Koppula Kotayya Naidu and Others vs Chitrapu Mahalakshmamma

Madhavan Nair, J.—Defendants 1 to 3 (father and two sons) are the appellants. The suit property originally belonged to the 1st defendant

and the 4th defendant had a mortgage over it. From the evidence it appears that a portion of it belonged to one Sitayya Naidu, another son of the

1st defendant, but no such distinction has been made in the suit and it is not necessary to refer to it any further. At a revenue sale on 8th May,

1918, the property was purchased by the 4th defendant for Rs. 762 in the name of his clerk. The case of the appellants is that this purchase by the

4th defendant was benami for themselves, the main object of the benami sale being to defeat an anticipated claim for partition from one

Ranganayakulu Naidu, the son of the 1st defendant''s brother. Though the property was sold, admittedly the appellants continued in possession;

but according to the 4th defendant it was thenceforward as his tenants whereas the appellants contend that it was because the real title vested in

them. Later on, 6 acres out of this property were sold by the 4th defendant to the 1st defendant''s daughter Chittamma for Rs. 1000. The

appellants allege that this sale was for the purpose of reimbursing Chittamma for the money which she lent for the purchase at the auction.

Ranganayakulu brought a suit O. S. No. 42 of 1922 for partition and recovery of a half share of the family properties. That suit was directed

against the present suit property and another 20 acres sold to one Chelamayya. In that suit the contention was raised by the plaintiff that the sale of

the suit land to the 4th defendant was benami, but this was denied by the present defendants. After some evidence had been taken in the suit it was

compromised on 25th January, 1924, as a result of which Ranganayakulu Naidu received 7 acres, 5 acres of which form portion of the suit

property. Subsequently, on 5th August, 1924, the 4th defendant sold the remaining property to the plaintiff for Rs. 4,000 under the sale deed,

Exhibit H, and the present suit was instituted by her for recovery of the property from the defendants.

The defendants denied that the 4th defendant had any title to the suit property as it was purchased by her benami for themselves''. The plaintiff

disputed the benami purchase contending that the 4th defendant purchased it for himself. It was also contended by the plaintiff that in the

circumstances of the case it was not open to defendants 1 to 3 to raise the plea that the property was purchased benami by the 4th defendant. The

second issue in the case related to these contentions. The learned District Judge"" upheld the contention of the appellants that the property was

purchased benami for them by the 4th defendant, but he declined to give effect to this finding because he held that the 1st defendant defrauded

Ranganayakulu of some portion of the suit property by setting up the false plea-that the property belonged to the 4th defendant as a result of the

auction purchase. Having been party to a plea of fraud which was successfully carried out, the learned Judge came to the conclusion that it was not

open to the defendants to raise the contention that the purchase of property by the 4th defend-ant at the auction sale was benami for them. It was

held in Kamayya v. Mamayya (1916) 32 M.L.J. 484 that a person who has conveyed property benami to another for the purpose of effecting a

fraud on his creditors cannot, where the fraud has been effected, set up the benami character of the transaction by way ''of defence in a suit by the

transferee for possession under the conveyance. Following this decision the learned Judge decreed the claim of the plaintiff.

On behalf of the appellants Mr. Somasundaram, accepting the finding that the purchase by the 4th defendant was benami for the appellants,

argues that no fraud was committed by them in O. S. No. 42 by raising the plea that the 4th defendant became the owner of the land by the

auction purchase, and that even if a fraud has been committed, since both the 4th defendant and the appellants were parties to the fraud, the Lower

Court should have dismissed the plaintiff''s suit. The latter argument raises the question whether Kamayya v. Mamayya (1916) 32 M.L.J. 484 was

correctly decided. Mr. Raghava Rao, on behalf of the respondent, besides supporting the judgment of the Lower Court on the ground on which it

is based, argues further that the learned Judge should have held that the purchase by the 4th defendant at the revenue sale was not benami for the

appellants but it was for himself. Thus, the points arising for consideration in this appeal are (1) whether the purchase of the suit property at the

revenue auction by the 4th defendant was benami for the appellants; (2) whether by raising the plea that the property was sold to the 4th defendant

at the revenue sale the defendants as a matter of fact defrauded. Ranganayakulu, the plaintiff in O.S. No. 42 of 1922; and (3) whether in the event

of our. upholding the findings of the District Judge, effect should not be given to the decision in Kamayya v. Mamayya (1916) 32 M.L.J. 484.

