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Case Number

Appeal from Original Decree No. 322 of 1897

Advocates

Dr. Bash Behary Ghose and Babu Joy Gobind Shome for the Appellant.
Babu Tara Kissore Ghowdhury for the Respondent.

Judges

Macpherson
Stevens, JJ.

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Smart Summary

Concise Analytical Summary of the Opinion

Factual and Procedural Background

The appellant sought a declaration that a Kobala dated 5th Assar 1296, executed by the appellant's father in favour of the respondent, was benami and a fictitious deed that did not affect the appellant's rights to the property. The plaint alleged the deed had been executed at the respondent's suggestion to secure the property against persons who had obtained decrees against the appellant's father, that the transaction was colourable (without consideration or transfer of possession), and that the respondent was fraudulently asserting title.

The respondent filed a written statement claiming title under the impugned Kobala and asserting there had been a valid sale for consideration. According to the plaint and undisputed facts, the deed was used to accomplish a fraudulent purpose: a decree-holder attached the property, the respondent put forward a claim based on the deed, and the court allowed that claim. The Subordinate Judge dismissed the suit without taking evidence on the ground that the plaintiff could not maintain it. The appellate court (this opinion) considered the correctness of that dismissal.

Legal Issues Presented

Whether a plaintiff who participated in or whose conveyance was used to effectuate a fraud can obtain relief by showing the conveyance was benami or fictitious after that conveyance has been successfully used to accomplish the fraudulent purpose.
Whether there is a legally significant distinction between fraudulent conveyances the purpose of which was not carried into execution and fraudulent conveyances that have been carried into execution (i.e., effect given to the intended fraud), and if so, how that distinction affects the availability of relief.
Whether prior case law that relaxed stricter rules concerning parties proving fraud in transactions applies where the fraudulent conveyance has been used to defraud creditors and has produced legal effect in favour of the transferee.
Whether subsequent payment to a creditor (partial satisfaction of a decree) alters the conclusion on whether the plaintiff should have been permitted to lead evidence and obtain relief.

Arguments of the Parties

Appellant's Arguments

The Kobala was benami and fictitious, executed at the respondent's suggestion to protect the property from decree-holders; it was a colourable transaction without consideration or transfer of possession.
The respondent had fraudulently set up a title and should not be allowed to retain the benefit of an instrument that was not a genuine conveyance.
There is no real distinction between cases where the fraudulent object was carried into execution and cases where it was not; earlier strict rules have been relaxed and relief should be available.
After the decree the money due was later paid (creditor received Rs. 5,000 for a claim of Rs. 8,000 and gave a receipt in full), and therefore the plaintiff should have been allowed to give evidence to support his case.

