in
Second Appeal No. 1656 of 1947.
T. V. R. Tatacliari, for the appellants.
K. N. Rajagopal Sastri and T. Satyanarayana,
for the respondent No. 1.
1961. September 22. The Judgment of the
Court was delh·crcd by
GAJENDRAGADKAR, J.-Tbis is an appeal by a
certificate granted by the High Court of llfadras..._
against its judgment and di>cree in Second Appeal
No. 1656of1947. The appeal arises out of Original
T
-·
3 S.C.R.
SUPREME COURT REPORTS
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 ~ase for respondent l
was that he had purchased the properties described
in the Schedule attached to his plaint on April 1,
J 936 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 ~uch properties after part

## Text

_Characters 0–39,343 of 40,329. This is a partial read: ask again with offset=39343 for what follows._

3 s.c.R.
SUPREME COURT REPORTS
73g
prayed for. It is clear that the approp.riate w:it ~n
• - the circumstances of the present oase 1s a writ Ill
the nature of mandamus and we modify the order
made by the High Court to this extent that a writ
in the nature of mandamus be issued directing the
appellant-Government to cancel its order on the
Collector made on June IO, 1954 and restraining
the Government and the Forest Officer from inter-
-,.
fearing with the petitioner's possession over 245.69
acres of land in village Singpur which he possesses
as tenant.
-
The appeal is dismissed with coat8.
Appeal dismissed.
IMMANI APPA RAO AND OTHERS
v.
GOLLAPALLI RAMALINGAMURTHI AND ORS.
(B. P. SINHA, C. J., P. B. GAJllJNDRAGADKAR and
RAGHUBAR DAYAL, JJ.)
,_
~raud--R•nami Conveyance in fraud of creditor.-Suit by
b•n,am•dar for posseS!ion-Plea ~f.fraud in defence-If barred by
••loppel--Proper approach-Public inter'81-lndian Trusts Act
1882 (2 of 1882) s. 84.
_..-
The conveyance in mit was tI.e result of a collusive plan
between respondent I and respondent 2 to defraud the latter's
creditors.
The a.izreement was that respondent I was to act as
the benamidar for respl)ndent 2 and hfa sons, the appellants.
The fraud succeeded and the creditors of respondent 2 were in
_... fact defrauded. Thereafter respondent I brought the present
suit for declaration of title and recovery of possession against
respondent 2 and the appellants on the basis of the conveyance.
The latter resisted the suit on the ground that the conveyance
wa. fraudulent, unmpported by consideration and passed no
title. The High Court in oecond 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 bv the High Court was correct and the
~stensible owner was entitled to a decree.
Held, that there could be no question of estoppel in a case
where both the parties were gu!ity of fraud
1961
State of Bihar
v.
Lt. Col. K. S. R.
Swami
Das Gupta],
1961
September 22.
1961
lmmlllli AH• Raa
v.
Gol/apal/i
R""'ali111amvrthi
740
SUPREME COURT REPORTS
[1962]
Where in a case, •Uch as
the present, one of the
confederates in fraud seeks a
decree on a conveyance that - •
resulted from roch faud and the other takes pica of fraud in
defence, the matter has to be decided on considerations of
public policy.
Since o~ of the panie1 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 rat.cd in defence and, if upheld, allow the
properties to remain \vhcre they were, than to dercee a suit
based on a fraudulent claim.
It could make no difference in such a case if the •uit was
based on a deed of conveyance and not a contract.
Vodiana Kamayya v. Gudiaa Kamayya, (1917) 32 M.J.J.
~84, Kep1'la Kotayyar Naidu v.
Chi:rapur Maha/ak•hmama,
( 1933) I.LR. 56
Mad. 646 and Mutho K .R.A.R.P.L.
Arunachalam Clvdtiar v.
Ranga•wamy Chettiar, (1936) I.L.R.
59 Mad. 289, disapproved.
Jlef"g v.
Sadler a1td
Moor<, [19371 2 K.B. 158, T. P.
Petherperumal Chttly v. R. Muniandi Seri<Ji, ( 1908) L.R. 35
I.A. 98 and llolman v.JohMOn, (1775) l Cowper, 341, referred
to.
D.a, Dem. RobPrl~ again.I Robtrt., Widow, (1819) 106
E. R. 401, considered.
Case.Jaw reviewed.
Section 84 of the Indian Trusts Act ;, 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 APPELLATY. JmusDICTIO::>: Civil Appeal
No. 76 of 1959.