Point 1. On this point, as already stated, the learned District Judge after a very detailed and careful consideration of the entire evidence came to

the conclusion that the purchase of the property by the 4th defendant was benami for the 1st defendant We see no reason to differ from his

conclusion. The reasons which persuaded him to hold that the purchase was benami are summarised in paragraph 15. The 1st defendant had

strong motive to bring about a benami sale, for he wanted to prevent his relative Ranganayakulu from claiming a share in the property. It is true that

the 1st defendant''s case that his daughter Chittamma supplied Rs. 800 to the 4th defendant for buying the property for which afterwards a portion

of it was sold to her, has not been satisfactorily made out; but having regard to Exs. 1 and 1(a) and the other evidence in the case, this failure

cannot be treated as fatal to the benami claim urged on his behalf. Exs. 1 and 1(a) are extracts from the 4th defendant''s account supplied to the 1st

defendant by his clerk. The 4th defendant says that he did not authorise his clerk to furnish these accounts to the 1st defendant, but this story has

been rightly disbelieved by the learned District Judge. These extracts show that though the 4th defendant provided the money for the purchase he

debited it against the defendants, and, as the District Judge says, ""it appears impossible to explain why he should have done this if he had been

buying the lands on his own account"". These accounts also show that though the 4th defendant is alleged to have purchased the property for

himself, the money due to him on the outstanding mortgage is still kept as a continuing debt. There is a considerable body of evidence to show that

the 1st defendant took active part in bringing about the sale in favour of the 4th defendant, that the intending bidders were persuaded to make no

bids so that the property may be knocked down in favour of the 4th defendant for a nominal price and, as it happened, he succeeded in buying it

for a ridiculously small price. The learned Judge finds that the present value of the property would be about Rs. 13,500, Even assuming that the

property had doubled in value since the purchase, and even if we add the mortgage ""amount together with interest due to she 4th defendant in

estimating its true value from his standpoint, the price actually paid, Rs. 762, is ridiculously small. The impression that the property must have been

purchased, benami gains in strength when we consider the evidence with regard to the actual possession. It is undisputed that the 1st defendant

was in possession of the property. The 4th defendant''s case is that he was in possession as his tenant. An oral lease in support of his possession is

set up by the 4th defendant. The only oral evidence adduced by the 4th defendant in, support of this part of his case is that of himself. The entries

in his account do not necessarily show that the paddy said to have been delivered by the defendants relate to the landlord''s share of this property,

for the 4th defendant had his own business and a commission shop run by one of his sons, and the delivery of the paddy might have been, as the

defendants say, for sale by him. And to complicate the situation there is a relationship of creditor and debtor also between the parties. As the

learned Judge says, ""these accounts are compatible with either view of the case"". Then there is the circumstance that the 4th defendant knows

nothing of this property, that a tank on it was dug at a cost of Rs. 100 by the 1st defendant; and there is satisfactory evidence that a portion of the

property, under an acre, was exchanged by the 1st defendant with one Papigadu (see the evidence of D. W. 4 and Exhibit D). It is hardly likely

that the 4th defendant would have allowed these transactions to take place if he had purchased the property for himself. Considering the evidence

as a whole, we are unable to agree with the respondent''s contention that the 4th defendant must have purchased the property for himself.

Point 2. On this point also we must accept the learned Judge''s conclusion. In his written statement as well as in his evidence the 1st defendant

has clearly stated that the motive for ''bringing about an ostensible sale of the property in favour of the 4th defendant, was to prevent

Ranganayakulu from claiming a portion of the property. Though he knew that the sale of the property was benami, to the 4th defendant, when

