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Structured Summary of the Opinion (Mears, C.J.)

Factual and Procedural Background

The facts, as stated in the opinion, are: Sheikh Vilayat Husain and Musammat Imaman were indebted to various creditors and faced at least one decree in execution. On 12 September 1904 they arranged with Muhammad Ismail that a fictitious sale-deed would be executed in his favour so as to defeat creditors. The sale-deed of 12 September 1904 was executed without any consideration passing to the ostensible vendors. Muhammad Ismail used the deed to have the property released from the decree and apparently collected rent for some period to give the transaction an appearance of genuineness. After Muhammad Ismail's death, Vilayat Husain and Musammat Imaman obtained possession of the house and began to collect rents themselves (circa 1909).

On 30 June 1917 the plaintiffs, who are the heirs of Muhammad Ismail, brought a suit to recover possession on the strength of the 12 September 1904 sale-deed. The defendants pleaded facts alleging that the plaintiff (Muhammad Ismail) and the defendants were in pari delicto — i.e., jointly engaged in the same fraud. The trial court (a learned Judge of this Court) had given a decree which was not in agreement with the lower appellate court; the opinion concludes that the decision of the lower appellate court was correct and should be restored. The present appeal was allowed, the decree of the learned Judge of this Court set aside, the decree of the lower appellate court restored, the plaintiff's suit dismissed, and each party ordered to pay his own costs.

Legal Issues Presented

  1. Under what circumstances can a defendant properly plead and rely upon facts showing that he and the plaintiff were in pari delicto (jointly guilty of a fraud)?
  2. When a plaintiff relies upon a deed, to what extent is a defendant entitled to give evidence of the circumstances surrounding the execution of that deed, including evidence that both parties were jointly engaged in fraud?

Arguments of the Parties

Plaintiffs' Position (as presented in the plaint)

  • The plaint was simple and rested on the 12 September 1904 sale-deed, the death of Muhammad Ismail, and the fact that the defendants realized rents from the property — i.e., claim for possession based on the deed.

Defendants' Position (as set out in their pleadings)

  • The defendants pleaded that the 12 September 1904 sale-deed was a device to defeat creditors and that both Vilayat Husain and Muhammad Ismail acted together in a fraudulent scheme; they alleged that the parties were in pari delicto.
  • They contended that, having pleaded the particulars of the joint fraud, the court should consider those facts and not assist a plaintiff who is equally guilty with the defendant.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Taylor v. Chester Example supporting that a defendant may by way of special pleading state facts showing that plaintiff and defendant are in pari delicto; endorses the maxim in pari delicto potior est conditio possidentis and that courts will not assist an illegal transaction. The court cites Taylor v. Chester as an authoritative example where such a pleading was entertained, the facts were examined, and the maxim was applied; it supports the proposition that the defendant may plead and prove joint fraud and thus the court should refuse assistance to either party.
Sidlingappa bin Ganeshappa v. Hirasa bin Tukasa Referenced in argument as allegedly factually similar to the present case. The court observed that Sidlingappa does not appear to have concentrated on the precise question whether a defendant may plead that he and the plaintiff were in pari delicto; the point does not appear in that judgment, and therefore it is not controlling for the present question.
Roberts v. Roberts Referred to by counsel; relevant to issues of assisting parties engaged in wrongdoing. The court notes that Roberts v. Roberts does not seem to have paid attention to the principle of in pari delicto potior est conditio defendentis and characterises that case as of doubtful authority in relation to subsequent decisions.
Herman v. Jeuchver Held out as a characteristic example of subsequent decisions consistent with Taylor v. Chester and the in pari delicto principle. Used as an example of later authority that aligns with the rule that courts will not assist parties equally guilty of fraud; supports the court's view of established practice.
Raghupati Chatterjee v. Nrishingha Hari Das Recent authority (Calcutta High Court) said to have considered the authorities and reached the same conclusion as the present court. The court notes that this recent case, after full consideration of authorities, arrived at the same conclusion as the present opinion and thus corroborates the court's approach.

Court's Reasoning and Analysis

The court's analysis proceeds from the factual matrix to established legal principles and their application:

  1. Pleadings and evidence: The court emphasises that where a plaintiff relies upon a deed, a defendant is entitled, as of course, to give evidence of the circumstances surrounding the document's creation. When those circumstances include an allegation of joint fraud by both plaintiff and defendant, the defendant must plead particulars of that fraud.
  2. Duty to frame issues and consider the plea: If the defendant's written statement complies with procedural rules and contains proper particulars, the court must consider it and frame appropriate issues for trial. The opinion records that the pleading in this case was proper and the court did indeed entertain it and allowed the genuineness of the document to be impeached.
  3. Legal principle when parties are in pari delicto: The court explains the operative rule — where the court concludes that the parties acted together to perpetrate a fraud and are equally guilty, the court will not assist either party. The maxim in pari delicto potior est conditio possidentis is invoked and explained as rooted in public policy: courts will not aid an illegal transaction or parties seeking relief based on that illegality.
  4. Application to the facts: The court finds that the wrongdoing occurred around 12 September 1904 and that the principal wrongdoers were Vilayat Husain and Muhammad Ismail. Because the defendants pleaded and established that the deed was a product of the joint fraud, neither they nor the plaintiff (and those claiming directly through them) could obtain assistance from the court on the basis of that deed.
  5. Reliance on authorities: The court relies on Taylor v. Chester and other subsequent decisions (cited examples) and legal authority (Broom's Legal Maxims) to support the proposition that a defendant may plead and prove joint fraud and that, if proven, the court must decline relief to a plaintiff who is not coming with clean hands. The court distinguishes Sidlingappa as not having addressed this specific point and treats Roberts v. Roberts as of doubtful authority in this respect.

