Law Web: Supreme Court: Court should not grant specific performance of illegal agreement

Undisputedly, both, the predecessorintitle

of the

defendant(s) as well as the plaintiff, are confederates in this

illegality. Both, the plaintiff and the predecessorintitle

of the

defendant(s) can be said to be equally responsible for violation

of law.

25. However, the ticklish question that arises in such a

situation is: “the decision of this Court would weigh in side of

which party”? As held by Hidayatullah, J. in Kedar Nath Motani

(supra), the question that would arise for consideration is as to

whether the plaintiff can rest his claim without relying upon the

illegal transaction or as to whether the plaintiff can rest his

claim on something else without relying on the illegal

transaction. Undisputedly, in the present case, the claim of the

plaintiff is entirely based upon the agreement to sell dated

15.05.1990, which is clearly hit by Section 61 of the Reforms

Act. There is no other foundation for the claim of the plaintiff

except the one based on the agreement to sell, which is hit by

Section 61 of the Act. In such a case, as observed by Taylor, in

his “Law of Evidence” which has been approved by

Gajendragadkar, J. in Immani Appa Rao (supra), although

illegality is not pleaded by the defendant nor sought to be relied

upon him by way of defence, yet the Court itself, upon the

illegality appearing upon the evidence, will take notice of it, and

will dismiss the action ex turpi causa non oritur actio i.e. No

polluted hand shall touch the pure fountain of justice. Equally,

as observed in Story’s Equity Jurisprudence, which again is

approved in Immani Appa Rao (supra), where the parties are

concerned with illegal agreements or other transactions, courts

of equity following the rule of law as to participators in a

common crime will not interpose to grant any relief, acting upon

the maxim in pari delicto potior est conditio defendentis et

possidentis.

26. It could thus be seen that, the trial Judge upon finding

that the agreement of sale was hit by Section 61 of the Reforms

Act, had rightly dismissed the suit of the plaintiff.

27. Now, let us apply the another test laid down in the

case of Immani Appa Rao (supra). At the cost of repetition, both

the parties are common participator in the illegality. In such a

situation, the balance of justice would tilt in whose favour is the

question. As held in Immani Appa Rao (supra), if the decree is

granted in favour of the plaintiff on the basis of an illegal

agreement which is hit by a statute, it will be rendering an

active assistance of the court in enforcing an agreement which

is contrary to law. As against this, if the balance is tilted

towards the defendants, no doubt that they would stand

benefited even in spite of their predecessorintitle

committing

an illegality. However, what the court would be doing is only

rendering an assistance which is purely of a passive character.

As held by Gajendragadkar, J. in Immani Appa Rao (supra), the

first course would be clearly and patently inconsistent with the

public interest whereas, the latter course is lesser injurious to

public interest than the former.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos. 76307631

OF 2019

SMT. NARAYANAMMA Vs SRI GOVINDAPPA

B.R. GAVAI, J.

Dated:SEPTEMBER 26, 2019.

Leave granted.

2. The present appeals arise out of the common judgment

and order passed by the Single Judge of the Karnataka High

Court in Regular Second Appeal No. 1925 of 2008 and Regular

Second Appeal No. 1834 of 2008 thereby dismissing both the

appeals.

3. For the sake of convenience, the parties shall be

referred hereinafter as per their status shown in the plaint

before the trial court. The suit O.S. No. 93/1999 was filed by

the plaintiff Govindappa, who is the son of Bale Krishnappa.

Originally the suit property belonged to one Bale

Venkataramanappa, who was the brother of Bale Krishnappa.

Said Bale Venkataramanappa has entered into an agreement to

sell with the plaintiff, specific performance of which is sought in

the present suit. The son of the Bale Venkataramanappa, M.V.

Nagaraj was defendant No. 1, who has been represented

through Legal representatives in the appellate courts since

deceased. The wife and daughter of Anjanappa, who was

another son of Venkataramanappa are the defendant Nos. 2 & 3

to the suit respectively. The daughter and wife of Bale

Venkataramanappa are defendant Nos. 4 & 5 to the suit

respectively. The R.S.A. No. 1925/2008 is filed by the original

defendant Nos. 4 & 5, who are daughter and wife of Bale

Venkataramanappa. The R.S.A. No. 1834/2008 has been filed

by the legal representatives of the original defendant No. 1,

M.V. Nagaraj and the original defendant Nos. 2 & 3, who are

wife and daughter of Anjanappa. The suit was filed inter alia

contending that the defendants did not come forward to execute

the sale deed in respect of the agreement to sell. After the

notice was issued by the Civil Judge (Junior Division) & JMFC,

Hoskote, the defendants appeared before the Court. However,

they did not file the written statement. The power of attorney

holder of the plaintiff is examined as PW1.

The plaintiff also

examined two witnesses in support of his case, i.e., PW2

and

PW3.

He produced documentary evidence Exhibits P1

to P34

in support of his case. The defendants did not crossexamine

the plaintiff. The trial court, upon appraisal of Exhibit P1,

i.e.,

the agreement to sell dated 15.05.1990, held that the suit

property was granted in favour of the defendant and as per the

grant certificate, there was a 15 years bar on alienation of the

suit property. The period of the said bar was to expire on

13.10.1988. It was, therefore, held by the trial Judge that since

the said agreement was executed during the nonalienation

period of 15 years, the agreement was void and nonexecutable.

It was held that since the said agreement was contrary to the

statutory bar, it was void in law and as such the suit for specific

performance of the contract was not maintainable.

4. Being aggrieved thereby, the plaintiff filed Regular Appeal

No. 86 of 2004 before the Principal District & Session Judge,

Bangalore. Before the appellate court, though the defendants

had put in their appearance, the Advocate did not appear to

argue the matter. The first appellate court held that the father

of Original defendant No. 1, namely, Bale Venkataramanappa,

had mortgaged the suit property by a registered mortgage deed

on 23.04.1990. It further held that on 15.05.1990 he had also

entered into an agreement to sell with the plaintiff. It was

further held that, the entire sum of Rs. 46,000/agreed

to be

paid to Bale Venkataramanappa was received by him. It was

further found that the plaintiff had already been put in

possession of the suit property. The first appellate court held

that, the reasoning of the trial court that the nonalienation

clause prohibits alienation was not apt. On this reasoning, the

appeal was allowed.

5. Being aggrieved by the judgment and order passed by the

first appellate court, the original defendant Nos. 4 and 5 had

filed Regular Second Appeal No. 1925 of 2008 whereas, legal

representatives of defendant No. 1 and original defendant Nos. 2

and 3 have filed Regular Second Appeal No. 1834 of 2008. Two

points were raised before the High Court on behalf of the

defendants. Firstly, that the suit which was filed in the year

1999 for specific performance of agreement to sell entered into

on 15.05.1990 was beyond limitation. Secondly, that in view of

provisions of Section 61 of the Karnataka Land Reforms Act,

1961 (hereinafter referred to as “the Reforms Act”), the

agreement was not enforceable. The High Court observed that,

as a matter of fact, the trial court ought not to have framed

such an issue. It further observed that, though in the suit for

specific performance of contract it was necessary to frame the

issue with regard to readiness and willingness of the plaintiff to

perform his part of the contract along with other issues, neither

the trial court nor the first appellate court had framed such an

issue. According to the High Court, in the absence of the

defendants neither filing the written statement nor contesting

the suit, the finding as recorded by the first appellate court was

correct in law. The High Court concurred with the finding of the

first appellate court that since the entire amount was received

by Bale Venkataramanappa, father of defendant No.1, and also

from the recital of the agreement to sell, it was clear that the

possession was also handed over. As such, the High Court held

that the finding of the first appellate court was correct. Being

aggrieved thereby, defendants have approached this Court.

6. Mr. Shailesh Madiyal, learned counsel appearing on

behalf of the defendants (appellants herein), submitted that in

view of the provisions of Section 61 of the Reforms Act, the

predecessorininterest

of the defendants, i.e., Bale

Venkataramanappa could not have transferred the said land, as

such, the agreement to sell was void in law and, therefore, not

enforceable. He submitted that the finding as recorded by the

trial Judge was correct in law, which ought not to have been

interfered with by the first appellate court. It is further

submitted that the High Court was also not correct in law in

upholding the finding of the first appellate court.

7. The original plaintiff (respondent(s) herein), on the

contrary, submitted that the provisions of Section 61 of the

Reforms Act would prohibit only the sale, gift, exchange,

mortgage, lease or assignment and would not prohibit an

agreement to sell. It is submitted that once the period of

restriction of 15 years is over, the agreement to sell, though

executed during the period of 15 years, becomes enforceable in

law. It is submitted that, in the present case, Bale

Venkataramanappa had received the entire consideration and

had also handed over the possession as per the agreement to

sell. It is further submitted that, the pleadings in the plaint were

not controverted by either filing written statement nor leading

any evidence and in this view of the matter, the first appellate

court and the High Court were justified in decreeing the suit.

8. The facts in the present case are not in dispute. On

20.10.1976, the suit property, i.e., 1 acre 6 guntas bearing

Survey No. 57 situated at Mutkur Village, Angondanahalli Hobli,

Hoskote Taluk, Bangalore District, was given as a grant in

favour of Bale Venkataramanappa. The said grant was under

the provisions of the Reforms Act. On 13.09.1983, the premium

was paid by Bale Venkataramanappa and the grant was

confirmed in his favour with a nonalienation

clause of 15 years.

On 15.09.1983, there was a mutation entry in the revenue

records entering the name of said Bale Venkataramanappa with

an endorsement that the land shall not be alienated for a period

of 15 years. On 23.04.1990, Bale Venkataramanappa, by a

registered mortgage deed, mortgaged the suit land in favour of

the plaintiff for a sum of Rs. 20,000/.

The mortgage deed

recites about the receipt of the entire mortgaged amount by Bale

Venkataramanappa. Under the mortgage deed, Bale

Venkataramanappa had agreed to repay the loan within a

period of one year. However, within a period of one month, Bale

Venkataramanappa executed an agreement to sell dated

15.05.1990 in favour of the plaintiff. The agreement to sell

recites that he was in need of money for his legal necessities

and to repay his hand loans and for his domestic needs and,

therefore, he had agreed to sell the suit property for a sum of

Rs. 46,000/.

He acknowledges the receipt of entire amount of

consideration, i.e., Rs. 46,000/.

The recital in the agreement

to sell reads that at the time of execution of the agreement, the

possession of the suit property is handed over to the plaintiff.

Further, the recital reads that the plaintiff shall take the

consent of the officers of the Tribunal or the concerned officers

at his own cost for transferring the property in the name of the

plaintiff.

9. It could thus be seen that, initially the property was

mortgaged on 23.04.1990, and within a period of one month the

agreement to sell is executed. At the time of the agreement

itself, the entire consideration amount is said to have been

received by Bale Venkataramanappa and also the possession is

handed over to the plaintiff.

10. It appears, that there were also parallel proceedings

before the revenue authorities. After the death of Bale

Venkataramanappa, the plaintiff filed an application on

12.05.1997 before the Tehsildar, Hoskote, for mutating his

name in place of Bale Venkataramanappa. The Tehsildar,

without any notice, carried out the mutation and entered the

name of the plaintiff in the revenue records. The defendants

challenged the same before the Assistant Commissioner,

Doddabalapura Division. The said appeal was allowed on

27.06.2008. Accordingly, the revenue records were corrected

and the defendants’ names were entered on 24.10.2009. The

said Order came to be challenged by the plaintiff before the High

Court by way of Writ Petition Nos. 2224322244

of 2011. The

High Court vide Order dated 26.07.2011, dismissed the said

petitions.

11. The short question that arises for consideration in the

present appeals is, as to whether the agreement to sell dated

15.05.1990 executed by Bale Venkataramanappa in favour of

the plaintiff would be enforceable in law or not.

12. For appreciating the said issue, it would be necessary

to refer to Section 61 of the Reforms Act, which reads thus:

“61. Restriction on transfer of land of which tenant has

become occupant.—

(1) Notwithstanding anything contained in any law, no

land of which the occupancy has been granted to any

person under this Chapter shall, within fifteen years

from the date of the final order passed by the Tribunal

under subsection

(4) or subsection

(5) or subsection

(5A) of section 48A be transferred by sale, gift,

exchange, mortgage, lease or assignment; but the land

may be partitioned among members of the holder’s

joint family,

(2) Notwithstanding anything contained in subsection

(1),

it shall be lawful for the occupant registered as such or

his successorintitle

to take a loan and mortgage or

create a charge on his interest in the land in favour of

the State Government, a financial institution, a cooperative

land development bank, a cooperative

society or a company as defined in Section 3 of the

Companies Act, 1956 in which not less than fifty one

per cent of the paidup

share capital is held by the

State Government or a Corporation owned or

controlled by the Central Government or the State

Government or both for development of land or

improvement of agricultural practices; or for raising

educational loan to prosecute the higher studies of the

children of such person and without prejudice to any

other remedy provided by any law, in the event of his

making default in payment of such loan in accordance

with the terms and conditions on which such loan was

granted, it shall be lawful to cause his interest in the

land to be attached and sold and the proceeds to be

utilised in the payment of such loan.

Explanation. – For the purpose of this subsection,

“Higher Studies” means the further studies after Preuniversity

Examination or 12th Standard Examination

conducted by CBSE or ICSE or any Diploma courses.

(3) Any transfer or partition of land in contravention of

Subsection

(1) shall be invalid and such land shall

vest in the State Government free from all

encumbrances and shall be disposed in accordance

with the provisions of Section 77.”

13. A perusal of the said provision would clearly show that,

notwithstanding anything contained in any law, no land of

which the occupancy has been granted to any person under the

said Chapter shall, within 15 years from the date of the final

order passed by the Tribunal under subsection

(4) or subsection

(5) or subsection

(5A)

of Section 48A

of the Reforms

Act be transferred by sale, gift, exchange, mortgage, lease or

assignment. However, the land may be partitioned among

members of the holders of the joint family. No doubt, that subsection

(2) of Section 61 of the Reforms Act permits the

registered occupant or his successorintitle,

to take a loan and

mortgage or create a charge on his interest in the land in favour

of the State Government, a financial institution, a cooperative

land development bank, a cooperative

society or a company as

defined in Section 3 of the Companies Act, 1956 in which not

less than 51% of the paidup

share capital is held by the State

Government or a Corporation owned or controlled by the

Central Government or the State Government or both. However,

such a loan can be taken only for the purpose of development of

land or improvement of agricultural practices or for raising

educational loan to prosecute higher studies of the children of

such person. It further provides that, in the event of such a

person making default in payment of such loan in accordance

with the terms and conditions on which such loan was granted,

it shall be lawful to cause his interest in the land be attached

and sold and the proceeds to be utilised in the payment of such

loan. Subsection

(3) of the said Section specifically provides

that any transfer or partition of land in contravention of subsection

(1) shall be invalid and such land shall vest in the State

Government free, from all encumbrances and shall be disposed

in accordance with the provisions of Section 77 of the Reforms

Act.

14. This Court in the case of Kedar Nath Motani and Ors.

vs. Prahlad Rai and Ors.1 had an occasion to consider the

question of application of the maxims ex turpi causa non oritur

actio and ex dolo malo non oritur actio. This Court has referred to

various English judgments in paragraphs 11, 12 and 14, which

read thus:

“11. Coming now to the question whether the appellants'

suit was rightly dismissed by the High Court on the

1 (1960) 1 SCR 861

application of the maxim, ex turpi causa etc., we have first

to see what are the specific facts on which this contention is

based. The case of the appellants was that the property was

taken benami in the names of Prahlad Rai and others to

avoid the implication of clause 16. In making the

application to the Bettiah Raj the signatures of Prahlad Rai

and others were made by Radhumal or someone under his

instructions, because the relationship between Radhumal,

Prahlad Rai and others was so intimate that it was

considered unnecessary to trouble them. Inasmuch, as the

matter was brought to the notice of the Assistant Manager

of the Court of Wards, all these facts were capable of being

investigated, including the making of the signatures by

Radhumal. No doubt, the making of the signatures of

another person without his consent, express or implied, is

an offence under the ordinary law, but the intention was

not so much to forge the signatures but to present the

application in the names of those persons. However it be,

we proceed on the assumption that there was some illegality

committed by Radhumal in approaching the Bettiah Raj

and also in the execution of the B.H. forms, which were also

signed with the names of these persons. The question is

whether this illegality is sufficient to nonsuit

the plaintiffs

on the application of the maxim.

12. The law was stated as far back as 1775 by Lord

Mansfield in Holman v. Johnson, (1775) 1 Cowp 341, 343 :

98 ER 1120, 1121, in the following words:

“The principle of public policy is this; ex dolo malo

non oritur actio. No Court will lend its aid to a man who

founds his cause of action upon an immoral or an

illegal act. If, from the plaintiff's own stating or

otherwise, the cause of action appears to arise ex turpi

causa, or the transgression of a positive law of this

country, there the Court says he has no right to be

assisted. It is upon that ground the Court goes; not for

the sake of the defendant, but because they will not

lend their aid to such a plaintiff. So if the plaintiff and

defendant were to change sides, and the defendant was

to bring his action against the plaintiff, the latter

would then have the advantage of it; for where both are

equally in fault, potior est conditio defendentis.”

There are, however, some exceptions or “supposed

exceptions” to the rule of turpi causa. In Salmond and

William on Contracts, four such exceptions have been

mentioned, and the fourth of these exceptions is based on

the right of restitutio in integrum, where the relationship of

trustee and beneficiary is involved. Salmond stated the law

in these words at p. 352 of his Book (2nd Edn.):

“So if A employs B to commit a robbery, A cannot

sue B for the proceeds. And the position would be the

same if A were to vest property in B upon trust to carry

out some fraudulent scheme: A could not sue B for an

account of the profits. But if B, who is A's agent or

trustee, receives on A's account money paid by C

pursuant to an illegal contract between A and C the

position is otherwise and A can recover the property

from B, although he could not have claimed it from C.

In such cases public policy requires that the rule

of turpis causa shall be excluded by the more

important and imperative rule that agents and trustees

must faithfully perform the duties of their office.”

Williston in his Book on Contracts (Revised Edn.), Vol. VI,

has discussed this matter at p. 5069, para 1785 and in

paras 1771 to 1774, he has noted certain exceptional cases,

and has observed as follows:

“If recovery is to be allowed by either partner or

principal in any case, it must be where the illegality is

of so light or venial a character that it is deemed more

opposed to public policy to allow the defendant to

violate his fiduciary relation with the plaintiff than to

allow the plaintiff to gain the benefit of an illegal

transaction.”

Even in India, certain exceptions to the rule of turpi

causa have been accepted. Examples of those cases are

found in Palaniyappa Chettiar v. Chockalingam Chettiar

(1920) ILR 44 Mad 334] and Bhola Nath v. Mul Chand,

(1903) ILR 25 All 639.

14. Recently, the Court of Appeal in Bowmakers

Ltd. v. Barnet Instruments, Ld. (1945) 1 KB 65] reviewed the

law on the subject, and laid down that every illegality did

not entitle the Court to refuse a judgment to a plaintiff. Du

Parcq, L.J., observed as follows:

“In our opinion, a man's right to possess his own

chattels will as a general rule be enforced against one

who, without any claim of right, is detaining them, or

has converted them to his own use, even though it may

appear either from the pleadings, or in the course of

the trial, that the chattels in question came into the

defendant's possession by reason of an illegal contract

between himself and the plaintiff, provided that the

plaintiff does not seek, and is not forced, either to

found his claim on the illegal contract or to plead its

illegality in order to support his claim.”

We are aware that Prof. Hamson has criticised this case

in (1949) 10 Cambridge Law Journal, 249, and has forborne

its application, except in the clearest possible

circumstances. The law has been also considered by

Pritchard, J., in Bigos v. Bousted (1951) 1 All ER 92, where

all the authorities are referred to.”

15. The threeJudge

Bench of this Court, after referring to

the aforesaid judgments, speaking through M. Hidayatullah, J.

(as His Lordship then was), observes thus:

“15. The correct position in law, in our opinion, is

that what one has to see is whether the illegality goes so

much to the root of the matter that the plaintiff cannot

bring his action without relying upon the illegal transaction

into which he had entered. If the illegality be trivial or

venial, as stated by Williston and the plaintiff is not

required to rest his case upon that illegality, then public

policy demands that the defendant should not be allowed to

take advantage of the position. A strict view, of course,

must be taken of the plaintiff's conduct, and he should not

be allowed to circumvent the illegality by resorting to some

subterfuge or by misstating

the facts. If, however, the

matter is clear and the illegality is not required to be

pleaded or proved as part of the cause of action and the

plaintiff recanted before the illegal purpose was achieved,

then, unless it be of such a gross nature as to outrage the

conscience of the Court, the plea of the defendant should

not prevail.”

16. It could thus be seen, that this Court has held that the

correct position of law is that, what one has to see is whether

the illegality goes so much to the root of the matter that the

plaintiff cannot bring his action without relying upon the illegal

transaction into which he had entered. This Court further held,

that if the illegality is trivial or venial and the plaintiff is not

required to rest his case upon that illegality, then public policy

demands that the defendant should not be allowed to take

advantage of the position. It has further been held, that a strict

view must be taken of the plaintiff’s conduct and he should not

be allowed to circumvent the illegality by resorting to some

subterfuge or by misstating the facts. However, if the matter is

clear and the illegality is not required to be pleaded or proved as

part of the cause of action and the plaintiff recanted before the

illegal purpose is achieved, then, unless it be of such a gross

nature as to outrage the conscience of the Court, the plea of the

defendant should not prevail.

17. Subsequently, another threeJudge

Bench of this

Court in Immani Appa Rao and Ors. vs. Gollapalli

Ramalingamurthi and Ors.2 again had an occasion to consider

2 (1962) 3 SCR 739

the issue with regard to applicability of the aforesaid two

maxims. This Court speaking through P.B. Gajendragadkar, J.

(as His Lordship then was) observed thus:

“12. Reported decisions bearing on this question show

that consideration of this problem often gives rise to what

may be described as a battle of legal maxims. The

appellants emphasised that the doctrine which is preeminently

applicable to the present case is ex dolo malo non

oritur actio or ex turpi causa non oritur actio. In other words,

they contended that the right of action cannot arise out of

fraud or out of transgression of law; and according to them

it is necessary in such a case that possession should rest

where it lies in pari delicto potior est conditio possidentis;

where each party is equally in fraud the law favours him

who is actually in possession, or where both parties are

equally guilty the estate will lie where it falls. On the other

hand, Respondent 1 argues that the proper maxim to apply

is nemo allegans suam turpitudinum audiendum est,

whoever has first to plead turpitudinum should fail; that

party fails who first has to allege fraud in which he

participated. In other words, the principle invoked by

Respondent 1 is that a man cannot plead his own fraud. In

deciding the question as to which maxim should govern the

present case it is necessary to recall what Lord Wright, M.R.

observed about these maxims in Berg v. Sadler and Moore,

(1937) 2 KB 158 at p. 62. Referring to the maxim ex turpi

causa non oritur actio Lord Wright observed that “this

maxim, though veiled in the dignity of learned language, is

a statement of a principle of great importance; but like most

maxims it is much too vague and much too general to admit

of application without a careful consideration of the

circumstances and of the various definite rules which have

been laid down by the authorities”. Therefore, in deciding

the question raised in the present appeal it would be

necessary for us to consider carefully the true scope and

effect of the maxims pressed into service by the rival

parties, and to enquire which of the maxims would be

relevant and applicable in the circumstances of the case. It

is common ground that the approach of the Court in

determining the present dispute must be conditioned solely

by considerations of public policy. Which principle would be

more conducive to, and more consistent with, public

interest, that is the crux of the matter. To put it differently,

having regard to the fact that both the parties before the

Court are confederates in the fraud, which approach would

be less injurious to public interest. Whichever approach is

adopted one party would succeed and the other would fail,

and so it is necessary to enquire as to which party's success

would be less injurious to public interest.

13. Out of the two confederates in fraud Respondent 1

wants a decree to be passed in his favour and that means

he wants the active assistance of the Court in reaching the

properties possession of which has been withheld from him

by Respondent 2 and the appellants. Now, if the defence

raised by the appellants is shut out Respondent 1 would be

entitled to a decree because there is an ostensible deed of

conveyance which purports to convey title to him in respect

of the properties in question; but, in the circumstances,

passing a decree in favour of Respondent 1 would be

actively assisting Respondent 1 to give effect to the fraud to

which he was a party and in that sense the Court would be

allowed to be used as an instrument of fraud, and that is

clearly and patently inconsistent with public interest.

14. On the other hand, if the Court decides to allow the

plea of fraud to be raised the Court would be in a position

to hold an enquiry on the point and determine whether it is

a case of mutual fraud and whether the fraud intended by

both the parties has been effectively carried out. If it is

found that both the parties are equally guilty and that the

fraud intended by them has been carried out the position

would be that the party raising the defence is not asking the

Court's assistance in any active manner; all that the

defence suggests is that a confederate in fraud should not

be permitted to obtain a decree from the Court because the

document of title on which the claim is based really conveys

no title at all. It is true that as a result of permitting

Respondent 2 and the appellants to prove their plea they

would incidentally be assisted in retaining their possession;

but this assistance is of a purely passive character and all

that the Court is doing in effect is that on the facts proved it

proposes to allow possession to rest where it lies. It appears

to us that this latter course is less injurious to public

interest than the former.”

18. This Court held that, which principle is to be applied in

the facts of the case would depend upon the question, as to

which principle is more consistent with public interest. The

Court finds that, when both the parties before the Court are

confederates in the fraud, the Court will have to find out which

approach would be less injurious to public interest. The Court

observed that, whichever approach is adopted, one party would

succeed and the other would fail and, therefore, it is necessary

to enquire as to which party’s success would be less injurious to

public interest. The Court in the facts of the said case finds that

if the decree was to be passed in favour of respondent No. 1

(who was the plaintiff), it would be actively assisting respondent

No. 1 to give effect to the fraud to which he was a party and it

has been held that in that sense the Court would be allowed to

be used as an instrument of fraud and that is clearly and

patently inconsistent with public interest.

19. It has further been held, that if both the parties are

equally guilty and the fraud intended by them had been carried

out, the position would be that, the party raising the defence is

not asking the Court’s assistance in any active manner. It has

been held, that all the defence suggested is that a confederate in

fraud shall not be permitted to obtain a decree from the Court

because the documents of title, on which the claim is based

really conveys no title at all. In the facts of the said case, it was

held, that though the result thereof would be assisting the

defence therein to retain their possession, for such an

assistance would be purely of passive character and all that the

Court would do in effect is that on the facts proved, it proposes

to allow possession to rest where it lies. It has been held that,

latter course appears to be less injurious to public interest than

the former one. This Court in the said judgment has digested

the English law on the issue in the following paragraphs, which

read thus:

“19. In support of the contrary view reliance is usually

placed on an early English decision in Doe, Dem. Roberts

against Roberts, Widow, 106 ER 401 . In that case it was

held that “no man can be allowed to allege his own fraud to

avoid his own deed; and, therefore, where a deed of

conveyance of an estate from one brother to another was

executed, to give the latter a colourable qualification to kill

game. The document was as against the parties to it valid

and so sufficient to support an ejectment for the premises”.

In dealing with the question raised Bayley, J. observed “by

the production of the deed, the plaintiff established a prima

facie title; and we cannot allow the defendant to be heard in

a court of justice to say that his own deed is to be avoided

by his own fraud;” and Holroyd, J. added that “a deed may

be avoided on the ground of fraud, but then the objection

must come from a person neither party nor privy to it, for

no man can allege his own fraud in order to invalidate his

own deed”.

20. This decision has, however, been commented on by

Taylor in his Law of Evidence. According to Taylor “it seems

now clearly settled that a party is not estopped by his deed

from avoiding it by proving that it was executed for a

fraudulent, illegal or immoral purpose [Taylor's “Law of

Evidence”, Vol. 11th, Edn. p. 97, para 93]”. The learned

author then refers to the case of Roberts, 106 ER 401 and

adds “in the subsequent case of Prole v. Wiggins, (1837) 3

Bing. NC 235 : 6 LJCP 2 : 43 R.R. 621, Sir Nicholas Tindal

observed that this decision rested on the fact that the

defence set up was inconsistent with the deed”. Taylor then

adds that “the case, however, can scarcely be supported by

this circumstance, for in an action of ejectment by the

grantee of an annuity to recover premises on which it was

secured, the grantor was allowed to show that the premises

were of less value than the annuity, and consequently, that

the deed required enrolment, although he had expressly

covenanted in the deed that the premises were of greater

value…” According to the learned author “the better opinion

seems to be that where both parties to an indenture either

know, or have the means of knowing, that it was executed

for an immoral purpose, or in contravention of a statute, or

of public policy, neither of them will be estopped from

proving those facts which render the instrument void ab

initio; for although a party will thus in curtain cases be

enabled to take advantage of his own wrong, yet this evil is

of a trifling nature in comparison with the flagrant evasion

of the law that would result from the adoption of an

opposite rule” (p. 98). Indeed, according to Taylor, “although

illegality is not pleaded by the defendant nor sought to be

relied upon by him by way of defence, yet the court itself,

upon the illegality appearing upon the evidence, will take

notice of it, and will dismiss the action ex turpi causa non

oritur actio. No polluted hand shall touch the pure fountain

of Justice” (p. 93).

21. To the same effect is the opinion of Story [Story's

Equity Jurisprudence, Vol. I, s. 421; English edition by

Randall, 1920, s. 298.] : “In general, where parties are

concerned in illegal agreements or other transactions,

whether they are mala prohibita or mala in se, courts of

equity following the rule of law as to participators in a

common crime will not interpose to grant any relief, acting

upon the known maxim in pari delicto potior est conditio

defendentis et possidentis. The old cases often gave relief,

both at law and in equity, where the party would otherwise

derive an advantage from his inequity. But the modern

doctrine has adopted a more severely just and probably

politic and moral rule, which is, to leave the parties where it

finds them giving no relief and no countenance to claims of

this sort.”

20. It could thus be seen that, although illegality is not

pleaded by the defendant nor is relied upon by him by way of

defence, yet the court itself, upon the illegality appearing upon

the evidence, will take notice of it, and will dismiss the action ex

turpi causa non oritur actio. It has been held, that no polluted

hand shall touch the pure fountain of justice. It has further

been held, that where parties are concerned in illegal

agreements or other transactions, courts of equity following the

rule of law as to participators in common crime will not

interpose to grant any relief, acting upon the maxim in pari

delicto potior est conditio defendetis et possidentis.

21. In the case of Nathu Prasad vs. Ranchhod Prasad and

Ors.3 the threeJudge

Bench of this Court had an occasion to

consider somewhat similar provisions which read thus:

“2. Section 73 of the Revenue Administration and Ryotwari

Land Revenue and Tenancy Act, Samvat 2007 (Act No. 66 of

1950) provides:

“No Pakka tenant shall sublet

for any period whatsoever any

land comprised in his holdings except in the cases provided

for in Section 74.

Explanation.— * * *.”

3 (1969) 3 SCC 11

Section 74 deals with subletting

by disabled persons. Since

the plaintiff is not a disabled person, the section need not be

read. Section 75 provides:

“A sublease

of the whole or any part of the holding

of a Pakka tenant effected properly and legally prior to

the commencement of this Act shall terminate after the

expiry of the period of sublease

or 4 years after the

commencement of this Act, whichever period is less.”

Section 76 provides:

“(1) If the sublessee

does not hand over possession of

the land sublet

to him after the sublease

ceases to be in

force under Sections 74 and 75 to the lessor or his legal

heir … he shall be deemed to be a trespasser and shall be

liable to ejectment in accordance with the provisions of

this Act.

(2) * * *.”

Section 78 provides:

“(1) Any person who in contravention of the provisions

of this Act, obtains possession of any land by virtue of a

bequest, gift sale, mortgage or sublease,

or of any

agreement purporting to be a bequest, gift, sale, mortgage

or sublease

shall be deemed to be a trespasser and shall

be liable to ejectment in accordance with the provisions

of Section 58.”

In the said case, the plaintiff/appellant before the Supreme

Court was a recorded pattedar tenant and had granted a sublease

of land to respondent Nos. 1 and 2 for five years. The suit

was filed on the ground that sublease

was in contravention of

Section 73 of the Revenue Administration and Ryotwari Land

Revenue and Tenancy Act, Samvat 2007 (Act No. 66 of 1950) and

that the said respondents had trespassed in the land. The trial

court had decreed the suit. The first appellate court had also

confirmed the same. However, the same was reversed by the

High Court in the second appeal. Allowing the appeal and

reversing the judgment of the High Court, this Court held that a

person inducted as a sublessee

contrary to the provisions of

Section 78 of the Tenancy Act did not acquire any right under a

contract of subletting

and his possession was not protected.

22. We have to apply the principles of law as deduced by

this Court in the case of Kedar Nath and Immani Appa Rao

(supra), to the facts of the present case.

23. The transaction between the late Bale

Venkataramanappa and the plaintiff is not disputed. Initially

the said Bale Venkataramanappa had executed a registered

mortgage deed in favour of the plaintiff. Within a month, he

entered into an agreement to sell wherein, the entire

consideration for the transfer as well as handing over of the

possession was acknowledged. It could thus be seen, that the

transaction was nothing short of a transfer of property. Under

Section 61 of the Reforms Act, there is a complete prohibition

on such mortgage or transfer for a period of 15 years from the

date of grant. Subsection

(1) of Section 61 of the Reforms Act

begins with a nonobstante

clause. It is thus clear that, the

unambiguous legislative intent is that no such mortgage,

transfer, sale etc. would be permitted for a period of 15 years

from the date of grant. Undisputedly, even according to the

plaintiff, the grant is of the year 1983, as such, the transfer in

question in the year 1990 is beyond any doubt within the

prohibited period of 15 years. Subsection

(3) of Section 61 of

the Reforms Act makes the legislative intent very clear. It

provides, that any transfer in violation of subsection

(1) shall

be invalid and it also provides for the consequence for such

invalid transaction.

24. Undisputedly, both, the predecessorintitle