Sadasiva Aiyar, J.
1. The learned District Judge in arriving at his conclusions has practically set aside the oral evidence on both sides as of very little value. He has considered the documentary evidence at great length and has then come to the conclusion that the documents do not prove the plaintiff's case, that case being that the 2nd defendant's purchase under Exhibit B was made as the 1st defendant's benamidar. In arriving at this conclusion, the learned District Judge has laid (in our opinion) undue stress in very many places on the fact that the burden of proof lay on the plaintiffs. We think that when the whole evidence on both sides has been let in it is not legally sound to lay stress on the burden of proof, and that the Court should weigh the evidence let in and the probabilities as a whole and then arrive at its findings on the facts. Further, as pointed out in Hall v. Venkatakrishna 13 M. 394 at p. 399 the burden of proof in most cases is not a burden that goes on for ever resting on the shoulders of the person upon whom it is first cast.' These considerations (it seems to us) have not been properly kept in mind by the learned Judge of the Court below in construing the documentary evidence on the construction of which the case of benami rests. After reading over the principal letters, in Exhibit E series, and hearing many of them discussed at the Bar, we are of opinion that Exhibits E14 and E16 have not been properly construed by the learned District Judge, and that, on a proper construction of these letters, the finding ought to have been that the 2nd defendant was the 1st defendant's benamidar in the matter of the purchase of lands from Padmanabha Aiyar.
2. The question of construction of documents is a question of law--Lala Fateh Chand v. Rani Kishen Kunwar 16 Ind. Cas. 67 : 16 C.W.N. 1033 : 23 M.L.J. 330 : 12 M.L.T. 413 : 10 A.L.J. 335 : 14 Bom.L.R. 1090 : 34 A.A 579 : 17 C.L.T. 1 : (1912) M.W.N. 1065, and as the finding of fact in this case in the lower Court has been based (as we have already stated) on the documentary evidence alone, we set aside the finding of the District Judge in the 2nd defendant's favour and decide the 2nd issue in the plaintiff's favour.
3. Before disposing finally of this second appeal we think it is desirable to obtain a finding from the District Court on the 7th issue, which has not been dealt with in the lower Appellate Court's judgment. The finding should be submitted within four weeks from the receipt of this order. Ten days will be allowed for filing objections.
4. I agree.
5. In compliance with the order contained in the above judgment, the District Judge of Tinnevelly submitted the following
1. A finding has been called for on issue No. 7, whether plaintiffs are not entitled to the whole or their share of the plaint properties and are precluded from maintaining this action on account of 1st defendant's conduct, as alleged in paragraphs 5 and 6 of 2nd defendant's written statement.
Assuming that the benami transactions in question were entered into in order to defraud 1st defendant's creditors, the rule of law applicable is very clearly laid down by authority. It is this, that 2nd defendant--in order to retain the suit property--must allege and prove that the contemplated fraud was successfully carried into effect. This is the position taken up by the Privy Council in Petherpermal Chetty v. Muniandy Servai 35 C. 551 (P.C.) : 35 I.A. 98 : 12 C.W.N. 562 : 7 Cri.L.J. 528 : 10 Bom.L.R. 590 : 5 A.L.J. 290 : 18 M.L.J. 277 : 4 M.L.T. 12 : 14 Bur.L.R. 108 : 4 L.B.R. 266 and by the High Court of Madras in Munisimi Mudaliar v. Subbarayar 31 M. 97 : 18 M.L.T. 151 : 3 M.L.T. 246.
The first question, then, that arises is whether the present is a case to which the rule above stated is applicable. The second is whether--it being such a case--the contemplated fraud was effected. The third and last whether--if the fraud was effected and 1st defendant is unable to recover his share--2nd defendant is entitled to retain at any rate their shares as against plaintiffs.
2. The finding of the District Munsif on these points--as I understand it--is as follows:
(a) that an acquisition of property benami in order to defraud creditors is not on the same footing as an alienation made with the same purpose; '
(b) that there is not, in fact, sufficient evidence to show that any creditor was actually defrauded;
(c) that, consequently, even 1st defendant could have maintained the action;
(d) that in any event, plaintiffs could maintain it in order to recover their own shares in the suit property.
3. On the first point, I am. unable to agree with the District Munsif that there is any reality in the very clear-cut distinction he draws between benami acquisitions and benami alienations, so long as the object of both is to secrete a debtor's property from his creditors. Each case must, I imagine, be judged on its merits; and it would obviously make a vast difference in the circumstances we are now considering, if it were alleged and proved that the attachment and purchase of the suit property by Padmanabha Iyer were part of the contemplated fraud.