Appeal from the judgment and decree dated
Nov()mbor 1(\, 1951, of the Madras High Court in
Second Appeal No. 1656 of 1947.
T. V. R. Tatacliari, for the appellants.
K. N. Rajagopal Sastri and T. Satyanarayana,
for the respondent No. 1.
1961. September 22. The Judgment of the
Court was delh·crcd by
GAJENDRAGADKAR, J.-Tbis is an appeal by a
certificate granted by the High Court of llfadras..._
against its judgment and di>cree in Second Appeal
No. 1656of1947. The appeal arises out of Original
T
-·
3 S.C.R.
SUPREME COURT REPORTS
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 ~ase for respondent l
was that he had purchased the properties described
in the Schedule attached to his plaint on April 1,
J 936 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 ~uch 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 respondent I was
resisted by respondent 2 and the appellants on
several grounds. It was urged by respondent ;l
-~ that the transfer in favour of respondent I 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 I. 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. :::5,000.
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
l'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 l on June 16, 1933. Simi1961
Immani Appa Rao
v.
GollapaUi
Ramalingamurthi
Gajendragad!r.ar J.
1961
l'111Mni AJ>la Ra1
v.
Gol/Dpllili
Ram4ling'111urthi
742
SUPREME OOURT REPORTS
!1962]
larly, on tho same advice a similar nominal transfer
deed was executed in favour of respondent l on
August 6, 1939, (Ex. P. 12) after the properties
covered by the said document had been released
from an oarlier non-possessory mortgage (Ex. P. 11)
which had been executed on July 21, l!l30.
Thus,
according to respondent 2 tho documents executed
in favour of respondent l were nominal and
collusive
and
were not supported
by
any
consideration.
Hospondent 2 further alleged that the execution of the said collusive documents between him
and respondent l ca.me to the knowledge of some of
-. .,,.
his creditors and \.hat led to an insolvency petition
,.,
against respondent 2 by one of his creditors in
I.P. No. 91 of 1933. This petition was filed in tho
Court of the Subordinate Judge at Elloro on
September 15, 1033, aga.inst respondent 2.
In
these insolvency proceedings respondent 2 was
adjudicated insolvent and the Otlicial Receiver,
appointed to take charge of respondent 2's pruperlies, brou~ht the said properties to s>1.lc bUhject
to the aforesaid nominal mortgages in favour of '
respondent 1.
Kantham>iui Scshamma purchased
tho aaid properties with her own money but benami
in the name of respondent 1 on condition that --
respondent l would re-convey the said properties
to the family of respondent 2 whenever ca.lied upon
to do so.
Tho allega.tion of respondent 1 that ho
ha.d obtained possession of tho properties
was~-
denied, and it was urged that respondent 1 had no
title to tho properties and was entitled to no relief
in the suit filed by him. That is tho su bstancc of
the pleas raised by respondent 2 and the appellants
joined respondent 2 in making tho Bame pleas by
their separate wri \.ten sta. temont.
At the trial three issues were tried as pre.:.~
liminary issues; they were ill81los 5, 8 and 9. Issues ·
8 and 9 were in regard to the court fees payable
on the claim madti ia the plaint and regarding the
pecuniary jurisdiction of the Court. The Court
•
•
<
--
3S.C.R .
SUPREME COURT REPORTS
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 I. 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 Ramasastru!u
v. Balakrishna Rao(').
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 eons for purposes
binding on the family did not vest in the Officiitl
Receiver on his insolvency, and so the sale effected
by the Offioial 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 I that
the properties sold by the Official Receiver to respondent I 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 I/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 I by virtue of the amendment
were traversed by respondent 2 and the appellants
in their additional written statements.
(I ) J.L.R. 1943 Mad. 83.
1961
lmmani Ap;a RarJ
v.
Gollapalli
Ramalingamurthi
Gaj1nd,.a1adkar J.
19~1
lmmani Appa Rao
v.
GollapaUi
Rcmalin1amur1hi
GaJttUhagadki..r J.