Holding and Implications

Holding: The court concluded that the decision of the lower appellate court was correct and must be restored. Accordingly, the appeal was allowed, the decree of the learned Judge of this Court was set aside, and the decree of the lower appellate court was restored. The direct, dispositive outcome was that the plaintiff's suit was dismissed.

Additional directions: The court ordered that each party pay his own costs throughout. Banerji, J. recorded his agreement with the judgment.

Implications: The opinion applies established principles (including the maxim in pari delicto potior est conditio possidentis) to deny relief where plaintiff and defendant are shown to be equally guilty of fraud. The opinion treats prior authorities to support that practice; it does not purport in the text to announce a novel legal doctrine beyond applying those principles to the facts of this case.

    Vilayat Husain v. Misran

    Mears, C.J:— This is an interesting case which has given rise to a discussion as to under what circumstances a defendant can properly plead and rely upon facts showing that he and the plaintiff were in pari delicto. The circumstances are as simple as they can be. Sheikh Vilayat Husain and Musammat Imaman were, on the 12th of September, 1904, indebted to various creditors. There was at least one decree outstanding which was in the course of execution. In that position of affairs they turned to Muhammad Ismail, who was a friend, and who agreed with them that a fictitious deed of sale of property should be executed in his favour, so that might serve as a shield against the demands of creditors. That deed of sale was in fact executed on the 12th of September, 1904, and no consideration passed from Muhammad Ismail to the ostensible vendors. Muhammad Ismail put forward a claim and got this very property released from the operation of the decree. Therefore the contemplated fraud was successfully carried out. It is probable that Muhammad Ismail collected the rents for some period; but if this was done, it was only to make the transaction of the 12th of September, 1904, appear to be a genuine and valid one. Under some circumstances which are not very clear, on the death of Muhammad Ismail, Vilayat Husain and Musammat Imaman got possession of the house and began to collect the rents themselves. In this way they asserted possession and dominion over the house in question. That was in the year 1909.

    On the 30th of June, 1917, after a lapse of some 9 years, the plaintiffs, who are the heirs of Muhammad Ismail, brought the suit to recover possession on the strength of the sale-deed of the 12th of September, 1904.

    It is now important to turn to the pleadings to see how the case was framed by the parties. As one would expect, the pleading in the plaint was quite simple; it was based upon a sale-deed, the death of Muhammad Ismail and the realization of rents by the defendants. To that apparently genuine claim the defendants set up what they contended was the true story; that is to say, they drafted pleas which showed, if they were true, and as they were subsequently found to be true, that Vilayat Husain and Muhammad Ismail were in pari delicto, that is to say, not one man but both were jointly engaged on a fraud in which each was equally culpable.

    If that written statement was a written statement in accordance with the rules and with the procedure, then it had to be considered by the court and proper issues framed. Nobody seems to have suggested that the pleading was in any way improper, and indeed there can be no question that this pleading was the proper pleading, and the points urged in it and the facts set out in it were proper to be raised and those which it was the duty of the court to consider, and, in fact, the court did consider this matter and the court allowed the genuineness of the document to be impeached.

    In all cases where a plaintiff is relying upon a deed, the defendant is entitled as of course to give evidence of the circumstances under which the document came into existence. When those circumstances embrace and include an allegation of a joint fraud by both plaintiff and defendant, the particulars of that fraud must be pleaded; and it is then the duty of the court to look into the matter, and if the court comes to the conclusion that the parties were acting together with a, view to perpetrate a fraud, and did in fact perpetrate that fraud, and that there is no difference in the degree of guilt of the plaintiff (who is asking the court to give him some help) and that of the defendant, the duty of the court is not to assist either party; in other words, the duty of the court is to dismiss the claim, because the court having then in its knowledge that it has before it two persons equally guilty of fraud will not assist eh her of them.

