IN THE HIGH COURT OF GUJARAT AT AHMEDABAD FIRST APPEAL No 335 of 1981 For Approval and Signature: HON'BLE MR.JUSTICE R.K.ABICHANDANI and HON'BLE MR.JUSTICE K.M.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- MANUBHAI KHANDUBHAI NAIK Versus SUMANTRAI RANCHHODJI NAIK SINCE DECED.BY HIS HEIRS & L/R -------------------------------------------------------------- Appearance: 1. First Appeal No. 335 of 1981 MR DD VYAS Sr. Advocate for the Appellant MR BS PATEL, Advocate for the Respondents -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE R.K.ABICHANDANI and HON'BLE MR.JUSTICE K.M.MEHTA Date of decision: 18/09/2003 ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE R.K.ABICHANDANI FOR THE COURT) #. This appeal is filed by the original plaintiff against the judgment and decree passed by the learned Civil Judge (Senior Division), Navsari on 6th August, 1980 in Special Civil Suit No. 113 of 1977, dismissing the suit in which the appellant had sought a declaration that the registered sale deeds dated 14th August, 1973 and 27th November, 1973 made in favour of the respondent-original defendant, were void ab initio, being without consideration and not intended to be acted upon, and seeking possession of the properties in question which were agricultural lands. #. As per the averments made in the plaint, the appellant was the owner of the lands bearing survey nos. 358, 359, 389, 223, 349, 240 and 294, situated at village Manekpor of District:Navsari. The plaintiff had inherited the lands under a registered Will dated 22nd December, 1971, which was executed by his elder brother Nathubhai. The plaintiff had entrusted the management of these lands to the defendant who was "Sadhubhai" (husband of wife's sister) of the plaintiff's nephew Thakorbhai alias Paragji Kikabhai Nayak. According to the plaintiff, he had earlier executed a power of attorney in favour of the defendant to enable him to manage the lands and keep proper accounts in respect of the yield, because, the plaintiff had implicit faith in the defendant. In para-5 of the plaint, it was contended that in July, 1973, the defendant had written a letter to the plaintiff, stating that the government was likely to tighten the laws by imposing ceiling on the land holdings, and that it would be prudent if the said lands which stood in the plaintiff's name were transferred to the name of the defendant, without intending to transfer the ownership, under a sale deed. The defendant had suggested that, for this purpose, a power of attorney may be executed by the plaintiff in the name of Thakorbhai Gopalji Desai, who was maternal uncle of the two sisters who were the wives of the defendant and Thakorbhai alias Paragji Kikabhai Nayak. The defendant had forwarded a draft of the power of attorney to England where the plaintiff ordinarily resided, and because the plaintiff had implicit faith in the defendant, he followed his instructions and executed the power of attorney in terms of the draft which was sent to him by the defendant. The defendant thereafter got executed two sale deeds dated 14.8.'73 and 27.11.'73 in his favour through the said power of attorney holder Shri Thakorbhai Gopalji Desai. Thus, the sale deeds were executed in favour of the defendant because of the plaintiff's implicit trust in him, and as per the advice and suggestion of the defendant that such a course was necessary to protect the land from the ceiling and other laws. According to the plaintiff, it was understood that the defendant was not to make any ownership claim on the basis of these documents which were nominally made and were sham and bogus, executed without consideration, and were not to be acted upon as per the prior understanding. It was further stated that both these documents were void, because, no amount towards the consideration as mentioned therein of Rs. 24,000/- or Rs. 7,000/- ever passed either in favour of the power of attorney-Thakorbhai Gopalji Desai or in favour of the plaintiff. According to the plaintiff, as per his information, financial condition of the defendant was so weak at that time that he could not have paid these amounts. It was further contended in para-5 of the plaint that, in reality, Thakorbhai Gopalji Desai was not authorised to sell or in any other manner transfer the lands in question to any one under the said power of attorney. On the contrary, there was a specific prohibition against effecting such transfer. Thus, the defendant did not acquire any right over these lands under the two sale deeds. However, the defendant filed a suit in the court of Civil Judge (Junior Division), bearing Civil Suit No. 61 of 1977, illegally asserting therein that he was the sole owner of the lands in question denying the ownership of the plaintiff and when the plaintiff came to know about such effort, he was constrained to file the present suit. In para-6, it was contended that the suit was being filed on the basis of title of the plaintiff for recovery of the property within 12 years, and due to the assertion of rights over the lands by the defendant by filing Civil Suit No. 61 of 1977 and, therefore, the suit was within limitation. In para-7 of the plaint, it was stated that the suit was valued at Rs. 1,08,000/- for the purpose of court fees and jurisdiction, further stating that the land in question was an agricultural land and the suit was valued for the purpose of jurisdiction and advocate's fees on the basis of the market value of the property which was Rs. 1.00 lac. #. In the written statement exh. 29, the defendant