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  • Indian Trusts Act II of 1882, sec. 84,
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  • Indian Trusts Act II of 1882, sec. 84,
Smart Summary

Factual and Procedural Background

The Plaintiff executed a deed of relinquishment in favour of the first Defendant, alleging that he was merely a benamdar and that the Defendants were the beneficial owners. He later sued to obtain a declaration of his right to certain property and to recover possession, alleging that the deed was a colourable instrument executed to shield the property from being sold in execution of decrees obtained against him by certain creditors. The Plaintiff says the intended fraud was not carried into effect because he succeeded on appeal in the suits brought by those creditors, and therefore he seeks to recover possession.

The Defendants traversed the Plaintiff's allegations. The lower Appellate Court gave the Plaintiff a decree for possession. The Defendants appealed to this Court on two grounds: (1) that the Plaintiff is estopped from alleging the deed to be colourable, and (2) that the Plaintiff is not entitled to rescind a deed he executed for the purpose of perpetrating fraud.

Legal Issues Presented

  1. Whether the Plaintiff is estopped from alleging that the deed of relinquishment was colourable.
  2. Whether a grantor who executed a deed with the intention to defraud creditors, but whose fraudulent purpose was not carried into effect, is entitled in equity to a declaration and to recover possession.
  3. Whether the deed of relinquishment operated to pass title (by conveyance or estoppel) to the nominal transferee where it was executed as a relinquishment and both transferee and purchaser knew the true nature of the document.

Arguments of the Parties

Defendants / Appellants' Arguments

  • The Plaintiff is estopped from alleging the deed of relinquishment to be colourable because of his prior act in executing it (estoppel argument).
  • The Plaintiff is not entitled to rescind a deed which he executed with the express purpose of defrauding his creditors; equity will not assist a fraudulent grantor.
  • Counsel for Appellants relied on authorities (including Chenvirappa v. Puttappa; Rangammal v. Venkatachari; Ranga v. Venkata; Yaramati v. Chundru) to support the proposition that relief should be refused where the transferor acted to defraud creditors, and invited referral to a Full Bench.