    The position, therefore, of this matter is that the decision of the lower appellate court is the right decision and that decision must be restored. But inasmuch as there has been considerable discussion on this master, it may be useful, without going into great length, to mention some authorities, so that there can be no question as to the propriety of pleading and entertaining any evidence of the allegations of a joint and equal fraud of plaintiff and defendant. An example of that type of pleading will be found in Taylor v. Chester . There, by way of a special reply, all the facts were stated which went to show that, if those facts were true, the plaintiff and defendant were in pari delicto. It may be noticed that in that case the defendant took issue on the reply and raised the precise question as to whether a pleading of this nature was a fit and proper pleading to be entertained by the court. The court decided that it was, went into the whole facts of the case, and, in the course of its judgment, said: “The maxim that ‘in pari delicto potior est conditio possidentis,’ is as thoroughly settled as any proposition of law can be. It is a maxim of law, established, not for the benefit of plaintiffs or defendants, but is founded on the principles of public policy, which will not assist a plaintiff who has paid over money, or handed over property in pursuance of an illegal or immoral contract, to recover it back, for the courts will not assist an illegal transaction in any respect.” The court also pointed out the further proposition that if a plaintiff can go into a court and make out a complete case without himself disclosing any fraud, then he may be entitled to recover. In all cases, however, where a plaintiff has to produce a document, he can, either by interrogatories, or when he is actually present in the box, be asked questions under cross-examination which will show that his first story to the court as regards the circumstances under which the document was executed is not a true story, and the defendant is entitled, if he has put on record the proper pleadings, to go into the whole of the circumstances and show that each party is in pari delicto. There are many other English authorities to that effect but the most concise summary of law is to be found in Broom's Legal Maxims, 8th Edition, at pages 561 and 562:—

    “Once it is established that the parties are in pari delicto, the courts will, not assist an illegal transaction in any respect, that is to say, the person who has asked the court to do something in his favour will fail.” “Not only,” says the learned author, “in æquali jure, but likewise in pari delicto, is it true that potior est conditio possidentis; where each party is equally in fault, the law favours him who is actually in possession; a well-known rule which is, in fact, included in that more comprehensive maxim to which the present remarks are appended. ‘If’ said Bullar, J., ‘a party comes into a court of justice to enforce an illegal contract, two answers may be given to his demand; the one, that he must draw justice from a pure fountain, and the other, that potior est conditio possidentis.’”

    Our attention has been drawn to the case of Sidlingappa bin Ganeshappa v. Hirasa bin Tukasa and it is contended that the facts of that case are so identical with the facts of the case under consideration that we are bound by the course that case took. If one studies that case, one will see that no attention was concentrated upon the question with which we are concerned here, which is whether a defendant can in a pleading raise facts which show that he and the plaintiff were in pari delicto. If he can raise such facts, he can prove such facts; and if he proves such facts, he can bring himself within the principle of law which has been laid down in the case to which we have referred above, and in others which are to be found appended to the notes in Broom's Legal Maxims. The court was referred to Roberts v. Roberts but the court does not seem to have paid any attention to the principle of in pari delicto potior est conditio defendentis, and that case is certainly not in harmony with the principle of subsequent decisions, of which Taylor v. Chester (supra) and Herman v. Jeuchver are characteristic examples, and appears to us of doubtful authority. The essence of the case now under consideration is that the defendants set up the joint iniquity of Vilayat Husain and Muhammad Ismail—they were alleging throughout the conceited plan by which both the plaintiffs and the defendants, in equal degree of wrong-doing, had agreed to take a course which would defeat, and did in fact defeat, creditors. In the case of Sidlingappa bin Ganeshappa v. Hirasa bin Tukasa this point does not appear to have been urged upon the court—at all events it finds no place in the judgment. We have no doubt whatever that the practice is that a defendant may always allege facts, that he and the plaintiff were together jointly equally guilty of a contemplated and executed fraud. Provided the pleading contains proper facts, an issue has to be found on that, and it is established to the satisfaction of the court that the plaintiff and defendant were jointly and equally engaged upon a fraud, it is then the duty of the court to give no assistance to the plaintiff, the position being that the plaintiff must come into court with clean hands.

    On the question of pari delicto one has to consider all the facts, and that requires an examination of the circumstances attending the execution of the document, if it be a document which is impeached. In this case the wrong-doing was in and around the 12th of September, 1904. The parties who were guilty of that wrong-doing were Vilayat Husain and Muhammad Ismail. Neither of them could have obtained any assistance from any court after the contemplated fraud had been carried out, and that bar applies also to people claiming directly through them.

    Mr. Uma Shankar Bajpai, after the close of the arguments—and indeed after delivery of judgment—called our attention to the very recent case of Raghupati Chatterjee v. Nrishingha Hari Das . There the Calcutta High Court; on of full consideration of all the authorities, came to the same conclusion at which we had arrived.

    We are, therefore, of opinion that this appeal must be allowed and the decree of the learned Judge of this Court set aside and the decree of the lower appellate court restored. The result will be that the plaintiff's suit will be dismissed. Each party must pay his own costs throughout.

    Banerji, J.:— I agree.

    Appeal allowed.

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    Comments

    Vilayat Husain v. Misran
    (Feb 16, 1923)