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Yaramati Krishnayya Vs. Chundru Papayya and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Judge
Reported in(1897)ILR20Mad326
AppellantYaramati Krishnayya
RespondentChundru Papayya and anr.
Cases ReferredChenvirappa v. Puttappa I.L.R.
Excerpt:
fraud on creditors - sham sale-deed to defeat creditors--collusive decree--suit to declare title of fraudulent transferor in possession. - - it may well be doubted whether a decree would have beep given in that suit for the benefit of the transferor alone. in such a case the court may well decline to move and may answer the plaintiff in the words which are often quoted from story's equity jurisprudence where the party seeking relief is the sole guilty party, or where he has participated equally and deliberately in the fraud, or where the agreement which he seeks to set aside is founded in illegality, immorality or base and unconscionable conduct on his own part; if the defendant were now seeking the assistance of the court to obtain possession of the land from the plaintiff, it may well..........is whether the plaintiff can maintain the suit, based as it is on the allegation that certain sale-deeds executed by the plaintiff were collusive and sham documents, executed for the purpose of protecting his property against creditors.5. the facts of the case are briefly as follows: the plaintiff, being heavily involved in debts, executed, without consideration, a sham sale-deed of certain lands in favour of the second defendant, and afterwards caused the latter to execute another sham sale-deed in favour of the first defendant.6. plaintiff, however, remained in possession of the land.7. in original suit no. 315 of 1887, a creditor of the plaintiff attached the lands in execution of a decree against the plaintiff. the sham sale-deeds were used as a cloak, and the attachment was.....
Judgment:

Subramania Ayyar, J.

1. Both the lower Courts found that the lands (to the registry whereof in the Government Revenue accounts the present litigation relates) belonged to the respondent (plaintiff), that they were in his possession before and at the time of the plaint and that the sale relied upon by the appellant (first defendant) as giving him a title to the property was a mere sham transaction under which no interest passed to him. Upon those findings it was held that the appellant had no right to claim that the registry of the property be transferred to his own name, and a decree was given to the effect that the respondent was entitled to have his name retained in the register as it had stood hitherto.

2. One of the contentions urged on behalf of the appellant was that the respondent was precluded from asserting his title to the land by the decision passed in Appeal Suit No. 105 of 1889 on the file of the Cocanada Subordinate Court. This contention, though advanced for the first time in this Court, must prevail, inasmuch as the facts required to support it are either set out in the plaint itself or are otherwise admitted.

3. They are as follows: One of the respondent's creditors instituted Original Suit No. 345 Of 1887 for the purpose of establishing that the transaction purporting to be the sale in favour of the present appellant was but a device intended to defraud the creditors, and therefore the lands in question were really the property of the respondent. Both the parties to the present appeal were made defendants to the suit, and a decree was therein given in favour of the creditor. The respondent however caused the present appellant to prefer an appeal against the said decree No. 105 of 1889 already mentioned. The creditor and the present respondent were made respondents to such appeal. The Appellate Court, with the consent of the parties, including the present respondent himself, reversed the decree and upheld the alienation to the present appellant. The collusive decree thus passed cannot be impeached by the respondent Venkatramanna v. Viramma I.L.R. Mad. 17 On this ground alone and without going into the other points argued I would reverse the decrees of the lower Courts and dismiss the suit, but without costs.

Benson, J.

4. The main question in this second appeal is whether the plaintiff can maintain the suit, based as it is on the allegation that certain sale-deeds executed by the plaintiff were collusive and sham documents, executed for the purpose of protecting his property against creditors.

5. The facts of the case are briefly as follows: The plaintiff, being heavily involved in debts, executed, without consideration, a sham sale-deed of certain lands in favour of the second defendant, and afterwards caused the latter to execute another sham sale-deed in favour of the first defendant.

6. Plaintiff, however, remained in possession of the land.

7. In Original Suit No. 315 of 1887, a creditor of the plaintiff attached the lands in execution of a decree against the plaintiff. The sham sale-deeds were used as a cloak, and the attachment was successfully resisted. The creditor then sued for a declaration that the sale-deeds were collusive, and got a decree in the first Court. In appeal, however, the plaintiff paid him a certain sum and induced him to consent to a decree admitting the title of the first defendant, and a decree was passed accordingly. In 1892 the first defendant applied to the Collector for transfer of revenue registry of the lands to his (first defendant's) name, and the Collector issued a notice that he would alter the register unless plaintiff established his right by a civil suit. Plaintiff, therefore, brought the present suit for a declaration that the registry of the lands was not to be altered. Both the lower Courts decreed in his favour, and first defendant now appeals against these decrees.