744
SUPREME COURT REPORTS
[1962]
.•
'Vhen tho suit went to trial on tho amended
plca<ling<i several issues were framed by tho learned
trial judge. In addition to tho issues arising on
tho pleadings
tho learned trio.I judge framed
suo motu one more issue l(a), whether respondent I
was the benamidar of the appellants, and if yes,
whether the appellants could be allowed to plead
the same as a defcnco in the suit. Tho learned
trial judgo found that the suit properties were the
joint family properties of respondent 2 and tho
appcllimts. Alternatively he hel<l that even if they
were originally the self-acquired properties of
respondent 2 thoy had been blended with the family
properties and thus became tho properties of the
undivided family. Ho found that the shares of the
appellants in the said properties did not vest in the
Oliicir.I Hcceivcr and so were not conveyed to res-
•
pondent I.
He came to tho conclusion that tho
purchase by respondent I from the Official Receiver
was only a benami transaction for tho benefit of
the appellants and that respondent I
had not
obtained possession of the properties at any time.
~
According to the learned trial judge the sale in
favour of respondent I 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 defrau-
•
-
r
'~ ..
ded. Since the fraud had been carried out, the
le1irncd jurl.go held respondent 2 and the appellants
..._ .•·
could not be allowed to plead the samo as a defence
in the Bnit. As a result of this finding the learned
judge passed a preliminary decree in favour of respondent 1 for I/5th share in items I 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 tho family was
constructed the learned judge held that respondent·~
1 wru; entitled to monetary compensation. Consistently with the preliminary decree thus passed as
to the 8hare of respondent 1 the learned judge
. ,. .
3 S.C.R.
SUPREME COURT REPORTS
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 rrwtu
and challenged his conclusion en it. The appellate
Court agreed with the conclusions of the trial judge
and so dismissed both the appeal and the crossobjections.
Against this appellate decree respondent 1 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
Insolveney (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 appellants' shares in the family properties
could not longer be sustained. This contention was
raised by respondent l. It was met by the appellants by their counter-contention that issue l(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 court on issue l(a), after giving both the
parties an opportunity to adduce evidence on the
1961
Immani Appa &a
v.
Gollapalli
R amal•ingamurthi
G11jemira,eadkar J.
1961
lmntani Appa R@
v.
Go/lapa!ii
Ramalircgamu1tlii
'
i46
SUPREME COURT REPORTS
[1962)
question about the completion or otherwise of tho
fraud connected with the benami purchase. After
remand the trial court took evidence and made
a finding tlmt
respondent 2 had successfully
played . fraud on l1is creditors by getting the
properties purchased by respondent I benami for
his sons at the salo held bv tho Official Receiver.
In due course this finding was 1;ubmitted by the
trial court to tho High Cour. Thereupon the appellants filed objections to the said finding.
After this finding was received the second
appeal was again placed for hearing by l\1r. Justice
Raghava Rao. At the second hearing the appellants raised the point thd amending Act by which
s. 28A was inserted in the Provincial Insolvency Act
was ultra i·irea.
The learned judge overruled the
objections made by the appellants against the finding submitted by the trial court on the issue remanded lo it and accepted that finding; but in view
of the fact that the vires of tho amending Act was
challenged he thought it expedient that the second
appeal should be hcarcd by a Bench of two judges.
That is how th3 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 11/tm vfrea was not pressecl 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 argum·ent
urged bPfore the High Court was whether having
. ..
1
_.._
regard to the fact that the fraud contemplated by
respondent 2 and respondent I had been effectively
carried out it was open to tho appellants to plea~
that fraud against respondent I in respect of his
• ..,..
claim fur poBl'ession of the suit properties in tho
present suit. Tho High Court considered tho conflicting decisions on this point and adhered to tho
view which h&a prevailed in tho 11aid High Court
..
..
1
-
~
-
--
& S.C.R.
SUPREME COURT REPORTS
since the decision in Vodiana Kamayya v. Gudisa
Mamayya (') 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 l'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 Receiver.
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. It
was effected with the mutual consent of the vendor
and the vendee to defraud the creditors of the
vendor. That being so the transfer is not supported by any
consideration and
thetransferee 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 defra.uded.
Possession of
the properties, however, remained with respondent
2 and his sons the appellants; and in the present
1)(1917) 32 Mad. L. J, 484.
1961
. Immani Appa.Rao
v.
dollapalli
Ramalin gamu rthi
Gajtndragadk111 J.
1911
/..,,.;A>;a Rao
...
'Go11.,a/li
RlllU/1rs l«lftlUtAi
G4i••1•i~a< ].
