1. Dispute over title to lands acquired benami to avoid lease resumption conditions — claim for declaration of title and possession. (Para 2 , 5 )
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1959 Supreme(SC) 170
SUPREME COURT OF INDIA
25th September, 1959.
S.R. DAS, C.J.I., M. HIDAYATULLAH AND K.C. DAS GUPTA, JJ.
Kedar Nath Motani and others, Appellants
Versus
Prahlad Rai and others, Respondents.
Civil Appeal No. 151 of 1955.
Advocates appeared
Mr. N. C.Chatterjee, Senior Advocate, (Mr. R. C. Prasad, Advocate, with him), for Appellants; Mr. A. V. Viswanatha Sastri, Senior Advocate, (Mr. B. P. Maheshwari, Advocate, with him), for Respondents.
Advocates:
A.V.VISHWANATHA SASTRI, B.P.MAHESHVARI, N.C.CHATTERJI, R.C.Prasad
A.V.VISHWANATHA SASTRI, B.P.MAHESHVARI, N.C.CHATTERJI, R.C.Prasad
The maxim ex turpi causa non oritur actio does not bar a claim if the illegality is trivial, venial, and not central to the cause of action, particularly in benami transactions where the source of funds is the primary determinant of title.
Headnote:(A) Civil Law - Benami Transactions - Maxims of Equity - Ex turpi causa non oritur actio - No Court will lend its aid to a man who found his cause of action upon an immoral or an illegal act; however, an exception exists where the illegality is of such a light or venial character that it is deemed more opposed to public policy to allow the defendant to violate a fiduciary relation than to allow the plaintiff to gain the benefit of an illegal transaction (Paras 12, 15). The correct position is that if the illegality does not go to the root of the matter and the plaintiff is not required to rely upon the illegal transaction to bring the action, the plea of the defendant should not prevail, provided the illegality is not of such a gross nature as to outrage the conscience of the Court (Para 15).
(B) Benami Transactions - Nature and Proof - Such transactions are recognized where the benamidar holds the property in trust for the principal (Para 16). The cardinal point to be proved in establishing the benami nature of a transaction is the source of money (Para 17).
(C) Fraud - Where fraud might have been contemplated but was not actually perpetrated because the party to be defrauded had knowledge of the facts and elected not to take action, the plaintiff cannot be deprived of a judgment on the grounds of fraud (Para 10).
Facts of the case:
The plaintiffs sought a declaration of title and possession of lands acquired by their predecessor in the names of others. The predecessor had a lease from a lessor which contained conditions requiring certain acquired lands to be passed to the lessor upon expiry of the lease. To avoid this, the predecessor acquired the lands benami in the names of others and used forged signatures on application forms. The trial court decreed the suit, finding the transactions were benami. The High Court reversed this, holding that the plaintiffs were disentitled to a judgment due to the fraud perpetrated on the lessor and the illegality of the forged signatures, applying the maxim ex turpi causa non oritur actio.
Findings of Court:
The court found that the benami nature of the transactions was clearly established by the source of the consideration. It held that the fraud was not actually effected because the lessor was aware of the benami nature of the transactions and chose not to enforce the lease conditions. The forging of signatures was deemed a trivial illegality that did not form the basis of the cause of action.
Issues: Whether the plaintiffs were barred from recovering the property under the maxim ex turpi causa non oritur actio due to the fraudulent intent and the use of forged signatures in the benami acquisition of the lands.
Ratio Decidendi: The court ruled that the maxim ex turpi causa non oritur actio does not apply in its full rigour when the illegality is trivial or venial and the plaintiff does not need to rely on that specific illegality to establish their claim. Since the source of money established the benami title and the intended fraud was not perpetrated, the defendants could not be allowed to use the trivial illegality of forged signatures to retain property held in trust.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether benami transactions involving forged signatures and intended fraud on a third party bar recovery under the maxim ex turpi causa non oritur actio. (Para 2 , 3 )
3. Fraud was not effected as the lessor had knowledge and took no action; forged signatures were trivial and not essential to prove the benami transaction. (Para 10 , 11 , 16 , 17 )
4. A plaintiff is not barred by ex turpi causa if the illegality is trivial and the cause of action does not depend on the illegal act. (Para 15 , 18 )