Respondent's Arguments

The respondent asserted he held a valid title to the property under the Kobala, alleging it was a good and valid sale for consideration.
Implicitly, by relying on the Kobala and the fact that the decree-holder's attachment was resolved in the respondent's favour, the respondent relied on the legal effect of the conveyance as creating a title.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Param Singh … (Defendant) v. Lalji Mal … (Plaintiff)	The opinion indicates this case might be an exception among cited authorities; no detailed rule recited in the text.	The court noted it may be an exception but did not treat it as controlling; no detailed application given.
Goberdhan Singh v. Ritu Roy	Authority for the proposition that where a colourable conveyance in fraud of creditors has been carried into effect, the Court refused to give relief.	Cited as a recent case where relief was refused; used to support dismissal of the appellant's suit.
Kali Charan Pal v. Basik Lal Pal	Same principle as above: refusal of relief when a colourable conveyance effected a fraud on creditors.	Used alongside Goberdhan Singh to demonstrate established practice of refusing relief in such circumstances.
Rangammal v. Venkatachari	Cited to show Madras Court adopted the course of refusing relief where fraud had been carried into effect.	Referred to as supporting authority from the Madras Court; applied to buttress the conclusion that relief should be refused.
Chenniappa v. Puttapa	Cited among authorities dealing with colourable conveyances; note that Birdwood, JJ., dissented from an Allahabad case referenced.	Mentioned to show divergent judicial views but overall support for refusing relief where fraud effected.
Aloksoondry Goopto v. Horo Lal Roy	Cited as an earlier case representing a stricter rule (against relief) which later cases purportedly relaxed.	Referred to as part of the historical doctrinal debate; court treated later cases purporting to relax the rule as distinguishable.
Kalee Nath Kur v. Doyal Kristo Deb	Also cited among earlier decisions reflecting the stricter rule.	Not applied to overturn the present outcome; court considered later authorities but found them distinguishable.
Luteefoonissa v. Goor Suran	Authority cited for the proposition that a party against whom an admission of a deed is sought to be used may explain and show the real nature of the transaction (distinguishing cases where the fraudulent purpose was not executed).	Cited but the court held it is not analogous because the present case involves a conveyance that had been used to effect the fraud.
Sree Nath Roy v. Bindoo Bashinee Delia	Consideration of whether an instrument (a jote) had a real existence or was colourable; supports allowing explanation of the true nature where fraud was not executed in the same way.	Cited as not being factually similar; court said it does not support the appellant's broad contention in the present circumstances.
Sreemutty Debia Choiodhrain v. Bimola Soonduree Debia	Holds that a defendant was not estopped from showing the true nature of a transaction by some admission in a prior suit (where facts differed from the present case).	Relied on by appellant's counsel for relaxation of strictness; court found it distinguishable and not applicable to a case where the conveyance had been acted on to effect fraud.
Gopee Nath Naik v. Jadoo Ghose	Reportedly adopted the view taken in Sreemutty Debia Choiodhrain's case; limited factual detail in the opinion.	Referenced but no detailed application; treated as not controlling due to factual differences.
Bykunt Nath Sen v. Gohoollah Sihdar	Contains judicial comments dissenting from the principle that a fictitious sale to cheat creditors can never be impugned by the seller or heirs; factual detail not provided in the opinion.	Used to show there were divergent judicial views; court did not adopt it as changing the result here.
Thakur Persad v. Baluk Ram	Held (on its facts) that a party could show the real character of a partition deed set up to defeat creditors; facts involved family rights and purchasers of other members' rights.	The court treated this case as favourable to the appellant at first sight but distinguished it on its facts (defendants had not acquired the appellant's interests); therefore it did not control the present outcome.
Ram Surun Singh v. Mussamut Pran Peary (and variants cited)	The Judicial Committee held in the reported case that a deed created no estoppel in the circumstances described; it may be open to the mortgagor to deny receipt of money and show the real truth where nothing had been done under the instrument to effect an illegal object.	Central to the court's analysis as furnishing the distinction: where the fraudulent purpose was not carried into execution, a party may show the true nature of the instrument. The court relied on this to distinguish such authorities from the present facts.
Mussumut Ooday Koowur v. Musstimat Ladoo	Companion authority cited alongside Ram Surun Singh for the principle that prior admissions or instruments do not always estop a party from showing the true nature of a transaction where the instrument had not been acted upon to carry out the fraudulent purpose.	Cited as authority for the same line of reasoning; the court found these cases inapplicable to the present case where the conveyance had been used to effect the fraud.
Symes v. Hughes	English authority cited for the proposition that where the purpose for an assignment is not carried into execution, the assignor may recover the property from the assignee who has given no consideration; relied upon to show the distinction.	Used by the court to support the analytical distinction between frauds not carried into execution and frauds that have been executed; the court treated this as aligning English law with the distinguished approach.
Bowes v. Foster	English case where a pretended sale did not transfer title and nothing was done in furtherance of the intended fraud; cited to show it does not help the appellant.	The court observed the facts were different (title not parted with and no further act to carry out fraud) and so the case was not helpful to appellant's position.
Taylor v. Bowers	Another English case where title remained in the plaintiff and only delivery of goods occurred; cited to show that in such circumstances relief principles differ.	Referenced as not helpful to appellant because the fraud there had not been put into execution in the same manner as in the present case.

Court's Reasoning and Analysis

The court accepted the Subordinate Judge's dismissal. Its analysis proceeded in these principal steps:

Fundamental proposition adopted: a plaintiff who seeks to have a conveyance declared fictitious cannot be permitted to take advantage of a conveyance that he or his agent executed for a fraudulent purpose when that conveyance has been successfully used to effect that fraud. The court emphasised that the appellant "cannot ask the Court to relieve him from the consequence of an accomplished fraud."
Distinction drawn between two categories of cases: (a) cases where a fraudulent conveyance was executed but the fraudulent purpose was not carried into effect (nothing was done under the instrument), and (b) cases where the conveyance was used to effect the fraudulent purpose (i.e., the fraud was carried into execution). The court stressed that many authorities relied upon by the appellant fall into the first category and thus do not support relief in the present circumstances.
Review of authorities: the court examined English and Indian precedents. It accepted that some older and cited decisions permit explanation of the true nature of an instrument where the fraudulent object was not carried out; these decisions (including Ram Surun Singh and Mussumut Ooday Koowur) show the rule that where nothing is done under an instrument to effect an illegal object, the assignor may recover. However, the court found that the present case involves a conveyance which was used to give effect to the fraudulent purpose (a decree-holder attached the property and the respondent's claim under the deed was allowed), placing it clearly within the category where relief has been refused in prior decisions.
On the contention that the stricter earlier rule has been relaxed by later cases, the court carefully reviewed those decisions and concluded that they are distinguishable by their facts; in none of them did the plaintiff seek relief against his own fraudulent conveyance which had been successfully used to defraud a creditor.
Policy consideration: the court acknowledged the argument that refusing relief might be seen as aiding the defendant to commit a fraud, but held that this is a lesser evil compared to giving relief to a plaintiff who had successfully perpetrated a fraud and is now asking the court to undo what he had accomplished by means of that fraud.
On the argument concerning subsequent partial payment to the creditor (Rs. 5,000 accepted in satisfaction of Rs. 8,000), the court found that this fact did not affect the legal conclusion; if the plaintiff would not succeed on the facts as pleaded, there was no need to call further evidence.

Holding and Implications

Holding: The appeal is DISMISSED and dismissed with costs. The court affirmed the Subordinate Judge's dismissal of the suit.

Implications:

The direct effect is that the appellant is not entitled to a declaration that the Kobala is benami or fictitious and remains bound by the legal consequences of the conveyance as it was used to effect a fraud; the respondent's title as established by the transaction and relied upon in the attachment proceedings stands for the purposes of this suit.
The court relied on existing authorities to distinguish between transactions where the fraudulent purpose was not executed and those where it was; it refused to extend relief in the latter situation. The opinion does not purport to set a new legal doctrine but applies established distinctions to the facts of this case.
No broader or novel precedent was announced beyond applying the existing rule that a party will not be relieved where he seeks to undo a conveyance that he caused to be used to accomplish a fraud on creditors.

Disposition: Appeal dismissed. (Signed in the opinion as S.C.S.)

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Banku Behary Das v. Raj Kumar Das

The object of this suit is to obtain a declaration that the Kobala of the 5th Assar 1296, executed by the Appellant's father in favour of the Respondent, is a benami and fictitious deed not affecting the Appellant's right to the property which it purported to convey, and to get such further relief as the Court may think fit to give in confirmation of the Appellant's title and possession. The plaint discloses that the deed in question was executed at the Respondent's suggestion to secure the property against persons who had obtained decrees against the Appellant's father, that it was a purely colorable transaction without consideration or any transfer of possession, and that the Respondent was now fraudulently setting up a title to the property. The Respondent put in a written statement in which he claimed title to the property under the Kobala impugned by the Appellant alleging that there was a good and valid sale for consideration. Admittedly the deed in question was used to give effect to the fraudulent purpose for which according to the Appellant's case it was executed. The holder of a decree against the Appellant's father attached the property, the Respondent was allowed to put forward a claim to it on the strength of this deed, and the claim was allowed by the Court. On the allegations in the plaint coupled with the undisputed facts mentioned, the Subordinate Judge, without taking any evidence, dismissed the suit on the ground that the Plaintiff could not maintain it.

In our opinion the decision is right, and the Appellant cannot ask the Court to relieve him from the consequence of an accomplished fraud. He cannot be allowed to show the true nature of the conveyance which gave a good legal title to the Respondent, when the conveyance has been successfully used to give effect to the fraudulent purpose for which it was executed. In none of the cases decided in England and in this country which have been cited in the argument, except perhaps the case of Param Singh…(Defendant); v. Lalji Mal…(Plaintiff).(1), does it appear that the relief has been given in a case such as this, and in the recent cases of Goberdhan Singh v. Ritu Roy and of Kali Charan Pal v. Basik Lal Pal where there was a colorable conveyance in fraud of creditors and the fraud had been carried into effect, this Court refused to give the Plaintiff relief. The same course was adopted by the Madras Court in Rangammal v. Venkatachari, and in Chenniappa v. Puttapa West and Birdwood, JJ., dissented from the Allahabad case mentioned above.