•
748
SUPREME COURT REPORTS
[1962]
action respondent l seeks to obtain possession of
the properties on tho ground that a. deed of conveyance hBB been passed in his favour by the Official
Receiver. Thue both tho parties are confederates in
the fraud and are equally guilty. Respondent 2 and
the appolla.nta seek to resist respondent l's claim
to recover p ssession of the properties conveyed t-0
him 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.
R~spondont l
meets 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 poSicssion of the properties,
and he urges that there is a conveyance duly executed in his fa.your on which the Court must act
without permitting respondent 2 to challenge its
validity. The High Court h9.s upheld the plea of
respondent l and has not allowed either respondent
2 or tho appellants to plead tho fraud in support
of their defence.
fo this decision right? That is
tho question which falls to be decided in the present
appeal.
Reported decisions bee.ring on this question
show that consideration of this problem often gives
riso to what may be described as a. battle of legal
maxims. Tho appellants emphasised that the
rloctrino which is pre-eminently applicable to the
present case is ex dolo malo non oritur actio or
ex turpi causa non orit·ur actio. In other 'vords, they
contondod that the right of action cannot arise out
of fraud or out of transgrossion of law; and according to them it is necessary in such a case that posses:iion should rest where it lies inpari delicto potior
est conditio pussiiknties; where each party is equally
in fraud tho law favours him who is actually in
possession, or where both parties aro equally guilty
the estato will lie where it falls. On the other hand,
respondent 1 argues that the proper maxim to apply
is nemo allegaRS suam turpitudinum audiendum eat,
...
-" - -
3 s.c.R.
SUPREME COURT REPORTS
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 inv-oked 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 cauaa 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 car!Jful 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 thl\t 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 I 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 ..
1111
Immani Appa.Rao
v.
Gollapalli
Ramalingamurthi
G~1ndra14Ulkar J.
1961
!""""'" Appa Raa
v.
Go//apal/i
Ramaf;ritantt11thi
Gajttul1a1ad~ar 'J.
750
SUP~EME COURT REPORTS
[1962)
which ho.s been withheld from him by respondent
2 and the appellants. Now, if the defenoo raised
by t.he appellants is shut out respondent I would
be entitled to a decree because there is an ostensible doed 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 I would be actively assisting respondent I to give effect to the fraud to which ho was
a party and in that sense the Court would be
allowed to bo used as an instrument of fraud, and
that is clearly and patently inconsistent with
public interest.
On the other hqnd, 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
tho fraud intended hv both the parties has been effectively carried out. If it iR found that both the partieR
are equallv guilty and that the fraud intended by
them has been carried ont the position would bo
that tho party. raising the defence is not askiniz
the Court's al!llistance in any active manner; all
that the <lefcncc suggests is that a confederate in
fraud should not be permitted to obt'lin a decree
from the Court because the document of title on
which the claim is based rcallv convoys no title
at all.
It. is true that a8 a ·result of permitting
respondent 2 and the appellants to provo their
plea th<:>y wonld incidentally be assisted in retainin~ th<:>ir posseB8ion;
but t.his assistance is of a
purely pa!!Sivo character and all that the Cour~
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
injurio1rn to public interest than the former.
There can be no question of estoppel in such
a case for the obvious rca8on that the fraud in
riucstion was agr<>ed by both the parties and both
pi.rties have aesisted each other in carrying out
the frstud.
When it is said that a person cannot
. "
3 S.C.R.
SUPREME COURT REPORTS
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 assistance on 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 convevs 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
C?ntest between two participants in fraud possess10n should be allowed to remain where it rests
appears to h!l.ve been consistently accepted until
Cilief Justice Sir Lawrence Jenkins struck a note
of dissent in Sidlingappa Bin Ganeshappa v.
Hirasa Bin Tukasa (1 ). Thereafter the correctness of
(I) (1907) I. L. R. 31 Bom. 405.
1961
Immani Appa R:io
v .
Gollapalli
Ram!llingamurthi
Gajendragadkar J.
JHI
l"""""iAJ>P•R"°
••
Golioptdli
Remati.,amurthi
•
752
SUPREME COURT REPORTS
[1962]
this judgment wa.s sometimes doubted in the subsequent decisions of tho said High Court [Vide :
Lakshman Balvant Kl1isti v. Vasudev Jlfohoniraj
Pande(')] and finally the Full Bench of the said High
Court reversed the said decision of Sir La.wrcnco
Jenkins
in
Gv.ddap;;a
Chikkappa
Kurbar v.
