Skip to content


Abdul Jabbar Vs. Abdul Muthaliff and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 2557 of 1977
Judge
Reported inAIR1982Mad12
ActsIndian Contract Act, 1872 - Sections 23
AppellantAbdul Jabbar
RespondentAbdul Muthaliff and ors.
Advocates:N.R. Chandran, Adv.
Cases ReferredSitaram. v. Radhabai
Excerpt:
.....- in present case respondent contributed for lawful construction and he could always claim that property - no illegality involved in suit and claim not opposed to public policy - appeal dismissed. - - considering the evidence, the appellate court was of the view that the case of the defendants that the mill should be treated and enjoyed as the common property was totally false and cannot be upheld. 8 have been referred to as showing that the plaintiff had been sending fairly large amounts for the purpose of pur chase of the site for the rice mill as well as the construction of the building and purchase of the machinery. the fact that this money had undergone some change in the shape of a property cannot place the plaintiff in a better position. having obtained the property, can..........benefit. it was stated by the plaintiff that with the help of such funds the site over which the suit rice mill stands was purchased and the building for the rice mill was also constructed and the rice mill was installed therein. the plaintiff had the licence issued in his name and was in possession and enjoyment of the rice mill since july, 1972. as the first defendant entered the mill without the knowledge of the plaintiff and removed the account books etc., the plaintiff bas come forward with the present suit for declaration and injunction as mentioned above.2. the defendants in their written statement pointed out that the remittances were to be utilised for the benefit of the whole family, that the mill was never intended to belong exclusively to the plaintiff and that the.....
Judgment:

1. This second appeal has been filed by the first defendant in 0. S. No. 64 of 1972 in the Court of the Subordinate Judge of Pudukottai. The plaintiff filed the above suit for a declaration that he is the absolute owner of a rice mill known as 'Muthalif Rice Mill' and for a permanent injunction restraining the defendants from interfering with his possession and enjoyment. There are three defendants, who are the brothers of the plaintiff. According to the plaintiff. his father, who had some lands and a house sold them and settled down in a village called Kulamangalam in or about 1941. He was not able to make both ends meet and the plaintiff left for Kualalampur in or about 1952. The case of the plaintiff was that between 1962 and 1966 he had sent about Rs. 24,000 and between 1966 and 1971 further amounts totalling Rs. 24000 and that the remittances were subject to the understanding that the moneys belonged to the plaintiff and that they had to be used for his benefit. It was stated by the plaintiff that with the help of such funds the site over which the suit rice mill stands was purchased and the building for the rice mill was also constructed and the rice mill was installed therein. The plaintiff had the licence issued in his name and was in possession and enjoyment of the rice mill since July, 1972. As the first defendant entered the mill without the knowledge of the plaintiff and removed the account books etc., the plaintiff bas come forward with the present suit for declaration and injunction as mentioned above.

2. The defendants in their written statement pointed out that the remittances were to be utilised for the benefit of the whole family, that the mill was never intended to belong exclusively to the plaintiff and that the plaintiff had. in the presence of respectable members, accepted in writing the joint title of all the four brothers. According to the first defendant, he was dispossessed only after the plaintiff obtained an order of interim injunction in the suit' and he had not removed any account books etc., as alleged,

3. The learned Subordinate Judge, who tried the suit, decreed it and the defendants took the matter in appeal, which was heard by the District Judge of Pudukottai. Considering the evidence, the appellate court was of the view that the case of the defendants that the mill should be treated and enjoyed as the common property was totally false and cannot be upheld. The decree passed by the trial court was, therefore, confirmed. The first defendant alone had filed the present second appeal, defendants I and 3 being imp leaded as pro forma parties.