Ranganayakulu claimed a, half share in it in O.S. No. 42 of 1922, the defendants pleaded that the sale in favour of the 4th defendant was a genuine

sale and not a benami one. Their object clearly was-to deprive Ranganayakulu from getting his due share. In his-evidence as D. W. 4, the 1st

defendant distinctly says ""I expected Ranganayakulu Naidu to sue me for partition and my son Seethayya Naidu was then leading a bad life. So, I

got the 4th defendant to buy the property"". In another portion of his evidence he makes the untruth of his plea very clear. He says ""I denied the

benami nature of the transaction with 4th defendant. In para. III stated that the sales to defendants 5, 6 and 7 in that suit were real transactions and

not benami for defendant''s 1 to 4... That statement was false. I then stated that the suit lands were not in my possession. That is untrue."" It will be

remembered that Ranganayakulu claimed 20 acres for his share in O. S. No. 42 of 1922 and he compromised the suit by getting for himself only 7

acres, of which 5 acres formed a portion of the suit property. Mr. Somasundaram on behalf of the appellants contends that Ranganayakulu must

have compromised the suit because of the difficulty that he must have found in proving that the sale was benami and so he must have thought that

instead of spending unnecessarily money on the litigation to prove a difficult claim the best policy was to accept what he must have thought was an

adequate share and thus end the litigation. The evidence is not satisfactory to establish this contention. There is some evidence that towards the end

of the case the 1st defendant refused to sign the compromise saying that the lands were in the name of the 4th defendant and that he did not like to

give the plaintiff any share in it. There is also his evidence that he told the Subordinate Judge that the purchase was benami in the name of the 4th

defendant and at that time Ranganayakulu was in Court; but this statement is not corroborated by any other evidence. Assuming as the learned

Judge has found (see para. 14) that the 1st defendant made a declaration towards the close of the suit that the 4th defendant was only his

Benamidar, the evidence does not show that the plaintiff accepted the compromise in spite of this declaration. We cannot say what would have

been the exact extent decreed to Ranganayakulu in the absence of the false claim set up by the 4th defendant; but it is a fact that he set up a false

claim intending to defraud Ranganayakulu and that the latter had to accept by way of compromise a good deal less than what he claimed in the suit.

On the whole, we agree with the learned Judge that the plea of the ""1st defendant in O. S. No. 42 of 1922 was intended to defraud the plaintiff in

that suit and he was without doubt defrauded.

Point -3. The next question is whether it is open to the defendants to plead their own fraud as a defence to the present, action. The plaintiff as

having purchased the property from the 4th defendant may be treated as being in the same position as the 4th defendant for deciding this point. Mr.

Soma-sundaram argues that the appellants and the 4th defendant having been parties to a fraud which has been carried out, the maxim in part

delicto potiorest conditio possidentis will apply and that the plaintiff''s suit should be dismissed. But in Kamayya v. Mamayya (1916) 32 M.L.J.

484 it has been held that even though the plaintiff may have been a party to the fraud the defendant will not be permitted to plead his own fraud as

a defence to an action against him. The test given in the case is that that party must fail who first has to allege the fraud in which the participated. It

is clear if we apply this test in this case the appellants must fail. The appellants argue that the decision in Kamayya v. Mamayya (1916) 32 M.L.J.

484 is wrong, that it has not been approved of in other Courts and that before deciding this case we must take the opinion of a Full Bench on the

question whether Kamayya v. Mamayya (1916) 32 M.L.J. 484 has been correctly decided. In this connection our attention has been invited to the

very recent decision in Qadir Bakhsh v. Hakam (1916) 32 M.L.J. 484. As may be seen from that judgment, the law seems to have been

differently construed in other Courts. But so far as our own Court is concerned, the decision in Kamayya v. Mamayya (1916) 32 M.L.J. 484 has

been consistently followed in a series of decisions. Kamayya v. Maniayya (1916) 32 M.L.J. 484 was a decision by Sir John Wallis, C. J. and

Coutts-Trotter, J., as he then was. This decision was followed by Sir Walter Schwabe, C. J. and Coutts-Trotter, J., in Rao Bahadur K.S.

