SITA RAM versus RADHABAI AND ORS.

SITARAM

RADHABAI AND ORS.

October 16, 1967

[J. C. SHAH; S. M. Soou AND 1. M. SHELAT, JJ.]

Contract-Principle of in pari delicto--When applicable--' Parties not in pari delict<>--Right of ·less guilty party when arises. Hindu Law-Avyavaharika debt-Burden. of proof.

The plaintiff-respondent liled suit demanding that certain jewellery which she had entrusted to her deceased brother-appel- !ant's father-for safe custody be returned to her. The. appellant replied that his father during his life-time had returned the jewel-lery to the plaintiff. The trial Court dismissed the suit, but on appeal the. High Court decreed the suit. In appeal to this Court, the appel-lant contended, that (iJ the suit was not maintainable, because the jewellery was left with his father with the object of defrauding third party, who had filed suit claiming share in the ornaments; and (ii) the appellant was not liable to pay out of joint family property the debt of his father which was avyavaharika or illegal.

Held: The appeal must be dismissed.

(i) The principle' that .the Courts will refuse to enforce an illegal agreement at the instance of person who is himself party to an illegality or fraud is expressed in the maxim in pari delicto, portior est conditio defend.enti.o. But there nre exceptional cases in which man w>ll be relieved of the cvonsequences of an illegal contract into which he has entered. To those cases the maxim does not : apply·. They fall int<i three classes (a) where the illegal pur• pose has not yet been substantially carried into effect before it is sought to recover money paid or goods delivered in. furtherance: of it (b) where the plaintiff is not in pari de!icto with the defendant, (c) where the plaintiff does not have to rely on the illegality to make out his claim. (811 F-G].

It .is settled law that where the parties are not in pari delicto, che less guilty party may be able to recover money paid, or p'ro-perty transferred, under an unlawful contract. This possibility may arise in three situations. First, the contract may be of kind made illegal by statut~ i':1 t!te interests of particular class of persons ?f whom the plamt1ff 1s one. Secondly, the plaintiff may have been m~uced to enter mto. the contract by fraud or strong pressure. Thirdly, person who is under fiduciary duty to the plaintiff wfil not be allow_ed to retain Pl'Opel'ty, or to refuse to ace<>unt for money,s rece_1ved o_n the •ground that the. property or the money~ ~#!ze A~bJ~ mto his hands as proceeds of an illegal transaction.

The p,!aintiff's case was that at the pursuat'ion of appellant's father the jewellery was entrusrt!d to him. On the plaintiff's case the appellant's father was undet fiduciary duty to the plaintiff 'Ind he could not w~thhold t~e property entrusted to him on the plea th~t 1t was delivered with· the object of defeating the claim of third party. (812 D-E].

The p,!aintiff's case was that at the pursuat'ion of appellant's father the jewellery was entrusrt!d to him. On the plaintiff's case

sos

(ii) The burden of proving that there was debt and that the debt was avyavaharika or illegal lay upon the appellant. Granting that the defendant was after the death of his father, unable to trace the jewellery entrusted, it could not be inferred that the jewellery was misappropriated by his father. There was no evidence in this case to prove that the debt was avvavaharika or illegal. (813 A-CJ.

Toshanpal Singh v. District Judge of Agra, L.R. 61 I.A. 350, dis• tinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 961 of 1964.

Appeal from the judgment and decree dated July 18, 1961 of

the Allahabad High Court in First Appeal No. 162 of 1947.

J. P. Goyal and Sobhag Mal Jain, for the appellant.

W. S. Barlingay and A. G. Ratnaparkhi, for respondent No. I.

The Judgment of the Court was delivered by-

Shab, J.-Lachhmi Narain father of Sitaram appellant in this appeal-was the brother of Radhabai-respondent herein. On ' April 15, 1942, Radhabai-who will hereinafter be called 'the plaintiff' entrusted gold, pearl and diamond jewellery of the value of Rs. 32,379/6/- to Lachhmi Narain for safe custody. After the death of Lachhmi Narain in July 1943, the appellant was called upon by the plaintiff to return that jewellery. The appellant replied that Lachhmi Narain had during his life time returned the jewel-lery to the plaintiff. The plainbiff then instituted an action against Sita Ram, his son Ghanshyam and other members of the family, in the Court of the First Civil Judge, Kanpur, for ·a decree order-ing delivery of the jewellery or for payment of its value. The Trial Court dismissed the action upholding the case of the appel-lant that the jewellery was returned to the pJa:intiff by Lachhmi Narain on April 23, 1942. In appeal, the High Court of Allahabad reversed the decree passed by the Trial Court and passed decree diNCting that the jewellery be. restored to the plaintiff within one month from the date of decree, and in the event of failure to· comply with that direction the aippellant and his son Ghan-shyam to pay Rs. 32,379/6/- tog~ther with costs out of the estate of Lachhmi Narain in their hands. Against that decree, this appeal is preferred with certificate granted by the High Court, Ghaii-shyam who was at all material lirnes minor died unmarried dur-B ing the pendency of the appeal ., before the High Court and his name has been struck off.