Balaji Ramji Dange ('). Sinco then the decision
of tho Full Bench has beon consistently followed
in the Bombay High Court. The same viow has
been accepted by the Calcutta, Allahabad, Nagpur
and Patna High Courta [Vide : Pre.omath Kaer v.
Kazi M alwmt.d Shazid{•). Emperor v. Abdid Sheikh('),
Vilayat llusain v. Misran ('), Nau·ab Singh v. Daljit
Sfrigh ('), Qader Baksh v. llakim ('), Bishu:anath s/o
Karunashanker Shukla v. Surat Singl1 alias Chhuttu
Singh s/o Bhabhut Singh ('), and J. C. Field Electric
Supply v. J(. Agaru:ala (')(Case of illegal contra.ct)].
In Madrna tho earlier decisions of the High
Court appear to havt1 taken the same view [Vide:
Venkataramana v. Viramma (10),
Yaramati Krishnayya v.
Chundm
Papayya (")
and Raghavalu Chetty v. Adinarayana Chett11 ('')]. In the case
of l'odiana Kamayya
v. Gv.dita Mamayya (13),
however, a Division Bench of the Madras High
Court upheld the view that a person who lfti.s
conveyed property bcnami to another for the
purpose of effecting a fraud on his creditors cannot, where the fraud has been effected, set up the
benami <'haracter of the transaction by way of
defence in a suit by tho transferee for possession
under tho conveyance. Since then this view has
prevailed in the Madras High Court [Vide : Keppv.la
Kotayyar Naidu v. Chitrapu Mahalak.shmamma (")
and J.fothu K. R. A. R. P. L.
Aruna~halam Chettiar
v. Ra11ga<Ju:amy Chetliar (")]. In our
opinion
Ill (1130l 3l llom. L.R.
356.
(2) J. L. R l~I Born. 575.
13) (IQ03-418 C. W. M. 620.
(il A. J. R. l9l0Cal. <lO.
(5) I 19231 !. L. R. 45 All. 396.
(6l (1936! I. L. R. 58 All. 8'2.
(71 (1932! J. L. H.13 Lah. 713.
(8) A. I. R. 1943 Nag 113.
19! (195111. R. 30 Pat. 137.
1101 (IBR7) J. L. R. 10 Mad. 17.
(Ill (1897Jl.L.R.20Mad. 326.
(12) (1909Jf.L. R.32Mad.323.
(13) (1017! 32 Mad. L. J. 484.
(14) 11933) I. L. R. 56 Mad. 616.
<15) (1936) I. L. R. 59 Mad. 289.
- --f,
!·
.....
(
1'
--
:JS.C.R.
SUPREME COURT REPORTS
753
the view taken by these subsequent decisions
of the Ma<;lras High Court dces 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. Muniandi Servai (1).
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 obsevations made in Mayne's Hindu Law which
clearly support the view that we have taken. Says
Mayne: "The fact that A has assumed the name of
B in order to cheat X can be no· reason whatever
why a Court should a8sist 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 mE1ans of his alias, then it has
ceased t'o be a mere mask and has beaome 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
polourable gralil.t, then the maxim applies In pari
dalicto potior est con!litio posaid~tis. The Court
will help neither party and let the estate lie -where
it falls (•)".
Lord Atkinson h.ae observed that this
statement of the. law is oorre.ct and in that aense
(I) (1908) L. R. ~5 I. A,. 98.
.
.
(?) Mayne's Hindu Law, 7th Bd., p. 595, para 4-!' (351. A. p •. 192).
li61
Immani A.ppa Rao
v.
Gollapalli
Ramalintamurtlri
Gajendragadkar J.
1911
[-A;,. Rao
v.
Gtl/.pal/i
R01Miin101urthi
Goje.JrarlU!kar J ·
.,.
754
SUPREME COURT REPORTS
[1002Jtho view that we have taken may be said to be
consistent with the opinion oxpre~sed by the Privy
Council by approving the statement of the law
mado by MaYJle.
In oupport of tho contrary view reliance is
usually placed· on an early En1?lifh decision in Dot,,
Dem. Roberts agajnst Roberts, Widow('). Iii that
case it was held that "r!o man can be allowed to
allege hiR own fraud to avoid his own doed; an\!,
. therefore, where a deed of eonveya.nco of an esta.to
from one br-0ther to another was executed, to givo
the latkr a oolourable qualification to kill game.