Plaintiff / Respondent's Arguments

  • The deed was executed as a shield against alleged creditors but the contemplated fraud was not carried into effect because the Plaintiff subsequently succeeded on appeal and the creditors' claims were held to be unfounded.
  • Because the fraudulent purpose was not carried into effect, the beneficial owner is entitled to sue to establish that the deed was benami and to recover possession.
  • The deed executed was a relinquishment which, under the facts (both transferee and purchaser aware of its true nature), did not operate to convey title or create an estoppel; therefore the Plaintiff retained an enforceable title.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Yaramnti Krishnayya v. Chundru Papayya Cited as a Madras High Court authority attacking the rule that a beneficial owner may sue where fraudulent intention was not carried into effect. Court observed the Madras decision dissents from some of the Supreme Court's formulations but declines to adopt the Madras view where inconsistent with this Court's earlier rulings.
Chenvirappa v. Puttappa Cited as a Bombay High Court decision laying down a different rule on whether grantor can seek relief after a benami transfer. Cited as representing a contrary view; the Court examined it but ultimately adhered to the principle favouring relief where the fraudulent purpose was not carried into effect.
Rangammal v. Venkatachari (and Ranga v. Venkata) Cited among authorities supporting the view that a grantor acting to defraud creditors may be denied relief. Considered by the Court; treated as possibly dissenting from the broad formulation of Sir Richard Couch but not accepted where inconsistent with later authorities.
Sham Lal v. Amarendra (Sham Lal Mitra v. Amarendra Nath Bose) Cited regarding the proposition that showing a document executed but not carried into effect is colourable. Court reviewed the case and considered that the general rule laid down earlier (allowing proof of colourable instruments not acted upon) was not inconsistent with a proper distinction between executed and executed-into-effect frauds.
Ram Indur v. Roop Naraian Early Sudder Court authority: general principle that one who enters into a fraudulent agreement to defeat creditors shall not be relieved by the Court. Summarised as authority for strict rule; Court noted factual distinctions (whether fraud was carried into effect and whether innocent purchasers would be prejudiced) and considered it among the older authorities.
Roushun v. Collector of Mymensingh Authority applying the maxim that no person can take advantage of his own wrong where transfer was effective and intended to deceive the public to evade process. Used to illustrate cases where the fraudulent scheme had been successfully accomplished and relief was refused.
Brimho Mye v. Ramdolab Full Bench held Courts will not aid a party who founds his claim upon fraudulent agreements contrived to defeat justice. Relied on as an instance where the fraudulent object had been accomplished and relief was refused.
Raj Narain v. Jugunnath Sudder Court held plaintiff (a purchaser) entitled to succeed where there was nothing to show the contemplated fraud had been carried into effect; purchaser was bona fide for value. Noted by Court as an authority showing that courts sometimes allow recovery where fraud was not carried into effect and plaintiff was bona fide purchaser for value.
Koonjte Singh v. Junket Singh Majority held suit not maintainable where claim founded on benami deed intended to deceive creditors; dissent argued that if fraud not carried out plaintiff should succeed. Cited as showing divided authority; Court noted the dissent supports the view that non-executed fraud should not automatically preclude relief.
Black v. Darling U.S. Supreme Court authority cited for principle that when a plaintiff recovers money he intended to hide, creditors may actually benefit; intention alone should not bar recovery where fraud not carried out. Used by Court to support view that abandonment or failure of intended fraud can justify relief to the grantor.
Bhowanny Sunkur v. Purem Bibee Sudder Court ruling refusing relief to a party seeking to set aside an avowedly fraudulent benami sale. Cited among authorities that apply a strict rule refusing relief where the transferor acted with fraudulent intention.
Ram Soonder v. Anund Nath Sudder Court allowed plaintiff to succeed though plaintiffs were not beneficial owners and were cognisant of scheme; nothing showed fraud had been practised. Noted by the Court as an authority supporting the more lenient view that where fraud was not carried into effect relief may be granted.
Ram Lal v. Kishen Chandra Substantially same view as Ram Soonder — plaintiff allowed to succeed. Cited as an authority inconsistent with the strict earlier line; used to show the evolution of jurisprudence.
Birj Mohan v. Ram Nursingh Earlier Sudder Court decision allowing defendants to plead prior collusion in answer to claim founded on a fictitious taluk. Cited as an example of an earlier decision inconsistent with later lenient views.
Obhoy Churn v. Treelochun Ruled that a party cannot set up his own fraud to invalidate his own deed; plea of collusion not entertained. Used to illustrate the doctrine of Lord Mansfield (Montefiori v. Montefiori) that one cannot allege his own iniquity as defence or cause of action.
Roberts v. Roberts Authority relied on in Obhoy Churn; supports that one cannot rely on own fraud. Cited in support of the proposition that parties cannot allege their own fraud to invalidate transactions.
Montefiori v. Montefiori Lord Mansfield's doctrine that a person cannot set up his own iniquity as a defence or cause of action. Relied upon in Obhoy Churn and discussed by the Court as part of the strict line of authorities.
Hurry Sunker v. Kali Applied the doctrine that relief will be refused to a party seeking to set aside benami sale made to defeat rights of third parties, regardless of whether the fraudulent object was carried into effect. Included among cases exemplifying the strict approach; Court noted it expressly stated that it was immaterial whether creditors were actually defrauded.
Alok Soondry v. Horo Authority asserting that Courts exist to protect honest suitors and not to aid schemes of fraud; used to justify refusing relief. Cited by Court as part of the strict-view line; acknowledged but weighed against other authorities favouring the distinction.
Keshub v. Vyasmonee Cited among decisions following the strict rule refusing relief where transfer intended to defraud. Placed with similar authorities that would deny relief; Court contrasted these with later, more lenient authorities.
Azimut v. Hardwaree; Sukhi Mani v. Mohendra Nath; Ramanugra v. Mahasundur Judicial Committee observations that were thought to give some apparent support to the strict rule, though the question did not directly arise or was not decided. Court observed none of these cases decided the question directly; they were not treated as controlling.
Luckhee v. Taramonee; Fureedoonissa v. Ruhamut; Ghurreeb Hossain v. Useemoonnessa; Parikheet v. Radha Kissen; Kalee Nath v. Doyal Kristo Cases holding the strict rule applied not only to parties but also to persons who take under the real owner (heirs or purchasers). Cited as instances of broad application of the strict rule; Court noted some judicial doubt about the correctness of that breadth in specific instances.
Ram Surun Singh v. Pran Peari Judicial Committee held that a pleading by two defendants in a prior suit cannot amount to an estoppel between them; allowed subsequent denial of a former joint answer. Cited by Mookerjee, J. as authority supporting the proposition that prior statements in litigation do not necessarily estop parties from denying them later; used to support the view that parties can show a supposed transfer was not intended to pass title.
Oodoy Koowar v. Ladoo Authority aligned with Ram Surun Singh: a joint pleading cannot create an estoppel between defendants in later litigation. Relied on by Sir Richard Couch and noted by Mookerjee, J. in support of the lenient approach.
Sreemotee Debia v. Bimola Soonduree (Sir Richard Couch, C.J.) Established that parties are not precluded from showing that a benami instrument was not intended to pass beneficial ownership where the purpose was to obtain shield against a creditor. Cited as a key precedent for the proposition that intention not carried into effect allows the grantor to assert true ownership; Court broadly followed this reasoning.
Latteefoonissa v. Goor Sarun; Sreenath v. Bindubasini; Gopinath v. Jodu; Bykunt v. Goboollah; Mukim Mullik v. Ramjan Cases applying the principle in Sreemotee Debia that the true nature of the transaction may be established even if ostensibly it was made to shield against creditors. Listed by the Court as supporting authorities for the view that non-executed fraudulent intention does not automatically bar relief.
Kaly Charan Pal v. Rusik Lal Pal; Goberdhone Singh v. Ritu Roy; Banka Behary Das v. Raj Kumar Das; Govind Kuar v. Lala Kishun Prosad Decisions adopting the distinction between fraud merely intended and fraud actually accomplished, favouring relief where the fraud was not executed. Used by the Court to show later authorities endorsed the lenient rule; these influenced the Court's conclusion to follow the lenient approach.
Bateman v. Ramsay; Hamilton v. Ball; McUrdy v. Martin Cited as authorities representing the contrary (stringent) view that the grantor cannot reclaim even if the fraud was not carried out. Court acknowledged their position but declined to follow them for reasons explained in the judgment.
Param Singh v. Laljimal Allahabad High Court decision adopting the lenient view (the Court observed it perhaps goes too far). Cited as an instance of provincial High Court following the lenient approach; Court noted it but observed it may be excessive in scope.
Honapa v. Narsapa; Babaji v. Krishna; Preonath v. Kazi Mahomed Bombay High Court decisions (and one followed by this Court) supporting the lenient view allowing relief where fraud not executed. Cited by the Court as supporting the approach adopted here; Preonath was followed by this Court earlier.
Baker v. Guelman New York Supreme Court case: where an alleged creditor's claim proved unfounded, a conveyance made to defeat that claim was not fraudulent as against a person who had no lawful claim. Relied on by Mookerjee, J. to support the proposition that where the putative creditor had no lawful claim (established by later judgment), the transfer cannot be deemed fraudulent so as to bar the grantor's relief.
Symes v. Hughes; Taylor v. Bowers; Kearley v. Thomson English authorities discussed in relation to the distinction between intended fraud and carried-into-effect fraud; some English cases were doubted or distinguished. Considered in argument; Court rejected the submission that these authorities required denial of relief in the present facts and preferred the distinction endorsed by other authorities.
Birch v. Blagrave; Cottington v. Fletcher; Young v. Peachy; Platamone v. Staple English authorities recognizing distinction between intention not carried into effect and executed fraud (permitting recovery where fraud not consummated). Relied upon by Mookerjee, J. to show historical and equitable support for the lenient rule adopted.
In re Great Berlin Steam Boat Co.; Tennent v. Tennent Authorities cited for recognizing the distinction between unexecuted and executed fraudulent purposes. Quoted as supporting the proposition that the fact the deed was not acted upon is relevant to equitable relief.
Cecil v. Butcher; Davies v. Otty; Manning v. Gill Decisions confirming that the fact a deed or conveyance has not been acted on and the illegal object not carried out is an element for equity to consider. Mentioned as supportive authorities; Court relied on the general line when reaching its conclusion.
Lobo v. Brito Cited in context to illustrate that refusing relief where fraud not carried out would make Court an instrument to aid the defendant in a fraudulent claim. Used by the Court to illustrate the policy objection to the strict rule in circumstances like the present.
Waldron v. Harvey; McNeelley v. S.P.O Coy Authorities for the proposition that title to land cannot pass by admission when the Statute requires a deed. Cited by Court to support the view that a relinquishment did not operate to convey title in the circumstances and that the Plaintiff retained title.