5. Appeal allowed — High Court judgment set aside and trial court decree restored. (Para 19 )
6. When does the maxim 'ex turpi causa non oritur actio' bar a legal action?
It bars action when the illegality goes to the root of the matter such that the plaintiff cannot bring the action without relying on the illegal transaction. If the illegality is trivial or venial and not required to be pleaded as part of the cause of action, the plea of the defendant should not prevail. (Para 15 )
7. How is the benami nature of a transaction established in law?
The cardinal point to be proved in establishing a benami transaction is the source of the money used for the acquisition. (Para 17 )
8. Does the maxim 'in pari delicto' apply when one party claims innocence?
No. The maxim in pari delicto cannot be applied if the parties' positions are contradictory, such as when one party claims to be an innocent owner and the other claims the transaction was benami without the other's knowledge. (Para 9 )
9. Does an intended fraud that is not successfully perpetrated bar a plaintiff from seeking relief?
No. Public policy demands that where fraud might have been contemplated but was not actually perpetrated—for instance, where the party to be defrauded had knowledge and elected not to act—the defendant should not be allowed to perpetrate a new fraud. (Para 10 )
Judgment
HIDAYATULLAH, J. : This appeal with a certificate granted by the High Court of Patna has been filed against its judgment and decree dated 6-3-1952. By that judgment, the High Court reversed the decree of the Subordinate Judge of Motihari dated 29-3-1946.
2. The suit was filed by the present appellants for a declaration of their title to 136 odd bighas of Ryoti-kasht lands and for possession thereof either exclusively or jointly with the defendants. A claim for mesne profits and interest was also made. The suit was decreed by the Subordinate Judge, Motihari on the ground that the defendants were in possession of the suit lands as benamidars. The trial Judge found that the consideration for the acquisition of these lands had proceeded from the predecessor of the plaintiffs, who had acquired them in the farzi names of Prahlad Rai, Gulraj Rai and Nawrang Rai. He also held that the benamidars were related to Radhumal by marriage, and that Radhumal found it convenient to use their names. These findings were accepted by the present respondents in the High Court. They, however, raised before the High Court certain contentions found against them by the trial Judge. In the plaint, the appellants had given their reasons for acquiring the property benami in the names of Prahlad Rai, Gulraj Rai and Nawrang Rai. They had stated that, according to the terms of the lease, ryoti lands taken in the names of the lessee or his relatives and servants were liable to be resumed by the Bettiah Raj after the termination of the lease, and that the benami transaction was entered into to avoid this contingency. The answering respondents, therefore, contended in the Court of First Instance that the predecessor of the appellants had caused these lands to be settled by the Bettiah Raj benami in their names to effectuate a fraud upon the Bettiah Raj, and the fraud having succeeded, the plaintiffs-appellants were not entitled to a judgment. They also contended that after the termination of the lease of the appellants with the Bettiah Raj these lands were settled or deemed to be settled with them. Both these grounds were accepted by the High Court.
3. In this Court, the respondents have taken the same stand, and have also contended that the acquisition of these lands having been achieved by means of forging the signatures of Prahlad Rai, Gulraj Rai and Nawrang Rai, the present appellants are not entitled to a judgment on the application of the maxim, ex turpi causa non oritur actio. They, however, contend that if it be the view of the Court that both the parties had conspired to deceive the Bettiah Raj or were guilty of illegality, even then, potior est conditio defendantis.
4. By the decisions of the two Courts below and the concession of the respondents, all questions of fact must be taken to be finally decided. The question as to whether the acquisition was benami or not cannot any longer be re-opened, and the case has therefore to be considered only with regard to the principles contained in the maxims above referred to and the fact whether there was any fraud intended on the Bettiah Raj and if so, whether it was effected and who was responsible for it.
5. Though the decision of the case may appear to lie within a very narrow compass, it is necessary to recount rather voluminous facts bearing upon the history of these acquisitions. On 1-4-1922, the manager of the Court of Wards, Bettiah Raj, granted a lease of village Bijbania for 10 years (Asin 1327 to Bhado 1336), vide Ex. 7, to Radhumal, who was the karta of the joint family now represented by the plaintiffs and Mahadeo, respondent 6. On 26-6-1931, the lease was renewed for a further period of 10 years (1337 to 1346). Two of the conditions of this lease will have to be referred to in the sequel, and may conveniently be quoted here for easy reference :
"4. Not to make any settlement of land with a raiyat or other tenant without the consent of the manager, and in any application for such consent to any