8. I do not think that the plaintiff's suit is maintainable.

9. The law on the subject is very fully discussed in the case of Chenuirappa v. Puttappa I.L.R. 11 Bom. 708 in Rangammal v. Venkatachari I.L.R. 18 Mad. 378 in Sham Lall Mitra v. Amarendro Nath Bose I.L.R. 23 Cal. 460 and in the recent English case of Kearley v. Thomsom L.R. 24 Q.B.D. 742 . The general rule is that a man cannot set up an illegal or fraudulent act of his own in order to avoid his own deed ' (May on Fraudulent Conveyances,' 432). But some exceptions or quasi exceptions to this rule have been admit ted by the Courts. In Symes v. Hughes L.R. 9 Eq. 475 a fraudulent transfer was set aside in order that effect might be given to a compromise arranged between the transferor and his creditors. Here it will be observed that the Court acted in the interest, and for the protection, of innocent third parties. It may well be doubted whether a decree would have beep given in that suit for the benefit of the transferor alone. So if a voluntary deed has been kept in the hands of the grantor, and has never been acted upon, nor the grantee informed of its existence, a Court of Equity will treat it as an imperfect instrument, and, if the grantee surreptitiously gets possession of it, a Court of Equity will relieve against it Cecil v. Butcher 2 Jac. & W. 565.

10. A third exception was noticed by PARKER, J., in Venkataramanna v. Viramma I.L.R. 10 Mad. 17 viz. where a defendant is allowed to show the turpitude of both himself and the plaintiff in order to protect himself against an action by the plaintiff to give effect to a contract or deed entered into for an illegal or immoral purpose. Here an exception is allowed not for the sake of the wrong-doer, but on grounds of public policy, since the Court ought not to assist a plaintiff to recover property or enforce a contract in respect of which he has no true title or right. The rule of public policy cannot be applied without allowing the defendant to benefit by it. But the benefit is allowed him by accident as it were and not in order to secure him any right to which he is entitled [Holman V .Johnson (Cowper, 343)] per Lord MANSFIELD, and Luckmidas Khimji v. Mulji Canji I.L.R. 5 Bom. 295. Even this exception is not allowed, if a decree has been obtained by the fraud and collusion of both the parties. In such a case it is binding on both--Ahmedbhoy Hvbibhoy y. Vulleebhoy Cassumbhoy I.L.R. 6 Bom. 703 Prudham v. Phillips 2 Amb. Rep. 763 Venkataramanna v. Viramma I.L.R. Mad. 17 and Chenvirappa v. Puttappa I.L.R. 11 Bom. 708 .

