Case: Immani Appa Rao And Others Vs. Gollapalli Ramalingamurthi And Ors

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 cause not oritur actio. No polluted hand shall touch the pure fountain of Justice". (P. 93). 18. To the same effect is the opinion of Story: Storys Equity Jurisprudence, Vol. 1, S. 421; English edition by Randall, 1920, S. 298."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 in a common crime will not interpose to grant any relief, acting upon the known maxim In pari delicto potior est conditio defendentis et possidentis. The old cases often gave relief, both at law and in equity, where the party would otherwise deriver 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 or this sort". 19. In judicial decisions where this question has been considered a passage from the judgment of Lord Mansfield, C. J. in Holman v. Johnson, (1775) 1 Cowp 341, 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 this: ex 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 plaintiffs own stating or otherwise the cause of action appears to arise ex turpi causa or the transgression of 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" 20. 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 cannot 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 public interest or policy it makes any difference that the deed on which the present suit, is brought as one of conveyance. 21. 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 care 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 contemplate by respondents 1 and 2 had been effectively carried out and that in the carrying out of the fraud both the parties were equally guilty. 22.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The point thus raised lies within a narrow compass and the material facts which give rise to it are no longer in dispute. It is common ground that the approach of the Court in determining the present dispute must be conditioned solely by considerations of public policy.  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 purcly 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 formerThere 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 plead his own fraud it really means that a person cannot the permitted to go to a Court of Law to seek for its assistance and yet base his claim for the Courts 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 conveys no title 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. In our opinion, the view taken by these subsequent decisions of the Madras High Court does not represent the true and correct approach to the questionWe 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 public interest or policy it makes any difference that the deed on which the present suit, is brought as one of conveyanceWe 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 care 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 contemplate by respondents 1 and 2 had been effectively carried out and that in the carrying out of the fraud both the parties were equally guiltyThis 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 possession 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 Sidlingappo v. Hirasa, ILR 31 Bom 405. Thereafter the correctness of this judgment was sometimes doubted in the subsequent decisions of the said High Court (Vide : Lakshman Balwant v. Vasudeo Mohaniraj, 33 Bom LR 356 : (AIR 1931 Bom 227  )) and finally the Full Bench of the said High Court reversed the said decision of Sir Lawrence Jenkins in Guddappa Chikkappa v. Balaji Ramji ILR (1941,) Bom 575   : (AIR 1941 Bom 274  ) (FB). 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 (Vide : Preomath Koer v. Kazi Mahomed Shazid, 8 Cal WN 620, Emperor v. Abdul Sheikh, AIR 1920 Cal 90, Vilayat Hussain v. Mt. Misran, ILR 45 All 396 : (AIR 1923 All 504  ), Nawab Singh v. Daljit Singh, ILR 58 All 842: (AIR 1936 All 401), Qader Baksh v. Hakim, ILR 13 Lah 713 : (AIR 1932 Lah 503) (FB) Bishwanath v. Surat Singh, AIR 1943 Nag l13 and Jharia Coal Field Electric Supply Co., Ltd. v. Kaluram Agarwala, ILR 30 Pat 137: (AIR 1951 Pat 463  )(Case of illegal contract))In Madras the earlier decisions of the High Court appear to have taken the same view (Vide: Venkataramana v. Viramma, ILR 10 Mad 17, Yaramati Krishnayya v. Chundru Papayya ILR 20 Mad 326 and Raghavalu Chetty v. Adinarayana Chetty ILR 32 Mad 323  . In the case of 32 Mad LJ 484 : (AIR 1918 Mad 365) 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 : K. Kotayya Naidu v. C. Mahalakshmamma, ILR 56 Mad 646   : (AIR 1933 Mad 457  ) and Arunachalam Chettiar v. Rangaswamy Chettiar, ILR 59 Mad 289   : (AIR 1936 Mad. In our opinion, the view taken by these subsequent decisions of the Madras High Court does not represent the true and correct approach to the questionEven 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 public interest or policy it makes any difference that the deed on which the present suit, is brought as one of conveyanceIt 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 care 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 contemplate by respondents 1 and 2 had been effectively carried out and that in the carrying out of the fraud both the parties were equally