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1932 Supreme(SC) 2
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, SIR GEORGE LOWNDES, AND SIR DINSHAHMULLA.
SATGUR PRASAD (DEFENDANT NO. 1) - Appellant
Versus
MAHANT HAR NARAIN DAS (DEFENDANTS) - Respondents
On appeal from the Chief Court of Oudh.
Decided On : Jan. 18. 1932.
Solicitors for defendant No.1: Barrow, Rogers & Nevill. Solicitor for plaintiff: H. S. L. Polak.
A party who procures a conveyance through fraud or undue influence in a fiduciary relationship must account for profits from the date of possession, as equity requires restitutio in integrum to prevent the wrongdoer from benefiting from their own fraud.
Headnote:(A) Code of Civil Procedure, 1908 - Section 2(12) - Indian Contract Act, 1872 - Section 65 - Trusts Act - Section 88 - Mesne profits - Recovery of profits from date of wrongful possession - Where a conveyance is procured by fraud and undue influence, the possession is wrongful as between the parties from the date of the transaction - A party exercising the option to rescind is entitled to be restored as far as possible to his former position - The principle of restitutio in integrum applies, ensuring the defrauded party receives an account of rents and profits from the date of the conveyance, subject to credit for payments made.
(B) Concurrent findings of fact - Scope of interference - Findings of fact reached by two local courts will not be disturbed by the ultimate court of appeal unless there is a miscarriage of justice or violation of a principle of law or procedure.
(C) Fiduciary relationship - Person taking advantage of a fiduciary position to procure a conveyance is bound to hold any advantage so gained for the benefit of the other party.
Facts of the case:
A life interest holder in an estate executed a deed surrendering said interest to another party in exchange for monthly allowances. The deed was later challenged on the grounds of fraud and undue influence. Lower courts found that the deed was procured through fraud and that a fiduciary relationship existed between the parties. While possession was restored, the appellate court limited mesne profits to the period starting from the date of the suit, treating the deed as voidable and only becoming void upon the institution of the suit.
Findings of Court:
The court found that the deed was a conveyance and that possession was wrongful between the parties from the date of the transaction. The plaintiff is entitled to an account of rents and profits from the date of the conveyance, not merely from the date of the suit.
Issues: Whether concurrent findings of fact regarding fraud and undue influence should be disturbed and whether mesne profits are recoverable from the date of the fraudulent conveyance or only from the date the contract was avoided by filing a suit.
Ratio Decidendi: The court held that allowing a party to claim possession was not wrongful until the suit was filed would permit them to take advantage of their own wrong. Under the principle of restitutio in integrum and statutory provisions of the Contract Act and Trusts Act, a party defrauded is entitled to be restored to their original position, including the recovery of profits from the date of the wrongful possession, provided there is no undue delay in bringing the suit.
Result: Appeal dismissed and cross-appeal allowed; decree varied to award mesne profits from the date of the deed.
Legal Category Hierarchy
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practice and procedure
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appellate jurisdiction
- concurrent findings of fact
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appellate jurisdiction
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property law
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conveyance
- fraud and undue influence
- mesne profits
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conveyance
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contract law
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voidable contracts
- rescission
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voidable contracts
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trusts law
- fiduciary duty
Judgement
Consolidated Appeal and Cross-Appeal (No. 24 of 1930) from a decree of the Chief Court (May 2, 1928) which modified a decree of a single judge of that Court (November 28, 1927).
The dispute related to an estate of which a mahant had been recorded as the taluqdar under the Oudh Taluqdari Estates Act, 1869. Upon the death intestate of a succeeding mahant, disputes between claimants were settled by an agreement of January 20, 1922, under which Mahant Har Narain Das (plaintiff) was to succeed for his life, and upon his death Satgur Prasad, alias Hari Saran Das (defendant No. 1). On November 25, 1924, the plaintiff executed a deed by which he surrendered his life interest to defendant No. 1 on condition that the latter paid him Rs.1000 a month; a monthly allowance of Rs.100 was to be made also to defendant No. 3 and of Rs.50 to his wife. In pursuance of this deed defendant No. 1 took possession of the estate.
The plaintiff brought the present suit in the Chief Court on February 21, 1927, claiming a declaration that the deed of November 25, 1924, was void on the ground that it had been procured by fraud and undue influence, and that defendant No. 1 was entitled to no benefit under it, a decree for possession and mesne profits, estimated at 5 lakhs, was prayed for.
The trial judge (Pullan J.) set aside the deed and made a decree for possession and for mesne profits to be assessed in execution proceedings.
Upon an appeal by defendant No. 1 only, the decree was affirmed by Stuart C.J. and Wazir Hasan J., subject to a modification on a point not material to this report. Mesne profits were decreed only from the date of the suit, on the ground that the deed was voidable at the option of the plaintiff, and that he had not exercised his option till he sued.
Both Courts found that the deed was procured by fraud and undue influence, and that defendants Nos. 1 and 3 had been in a fiduciary relation to the plaintiff, and had taken advantage of that relation to procure the deed.
1931. Nov. 27, 30; Dec. 1. Upjohn K.C., De Gruyther K.C. and Jopling for the defendant No.1. There was no evidence that the deed was induced by fraud or undue influence; the Courts misapplied the law applicable Raghunath Prasad v. Sarju Prasad .(( 1923) L. R. 51 I. A. 101.) The rule with regard to concurrent findings does not apply Harendra Lal Roy v. Hari Dasi Debi .(( 1914) L. R. 41 I. A. 110, 119.)
Dunne K.C, Dube K.C, Wallach and Sir Tej Bahadur Sapru for the plaintiff—not being called upon in the first appeal. Upon the cross-appeal the plaintiff is entitled to mesne profits from the date when possession was taken under the deed. If the possession is to be regarded as under a contract, the plaintiff was so entitled by the Indian Contract Act, 1872, s. 65. If the possession should be regarded as under a conveyance, mesne profits were payable on the same basis under the Specific Relief Act, 1877, s. 35. [Reference was made to Erlanger v. New Sombrero Phosphate Co. (( 1878) 3 App. Cas. 1218, 1278.)]
Upjohn K.C to the cross-appeal. By s.2, sub-s.12, of the Code of Civil Procedure mesne profits are recoverable only for the period of wrongful possession. Under s. 19 of the Contract Act, the contract was voidable; it became void only when the plaintiff by bringing his suit elected to avoid it Clough v. London and North Western Ry. Co. (( 1871) L. R. 7 Ex. 26.); United Shoe Machinery Co. v. Brunet ([ 1909] A. C. 330, 339.) ; Elliott v. Boynton .([ 1924] 1 Ch. 236.) The cross-appeal seeks both to affirm and disaffirm the transaction. Sect. 65 of the Contract Act applies only where an agreement is found to have been void ab initio, or "becomes void" by impossibility of performance.
[SIR DINSHAH MULLA. Having regard to the finding of fiduciary relation, do not ss. 86, 88 and 80 of the Trusts Act apply?]
The plaintiff did not claim on that basis. Further, the sections do not apply. The principle embodied relates to transactions which are void unless ratified, not t