asserted that he was the sole owner of the property in question in view of the two registered sale deeds executed in his favour in respect of these lands, and that he was in possession and occupation thereof. In para-4 of the written statement, he admitted that he was earlier managing the properties, but after the sale deeds, he had become the owner thereof. In para-5 of the written statement, it was denied that the defendant had written a letter to the plaintiff, stating that nominal sale deed may be executed in view of the provisions of the Land Ceiling laws. It was stated that the plaintiff wanted to sell his lands, and therefore, the defendant showed a desire to purchase them and the plaintiff had executed the power of attorney in favour of Thakorbhai Gopalji Desai for the purpose of making the sale deeds. It was admitted that he was advising the plaintiff as regards the procedure for effecting such sale, but denied that consideration was not to pass in respect of these two transactions. He has stated that the amounts were paid in cash, as mentioned in the sale deeds, to the power of attorney holder of the plaintiff. The defendant denied the contention that no authority was given under the power of attorney by the plaintiff for the sale or transfer of the lands in question. According to the defendant, the plaintiff had instituted the suit at the instigation of other relatives. It was also contended that the suit was not maintainable, in view of the provisions of Section 31 of the Foreign Exchange Regulation Act, 1973, because, the plaintiff was having British nationality. It was further contended that the suit was barred by limitation. #. The trial court framed issues at exh. 11, which are as under:- [1] Does the plaintiff prove that sale deeds dated 14.8.73 and 27.11.73 executed by Thakorbhai Gopalji, the general power of attorney holder of plaintiff, in favour of defendant for suit lands were without any consideration, sham, nominal and to avoid technicalities of the Ceiling Act? [2] Does the plaintiff prove that he had sent power of attorney on advice of defendant and had asked Thakorbhai Gopalji to execute sale deeds, but they were not to be acted and no ownership in reality were to be transferred to defendant? [3] Does the plaintiff prove that the defendant was managing suit lands in absence of plaintiff as he was in foreign country? [4] Whether the defendant proves that the suit is time barred? [5] Whether the defendant is entitled to get declaration as prayed for? [6] Whether the plaintiff is entitled to get vacant possession of suit lands from defendant? [7] Whether the plaintiff is entitled to get accounts as prayed for? [7A] Whether the defendant proves that the plaintiff is foreigner and not a citizen of India and therefore he is not entitled to hold property in India and, therefore, the suit is not maintainable? [8] What reliefs or relief, if any, the plaintiff is entitled to get? [9] What order and decree? #. The trial court recorded composite reasons for issue nos. 1 to 7. It was held that the letters exhs. 79 and 80, which were written by the defendant to the plaintiff would go to show that the parties wanted to circumvent the provisions of the Gujarat Agricultural Lands Ceiling Act (1960) (hereinafter referred to as the "Ceiling Act") and thus, from all these facts, "it would be clear that Section 23 of the Indian Contract Act as well as pari delicto are amply attracted in our case". It was held: "now if that is so, as the object or the consideration of the present agreements being unlawful, the said two sale deeds exhs. 60 and 61 are therefore void and court cannot lend its support to the plaintiff in order to achieve his said unlawful or illegal act or design. From all these facts, it would be clear that the suit lands in question be governed by Schedule I of the Gujarat Agricultural Lands Ceiling Act and the ceiling area in respect to the suit lands would come to about Acres 12-50 Gunthas or at the most, 15 Acres of land. As observed above, the total area of the suit land is about Acres 16-05 Gunthas of land, and thus, upon the facts on record, the provisions of the Gujarat Agricultural Lands Ceiling Act, 1960 are applicable to the facts of our case". In para-14, the trial court held: "Thus, the result is that in law also the above said two transactions are deemed to have been made in anticipation in order to defeat the object of the Act and hence fraudulent and the result is that the said two sale deeds exhs. 60 and 61 are thus hit by Section 23 of the Indian Contract Act, and equally the principle of pari delicto would apply to the facts of the present case." In para-23 of the judgment, it was held that the suit of the plaintiff was not maintainable as it was hit by Section 23 of the Contract Act. While considering the question as to whether the sale deeds were without consideration, the trial court in para-31 of the judgment concluded that when sale deeds exhs. 60 and 61 were executed, it would be very difficult to accept the oral evidence and that in the two sale deeds it was specifically stated that the power of attorney holder Thakorbhai alias Paragji Kikabhai was paid the amount of consideration in cash. The Court held : "In my opinion, the documentary evidence exhs. 60 and 61 should prevail over the oral testimony of the said plaintiff's witness no. 3 Thakorbhai Gopalji Desai ... The result would be that it cannot be said that the two sale deeds in question are without any consideration". In para-32 of the judgment, it was concluded