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(Rachakonda) Narayanamurti Vs. Darmana Ramalingam and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtChennai
Decided On
Reported inAIR1933Mad187; 145Ind.Cas.599
Appellant(Rachakonda) Narayanamurti
RespondentDarmana Ramalingam and ors.
Cases ReferredConnolly v. Consumers
Excerpt:
.....beginning of para. when it comes to the notice of the court that the real consideration for the suit transaction is not the consideration alleged and proved but is one which is distinctly immoral and illegal, is it to shut its eyes to the true state of affairs disclosed by the evidence and give a decree to the plaintiff as if the transaction between the parties was lone which could not be impeached? what should be the duty of a court in a case like this was pointed out by the privy council in connolly v. as pointed out in that judgment, it may be taken to be well settled that if the illegality of a transaction is brought to the notice of the court, the court should not assist the person who invokes its aid even though the defendant has not pleaded the illegality and does not wish to..........also for the transfer in favour of the plaintiff. the two issues in the case were: (1) whether the suit promissory note is not supported by consideration; and (2) 'whether the endorsement of transfer is genuine and supported by consideration. on these issues both the courts found that the consideration for the suit note was, as alleged by the plaintiff, the withdrawal of the sale deed, ex. e, from registration and that the transfer of the suit promissory note was not for consideration. the learned subordinate judge on these findings gave a decree to the plaintiff treating him as a transferee for collection. though the promissory note was found to be supported by consideration the learned district judge declined to pass a decree in favour of the plaintiff because he held having regard to.....
Judgment:

Madhavan Nair, J.

1. The plaintiff is the appellant. This second appeal arises out of a suit to recover from defendant 1 and his son defendant 2 Rs. 3,740 due on a promissory note executed by them in favour of defendant 3. Defendants endorsed the note in favour of the plaintiff who is his son-in-law. The contesting defendants pleaded want of consideration for the promissory note and also for the transfer in favour of the plaintiff. The two issues in the case were: (1) Whether the suit promissory note is not supported by consideration; and (2) 'Whether the endorsement of transfer is genuine and supported by consideration. On these issues both the Courts found that the consideration for the suit note was, as alleged by the plaintiff, the withdrawal of the sale deed, Ex. E, from registration and that the transfer of the suit promissory note was not for consideration. The learned Subordinate Judge on these findings gave a decree to the plaintiff treating him as a transferee for collection. Though the promissory note was found to be supported by consideration the learned District Judge declined to pass a decree in favour of the plaintiff because he held having regard to the facts disclosed in the evidence, that:

the sole consideration for the suit pronote was an undertaking to forgo the fruits of systematic procuration, and this is not a form of consideration that any Court can take cognizance of.

2. In the last paragraph of the judgment he says:

I find that the consideration for the suit pronote was nil, and that it was obtained by a disgraceful kind of blackmail.

3. His opinion apparently was that the history of the transaction which led to the execution of the promissory note showed that the real consideration for the promissory note was immoral and therefore the suit was not enforceable. In this view he set aside the decree of the Sub-Judge and dismissed the plaintiff's suit. To understand the conclusions arrived at by the learned Judge a few facts have to be mentioned and they are referred to in detail in the third and succeeding paragraphs of the appellate judgment. It would appear that defendant 1 is a rich raiyat and that defendant 2 is an young man addicted to drink and women and that defendant 3 gaining control over him by pandering to his weakness, persuaded him, to execute a sale deed in his favour, Ex. E, for Rs. 9,000. The document recites that a sum of Rs. 3,000 had been paid in cash to defendant 2 and that the balance of Rs. 6,000 would be paid at the time of registration. Defendant 3 is a pleader. When the document was presented for registration by his clerk, defendant.2 objected, alleging that it was executed by undue influence and while he was under the influence of drink and also that the consideration of Rs. 3,000 had not been paid. The document was therefore returned unregistered. During the inquiry before the Registrar a compromise was arranged between the parties at the intercession of one Venkateswarulu, a pleader, and defendants 1 and 2 executed the suit, note, Ex. A, for Rs. 2,750 in favour of defendant 3 and he then withdrew the suit deed without pressing for its registration. It was in these circumstances that the learned District Judge came to the conclusion that the suit note was unenforceable. His reasoning may be put in his own words:

What after all was the consideration for the suit pronote? Defendant 3 in Ex. E says that he paid defendant 2 Rs. 3,000 in cash. Defendant 2 denied this in Ex. 2. If it were true, then I do not see why defendant 3 was willing to accept a pronote for Rs. 2,750 and give up in return not only his own Rs. 3,000, but also the chance of buying valuable property. The fact that the property was valued and coveted is shown by the circumstances that Ex. E has not yet been returned.' I am not satisfied that there was any consideration for the first sale deed Ex. E, other than housing defendant 2 and procuring for him women and drink. If this is so, then the sole consideration for the suit pronote was an undertaking to forgo the fruits of systematic procuration, and this is not a form of consideration that any Court can take cognizance of. From the history of the transactions between defendants 3 and 2, I have no hesitation in believing the evidence of D.W. 1, viz., that the only consideration for Ex. E was an immoral one and in disbelieving the recital in Ex. 3 that it was a cash transaction. Defendant 3 has not given any evidence in this case and he was at pains to avoid doing so.