4. At the time of the admission of this second appeal, the following questions were formulated for decision-

1. Whether the plaintiff violated the provisions of Sections 8 and 9 of the Foreign Exchange Regulation Act in remitting moneys from Malaysia to this country and if .4o whether his claim to the suit property said to have been acquired from out of those funds be enforced: and

2. Whether the transaction pleaded by the plaintiff is against public policy?

5. A perusal of the written statement will show that the remittances by the plaintiff were admitted and that the only other case was that the rice mill was set up not only with the funds remitted by the plaintiff. but also with the earnings of the other members of the family. In the written statement, as drafted, it was not stated that there were any remittances through illegal means. However, the case appears to have proceeded, even in the trial court on the basis that the remittances were sent neither through banks nor through post, but only through individuals re turning to India from Malaya. There were no account books to show whether the defendants had their own personal earnings in India and how the moneys were remitted by the plaintiff. In the absence of any documentary evidence, the case had to be decided only on the basis of the oral and circumstantial evidence. There were several letters mark ed as Exs. A.3 to A.11, which have been

considered by the courts below and from which an inference has been drawn that there was no possibility that the rice mill could have been constructed with the earnings in India. In other words, the finding is that the defendants could not have had any savings As far as the remittances from abroad were concerned,

Exs. A.4 to A.8 have been referred to as showing that the plaintiff had been sending fairly large amounts for the purpose of pur chase of the site for the rice mill as well as the construction of the building and purchase of the machinery. The licence for the rice mill was obtained by the first defendant in his own name and from Ex.A.12, which is a letter written by one Sulthan, who is the brother-in-law of the second defendant it is seen that the said Sulthan had found fault with the first defendant in obtaining the licence in his own name and that the first defendant had even would be transferred in the name of the plain tiff as soon as he returned to India. The plaintiff was told that he need not have any apprehension on that score and re quested him to arrange for remittances to discharge the amounts already due towards the construction and also to meet the further expenses.

6. On the other hand, the defendants had relied on Exs. B-3 to B-5, and also Ex,, B-20 to B-22, to prove that they had been borrowing moneys for the purpose of the construction. But those transactions showed that the defendants were hard pressed even to raise small arnotints and from Ex. B-20 an inference had been drawn by the court below that the loan had been borrowed only for meeting the family expenses and not for any investment. These exhibits have been considered as not supporting the case of the defendants that they had invested funds of their own. Thus, it is clear from the findings of the court below that the plaintiff alone had been financing the construction of the rice mill. It is only on the basis of the admitted position that the moneys were not sent through banks or recognised channel, but only through individuals returning to India from Malaya, that the present case of the first defendant that those remittances are illegal is built up. It is significant to note that there was no pleading on this aspect and there was no evidence. Illegality of remittances cannot be presumed. It has to be established as a fact by the person alleging it. There was not even an allegation on this aspect. There was no issue and there was no evidence. Even assuming that these deficiencies have to be ignored and that the matter has to be considered in the light of the remittances being through non-official channels, the question is whether the plaintiff is disabled from filing the present suit.

Section 23 of the Indian Contract Act runs as follows-

'The consideration or object of an agreement is lawful unless-

it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or

is fraudulent; or involves or implies injury to the person or property of another; or

the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to he unlawful. Every agreement of which the object or consideration is unlawful is void.71

The contention of Mr. N. R. Chandran, learned counsel for the appellant was that the object of the agreement was unlawful in the present case because remittances through unofficial channels were forbidden by law or at any rate the object of an agreement was opposed to public policy because the remittances through unofficial channels were contrary to the provisions of the Foreign Exchange Regulation Act. According to him, it would follow that if the consideration of an agreement is unlawful then it would be void.

7. It is necessary to determine what is the agreement with which we are now concerned and to see if it involves any unlawful object. There are two stages to these transactions, (1) the remittances and, (2) the construction of the rice mill. It is true that the remittances as such through non-official channels were contrary to the provisions of the Foreign Exchange Regulation Act. If the plaintiff had instituted the present suit for recovery of the money so sent, then it could be held that the object of the agreement was unlawful and that it is, therefore, void, so that no suit could be filed for recovery of such an amount. The contention of Mr. N. R. Chandrar. is that even where the amounts remitted had undergone a metamorphosis in the shape of other properties as in this case, the plaintiff would be debarred from filing any suit In other words, his contention is that the money as such cannot be recovered when remitted. The fact that this money had undergone some change in the shape of a property cannot place the plaintiff in a better position. The argument, though attractive. has to be rejected.