that it was not proved that the sale deeds exhs. 60 and 61 were not to be acted upon or that the defendant was not to get any right, title or interest in the lands. It was held: "the defendant in conspiracy with the plaintiff had sent General power of attorney of the plaintiff's witness no. 3 Gopalji Thakorbhai for the execution thereof by the plaintiff, and that the plaintiff in fact, had executed a General power of attorney in favour of the plaintiff's witness no. 3 who has passed the sale deeds exhs. 60 and 61. It is also proved that exhs. 60 and 61 were executed in order to circumvent the above Ceiling Act, and under the circumstances, my answer to the above said issues is therefore, as shown above". #. The learned Senior Counsel for the appellant argued that the facts clearly established that the appellant was the owner of lands in question and this was even admitted in the written statement in which the defendant had stated that prior to two sale deeds, he was managing the lands in question on behalf of the plaintiff, and that the plaintiff had executed power of attorney in favour of Thakorbhai Gopalji Desai, pursuant to which the two sale deeds exhs. 60 and 61 were executed in his favour. It was contended that the defendant has not led any evidence to establish his title. It was then argued that the power of attorney which was executed by the appellant in favour of Thakorbhai Gopalji did not authorise Thakorbhai Gopalji to execute any sale deed or transfer the land in any other manner. He submitted that in fact, under Clause-10 of the power of attorney, there was a specific prohibition against effecting any transfer of the land in question and this fact was also pleaded by the plaintiff in para-5 of the plaint. The learned Senior Counsel argued that, on the finding that the sale deeds were executed with a view to defeat the provisions of the Ceiling Act and were, therefore, void under Section 23 of the Indian Contract Act, the Court ought to have declared that the title in the land in question did not pass in favour of the defendant and that the plaintiff continued to be the owner of the property in question. It was then argued that the trial court has decided the matter without framing any issues on the question of fraud on the statute or in respect of Section 23 of the Act. It was contended that the principle of in pari delicto was not applicable in the instant case, because, the plaintiff had only acted as per the advice of the defendant who was managing the lands, and that mere execution of such sale deeds did not amount to defeating the provisions of the said Act. The learned Senior Counsel referred to the documentary evidence in the form of the letters which were addressed by the defendant to the plaintiff at the relevant time, pointing out that it was, in terms, admitted by the defendant in those letters that he had forwarded the draft of the power of attorney for getting the lands transferred in his name only as a matter of caution, and that no title was intended to be passed in his favour by the sale deeds executed on the advice of the defendant. It was submitted that the contents of the letters established that no consideration was to pass, because, no title was to be conveyed in favour of the defendant, and that it was only an arrangement to safeguard the lands against the provisions of the Ceiling Act, and the arrangement was only sham and not meant to be acted upon. That situation was quite different from any fraud being committed with a view to defeat the provisions of the Act. It was submitted that the finding of the trial court that, consideration passed was based merely on the statements contained in the sale deeds, and the trial court did not properly appreciate several letters written by the defendant which clearly established that he never intended to purchase the land for any consideration and there was a mention in his letters that even after the nominal transfer of the lands to his name, they would continue to be the lands of the plaintiff and that the plaintiff need not worry about the lands, and further that the defendant was ready to give any writing in this regard if the plaintiff wanted him to execute such writing. 6.1 The learned Senior Counsel, in support of the contentions relied upon the decision of the Supreme Court in Sita Ram vs. Radha Bai and others [AIR 1968 SC 534], in which the Supreme Court in context of the provisions of Sections 23 and 24 of the Contract Act and the principle of "in pari delicto", held that, the principle that the courts will refuse to enforce an illegal agreement at the instance of a person who is himself a party to an illegality or fraud is expressed in the maxim "in pari delicto potior est conditio defendentis" and the exceptions in which a man will be relieved of the consequences of an illegal contract into which he entered to which cases the maxim does not apply. They fall into three classes: [a] where the illegal purpose has not yet been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it; [b] where the plaintiff is not in pari delicto with the defendant; [c] where the plaintiff does not have to rely on the illegality to make out his claim. It was held that in cases where the plaintiff must have been induced to enter into a contract by fraud or strong pressure, the parties are not in pari delicto , the less guilty party may be able to recover money paid or property transferred, under the contract. It was also held that the person who is under a fiduciary duty to the plaintiff will not be allowed to retain property or to refuse to account for moneys received, on the ground that the property or the moneys have come into his hands as the proceeds of an illegal transaction. 