It is argued that there is no real distinction between cases in which there is a fraudulent conveyance to cheat creditors but nothing more is done in furtherance of the fraud, and cases in which the fraudulent purpose is effected wholly or partially by means of the fraudulent conveyance, and we have been referred to a number of cases in which it is said that the stricter and broader rule adopted in the earlier cases in this Court [Aloksoondry Goopto v. Horo Lal Roy and Kalee Nath Kur v. Doyal Kristo Deb], has been relaxed and relief given without any such distinction being drawn. The cases referred to are Luteefoonissa v. Goor Suran, Sree Nath Roy v. Bindoo Bashinee Delia, Sreemutty Debia Choiodhrain v. Bimola Soonduree Debia, Gopee Nath Naik v. Jadoo Ghose, Bykunt Nath Sen v. Gohoollah Sihdar, and Thakur Persad v. Baluk Ram. All these cases purport to follow the decision of the Judicial Committee in Ram Surun Singh v. Mussamut Pran Peary, and Mussumut Ooday Koowur v. Musstimat Ladoo. In the former case the Plaintiff sued for possession on a conditional deed of sale executed by the Defendant who pleaded that the deed had been merely nominally executed without any consideration to protect the property against persons claiming it as heirs of her husband. In a previous suit brought by those persons for the property and charging that the conveyance was made to deprive them of their rights, the Plaintiff and Defendant both asserted that the deed was a good deed for consideration. The suit was dismissed on the sole ground that there was no right of suit in the widow's lifetime. It was contended that the Respondent was estopped by her pleadings and admissions in that suit and could not deny or contest the validity and legal effect and operation of her deed, or set up her own fraud to prevent the operation of it. Their Lordships held that the deed created no estoppel, that it was a case of a common mortgage in which it was open to the mortgagor to deny the receipt of the money and to cut it down to a nominal sum or nothing, and that being so and the instrument being relied on by a person out of possession seeking to recover possession through the medium of a foreclosure suit, there was nothing to prevent the Defendant from showing the real truth of the transaction. As regards the estoppel by pleading they said that a pleading by two Defendants against the suit of another Plaintiff could not amount to an estoppel as between them.

In the latter case the Plaintiff claimed the property as heir of her deceased son Shib Lall and denied that the latter had been given in adoption to the Defendant who was the widow of Shib Lall's brother. In a previous suit brought by the Respondent for herself and as guardian of Shib Lall to redeem a property mortgaged by the Plaintiff's husband it was objected that she was not the guardian of Shib Lall and could not maintain the suit. The Plaintiff intervened in that case and put in a petition supporting the adoption and disclaiming any interest in the property. Their Lordships said that if the petition was to prevent the Plaintiff from recovering the property it would only do so either because it operated as a conveyance or a contract to convey or by way of estoppel. That it could not operate as a conveyance or contract because the Plaintiff had at that time no interest in the property and never contemplated a conveyance of the right which she now had. That it did not operate as an estoppel because the fact that the Plaintiff professed to resign some supposed interest as heir of her husband could not estop from setting up her real right as heir of her son when that right accrued, and they added that there was no consideration, no misrepresentation to the Defendant, who knew the actual facts and did not alter her position in any way.