Court's Reasoning and Analysis

The Court conducted a twofold analysis: (a) whether there was any estoppel, and (b) whether equitable relief should be denied to a grantor who had executed an instrument with the intention to defraud creditors but whose fraudulent purpose was not carried into effect.

On estoppel: the Court (Rampini, J.) found there was clearly no estoppel because the Defendants were in no way misled or induced to alter their position by the Plaintiff's conduct. The deed had not operated as a conveyance in law, and both the nominal transferee and the purchaser were aware of the true nature of the instrument.

On the substantive equitable question: Mookerjee, J. reviewed a large body of case law (both Indian and foreign) and traced two strands of authority. The earlier, stricter line held that a party who enters into a fraudulent arrangement to defeat creditors cannot be relieved by the Court even if the party later seeks to set aside the transaction. The later, more lenient line (including decisions of Sir Richard Couch and several subsequent authorities) drew a distinction between (i) cases where the intended fraud was carried into effect and (ii) cases where the fraud remained only as intention and was not executed. The Court accepted the latter distinction as sound equitable doctrine: where the fraudulent purpose has not been carried into effect, and especially where the putative creditors were not in fact defrauded (for example when their claims were later held unfounded), equity should not punish the grantor by awarding the thing to the nominal transferee who acts unconscionably.

The Court also relied upon statutory recognition of the distinction in sec. 84 of the Indian Trusts Act, 1882, which contemplates transfers made for an illegal purpose and instructs that if the purpose is not carried into execution or other conditions exist, the transferee must hold the property for the benefit of the transferor.

Applying these principles to the present facts, the Court emphasized that (a) at the time of the deed the Plaintiff feared execution by decree-holders but ultimately succeeded on appeal and those creditor claims were found unfounded, (b) the second Defendant was found not to be a bona fide purchaser for value without notice (a factual finding not challenged), and (c) the deed executed was a relinquishment which, because of statutory/formal requirements for transfer and because both transferee and purchaser knew the true nature of the deed, did not operate to pass valid title nor to create an estoppel. On that combined basis the Court concluded the Plaintiff retained an enforceable title and should recover possession.

Holding and Implications

Holding: The appeal was dismissed and the decree of the Courts below in favour of the Plaintiff was affirmed. The Court ordered the appeal dismissed with costs. The core ruling is: APPEAL DISMISSED.

Implications:

  • Direct effect: The Plaintiff's decree for declaration and recovery of possession was upheld and the Defendants' appeal failed; the Plaintiff retains enforceable title and may recover the property.
  • Legal principle applied: The Court affirmed the equitable distinction between an intended but unexecuted fraudulent transfer and a transfer by which the fraudulent purpose has been carried into effect — permitting relief to a transferor where the fraudulent object was not consummated and where allowing the transferee to keep the property would itself be unconscionable or would reward a more serious wrongdoing.
  • Statutory reference: The Court relied upon sec. 84, Indian Trusts Act, 1882, as consistent with the equitable distinction and as supportive of the result.
  • Scope of precedent: The decision aligns with the line of authorities permitting relief in cases where fraud was not executed; the Court examined contrary authorities but declined to adopt an absolute rule barring relief in all cases of initial fraudulent intention.