6.2 The decision of the Supreme Court in Jambu Rao Satappa v. Neminath Appayya [AIR 1968 SC 1358] was cited to point out that in context of Section 23 of the Contract Act, the Court while considering whether knowledge of a party that purchaser will be in possession of land in excess of ceiling under Section 5 of the Bombay Tenancy & Agricultural Lands Act, held in para-8 of the judgment that the Act contained no general restrictions upon such transfers and unless at the date of the acquisition, the transferee held the land in excess of the ceiling, the acquisition to the extent of the excess over the ceiling will not be invalid. It was held that the inability of the transferee to hold the land in excess of the ceiling prescribed by the statute has no effect upon the contract, or the operation of the transfer. The statutory forfeiture incurred in the event of the transferee coming to hold land in excess of the ceiling does not invalidate the transfer between the parties. It was held that contract for purchase of land entered into with the knowledge that the purchaser may hold land in excess of the ceiling is not void and enforcement thereof cannot be resisted on the ground that, if permitted, it will result in transgression of the law. #. The learned counsel appearing for the respondent supported the decision of the trial court and contended that it was the plaintiff's own case that the defendant had induced him to execute sham sale deeds to save the land from the provisions of the Ceiling Act and the draft of the power of attorney was sent by the defendant to him which he executed in England and sent it to the defendant. It was pointed out that the original power of attorney was not produced and that from the power of attorney exh. 94, one page which might have included Clause-10 was missing. It is, therefore, not proved that under Clause-10 of the power of attorney exh. 94, the plaintiff had prohibited the transfer of the land in question or that the power of attorney did not have any power to convey the title of the lands in question by executing the sale deeds. It was then argued that there was no prayer made in the plaint for cancellation of the instruments under Section 31 of the Specific Relief Act and neither the plaintiff, nor his power of attorney holder Kantaben who had filed the suit had entered the witness box. The learned counsel also argued for the first time that the suit was barred by limitation and the provisions of the Benami Transactions (Prohibition) Act, 1988 were applicable to the transactions even though the Act came into force much after the execution of the sale deeds. It was further contended that though the letters written by the defendant exhs. 79, 80 etc. referred to the arrangement of transferring the land to the defendant to safeguard them from the provisions of the Act, the letter did not specifically state that no consideration would pass from the defendant to the plaintiff. The learned counsel argued that two sale deeds were executed on different dates and if really no consideration was required to be paid, both would have been executed on the same day or in quick succession. He submitted that in these two registered sale deeds, it was clearly mentioned that the consideration was paid in cash to the power of attorney holder and, therefore, no oral evidence could have been admissible against such statement made in the documents. The learned counsel also argued that since the sale deeds were executed with a view to defeat the object of the Ceiling Act, the plaintiff was not entitled to recover possession of the land on the principle of "in pari delicto" even if the title did not pass by virtue of the provisions of Section 23 of the Contract Act. It was submitted that even if the consideration was not paid because of the documents being executed with a view to defeat the provisions of the Ceiling Act, and, therefore, being sham and bogus, the plaintiff would not be entitled to recover the possession of the lands in question. The learned counsel further argued that the appeal itself was not maintainable before this Court, because, for the purpose of court fees, the suit was valued only at Rs. 300/-, while the property was of the market value of Rs. 1.00 lac, as stated in para-7 of the plaint. He argued that since the valuation for the purpose of court fee was less, the appeal could have been filed only before the District Court. #. In support of his contentions, the learned counsel for the defendant relied upon the following judgments. [a] The decision of the Supreme Court in the case of Immani Appa Rao v. Gollapalli Ramalingamurthi [AIR 1962 SC 370] was cited for the proposition that where both the transferor and the transferee were in equal fraud in carrying out the transfer to defraud the creditors of the transferor and the fraud contemplated had been carried, but the possession remains with the transferor, in a suit by transferee for possession, it is open to the transferor to plead fraud and the absence of consideration. In such a case, there can be no question of estoppel for the obvious reason that a fraud in question was agreed to by both the parties and they had assisted each other in carrying out the fraud. When it is said that a person cannot plead his own fraud, it really means that he 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.