Those were not therefore cases of a fraudulent conveyance by a deed of absolute sale to which effect had been given in and of the intended fraud and they furnish, we think, no authority for the broad contention now put forward. It is unnecessary to allude in detail to the cases cited from the Weekly Reporter; the facts are not fully stated and in none of them do the facts appear the similar to the facts of this case. In Luteefoonissa's case it was held citing the case of Ram Surun Singh v. Pran Peary, that a party against whom the admission of a deed of gift is sought to be used may explain the matter and show the real nature of the transaction. In Sree Nath Roy's case the question was whether a jote had a real existence or was, as the Defendant contended, only colourably created. It was held that the Defendant was not estopped by a statement of the person from whom he derived title by purchase from showing that the jote was only colourably created and two cases Ram Surun Singh v. Mussamut Pran Peary, Mussumut Oodey Koowur v. Mussumat Ladoo were cited as an authority. In Sreemutty Debia Chowdhrain's case the defence in substance was that the persons from whom the Plaintiff derived title by purchase were really the benamidars of the Defendant who was the real owner. It was held, again citing the cases in 13 Moo., that the Defendant was not estopped from shewing the true nature of the transaction by some admission which she had made in a previous suit. In Gopee Nath Naik's case the facts are not at all stated, but Markby and Mitter, JJ., said they adopted the view of the law taken in Sreemutty Debia Chowdhrain's case. In Bykunt Nath Sen's case there is also no report of the facts, but Markby, J., said that he dissented from the Judges, statement that “it is a settled principle that when a father makes a fictitious sale to cheat his creditors, neither he nor his heirs can afterwards impugn its validity” and he added that this principle was inconsistent with the decisions in Ram Surun Singh v. Musst. Pran Peary and Musst. Oodey Koowur v. Musst. Ladoo and in Sm. Debia Chowdhrain v. Bimola Soonduree. In none of those cases does it appear that the Plaintiff was asking for relief against his own fraudulent conveyance which had been successfully used to defraud a creditor. It is true that in Sree Nath Boy's case and in Sreemutty Debia Chowdhrain's case Sir Richard Couch made some remarks of a general character which must however be taken in connection with the facts of the particular case before him. In the former case he said that the questions “to what extent a person shall be at liberty to allege and prove fraud in a matter to which he was a party, or shall be at liberty to allege and prove that any admissions made by him were made with a fraudulent purpose and were not true, and also to what extent persons claiming under anyone who had made such admissions will be at liberty to do the same” had been much discussed in the Courts in England, then he said that in this respect there was no difference between the law in England and the law in India, and for the law in England he cited Symes v. Hughes(18) and said that the law in India had been settled in the case of Ram Surun Singh v. Musst. Pran Peary — In Symes v. Hughes which Sir Richard Couch cited in both the cases referred to, Lord Romily, M.R, said “where the purpose for which an assignment is given is not carried into execution, and nothing is done under it, the mere intention to effect an illegal object when the assignment was executed does not deprive the assignor of his right to recover the property from the assignee who has given no consideration for it,” and he added that in that case no harm had been done to any creditor and that the suit was now being prosecuted to enable the creditor to recover something. We cannot suppose that Sir Richard Couch would have cited the case as stating the law in England without recognising the distinction referred to in it.

The case which at first sight seems most in the Appellant's favour is that of Thakur Per sad v. Baluk Ram. There Thakur Persad who was a member of a family, to which apparently the Mitakshara rules applied, claimed as exclusively his a property which had been acquired in his name. The Defendants were the purchasers of the rights and interests of the other members of the family. Thakur Persad had mortgaged the property and to defeat the claims of the mortgagee he and the other members of the family set up in execution proceedings a partition deed by which no part of the property in question had been allotted to Thakur Persad. It was found that the partition deed was not a real transaction and that the property had been acquired in Thakur Persad's name for all the members of the family. Mitter and Maclean, JJ., held, citing Ram Surun Singh v. Pran Peary, that Thakur Persad was entitled to shew the real character of the partition deed in the suit between himself and the purchasers of the rights of the persons whose fathers had joined with him in setting it up. The Defendants had not however acquired the interests of Thakur Persad, the latter had not parted with his interest and it was found that although not entitled to the whole property he was entitled to his share as a member of the family.

The English cases cited do not help the Appellant. In Bowes v. Foster there was a pretended sale but the Plaintiff had not parted with the title to the goods and nothing further was done in furtherance of the intended fraud. So also in Taylor v. Bowers the title to the goods was still in the Plaintiff and he was not a Lord Justice James said obliged to state a fraud of his own as part of his title. Nothing moreover had been done to carry out the fraudulent or illegal object beyond the delivery of the goods.

The argument that in the case of a fraudulent conveyance there is no distinction between the cases in which the fraudulent object has been carried into execution and the cases in which it has not, might, if sound, be a good ground for holding that the Court would not give relief in either case, but not for holding that it would give relief promiscuously in both. It is said that by refusing relief the Court is aiding the Defendant to commit a fraud, but this is a lesser evil than giving the Plaintiff relief against a fraud which he had successfully perpetrated. He is asking the Court to undo what he did for a fraudulent purpose by means of a fraudulent conveyance which was used to accomplish that purpose, and the authorities, we think, show that the Court will not give him any relief.

It is said that the money due under the decree referred to at the commencement of this judgment was afterwards paid, that the creditor received Rs. 5,000 in satisfaction of his claim for Rs. 8,000 and gave a receipt in full and that the Plaintiff ought to have been allowed to give evidence in support of his case. We think this makes no difference and if the Plaintiff would not succeed on the facts as stated, it was not necessary to go into evidence. The appeal is dismissed with costs.

S.C.S

Appeal dismissed.

Banku Behary Das v. Raj Kumar Das

Concise Analytical Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Respondent's Arguments

Other Contentions / Authorities Relied Upon

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Banku Behary Das v. Raj Kumar Das

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