There appears to be authority both for and against the District Munsif's view. A case of such an acquisition is referred to in Jadu Nath Poddar v. Rup Lal Poddar 33 C. 967 : 10 C.W.N. 650 : 4 CRI.L.J.22 Konjee Singh v. Jankee Singh (1852) Bang. S.D.A. 838. In that case, the majority of the Court decided against the plaintiff, who sued to recover property bought by him in the defendant's name with a view to secure it from his creditors. The minority rested is decision on, inter alia, the ground that, if the plaintiff succeeded, the creditors would be benefited. All the circumstances of the case are not to be found in the quotation in Jadu Nath Poddar v. Rup Lal Poddar 33 C. 967 : 10 C.W.N. 650 : 4 CRI.L.J. 22, but it seems to me that if the minority was right, it was certainly not on the ground stated. In this, as in every similar case, it is difficult to see how creditors, who have been induced to let their claims lapse, could get any benefit from either party. And if their claims were still alive, they could, I imagine, pursue the property equally in the hands of the owner and of the benamidar. For, when once the purchase has been found to have been benami and in fraud of them, it is invalid against their claims unless the property has, in the interval, passed into the possession of a bona fide purchaser for value.
A case to the contrary effect is cited by Mayne in paragraph 447 of his Hindu Law, 7th Edition Suboodra v. Bikramadit S.D. of 1858. There a man made a purchase in another person's name with the object of preventing the property from being seized by his creditors. The Court held that he could enforce his rights against the benamidar, opining that he was merely suing 'to have a legal right enforced, an act legal in itself though...done with a motive of keeping the property out of the reach of his creditors.'
The whole circumstances of the case are not given, but they seem to me on the face of them to be not very different from those now in question. When the present suit properties were attached, brought to sale and purchased by a creditor, they passed once and for all out of the reach of the other creditors. The latter were in no way prejudiced (they might conceivably even have been benefited) by the re-acquisition and it is impossible to see how it was illegal for 1st defendant to re-acquire the property, even if he did so benami in order to screen it from them. The case, as I have already indicated, would be very different if the attachment and purchase by Padmanabha Iyer had been part of the whole scheme of fraud, bat this, is neither alleged nor proved.
4. I would, therefore, hold that this is not a case to which the rule laid down in Petherpermal Chetty v. Muniandy Sarvai 35 C. 551 : 35 I.A. 98 : 12 C.W.N. 562 : 7 Cri.L.J. 528 : 10 Bom.L.R. 590 : 5 A.L.J. 290 : 18 M.L.J. 277 : 4 M.L.T. 12 : 14 Bur.L.R. 108 : 4 L.B.R. 266 is applicable and that there is nothing to prevent 1st defendant and a fortiori plaintiffs from recovering the suit properties from 2nd defendant. On this finding, it is not strictly necessary to proceed any further, but as the other points have been raised, I will briefly consider them.
Before doing so, I must indicate one other ground on which, I imagine, 2nd defendant must fail. Mayne in paragraph 446 cites an English case, Haigh v. Kaye (1872) 7 Ch. App. 469 : 41 L.J. Ch. 537 : 26 L.T. 673 : 20 W.R. 597, which lays down a further rule that 'in order to enable the grantee to retain the property, he must expressly set up the illegality of the object and admit that he is holding for a different-purpose from that for which he took the property.' This, of course, is what 2nd defendant has never done. Throughout a protracted litigation, of which the present suit is only a part, he has steadily maintained in various Courts that the transactions were bona fide, with his own funds and on his own account. And it was only in the alternative that he fell back on the plea that plaintiffs, on their own showing, were disentitled to succeed. Neither explicitly nor by implication has he ever admitted the real purpose of his holding or set up its illegality and he can hardly, I think, be allowed to put them forward merely as an argument in the last resort.
5. On the next point, there is, of course, no room for doubt as to the object of the transaction. It is plainly to be seen from paragraph 14 in the plaint and from the letters, Exhibit E series, that passed between the parties. Exhibit E14, which is dated after Padmanaba Iyer's sale, closes with the significant remark, ' hereafter there can (not) be the least fear about the (suit) properties.'
As to the success with which the fraud was carried out, the evidence is more than ordinarily lacking in precision. On one side is that of 27th defendant's witness and on the other that of 1st defendant. The latter merely succeeds in conveying the impression that no creditor was paid more than a part of his dues, and most of them nothing at all, but it is all exasperatingly lacking in details as to dates and figures. And, as plaintiff's Pleader points out, we are only concerned with creditors who may have given up their claims after October 1900.