The plaintiff's case that on' April 5, 1942 she entrusted to Lachhmi Narain her jewellery described in the plaint. was not denied by the appellant. The appell~nt~ however, su~mttted. that the jewellery was returned to the plamt1ff by Lachhm1 Naram on

April 23, 1942. The burden of proving that case lay upon the appel- !ant. In support of that case the appellant relied upon receipt Ext A-4 which it was claimed the plaintiff hacl' given acknowledg-ing receipt of the jewellery. The Trial Court held that the receipt was "not genuine" and with that view the High Court agreed. The receipt was not relied upon by the appellant before this Court But the appellant also relied upon the following circumstances which he claimed established his plea:

(!) On receiving telegram on April 20, 1942, from Lachhmi Narain, the plaintiff and her son-in-law Radha Kishen proceed'ed to Kanpur and remained in that town till April 23, 1942.

(2) That on the plaintiff's admission, the steel box in which the jewellery was taken from Jhansi to Kanpur was even at tlie date of the trial with the plaintiff;

(3) That the plaintiff sent some jewellery to her daughter Shyamabai with the letter Ext. A-2, and in the list nf jewellery some items of jewellery entrusted by the plaintiff to Lachhmi Narain are included;

(4) That the plaintiff did not' make demand for the jewel-lery during the lifetime of Lachhmi Narain and for two years thereafter.

The High Court held that these circumstances did not assist the case of the appellant, and we agree with the High Court in that view. -

The plaintiff stated that she proceeded to Kanpur on receiv-ing telegram from Lachhmi Narain th;,t the padlock of her house at Rail Bazar. Kanpur, was broken, and that she returned to Jhansi by the evening train leaving Kanpur for Jhansi. She stated that the jewellery was not retui'lled to her by Lachhmi Narain. It is true that the testimony of Dr. Mohan Lal who stated that he had medically treated the plaintiff on the 22nd and 23rd of April 1942 at Jhansi was found by the Trial Court to be unrelia-ble, and the record of his Dispensary untrustworthy. But from the presence of the plaintiff at Kanpur on April 23, 1942, no infer- ence may be raised that she received the jewellery from Lachhmi Narain on that day.

it was not the case of the plaintiff that she entrusted the jewellery to Lachhmi Narain in the steel-box; she stated that the jewellery was handed over to Lachhmi Narain in "baskets'', and she carried the empty steel-box with her to Jh~nsi.

The letter Ext. A-2 is adm;tted' to be written by the plain-tiff, but it bears no date. Again similarity of names of individual pieces of jewellery commonly used by women in well-to-do families in Ext. A-2 and in the list of jewellery entrusted to Lachhmi Narain

does not lead to the inference that after receiving the jewellery f'rom Lachhmi Narain the plaintiff sent it to her daughter Shyama· bai. Raclha Charan with whom the jewellery was sent to Shyama-bi1i has not been examined as witness and the testimony of Banwari Lal-husband of Shyamabai-who deposed about the circumstances in which the jewellery was sent to Shyamabai goes

<1gainst the case of the appellant.

In view of the confidence rq>osed by the plaintiff in Lachhmi Narain, absence of a' demand for return of the jewellery during the lifetime of the latter is not significant. After. the death of Lachhmi Narain it appears that oral demands were made for reiurn of the jewellery from the appellant: see the lawyer's notice

Ext. 24.

The circumstances taken either individually or collP.ctively do not make out the case of the apf)(:lla.nt.

Counsel for the appeuant contended that in any event the suit filed by the plaintiff was not maintainable, because on her own case the jewellery was left wtth Lachhmi Narain with the object of (!efraud1.ng Gomti Bai-widow of the son of the plain-tiff. The facts which have bearing on the plea may be set out. Ram Sewak son of the plaintiff died in November 1941 leav-ing him surviving his wife Gomtib&i. Between Gomtibai and the pla.intiff there arose disputes, which were, referred to arbitration, and during the pendency of the arbitration proceeding, the plain-E tiff entrusted the jewellery to I.:achhmi Narain. The appellant con-tends that on the averments made in the plaint, the suit filed by the plaintiff was liable to be dismissed on the maxim "in pari de:icto, portior est conddtio defendentis".

In paragraph 5 of the plaint it was a•verred by the plaintiff that after the death of Ram Sewak, his widow Gomi;bai demand-ed partition of the property of the family, and she made claim to the plaintiff's ornaments. In paragraph 6 it wa~ stated that the plaintiff's brother Lachhmi Narain "gave her to understand and assured her" that it was .not safe to keep her jewellery at Jhansl and th&t she should deposit the jewellery with him .at Kanpur. In

the plaint it was further stated:

"Because of the dispute with Gomti Bai and. political movement, and on the advice of d'efendants Nos. I to 7, the plaintiff also Thought· it proper to deposit her ornaments will Lachhmi Narain and defendants for their .safety. AC(!9rdingly a:tter coming· from Jhansi City, the plaintiff on . . . . · /5 April, 1942; deposited her jewellery . . . . . )Vith. tacbhmi :Narafo . , . . and got writing in respect of the' deposit of the ornaments by Shyama Charan and Priya Charan in the presence of allld in consultation with defendants Nos. 1 and 7 and also made note on the same in his own hand witlt respect tocth~ deposit of.the ornaments. . . .".