The document was as against tho parties to it valid
and so sufficient ta support an ejectment for tho
premises". In dealing with the question raised
Bayley, J. ob1ervcd "by the prod11ction of the
deed, the plaintiff establiel1cd a priina facie titlti;
and we cannot allow the dofendent to be heard iQ
a Court of Justice to say that his own deed is to l;>e
avoided by his.own fraud;" and Holroyd, J., added
t11at "a deed may be a.voided on the ground of
fraud, but then tho objection must come from &
person neither. party nor privy to it, for no man
can allege his own fraud in order to invalidate hi.a
own deed",
This decilion has, however, been commented
on by Taylor in hiB "Law of Evidence". According
to Taylor "it Mems no1v clearly aettled that a party
is not ostopped by his deed from a.voiding it by
proving that it was oxeouted for a fraudulent,
illef.!al
or immoral purpose ( ')". Tho learned
e.utbor then refers to tho case of Rober~ ( 1 ) and
adds "in the subscqucn t case of Prole v. ·Wiggins ('}
Sir Nioholai! Tindal observed that this deoilion
rested on the· fact that the defcnoo set up waa
inconsistent with the deed". Taylor then add1
that "the oase, however, oan scarcely bo supported
by this cireumstanoe, for in an .a.otion of ejootmen•
by the grantee of an annuity to recover premisea
(II (1819) 106 E. R. 401.
(21 Taylor's "~w of.~vi4e~e", Vol. I, Hlh Ed. p. 97, i-roJ'&l'h 93.
(31 ( 1937) 3 Bma. N.;r 2SS, 6 L.J.C.P. 2, 43 R.R. 621.
·\ ..
3 s.c.R. s UPREME OOURT REPORTS
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 enrolment, 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
iJnmoral purpose, or in contravention of a statute,
or of public policy, neither of them will be estoppcd
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. IJ8 ). 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
rrwla proliibita or rrwla in se, Courts of Equity
following the rule of law as to participators in a
common crime will not interpose to grant any relief,
acting upon the known maxim In pari delicto potior
et1t ronditio defendentis et possidenti~. The old cases
often gave relief, both at law and inequity, where
the party would othe:rwise derive an advantage
from his inequity. But the mod,ern 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. Volt ll $. 421; English edition
by Randell, 1920, S. 298.
196.I
lmmani Appa R"'\
••
Gollapalli
Ramalin1-.thi.
Gajendr°'adkarlJ."
IHI
JtffnM11; Appa Rao
Y,
Gollap<lli
1rmalingam111thi
O'!i1111ir"l•h ].
7~6
SUPAEME COURT REPORT8
[196:!]
In judicial decisions where this question has
been considered a pa.ssage from tho judgment of
Lor-: l\fansfield, 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 Le tru'3 principles which should govern the
decision of such ca.sos.
Said Lord Mansfield, C. J.,
"tho objection that a contra.ct is immoral or illegal
as between plaintiff and defendant sounds at all
times very ill iq the mouth of the defendant. . It is
not for his sa.lie, however, that the objection is ever
allowed; but i~ is founded in general principles of
policy whkh the defendant ha.s the a.i van ta.go of,
contrary to the real justice, a.s between him and tho
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 ma.n who
founds his ca.use· of action upon an immoral or an
illega.I a.ct. If, from the plaintiff's own stating or
otherwise the ca.use of action appears to arise ex
turpi ca·usa or .the transgression of a positive IMT
of this country, there the court says he has no right
to be assisted.. It is upon that ground the Court
goca; not for the sake of the defendant, but .because
th<'Y will not lend their aid to such a. plaintiff''.
On behalf 0f the respondents it was urged
that the principles on which the appellants rely a.re
applicable to 00ntra.cts and not to conveys.noes. A
conveyance, it is argued, rests on a clifferent basis
from a t:ontraot, and so the English decisions cannot be pressed into service by the appellants. We
are not impressed by this argnmont.
Even if
respondent l ha.a based his cue on a conveyance
the position st.ill remains that as a result of tho
facts proved 11" respondont 2 and the appellants tho
·conycya.nce isl· void ab inltw. It is & dooument
fradulently eaouted and as such· it convoys no title
to tho transfe~o at a.IL That being so we do not
think that in giving effect to the considera.tiorn1 of
(I l (I nSl 1 'cowrtr 341.
....
3S.C.R.
SUPREME COURT REPORTS
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 falling 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 rnjecting the said argument. Since
the present case is entirely outsides.