RAGHUPATI CHATTERJEE Vs. NRISHINGHA HORI DAS

JUDGEMENT

(1.) This is an appeal by the second defendant in a suit for recovery of immoveable property on establishment of title. The disputed land belonged to one Saha and was occupied by one Mallik as-a tenant under him. On the 15 June, 1886, Saha executed a mortgage-deed in favour of Das. This transaction, it has now been ascertained, was fictitious, and the mortgage was effected solely with a view to delay, if not to defeat, the creditors of Saha. Das sued on the mortgage, obtained a decree, and on the 7 November 1892, became purchaser at the sale which followed in due course. The fifth defendant is the representative-in-interest of Saha. The second defendant is the successor of Mallik. The plaintiffs are the representatives of Das. They commenced this action on the 2 January, 1914 for declaration of their title by purchase at the mortgage sale and for recovery of possession. The claim was contested by the second and fifth defendants; they united and urged that the mortgage was fictitious and had not vested the title in the plaintiffs. The Courts below have found that the mortgage was fictitious and was a fraudulent device to delay, if not to defeat, the creditors of the mortgagor. The Courts below have further held that the fraudulent purpose was, in fact, accomplished. The Courts have, however, disagreed upon the question whether, upon these facts, the plaintiffs were entitled to relief. The Trial Court held that as the mortgage was fictitious, no title had passed to the plaintiffs, who could not consequently claim a declaration of title and recovery of possession. The Subordinate Judge, on the other hand has held that as the fraudulent purpose had been accomplished the mortgage must be deemed, operative and unimpeachable between grantor and grantee and the plaintiffs; were consequently entitled to recover possession. The second defendant, the tenant, alone has appealed against this decree. The fifth defendant, who holds the superior interest, was joined as a respondent to the appeal and has prayed; for an order that, she might, if necessary, be transferred to the category of appellants. There can be no question that the second defendant is competent to maintain the appeal. He is a transferee of the tenancy, and while he has been accepted as tenant by the fifth defendant the plaintiffs have questioned the legality of his purchase on the allegation that the tenancy is non-transferable. The second defendant; has, consequently, a substantial interest in the determination of the question whether the superior interest has vested in the plaintiffs or is still held by the fifth defendant.

(2.) The history of the development of the Daw of Fraudulent Conveyances in Indian Courts was reviewed in Jadu Nath Poddar V/s. Ruplal Poddar 33 C. 967 : 10 C.W.N. 650 14 C.L.J. 22. It was ruled in that case that, if the purpose for which the assignment is made, is not carried into execution, and nothing is done under it, the mere intention to effect an illegal object does not deprive the assignor of his right to recover the property back from the assignee who has given no consideration for it. This view was approved by the Judicial Committee in Petherpermal Chetty V/s. Muniandy Servai 35 C. 551 : 10 Bom. L.R. 590 : 12 C.W.N. 562 : 5 A.L.J. 290 : 7 C.L.J. 528 : 14 Bur. L.R. 108 : 18 M.L.J. 277 : 35 I.A. 98 : 4 M.L.T. 12 : 4 L.B.R. 266 (P.C.). The Indian Trusts Act, likewise, enacts in Section 84 that where the owner of property transfers it to another for an illegal purpose, and such purpose is not carried into execution, or the transferor is not as guilty as the transferee, or the effect of permitting the transferee to retain the property might be to defeat the provisions of any law, the transferee first hold the property for the benefit of the transferor. This is a modification of the stringent rule enunciated in the earliest cases, namely, that a person is not entitled to ask a Court of Justice to afford him relief from the consequences of his own misconduct. The later cases enunciate the more lenient rule that the real nature of the transaction should guide the Court in determining the real rights of the parties. Thus has been slowly evolved the modern rule that, although where the intended fraud has been carried into effect, the Court will not allow the true owner to resume the individuality, which he has once cast off in order to defraud others, yet, if he has not defrauded any one, the Court will not punish his intention by giving his estate away to another whose retention of it is an act of gross fraud; Cf. Taylor V/s. Bowers (1876) 1 Q.B. 291 : 46 L.J. Q.B. 39 : 34 L.T. 938 : 24 W.R. 499.

(3.) We have next to consider the class or cases where the fraudulent purpose has in fact been accomplished. In such cases, it is well settled that the Courts will not aid a fraudulent grantor to reclaim, or recover from his transferee, property transferred in fraud of creditors, or its proceeds. The object of the rule is not to protect the fraudulent grantee, but to protect society, and this purpose cannot be achieved without allowing the grantee to retain his ill- gotten gains. The seasons for the rule have been expressed in a variety of ways: (1) considerations of public policy as well as the expressed provisions of the Statute; of Frauds forbid relief against a transaction of this nature; (2) the Courts refuse to interfere, hot because they approve the reprehensible conduct of the confederate but because they will not aid the other party in an illegal undertaking; (3) the law will not permit a partier to deliberately put his property out of his control for a fraudulent purpose and then, through the intervention of the Courts, regain the same after his fraudulent purpose has been accomplished; (4) where both parties are equally culpable, the law will leave the parties where it finds them, and not engage itself to determine the rights of the matter as between them; (5) when a suitor applies for equitable relief, he must come into Court with clean hands, with respect to the matters concerning which he asks relief; (6) he who doth fraud may not borrow the hands of the Chancellor to draw equity from a fountain his hand hath polluted; (7) when property has been fraudulently conveyed, the grantor, his heirs and assigns are afterwards estopped to set up the fraud as a foundation for an action for the recovery of the property. We have stated the leading reasons usually assigned in support of the rule enforced when recovery is claimed by the fraudulent grantor, in order to enable us to determine. What rule should be enforced when a recovery is sought by the fraudulent grantee. Upon that question, there has been divergence of judicial opinion, as is indicated by the decisions in Montefiori v. Montefiori (1762) 1 Black. W. 363 : 96 E.R. 203 and Holman V/s. Johnson (1775) 1 Cowp. 341 at p. 343 : 98 E.R. 1120. In Montefiori V/s. Montefiori (1762) 1 Black. W. 363 : 96 E.R. 203, Lord Mansfield, C.J., when invited to decide whether a note without consideration given fraudulently to carry on a marriage treaty, shall be good against the drawer, observed that, no man shall set up his own iniquity as a defence any more than as a cause pf action.