This summary is strictly confined to the facts, arguments, authorities and reasoning contained in the provided opinion and does not introduce information beyond that text.

    Jadu Nath Poddar v. Rup Lal Poddar

    Rampini, J.:— In the suit out of which this appeal arises the Plaintiff seeks to obtain a declaration of his right to certain property and to recover possession of it from the Defendants. He had executed a deed of relinquishment in favour of the Defendants in which he alleged that in respect of that property he was the benamdar of the Defendants, and he now sues to have it established that this deed of relinquishment was a colourable deed, which he executed to save his property from being sold in execution of decrees obtained against him by his creditors. He alleges that his intended fraud was not carried out because he won the appeals he preferred in the suits with his creditors and so he desires to get back possession of his property. The Defendants traverse his allegations. The lower Appellate Court has given the Plaintiff a decree.

    The Defendants appeal on two grounds (1) that the Plaintiff is estopped from alleging the deed of relinquishment to be colourable and (2) that the Plaintiff is not entitled to rescind a deed he executed for the purpose of perpetrating fraud.

    There is clearly no estoppel in this case. The Defendants were in no way misled and thereby induced to do any thing or alter their position. Further, the rule laid down by this Court is that when the intention to commit fraud has not been carried into effect a beneficial owner is entitled to sue for a declaration that a deed of transfer executed by him is benami. This rule has no doubt been attacked by the Madras High Court in the case of Yaramnti Krishnayya v. Chundru Papayya(1), and a different rule has been laid down by the Bombay High Court in Chenvirappa v. Puttappa(2), but I see no reason to dissent from the rulings of this Court on the subject. I would therefore dismiss this appeal with costs.

    Mookerjee, J.:— On the 29th November 1893, the Plaintiff executed a deed of relinquishment in favour of the first Defendant by which he declared, that the properties in dispute in this litigation belonged to the latter. On the 14th January 1899, the first Defendant executed in favour of the second Defendant a conveyance in respect of a half share of these properties, as if he was the beneficial owner entitled to deal with them. The Plaintiff now seeks to recover possession upon declaration that the deed of relinquishment was not intended to and did not confer any valid title upon the first Defendant, and that consequently, the second Defendant did not acquire any rights under his purchase. It has been found as a fact that the second Defendant is nob a bonâ fide purchaser for value without notice, and that at the time, he made his purchase, the first Defendant was not competent to deal with the properties. The accuracy of this finding has not been challenged before this Court. The Defendants, however, contended in the Courts below, and they have repeated the objection in this Court that the Plaintiff is not entitled to any relief, because at the time, when he executed the deed of relinquishment, he did it for the express purpose of defrauding his creditors. The Plaintiff admits that shortly before the deed was executed, some persons who alleged themselves to be his creditors had obtained decrees against him, against which he preferred appeals. He apprehended that during the pendency of the appeals the decree-holders might take out execution, and with a view to protect his properties, he executed this deed of relinquishment as a shield against those creditors. As a matter of fact, no execution was ever taken out, and the appeals instituted by the Plaintiff, were ultimately successful with the result that the alleged claims of the creditors were held to be unfounded and were dismissed. Under these circumstances, the Plaintiff contended, that his conduct was not such as to preclude him from establishing the truth and recovering possession of the properties. The Courts below have concurrently adopted this view of the matter and have given the Plaintiff a decree for possession. The Defendants have appealed to this Court, and on their behalf it has been contended that as the Plaintiff executed the deed of relinquishment in order to defraud his creditors, he has no standing in a Court of Equity which will not extend relief to a fraudulent grantor. In support of this proposition, reliance has been placed upon the cases of Chenvirappa v. Puttappa, Rangammal v. Venkatachari(3), confirmed on appeal in Ranga v. Venkata(4) and Yaramati v. Chundru. The learned vakil for the Appellants has further argued that the contrary view taken in the case of Sham Lal v. Amarendra(5), where it was held that it is open to a party to show that a document executed but not carried into effect is colourable was not necessary for the purposes of that decision and cannot be supported upon the authorities. The learned vakil has invited us to refer the question raised to a Full Bench for decision. There can be no doubt that there has been considerable diversity of judicial opinion upon the matter, and it is necessary, therefore, to examine the various authorities and the principles upon which they are founded.