8. The construction of the rice mill by itself does not involve execution of any unlawful object. Anyone could lawfully construct a rice mill and the person who has contributed for the construction can always claim the property as his. To take an example, supposing A had remitted in an illegal manner funks to B which B had invested in a bank and if B wants the money back from the bank, the bank cannot be heard to say that the remittances were illegal and that he cannot seek to recover the -money.

9. The learned counsel for the 4ppellant relied on the maxim, in pari delictopotiorest conditio possidentis to support his plea that the plaintiff could not sue for declaration or possession. This maxim has been examined by the Supreme Court on a number of occasions. As the matter has been considered by the Supreme Court in the light of the decisions rendered by the Privy Council and the British courts, a brief reference to some of those decisions will not be out of place. Lord Mansfield stated in Holman v. Johnson, (1775) 1 Cowp 341 , that

'No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.'

The leading decision on this point is that of the Privy Council in Petherpermal Chetti v. Muniandi Servai, (1908) 35 Ind App 98, where Lord Atkinson dealing with the effect of benami convey~-ances which are motivated by the design to achieve an illegal or fraudulent purpose, quoted from Mayne's Hindu Law, 7th Edn. page 595 para 466 the passage running as follows:-

'Where a transaction is once made out to be a mere benami it is evident that the benamidar absolutely disappeam from the title. His name is sirnply an alias for that of the person beneficially interested. The fact that A has assumed the name of B in order to cheat X can be no reason whatever why a Court should assist or permit B to cheat A. But if A requires the help of the court to get the estate back into his possession, or to get the title into his own name, it may be very material to consider whether A has actually cheated X or not, If he has done so by means of his alias, then it has ceased to be a mere mask, and has become a reality, It may be very proper for a court to say that it will not allow him to resume the individual' which he has once cast off in order to defraud others. If, however, he has not defrauded anyone, there can be no reason why the court should punish his intention by giving his estate away to B, whose roguery is even more complicated than his own . .......For instance, persons have been allowed to recover property which they had assigned away....... Where they had intended to defraud creditors, who in fact, were never injured.... But where the fraudulent or illegal purpose has actually been effected by means of the colourable grant, then the maxim applies, 'in pari delicto potior est conditio possidentis'. This court will help neither, party. Let the estate lie where it falls.'

In Bowmakers Ltd. v. Barnett instruments Ltd., (1945) 1 KB 65, Dit Parcq. LJwho delivered the judgment of the Court of appeal after quoting the maxim 'in pari delicto' observed:-

'The Latin maxim must not be understood as meaning that where a transaction is vitiated by illegality the person left in possession of goods after its completion is always and of necessity entitled to keep them. Its true meaning is that where the, circumstances are such that the Court will refuse to assist either party, the consequence must, in fact follow that the party in possession will not be disturbed. As Lord Mansfield said. the defendant then obtains an advantage 'contrary to the real justice, and, so to say, 'by accident'.'

In Waman Srinivas Kini Bhagwandas & Co., : AIR1959SC689 v. Ratilal Supp. ( The Supreme Court referred to the case of Bowmakers Ltd. v. Barnet Instruments Ltd., (1945) 1 KB 65, cited above, with approval. In that case, a tenant, who occupied an old building vacated it when there was a change of landlord, who put up a new construction. He later became a tenant under the new landlord. There were sub-tenants in the old building who also shifted to the new building. One of the terms of the tease was that the landlord would permit the tenant to keep sub-tenants. However, the landlord brought a suit for ejectment on the basis of the statutory provision which prohibits sub-letting. The tenant's defence was that the statute did not apply to contracts between the landlord and tenant and, therefore, it did not preclude sub-letting and that in any event the parties were in pari delicto. The Supreme Court after referring to the case of Bowmakers Ltd. v. Barnett Instruments Ltd., pointed out that the suit for ejectment was not brought for the enforcement of the agreement which recognised sub-letting, but for enforcing the right of eviction which flowed directly from an infraction of the statute which itself provided a remedy. A distinction between a case where the assistance of the court was sought in enforcing the object which was unlawful and a case where the plaintiff came to the Court for a remedy against one who had contravened the provisions of a statute, operating against sub-letting. was considered to be based on public policy of the agreement and the relief against illegality could be had,