Venkatarama Aiyar Vs. Janab V. Hamid Sultan Maracayar Sahib Bahadur and Others, and Was again followed in Ramasami Naicker v. Alamelu

Amma (1923) 46 M.L.J. 298 by Coutts-Trotter and Ramesam, JJ. Pachayammal v. Devanaiammal (1925) 22 L.W. 313 is the next decision of

this Court where Kamayya v. Mamayya (1916) 32 M.L.J. 484 was followed by Waller, J. This decision is interesting as in it the view now urged

by Mr. Somasundaram was specifically put before the learned Judge Mid the Calcutta decision in Raghupati v. Nrishinya Hari Das (1922) 36

C.L.J. 491 in support of it was also brought to his notice. The Lahore case had not then been decided. Though he was aware that there was a

considerable body of authority in favour of the view that the defendant is entitled to show the real nature of the transaction as against a confederate

in the fraud, the learned Judge still preferred to follow the decision in Kamayya v. Mamayya (1916) 32 M.L.J. 484 as in his view the principle

embodied in that decision was more effective in minimising fraud than the other view. In this Connection attention may be drawn to the following

observations:

The question is one of public policy, and I think that public policy will be best served, by following the rule that a man should not be allowed to

plead his own fraud. As Sir Lawrence Jenkins showed in the Bombay case,, it is the rule which ''will be most apt to deter persons from frauds of

this kind. It is the fraudulent grantor, who expects to extract the entire, or the main benefit from the fraud. And if he realised that the law will give

him neither a remedy nor a defence against his confederate, the temptation to commit the fraud will be minimised.

The decision in Kamayya v. Mamayya (1916) 32 M.L.J. 484 by the then Chief Justice and himself was followed by Coutts-Trotter, J., after he

became Chief Justice in Subbaraya Chetty v. Subbaraya Chetty (1926) 24 L.W. 500. Palepu Narayanamurthi v. Koniali Chandrayya (1927) 26

L.W. 67 by Waller, J., is the latest decision of this Court on this point. In that case also Kamayya v. Mamayya (1916) 32 M.L.J. 484 was

followed. Having regard to this strong current of authority in our Court in support of the decision in Kamayya v. Mamayya (1916) 32 M.L.J. 484

and the-absence of any conflict of views, we do not think we will be justified in referring it for a fresh consideration before a Full Bench. Following

Kamayya v. Mamayya (1916) 32 M.L.J. 484 we would therefore: hold that in the circumstances of the case it is not open to the appellants to

plead their own fraud as a defence to the plaintiff''s suit.

The appeal therefore fails and must be dismissed with costs. The Government will be entitled to realise'' their costs from the appellant. The

memorandum of objections is for costs only. It is dismissed with costs.

Jackson, J.

I agree that there should be no departure from: the rule of law set forth so clearly in Kamayya v. Mamayya (1916) 32 M.L.J. 484. This may

involve some divergence from the law as understood In Northern India"", but the Madras practice in my opinion accords with what should be the

public policy of this Presidency. In fact so far from extending the scope of benamidars, by allowing them first to cheat their victim and then come

again into Court with the story that the previous case was false, I should prefer to see benami transactions altogether forbidden, and I consider that

this Presidency, whatever may be the condition of the less literate parts of India, is now ripe for such legislative action. The treatment of this

question by the Civil justice Committee of 1924-25 was most unfortunate? All the members of the Committee were agreed as to the evils of the

benami system, which it denounced in terms both forcible and true. But three of the members considered that the proposed legislation (preventing

any plea short of'' fraud that the documentary evidence of title is a sham) should not be introduced unless it resulted in the abandonment of the

practice within a reasonably short time. Apparently the dissident members envisaged Indians still putting property under fictitious titles and pleading

that they had never heard of the new law. Such a fear would be quite groundless in this Presidency, and if that fear were removed, the Committee

was prepared unanimously to recommend the abolition of benami transactions. It is unnecessary to detail the advantages of such a measure which

are fully set forth in the Committee''s report. But apart from the resultant benefits - to public morality--restricted scope for perjury when registered

documents are regarded as conclusive evidence--restraint upon excessive borrowing in the hope of concealing assets, and restraint upon inordinate

rates of interest in the knowledge that assets may be concealed, there is a practical advantage which in these times cannot be ignored. Under the

present system a greater number of suits is being admitted than can possibly be decided within a reasonable time; and financial stringency precludes

the increase of Courts. The remedy must therefore lie in restricting the field of litigation, and that can best be done by making the creation,

assignment or extinction of title still more dependent upon registered documents to the exclusion of oral evidence.