    One of the earliest cases in these provinces in which the question was raised, as to how far the grantor of a fraudulent deed is entitled to ask a Court to relieve him of its consequences, is that of Ram Indur v. Roop Naraian(6). In that case, A who was indebted to B. executed a mortgage in his favour, but with a view to defraud other creditors, antedated it by eight years; A. further gave a warrant of attorney to B. to enable B. to confess judgment on behalf of A, in a suit by B. to enforce the security as against A. The mortgage was intended to be fictitious and was granted with a view to screen the property from the creditors of A.B also executed an engagement in favour of A. which recited the true nature of the whole transaction. Subsequently, B. sued upon the mortgage, obtained a decree upon confession of judgment, had the property put up to auction, purchased it himself and instead of holding it as trustee for A. later on, conveyed it to a stranger. A sued to recover the property. The Sudder Court dismissed the suit upon two grounds, first, that the Plaintiff could not recover the property from a bona fide purchaser for value without notice, and, secondly, that the Plaintiff could not ask to be relieved of the consequences of his own fraudulent act. With regard to this second ground, the Court observed that it is a general principle of law, that a man entering into a fraudulent agreement with another of this nature to defeat the rights of third parties, creditors for instance, shall not himself or his representatives, be relieved against the consequences of his own fraudulent act. Though the creditors may, and if his partner in the fraud, takes advantage, ever so dishonestly, of the power which has been put into his hands, a Court of Justice will not interfere on behalf of him or his heirs. With regard to this case, two points deserve attention, namely, first, that apparently, the fraudulent object in view was not carried out and, secondly, that if the Plaintiff had been allowed to recover the property, either the first transferee from him would have lost the sum justly payable to him, or the seconded transferee, who had taken without notice of the secret agreement, would have lost his money.

    A similar question was raised in Roushun v. Collector of Mymensingh(7). A. sued to recover property from B, which had been conveyed to him under a secret engagement that he was to hold it for the benefit of A. The Sudder Court dismissed the suit on the ground that the sale, though nominal, was effective by a deed duly drawn out, attested and registered, possession given by mutation in the Revenue Registers, and all this done to deceive the public and to evade a rightful process of law. The decision was rested on the ground that no person can take advantage of his own wrong. It may be observed that the suit was resisted, not only by B. but also by persons who had purchased at a Bale held by the Collector to whom B. had given the property as a security for due payment of the Government revenue.

    In the case of Brimho Mye v. Ramdolab(8) the cases just referred to were followed. A. transferred properties to B., with a view to save them from the claim of his creditors. The creditors took out execution, attached the properties and were successfully met with a claim by the transferee. A. then sued to recover the property from B. and a purchaser claiming under him. A Full Bench of Sudder Court held, that the Court will never sanction, or in any way give the aid of its authority to a party, who, by his own omission founds his claim upon fraudulent agreements contrived in order to defeat the ends of justice. It may be remarked that the fraud intended to injure the rights of the creditors had been successfully accomplished, and also, that the transferee from B. claimed to be bona fide purchaser for value without notice.

    In the case of Raj Narain v. Jugunnath(9) A. sued to recover property to which he claimed title by purchase from X. It was found that B. was the real owner of the property, and had executed a conveyance in favour of X, complete in form but nominal in intention and effect, with a view to escape the pressure of the claims of his creditors. The Sudder Court held that A. was entitled to succeed, and observed that a party having made a transfer in fraud, cannot reclaim property from the transferee upon tender of proof that the documents were not bona fide, or sue to treat the acts of the transferee as null and void. It will be observed that the Plaintiff was a bona fide purchaser for value from X., and on that ground alone was entitled to succeed; at the same time there was nothing to show that the fraud contemplated had been carried into effect.

    In the case of Koonjte Singh v. Junket Singh(10) A. sued to recover property which was alleged to have been purchased by him in the name of B., with a view to save it from his creditors. The majority of the learned Judges held, that the suit was not maintainable, as the claim was founded on a deed drawn out benami in order to deceive creditors. The dissentient Judge, however held, that as the contemplated fraud had not been carried out the Plaintiff was entitled to succeed, and he pointed out that if the suit was decreed, instead of creditors of the Plaintiff being defrauded, they must be benefited, because if the property be declared to belong to the Plaintiff, his creditors may take it in satisfaction of their claim. I may point out that the view thus indicated accords with the opinion of the Supreme Court of the United States in Black v. Darling(11), namely, that in an action to recover money deposited with the Defendant it is no valid defence to urge that the Plaintiff made the deposit with the intent to cheat and defraud his own creditors, because as soon as the Plaintiff recovers, his creditors are likely to be benefited by the money.

    In Bhowanny Sunkur v. Purem Bibee(12), the Sudder Court ruled upon the authority of the cases of Ram Indur v. Roop Naraian and Brimho Mye v. Ram Dolab, that no relief will be given to a party suing for the purpose of setting aside a benami sale, avowedly made with the fraudulent intention of defeating the rights of a third party who had a claim against the property. The report does not show, whether the Plaintiffs had succeeded in the scheme which had been planned with a view to enable them to evade payment of their just debts.

    In the case of Ram Soonder v. Anund Nath(13) the Sadder Court held, following the decision in Raj Narain v. Jugunnath Prosad that a Plaintiff was entitled to succeed as against a Defendant who admitted that he had made a fictitious transfer in favour of the Plaintiff, with a view to evade payment to his own creditors. It will be observed that in this case, the Plaintiffs were allowed to succeed, although it was found that they were not the beneficial owners and were cognisant of all the particulars connected with the scheme for defrauding the creditors. There was nothing to show that the intended fraud had been actually practised against the creditors, and yet the Court held, that the ostensible transfer could not be legally disputed. Substantially the same view was taken in Ram Lal v. Kishen Chandra(14). These cases, however, are inconsistent with the earlier decision of the Sudder Court in Birj Mohan v. Ram Nursingh(15) where the Defendants who had collusively created a fictitious taluk in favour of the Plaintiffs in order to evade their liability under a decree passed against them in another suit were allowed to plead and successfully their previous collusion in answer to the unfounded claim of the Plaintiffs.