10. There were two other decisions rencered by the Privy Council just before and after the aforesaid decision of the Supreme Court. In Sarjan Singh v. Sardara Ali, 1960 AC 167, a case arose or. the following facts. The policy of the Road Transport department of the Federation of Malaya was to grant haulage permits only to persons who had possessed them before the war. The defendant in that action was a road haulier who had apparently had a haulage permit previously and had every chance of obtaining one, The plaintiff in that action was a lorry driver. Who could not obtain a haulage permit for plying the lorry. Both of them entered into an agreement, as a result of which the defendant brought in his own name a lorry with the funds belonging to the plaintiff. The defendant executed a letter recognising the rights of the plaintiff. Some time after the purchase, the plaintiff and the defendant fell out and the defendant claimed the lorry as his and the plaintiff was only in the position of a driver employed by him. When the plaintiff was absent from his, home, the defendant came and took away the lorry and thereafter he refused to return it. The plaintiff then filed a suit for a declaration that he was the owner of the vehicle or in the alternative for damages. The matter reached the Privy Council it was held that the plaintiff was entitled to sue in trespass. At page 176, Lord ' Denning, speaking for the Privy Council, observed:-

'Although the transaction between the plaintiff and the defendant was illegal, nevertheless it was fully executed and carried -out; and on that account it was effective to pass the property in the lorry to the plaintiff. There are many cases which show that when two persons agree together in a conspiracy to effect a fraudulent or illegal purpose - and one of them transfer's property to the other in pursuance of the conspiracy - then, as. soon as the contract is executed and the fraudulent or illegal, purpose is achieved, the, property (be it absolute or special) which has been transferred by the one to the other remains vested in the transferee notwithstanding its illegal origin; see Scarf v. Morgan (1818) 4 M & W 270 , per Parke B. The reason is because the transferor, having fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by which he did it - he cannot throw over the transfer. And the transferee. having obtained the property, can assert his title to it against all the world, not because he has any, merit of his own, but because there is no one who can assert a better title to it

At page 177, it was added.-

'Their Lordships do not overlook the fact that the defendant remained registered as the owner of the lorry and that no permission was given for the sale. but this did not prevent the property in it passing to the plaintiff. The registration book is not in Malaya, any more than it is in England, a document of title. The title passed by the sale and delivery of the lorry to the plaintiff. The absence of registration would no doubt put the plaintiff in difficulty if he had to prove his title, but it would not invalidate it.',

11. Another case arose for decision of the Privy Council in Palaniappa Chettiar v. Arunachalarn Chettiar, 1962 AC 294, in which again Lord Denning spoke for the Privy Council. In that case, the father owned 139 acres of land cultivated with rubber in Malaya. Under the Rubber Regulations of 1934. a distinction was made between the holding of less than 100 acres and holdings of more than 100 acres. If a man held more than 100 acres, the permissible production was assessed by an assessment Committee. If he held less than 100 acres, it was assessed by the local District Officer. In order to avoid going before the Assessment Committee, the father decided to transfer 40 arres of land in favour of his son, for a purported consideration, which was not in fact paid. The transfer was duly registered and a certificate of title issued to the son. Thereafter, the father wanted to sell the 40 acres to a third party and asked his son to execute a power of attorney in his favour so as to enable him to transfer the land to the prospective purchaser. The son refused to do so, and the father brought the suit claiming that the son was the trustee of the 40 acres holding the property on trust for him. The claim of the father was negatived. In the course of the judgment at page 302, it was pointed out -

'If the fraudulent purpose had not been carried out, there might well have been room for repentance and the father might have been allowed to have theland retransferred to him But wherethe fraudulent purpose has actually been effected by means of the colourable transfer, there is no room for repentance. The father has used the transfer to achieve his deceitful end and cannot go back on it. He cannot use the Process of the Courts to get the best of both worlds - to achieve his fraudulent purpose and also to get his property back. The Courts will say -'Let the estate lie where it falls',In the earlier case Sarian Singh v. Sardara Alil 1960 AC .167, the plaintiff founded his claim on his right of property in the lorry and its possession, and did not have to rest his cause of action on an immoral or illegal act while in the case of Palaniappa Chettlar,the father had of necessity to put for ward, and indeed, assert, his own fraudulent purpose, which he had fully achieved. It was held that though in the former case the suit was maintainable the Courts should not lend their aid in the latter case to the father to obtain a retransfer from the son.