6. Twenty-seventh defendant's witness speaks about litigation referred to in Exhibit E7, which apparently ended in a decree against 1st defendant and others in December 1899.
It was about a chit conducted by 1st defendant and his brother. The chit broke down and 27th defendant's witness and other subscribers who had not drawn prizes sued the prize-winners and the stake-holders and got a decree. Of the amount decreed, it is perfectly clear from 27th defendant's witness' evidence and 1st defendant's admissions that the plaintiffs recovered no more than a percentage and that solely from the prize-winners. There is not the slightest reason to suppose that they got anything whatever out of 1st defendant and his brother and there is every reason to suppose that, if they had known the nature of the suit transactions, they would have proceeded against the properties acquired in 2nd defendant's name. Twenty-seventh defendant's witness says in this connection: 'I never took any steps to recover the balance, I did not because I thought it was hopeless to recover anything from Ayyavier and Vythilingam Iyer. I thought so because several of the creditors came to grief and could not recover the amounts due to them. I made no special inquiries as to whether they had any property because it was believed by myself and other creditors that they were worth nothing.... I met Ayyavier in Andu 1078 (1903). He explained to me with tears in his eyes that he had parted with all his properties and could not, therefore, pay me my debts.... I believe that my claim against Ayyavier was not barred.'
On this the District Munsif comes to the conclusion that the decree was not alive on the date of the conversation referred to. If it was not, Ayyavier's representation was altogether superfluous and inexplicable. Under the circumstances, I see no reason why 27th defendant's witness should not be believed when he says that, as far as he knew, his claim was then alive. If it was, it is obvious that he was induced not to press it by the representation, which he believed, that the debtors had no property he could proceed against. The suggestion that his claim was met by the sale of a house to him is obviously futile, as the sale was several years before the litigation about the chit.
First defendant's evidence as 10th plaintiff's witness it is impossible to read with any degree of patience and without a strong prejudice. His very evident object throughout has been to protect his property by a systematic course of fraud. He first overloaded it with a number of fictitious encumbrances in order to deter creditors by the prospect of endless litigation from proceeding against it. And when a creditor did attach and buy it, he re-purchased it in another's name. The impression that his evidence leaves on my mind is that he paid no one anything if he could help it. He professes to have satisfied all his creditors but two or three within six months of his release from Jail, but has no acquittances or accounts and cannot say how much he paid, to whom, on what dates and from what source. In the absence of all this detail, it is obviously impossible to say which of his creditors, except perhaps 27th defendant's witness and. another, gave up their claims subsequent to October 1900. It is quite clear from his evidence that he never paid 27th defendant's witness a penny. In the case of one Ponnu Ammal he admits a debt of Its. 4,600 on a pro-note, which he says was compounded eventually for Rs. 2,000 some years after the benami acquisitions. The inference is, I think; justifiable that Ponnammal would not have given up so much had she known that 1st defendant still had some property.
I need refer to only one other debt and that is the decree debt in Original Suit No. 86 of 1072. It was owing by 1st defendant and his brother to one Sangu Iyer. At about exactly the same time as the benami sale to 2nd defendant, his brothers took an assignment of this decree. They were, I may remark, on extremely bad terms with him and their sole object appears have been to expose the dishonest deal-is between him and 1st defendant and Section brother. In pursuance of this object, hey got the decree transferred to Tinne-elly for execution and attached the properties comprised in Exhibit B. Second defendant put in a claim petition, which was allowed.
Thereupon his brothers filed a suit against him and 1st defendant and his brother, which he alone defended. The suit was dismissed in the Court of first instance, bat the District Court reversed its decision and found 2nd defendant's purchase to have been benami for 1st dafendant and his brother. There was a second appeal to the High Court which was dismissed. Ultimately it would appear from Exhibits U & U1 that 1st defendant and his brothers themselves satisfied the decree.
On the lines laid down in Muthuraman Chetty v. Krishna Pillai 29 M. 72 : 15 M.L.J. 478 there would seem in this instance to have been part performance of a substantial character' of the fraudulent agreement. The Privy Council, however, in Petherpermal Chetty v. Muniandy Servai 35 C. 551 : 35 I.A. 98 : 12 C.W.N. 562 : 7 CRI.L.J. 528 : 10 Bom.L.R. 590 : 5 A.L.J. 290 : 18 M.L.J. 277 : 4 M.L.T. 12 : 14 Bur.L.R. 108 : 4 L.B.R. 266 took a different view of a somewhat analogous litigation. They held it to be sufficient that the creditor had been successful and had been paid his debt together with the costs of the litigation, adding that 'if his interests were prejudiced at all, it was only to the extent that he was obliged to take proceedings which, had the deed never been executed, he might possibly never have been obliged to take.' This view I am bound to follow, but I do so with some reluctance. No doubt, 2nd defendant's brothers took the assignment with their eyes open, but it is difficult to see how ultimate payment plus taxed costs can be held to be a sufficient compensation for several years of litigation and delay forced on them by a benami purchase.