    A view similar to the one taken in the last case was adopted by the Sudder Court in Obhoy Churn v. Treelochun(16). It was ruled upon the authority of Roberts v. Roberts(17) and Montefiori v. Monterori(18), that although a deed may be avoided on the ground of fraud, the objection must come from a person neither party nor privy to it, for no man can allege his own fraud to invalidate his own deed. The Defendants admitted in answer to the claim that they had executed a deed of sale in favour of the Plaintiffs, but pleaded that it was a purely fictitious transaction resorted to for the purpose of defeating the claims of parties who held decrees against the vendors. It was contended that as the persons through whom the Plaintiffs derived title were in pari delicto with the Defendants the latter should not be debarred from pleading the fictitious nature of the transaction. The Sudder Court held that a plea of this description could not be heard in a Court of Justice, and observed that it was well, that it should be understood, that when people execute fictitious deeds for the purpose of defeating their creditors, avoiding an attachment or effecting any other fraudulent purpose, they place themselves completely at the mercy of the person in whose name the fictitious conveyance is made out, and that their plea of the transaction being a benami one, will not be listened to. This case therefore proceeded upon the doctrine laid down by Lord Mansfield in Montefiori v. Montefiori that it was immaterial whether the fraud is alleged as a matter of defence or as a ground of action, because “no man shall set up his own iniquity as a defence, any more than a cause of action.”

    The cases analysed above are based on the doctrine that where a party admits that he has made a fictitious transfer of his property to another with a view to effect a fraud, but asks to have his act undone, the Court would refuse relief, and would leave the parties to the consequence of their misconduct, dismissing the claim when the suit was brought by the real owner to get back possession of his property, and refusing to listen to the defence when he set up in opposition to the person whom he had invested with the legal title. The rule thus stated was subsequently adopted in the cases of Hurry Sunker v. Kali(19), Alok Soondry v. Horo(20) and Keshub v. Vyasmonee(21). In some of these cases, no doubt, the fraudulent object had been carried into effect, while in others the attempt had failed; but it was expressly stated in Hurry Sunker v. Kali Kumar, that it was immaterial whether any creditors of the transferor were actually defrauded, and in Alok Soondry v. Horo Lal, Jackson, J, with the concurrence of Sir Barnes Peacock, C.J, observed that as Courts of Justice are designed for the protection of honest suitors and the enforcement of just claims, they are not available as machinery to aid the carrying out of schemes of fraud. This view might seem to receive some apparent support from observations of the Judicial Committee in Azimut v. Hardwaree(22), Sukhi Mani v. Mohendra Nath(23) and Ramanugra v. Mahasundur(24). In none of these cases however did the question arise directly for consideration, nor was it actually decided. It may be added that the Courts went so far as to hold that the rule was applicable not only to the parties to the transaction, but also to persons who take under the real owner whether as heirs or purchasers; see Luckhee v. Taramonee(25), Fureedoonissa v. Ruhamut(26), Ghurreeb Hossain v. Useemoonnessa(27), Parikheet v. Radha Kissen(28) and Kalee Nath v. Doyal Kristo(29). In the case last-mentioned, however, Sir Charles Hobhouse, J., expressed considerable doubt as to the correctness of the view and assented to it on the ground that it was supported by a considerable body of authorities and might be regarded as desirable in the circumstances of this country.

    About this time the Judicial Committee decided the case of Ram Surun Singh v. Pran Peari(30) in which it was held that where in a suit two of the Defendants in their answer made a statement in respect of an alleged mortgage transaction with the object of defeating the unfounded claim of the Plaintiff, it was open to either of these two persons in a subsequent litigation in which they were arrayed as Plaintiff and Defendant, to plead that the statement in the joint answer in the former suit was false and intended as a fraud on the third party. Lord Justice James observed in delivering the judgment of their Lordships that it is open to a mortgagor to deny that the money the receipt of which is formally acknowledged under his hand and seal was actually advanced and that he could do so notwithstanding that he had made a contrary statement in a previous litigation with a third party; for a pleading by two Defendants against the suit of another Plaintiff can never amount to an estoppel as between them. A similar principle was adopted by the Judicial Committee in the case of Oodoy Koowar v. Ladoo(31). These decisions were relied upon by Sir Richard Couch, C.J, in Sreemotee Debia v. Bimola Soonduree(32) as establishing that even where the object of a benami transaction is to obtain a shield against a creditor, the parties are not precluded from showing that it was not intended that the property should pass by the instrument creating the benami, and that in truth it still remained with the person who professed to part with it. The same view was also taken in the cases of Latteefoonissa v. Goor Sarun(33), Sreenath v. Bindubasini(34), Gopinath v. Jodu(35), Bykunt v. Goboollah(36) and Mukim Mullik v. Ramjan(37). Later on many of the authorities on the subject were reviewed in Sham Lal Mitra v. Amarendra Nath Bose and the learned Judges while approving of the rule laid down by Sir Richard Couch in Sreemotee Debia Chowdhuri v. Bimola Soonduree indicated that there might be a substantial distinction between cases in which the fraud had been carried into execution and cases in which the contemplated fraud had not gone beyond the stage of intention. This distinction was subsequently adopted as well-founded in the cases of Kaly Charan Pal v. Rusik Lal Pal(38), Goberdhone Singh v. Ritu Roy(39), Banka Behary Das v. Raj Kumar Das(40) and Govind Kuar v. Lala Kishun Prosad(41). It is clear therefore that although in the earliest cases, a very stringent rule was laid down to the effect that a person is not entitled to ask a Court of Justice to afford him relief from the consequences of his own misconduct, the later cases enunciate a more lenient rule that the real nature of the transaction ought to guide the Court in determining the real rights of the parties. Upon this rule has been engrafted the distinction that although where the intended fraud has been carried into effect, the Court will not allow the true owner to resume the individuality which he has once cast off in order to defraud others, yet if he has not defrauded any one, the Court will not punish his intention by giving his estate away to another whose retention of it is an act of gross fraud. In my opinion, this rule is eminently just and ought to be adopted as based on sound equitable doctrine. It is obvious that where the fraudulent purpose has actually been accomplished by means of the colourable grant, the maxim applies “In pari delicto melor est conditio possidentis” But where the fraud has not been accomplished, can this maxim be legitimately applied? A. makes a fictitious grant to B. with a view to defraud his creditor C. but the creditor is not actually defrauded. So far as the transaction itself is concerned, the parties no doubt stand in the same position; A. had a fraudulent intention and B. was willing to aid him in carrying that intention into effect. But if the intention is not carried out and B. dishonestly sets up a title to the property, his guilt is obviously greater than that of A. and I cannot appreciate upon what ground the Courts can refuse to afford relief to A. as against B. whose roguery, as has been well said, is even more complicated than that of A. To refuse relief in such a case would be to encourage a double fraud on the one side (B) to punish the single fraud on the other (A) [Gowan v. Gowan(42)]. It further appears to be clear that if we adopt this view and hold that fraudulent intention is the sole determining element, irrespective of the question whether or not that intention has been accomplished, the result would be that the grantor would be punished even though he abandoned his fraudulent purpose. I am aware of no case where the theory which underlies the rule in its most stringent form has been more vigorously explained than in Church v. Muir(43) where Chief Justice Beasby observed as follows: “A contract the purpose of which is to protect the debtor against the just claims of creditors, is an immoral act. Such an affair is inimical to social policy. In their essence and in their effects such contracts are as immoral, as pernicious, as many of those which the law has declared to be utterly void. In these respects, how are they to be distinguished from the contracts which have been so often judicially condemned, not on account of any enormous immorality, but on the score of their inconsistency with public interest and good Government. They are hostile to fair dealing and commercial honesty and on this account should be subjected to the bar of outlawry.” This condemnation of fraudulent conveyances may be conceded to be just, but it seems to me that the consequences may be easily carried too far. In my opinion, mere intention, not carried into effect, ought not to be sufficient to deprive the party of the assistance of the Court in enforcing his rights; and if he either abandons his fraudulent purpose before it is accomplished or pays his debts to the full value of the property conveyed, the fraud should be regarded as purged; see Carll v. Emery(44) and Drinkwater v. Drinkwater(45), in the former of which case Davens, J., in delivering the judgment of the Supreme Court of Massachusetts, observed as follows: “It would seem equally clear, that when a party who has transferred property to delay or defraud creditors, abandons his fraudulent purpose, apprising the other party thereof, and seeks to re-instate himself in the possession of his property in order to pay his creditors, he may do so. It cannot be that the other party, who has been a participant in the fraudulent transaction, by reason of such participation should be able to hold the property, the possession of which he had so acquired and thus prevent it from being devoted to its legitimate uses.”

    If we apply these principles to the case now before us, the inference is Irresistible that the Plaintiff ought to succeed. At the time when the Plaintiff executed the deed of relinquishment, he apprehended trouble from creditors who had obtained decrees against him. These decrees, as I hive already stated, were subsequently reversed and it was established that the claims which they had set up were unfounded. Upon what principle, can it be maintained that the Plaintiff was guilty of fraud which disentitle him to protection from a Court of Equity 1 I am fortified in the view I take by the reasoning contained in the decision in the case of Baker v. Guelman(46). A. sued B. for slander. B. to protect himself conveyed property to C., who agreed to reconvey. B, defeated the slander suit. Subsequently C. betrayed the trust, and refused to give back the property. The Supreme Court of New York held that C. must reconvey. Johnson, J., observed that as the Plaintiff in the slander suit was ultimately defeated, he had no lawful claim as a creditor, and the conveyance could in no sense be said to be fraudulent because it was made to hinder a person who had preferred a claim which had no foundation in law or justice and the verity of which was not established by a judgment of a competent Court. To extend the operation of the rule to a case of this description, does not appear to me to be defensible upon any intelligible ground either of law or of public policy. The learned vakil for the Defendants-Appellants strenuously contended that the view taken by Sir Richard Couch in Sreemotee v. Bimola is based upon the decision in Symes v. Hughes(47), which, as well as the case of Taylor v. Bowers(48) has been doubted by Fry, L.J, in Kearley v. Thomson(49). He also referred to a passage from Kerr on Fraud and Mistake, 3rd Ed., 405, in which the learned author questions the soundness of the distinction taken between cases where a deed executed or a conveyance made has performed its office, and cases where the deed or conveyance has not been used for the purpose for which it was executed. With all respect for the learned author, I am unable to adopt his criticism as sound in principle, and there is undoubtedly high authority in support of the contrary view. Thus in Birch v. Blagrave(50) a person was allowed to recover property which had been assigned away in order to avoid service in the office of a Sheriff, where it was found that he was excused service not because he actually pleaded that he had no property in the country but because he ultimately paid the fine. Lord Hardwicke drew a distinction between a case in which the unlawful intention had been carried into execution and a case in which no fraud was actually committed. The same distinction is supported by the cases of Cottington v. Fletcher(51), Young v. Peachy(52), Platamone v. Staple(53) and was recognised in In re Great Berlin Steam Boat Co.(54) and in the observation of Lord Westbury in Tennent v. Tennent(55). In Cecil v. Butcher(56) Sir Thomas Plummer, M.R, reviewed the earlier authorities and concluded that the fact that the deed had not been acted upon and the illegal object had not been carried into execution was an element to be taken into consideration. To the same effect are the cases of Davies v. Otty(57) and Manning v. Gill(58) in which persons were allowed to recover property which they had alienated in order to avoid the effects of conviction for a felony which the grantors supposed they had committed but which they had not and could not have committed.