4. In second appeal Mr. G. Lakshmanna argues that the main question for decision being whether the promissory note was not supported by consideration and that point having been found in his favour by the District Judge he should have given the plaintiff a decree for the amount claimed as was dona by the Sub-Judge; he also argues that the compromise which led to the execution of the promissory note, and the consideration for the first sale deed Ex. E not being impeached before him, it was not open to the District Judge in the absence of specific issues on those points to arrive at the conclusion that the consideration for the promissory note was immoral and to dismiss the plaintiff's suit on a point which was not raised and on which there was no issue. In an ordinary case I should have accepted this contention; but having regard to the special facts appearing in the evidence in this case on which the learned Judge has relied for his conclusions, I cannot accept the appellant's contention. It is true that no issue was raised regarding the immoral nature of the consideration, but an indication of the point is distinctly given in the beginning of para. 3 of the written statement of defendants 1 and 2 and the evidence on the facts relating to it has also been given. When it comes to the notice of the Court that the real consideration for the suit transaction is not the consideration alleged and proved but is one which is distinctly immoral and illegal, is it to shut its eyes to the true state of affairs disclosed by the evidence and give a decree to the plaintiff as if the transaction between the parties was lone which could not be impeached? Mr. Lakshmanna would unhesitatingly say yes'; but his contention appears to be untenable from the decisions which have been brought to my notice. What should be the duty of a Court in a case like this was pointed out by the Privy Council in Connolly v. Consumers' Cordage (1904)89 LT347. In that case Lord Halsbury observed:

that it is the right and duty of the Court at any stage of the cause to consider, and, if it is sufficiently proved, to act upon, an illegality which may turn out to be fatal to the claims of either of the parties to the litigation.

5. He adds further that:

their Lordships however do not doubt that the learned Judges had a right and that it was their duty, if they thought the facts were established, to take care that the process of the Court should not be used for the purpose of establishing a claim that ought not to be permitted to be enforced in a Court of Justice.

6. In that case as no evidence was offered on the question of illegality, and as the Supreme Court of Canada assumed the existence of an illegality from the circumstances fraught with suspicion, the case was remanded for a new trial to decide the issue as to illegality after taking evidence. The principle enunciated by the Judicial Committee has been followed in many cases in England and America and in this country also. The English and American cases are referred to in the judgment of Mukerjee, J., in Atikulla v. Habibulla A.I.R.1920Cal704. As pointed out in that judgment, it may be taken to be well settled that if the illegality of a transaction is brought to the notice of the Court, the Court should not assist the person who invokes its aid even though the defendant has not pleaded the illegality and does not wish to raise the objection. This is based on grounds of public policy. A transaction submitted for adjudication may appear prima facie to be harmless; but if it appears to the Court that it has grown out of illegal or immoral circumstances it is the duty of the Court to take notice of such circumstances and give adjudication accordingly. The decision in Atihulla v. Habibulla A.I.R.1920Cal704 was followed in this Court by Curgenven, J., in D. Lakshmiayya v. O. Murahari : AIR1930Mad547 . The decisions relied on Mr. Lakshmanna, viz. Hyams v. Stuart King (1908) 2KB 696 and North Western Salt Co., Ltd. v. Electrolytic Alkali Co. Ltd. (1914) AC 461, dealing with transactions arising out of wagering contracts under the English law, do not really help him as wagering contracts are not immoral or illegal but have only been declared to be void by statute. I do not think the considerations applicable to those cases can be successfully urged in support of the contention that if a contract, ostensibly good, is really based upon an immoral consideration and this is clearly brought to the notice of the Court, the Court should ignore it and proceed to give a decree to the plaintiff who desires to enforce the contract.

7. It is argued on behalf of the respondents that the conclusion arrived at by the Judge as regards the immoral consideration should be accepted, and that his decree should be upheld. As the point under consideration was not specifically raised in the case, I think the learned Judge should have given an opportunity to the plaintiff to meet the objection when it came to his notice that the suit transaction was of a questionable character, as was done in Connolly v. Consumers' Cordage Co. (1). I would therefore call upon the lower Court to submit a finding on the question

whether the consideration for the suit note is tainted with immorality.

8. In deciding this point the Court will have to consider the validity of the sale transaction Ex. E and of the compromise which immediately preceded the execution of the suit promissory note. Before I conclude I must point out that I have not expressed any opinion as regards the evidence relating to the alleged immoral nature of the transactions brought to light in this suit, nor do I desire to express any opinion lest any opinion of mine might embarrass the lower Court in arriving at its own conclusion. The lower Court is at liberty to consider the entire evidence afresh and arrive at its own conclusion. As the point is a new one it is open to the parties to adduce fresh evidence. The finding is to be submitted within three months after the receipt of this order and ten days for objections. (In pursuance of the order contained in the above judgment, the District Judge of Ganjam submitted the following)

9. Finding-- I find therefore that the consideration for the suit note was illegal, and of such a character that contract based on it could not be enforced. (This second appeal coming on for final hearing after the return of the above finding, the Court delivered the following)

10. Judgment-- The finding that is now submitted is covered by my order calling 'for a finding.' The pronote now being found to be illegal cannot be made the basis of the suit. The finding is accepted and the second appeal is dismissed with costs.


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