7. On the second point, then, I find that two creditors, at least, were defeated and that, therefore, the contemplated fraud was effected. On this finding, 2nd defendant can, of course, retain the property as against 61st defendant. The last question is whether he can retain, at any rate, their shares as against plaintiffs. On this point I can find, and have been shown, no authority. A case is re-ported in Rangammal v. Venkatachctri 20 MA. 323 : 6 M.L.J. 64, but being concerned with a widow, it is hardly parallel to the present suit which is by coparceners.
It is argued that the decision in that case turned on the benefit presumed to have been derived by the widow from her hus-. band's fraud and that similarly, in this case, plaintiffs should be non-suited as having profited by their father's dishonesty. There are,, no doubt, sentences in the judgment which are capable of such a construction, but it is perfectly clear that the Court of 1st instance non-suited the then plaintiff on the ground that she stood in the shoes of her deceased husband who could not, if alive, have succeeded on the rule of equal delinquency.
It seems to me obvious that in cases of this nature the question of benefit -or profit is quite irrelevant. A fraudulent confederate can retain the property of his partner in guilt on one ground only, and that is by proof that the person who sues him is 'in pari delicto.' As between confederates who have combined to cheat others, the law will not interfere to evict the one in possession. And even if such a question be material it is not easy to see how the widow in the previous, or plaintiffs in this case, can properly be said to have profited or benefited by the fraud. To my mind it is clear that the only person who benefited prior to the litigation was the dishonest confederate. It may he that some creditors have relinquished part of their claims, but how, it may well be asked, are plaintiffs or 1st defendant now any better off on that account than if their creditors had attached and sold their property and thereby satisfied their claims? They would then have lost their property and, so far, they have lost it now, as effectively as if it had been attached and sold in satisfaction of the decrees against them.
8. It is, of course, the case that plaintiffs, if successful, will take back their shares of the joint property relieved by their father's fraud of the burden of paying their father's debts, which they were indubitably liable to pay. But is this, again, a material consideration? I think, not at any rate as between them and 2nd defendant. Ha is allowed, as Mayne puts it, to cheat their fathers because he and they jointly succeeded, in cheating others. As against co-parceners who were minors and are not asserted to have had any knowledge of or part in the fraud, I am quite unable to see how his plea of ' inpari delicto' can be entertained. He has no rights in the matter at all, bat is allowed, solely on grounds of public policy, to retain his fraudulently acquired property against his equally fraudulent confederate. Plaintiffs are obviously in a very different position from 1st defendant and there is no apparent ground in reason or in law why 2nd defendant should be permitted to cheat them, they not having been confederate with him in his successful fraud.
A doubt of this kind was suggested (vide page 593 of Mayne's 7th E lition) by Lord 'Eldon, who questioned whether the rule would be enforced in the case of persons claiming under the settlor, but themselves not parties to the fraud. On page 388 of the 18 Madras ruling, Rangammal v. Venkatachari 18 M. 378 at p. 386 on the other hand, it is laid down distinctly that no such relaxation can be allowed. But that case may be distinguished on the ground that it was there sought to set aside a collusive decree. The 20 Madras decision may also be distinguished if it need be distinguished at all--on the ground that it dealt with a widow and not with co-parceners, who can hardly be said to stand in any one's shoes as regards their own shares in the joint property.
9. I must, therefore, find that the rule is not applicable to plaintiffs. They are co-parceners innocent of the fraud and 2nd defendant cannot be allowed to retain their shares of the joint property.
To sum up, I hold
I. That the rule is not applicable to the facts of this case at all.
II. That 2nd defendant must, in any case, fail as he has never admitted the fraud.
III. That, if the rule be held applicable, there has been a successful fraud.
IV. That, however, plaintiffs can m, tain a suit to recover at any their shares.
This second appeal coming on again final hearing after the return of the finding c the lower Appellate Court upon the issued referred by this Court for trial, on Friday the 1st day of May 1914, and having stood over for consideration till this day, the Court delivered the following