12. It is these cases, which were considered by the Supreme Court in Smt. Surosaibalini Debi v. Phanindra Mohan Majumdar, : [1965]1SCR861 . The plaintiff in that case was employed at Calcutta in the Court of Wards, whose service rules did not permit him to start or carry on any trade or business of his own. He arranged with his father-in-law, who was the defendant in the suit, that the father-in-law should be held not to be the owner of the business. However, the plaintiff was in actual management of the said business. He had to leave Calcutta on medical advice and he put his father-in-law in possession on the understanding that on his return the business should be handed over to him. However, when he returned, his father-in-law refused to so hand over. The result of having the business in the name of the father-in-law was also to escape from payment of income-tax. The plaintiff filed the suit for recovery of possession and he succeeded in the trial Court as well as in the High Court. But when the matter came up before the Supreme Court on appeal, the appeal was dismissed. There were two separate judgments, one by Shah, J. (as he then was) on behalf of himself and Gajendragadkar C. J., and the other by Rajagopala Ayyangar, J. In the course of the judgment, their Lordships pointed out that the object of the agreement at its inception was not to evade tax, but to avoid the service rules, which were not statutory. At page 867 (of SCR) {at p. 1368 of AIR) Shah J. stated:-

'It is. true that if the plaintiff seeks the assistance of the Court to effectuate an unlawful transaction, the Courts will refuse to assist him. Where, however, the plaintiff is seeking to enforce his title to property and it is not an integral part of his pleading which he must prove to entitle him to relief that there was between him and the defendant an unlawful transaction or arrangement which he seeks to enforce, the plaintiff will be entitled to the assistance of the Court, even if the initial title of the plaintiff is routed in an illegal transaction. '

13. In the course of the judgment, reference was made to the distinction between (1) claims in which a party to an action has to rely essentially upon a conspiracy to effectuate an illegal or fraudulent purpose, to support his claim to the propcity transferred to or held out in the other party's name and, (2) claims in which unlawful or unworthy object is fulfilled, the property is owned by the claimant, and the claimant, seeks the assistance of the Court not to effec tuate his unlawful purpose, but in sub stance to enforce his title by a plea in detinue under a transaction which was not tainted by illegality. Palaniappa Chettiar v. Arunachalarn Chettiar, 1962 AC 294, was taken to illustrate the first principle and Sarjan Singh v. Saxdara Ali, 1960 AC 167, as illustrating the second principle, Rajagopala Ayyangar J also referred to the plaintiffs claim to possession being independent of and wholly dissociated from the illegal transaction of the original benami purchase which fell into line with Sarjan Singh's case, 1960 AC 167. Not being tainted with illegality, the plaintiff's claim was found to be open to no objection.

14. The scope of the maxim in pari delicto potior est conditio defendentis was outlined in Sitaram. v. Radhabai, : [1968]1SCR805 . It was pointed out that the maxim did not apply to three classes of cases, namely (a)where the illegal purpose has not yet been substantially carried into effect (b)where the plaintiff is not in pari de licto with the defendant and (c) where the plaintiff does not have to rely on the illegality to make out his claim.

15. In the present case, the plaintiff has not relied on his illegality in order, to make out his claim. He has provided the necessary funds for the construction of the property and his stand in this behalf has been upheld by both the, Courts below. Therefore, he is merely trying to recover his own property and the case squarely falls within the proposition (C) referred to above. There is no question of any illegality or anything opposed to public policy involved in the actual suit that was filed by the plaintiff here. The second appeal is, accordingly, dismissed; but in the circumstances no order to costs.

16. Appeal dismissed.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //