Monday, 21 October 2019

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,
4
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
5
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
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
7
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
8
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.
9
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.
10
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.
11
(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
12
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
13
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
14
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:
15
“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
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
17
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,
18
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.”
19
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
20
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
21
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.”
22
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
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.
28. In the result, the appeals deserve to be allowed and are
accordingly allowed. The judgment and order passed by the
High Court of Karnataka dated 08.06.2015 and the Order
passed by the Fast Track CourtIII,
Bangalore Rural District,
Bangalore, dated 17.06.2008 are quashed and set aside. The
order dated 23.01.2004 dismissing the suit passed by the trial
court is upheld.
29. The parties shall bear their own costs.
…....................J.
[ARUN MISHRA]
......................J.
[M. R. SHAH]
......................J.
[B.R. GAVAI]
NEW DELHI;
SEPTEMBER 26, 2019.
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