11. I think that, broadly speaking, these are the only exceptions which are to be gathered from the English cases, and from the reported cases in this Court and in the Bombay High Court. The Calcutta High Court has gone further Debia Choivdrain v. Bimola Soonduree Debia 21 W.R. 422 .Bykwt Nath Sen v. Goboollah Sikdar 24 W. R:, 391 but the rule there laid down has been expressly dissented from by the Bombay High Court--Chenvirappa v. Puttappa I.L.R. 11 Bom 708 which, as I think, justly remarks: 'These decisions go a long way towards enabling a party to a dishonest trick, by which his creditors may have been defrauded, to get himself reinstated when his purpose has been served.' They have been dissented from also by this Court Bangammal v. Venkatachari I.L.R. 18 Mad. 378 confirmed in Rangam mal v. Venkatchart I.L.R. 20 Mad. 323. The Calcutta rule has, indeed, notwithstanding these dissents, been affirmed in Sham Lall Mitra v. Amarendro Nath Bose I.L.R. 23 Cal. 460. In doing so the Court relied on the case of Symes v. Hughes L.R. 9 Eq. 475already cited by me and on the case of Taylor v. Bowers L.R. 1 Q.B.D. 291 . In the former case, however, the interests of third parties were involved, and the latter case has been dissented from in Kearley v. Thomson L.R. 24 Q.B.D. 742 . FRY L.J., in delivering judgment,, stated: 'In that case Taylor v. Bowers L.R. 1 Q.B.D. 291 MELLISH, L.J., in delivering judgment, says at p. 300 ' If money is paid, or goods delivered for an illegal purpose, the person who has so paid the money or delivered the goods may recover them back before the illegal purpose is carried out It is remarkable that this proposition is, as I believe, to be found in no earlier case than Taylor v. Bowers L.R. 1 Q.B.D. 291 which occurred in 1867, and notwithstanding the very high authority of the learned Judge who expressed the law in the terms which I have read, I cannot help saying for myself that I think the extent of the application of that principle, and even the principle itself, may, at some time hereafter, require consideration, if not in this Court, yet in a higher tribunal: and I am glad to find that in expressing that view I have the entire concurrence of the Lord Chief Justice.' This passage was quoted with approval by this Court in Bangammal v. Venkatachari I.L.R. 18 Mad. 378. With the exception, then, of the cases to which I have referred and which have been dissented from, I do not think that any authority will be found for holding that a plaintiff can come into Court alleging his own fraud and ask the Court simply and solely for his own benefit to set aside the fraudulent deed or make a declaration to protect him from the threatened consequences for his own act. In such a case the Court may well decline to move and may answer the plaintiff in the words which are often quoted from Story's Equity Jurisprudence Where the party seeking relief is the sole guilty party, or where he has participated equally and deliberately in the fraud, or where the agreement which he seeks to set aside is founded in illegality, immorality or base and unconscionable conduct on his own part; in such cases Courts of Equity will leave him to the consequences of his own iniquity and will decline to assist him to escape from the toils which he has studiously prepared to entangle others' ( Section 268). Especially will this be the case if the purpose of the fraud has been effected by defeat of a third person's rights asserted in Court or effected in any other material way, Ahmedbhoy Hubibhay v. Vulleebhoy Cassurnbhoy I.L.R. 6 Bom. 703 Venketrammanna v. Viramma I.L.R. 10 Mad. 17 Chenvirappa v. Puttappa I.L.R. 11 Bom. 708. Bang animal v. Venkatachari I.L.R. 18 Mad. 378. I think, then, that the plaintiff, apart from his conduct in Original Suit No. 345 of 1887, has no title to come to a Court of Equity and ask for such a declaration as he now seeks. If the defendant were now seeking the assistance of the Court to obtain possession of the land from the plaintiff, it may well be that the Court would allow the plaintiff to plead the true rights of the parties, even though the plea involved a declaration by the plaintiff of his own turpitude. The Court would then allow the plea on grounds of public policy, and in order that it might not itself be made an instrument to aid the defendant in his fraudulent claim to possession contrary to the real agreement with the plaintiff. That, however, is not the case before us. The plaintiff is in possession, and he may be left to rely on it if the defendant seeks to disturb him.

12. The impropriety of assisting the plaintiff becomes, I think, even more clear, if his conduct in Original Suit No. 845 of 1887 be considered. In that suit the sham sale-deed was successfully used as a cloak to defeat an attaching creditor, and the latter was thus driven to a regular suit. He then succeeded in showing in the Court of First Instance that the sale-deed was a sham, but the present first defendant (then third defendant) in collusion with the plaintiff (then first defendant) appealed against the decree. The appeal was compromised by the present plaintiff paying Rs. 150 to the attaching creditor, and a decree was passed affirming the title of the present first defendant.

13. Thus the sham sale-deed was successfully used in a Court of Justice for the purpose for which it was concocted, viz., to defeat and delay a creditor and the plaintiff afterwards acknowledged its validity in a Court of Justice and caused a decree to be passed affirming the same (see present plaint), a decree to which both he and the present defendants were parties (Exhibit L.)

14. I think that, in these circumstances, it would be contrary to public policy, and disastrous to public morality, that the Courts should now allow him to plead his own baseness and should actively assist him to undo his own solemn acts, and this even before his possession of the property is actually attacked by the partner of his crime. I would, therefore, set aside the decrees of the Courts below and dismiss the plaintiff's suit, but without costs, in consideration of the defendant's fraudulent conduct.


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