    It is manifest, therefore, that there is a considerable body of authorities in favour of the view indicated in Symes v. Hughes, upon which Sir Richard Couch relied, namely, that “where the purpose for which the assignment was made is not carried into execution; and nothing is done under it; the mere intention to effect an Illegal object, does not deprive the assignor of his right to recover the property back from the assignee who has given no consideration for it.” There is ample authority that in such cases equity will not permit the assignee to work a fraud and retain the property himself by setting up the Statute of Frauds as a defence [Haigh v. Kaye(59), Lincoln v. Wright(60) and Childers v. Childers(61)]. I may further observe that the distinction between the effect of fraud merely intended and a fraudulent purpose actually accomplished, has been recognised by the Indian Legislature in the Indian Trusts Act II of 1882, sec. 84, of which provides as follows:— “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 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.”

    As pointed out in Story on Equity Jurisprudence, Vol. I, sec. 298, the test is whether the parties are truly in pari delicto and it appears to me that when the fraudulent intention has not been carried into effect and the nominal transferee dishonestly sets up a title for himself, the parties cannot rightly be regarded as in pari delicto. I am not unmindful that the contrary view has been maintained by eminent Judges; see for instance Bateman v. Ramsay(62), Hamilton v. Ball(63) and McUrdy v. Martin(64), but for the reasons I have already stated I am unable to adopt the view laid down in those eases. I may add that this view was adopted by the Allahabad High Court in Param Singh v. Laljimal(65) which perhaps goes too far, and by the Bombay High Court in Honapa v. Narsapa(66) and Babaji v. Krishna(67), the last-mentioned of which cases was followed by this Court in Preonath v. Kazi Mahomed(68). I am not satisfied that the Madras High Court did really take a different view in the cases of Ranga v. Venkatachari and Yaramati v. Chundru.

    Upon a careful examination of the judgments in Chenvirappa v. Puttappa, Ranga v. Venkatachari and Yaramati v. Chundru I am rather inclined to hold that they dissent only from the rule laid down by Sir Richard Couch in somewhat broad and unqualified terms in Sreemotee Delia v. Bimola Soonduree, but are really in harmony with the principles embodied in Goberdhone v. Ritu Roy and Banka Behary v. Raj Kumar. If, however, the learned Judges intended to affirm a rule inconsistent with the decisions last mentioned, I regret I am unable to adopt such view.

    With all respect I am unable to see, how the view taken by this Court enables a party to a dishonest trick by which his creditors may have been defrauded to get himself reinstated when his purpose has been served. On the other hand it seems to me that if the Court refuses to aid a Plaintiff who has made a fictitious transfer of his property from an improper motive but has not carried into effect his intention, the Court really becomes an instrument to aid the Defendant in his fraudulent claim to possession contrary to the real agreement with the Plaintiff. I fail to appreciate how in such an event a Court of Equity can rightly hold that the Plaintiff must suffer because he had an improper motive though no one has suffered by reason thereof and the conduct of the Defendant is beyond question unconscionable [See Lobo v. Brito(69)].

    There is another aspect of the case before me which calls for notice. The Plaintiff did not execute a conveyance in favour of the Defendant but gave him a deed of relinquishment. Now it is well settled that title to land cannot pass by admission when the Statute requires a deed; see Waldron v. Harvey(70) and McNeelley v. S.P.O Coy.(71). It is obvious therefore that the mere execution of the deed of release did not create any title in the Defendant. No doubt under certain circumstances the Plaintiff might be estopped from setting up a title in himself; but as the nominal transferee and the purchaser from him were both aware of the true nature of the deed of relinquishment, they cannot set up a title by estoppel. How has then the title which was vested in the Plaintiff passed away from him? The deed of relinquishment does not operate as a conveyance or even as a contract to convey the interest of the Plaintiff nor does it operate by way of estoppel. As observed by their Lordships of the Judicial Committee in Oodoy Koowar v. Lidoo there is no other way in which it can operate. I must hold accordingly that the Plaintiff has still an enforceable title, and there is nothing to prevent him from recovering the property in suit.

    The result, therefore, is that the decree made by the Courts below must be affirmed and this appeal dismissed with costs.

    N.G
    Appeal dismissed.

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