In paragraph 7 it was stated that in the dispute between the plain-tiff and Gomti Bai, Lachhmi Narain had been showing great sympathy with the plaintiff and ultimately, according to his desire and in consultation with him, an agreement was reached on June 27, 1942, between the plaintiff and Gomtibai, and it was settled that the plaintiff be ·declared owner of the jewellery in her possess'on a11d which was kept in deposit with Lachhmr Narain and that Gomti Bai be declared owner of the jewellery in her possession.

In the written statement filed by the appellant it was stated:

"(5). As regards para no. 5 of the plaint, it was admitted

that there took place death of Ram Sewak son of the plaintiff, and certain disputes between the plaintiff, and widow of Ram Sewak. Rest is not admitted .

• " As regards para no. 6 of the plaint, it was admitted that the plaint;ff kept some ornaments with her brother on 15th April, 1942 out of certain policy. Rest is not admitted.

(7) As regards para nt>: 7 of the pladnt, it is admitted

that Lala Lachhmi Narain had sympathy with the plain· tiff and that an agreement was arrived at between the plaintiff and Gomti Bai. Rest is wrong and not admitted. Lala Lachhmi Narain did not at all participate in the disputes between the pla.intiff and Gomti Bai, nor was any agreement arrived at in consultation with Lala Lachhmi Narain."

Counsel for the appellant contends that the plaint contains clear admissions that the plaintiff and Lachhmi Narain ct>lluded with the object of defeating the claim of Gomtibai, that in furtherance of that object the plaintiff entrusted the jewellery to Lachhmi Narain, and that in consequence thereof Gomtibai was defrauded. It is clear that the appellant did not plead that with view to defeat the claim t>f Gomti Bai the plaintiff and Lachhmi Narain entered into an arrangement. under which the property belonging to Ram Sewak was handed over to Lachhmi Narain and that as result of that arralngement the claim of Gomti Bai was defeated. No issue was raised at the trial that in con-sequence of the arrangement between the plaintiff and Lachhmi Narain, Gomtibai was defrauded of her rightful claim. From the averments made in paratpragh 7 it appears that it was the plaintiff's case that Gomtibai knew that the jewellery in dispute in this suit was in the possession of the plaintiff, and by an agreement bet· ween her and the plaint;ff she' admitted that the jewellery was to belong to the plaintiff .. It is clear that on the averrnents made in the plaint, the plaintiff did not plead that she deposited the orna-ments belonging tt> Gomtibai with Lachhmi Narain with view to defeat the claim of Gomtibwi and the latter was ln fact de-frauded. The Trial Judge in his judgment observed:

"The alleged entrusbnent of the ornlll!lents of Lachhmi Narain was meant to save them from the clutches of Musammat Gomti Bai, the rightful owner's widow. The purpose was achieved, and Musammat Gomti Bai had not the scent of the ornaments, which do not seem to have bee·n considered at the time of the adjusbnent by the arbitrators on the basis of which they made the award. The fraudulent intent of Lachhmi Narain and the plaintiff was thus successful. What the plaintiff now wants to claim really belonged to her son Ram Sewak and after him for life, to his widow Musammat Gomti Bai . . . . I do not think that the plaintiff return the ornament even if they had not been returned ... ".

In so observing, in our judgment, the learned Trial Judge de-termined an issue which did not arise on the pleadings of the parties. If the plaintiff's· case as set out in the plaint be accepted, Gomtibai knew that jewellery of the family was handed over by the ·plaintiff to Lachhmi Nairain, and it was agreed between the contesting parties that the jewellery was to be retained by the platlntiff. No arg11ment was apparently addressed before the High Court l>n the case which appealed to the Trial Court. There was no specific plea raised in the Trial Court on that part of the case. and the parties did not go to trial on that issue. Again, un-less the parties were proved to be in pari delicto the plea that the action instituted by the plaintiff was not maintainable cannot succeed.

The principle that the Courts will refuse to enforce an illegal 11greement at the instance of pe1'$on who is himself party to an illegality or fraud is expressed in the maxim in pari deucto portior est conditio defendentis. But as stated in Anson's 'Principles of the English Law of Contracts', 22nd End., p. 343: 'there are excel> tional cases in which man will be relieved Of the consequences of an i!legaol contract into which he ~as entered-cases to which the maxim d9fS not apply. They· fall mto three classes : (a) where the illegal purpose has riot yet been substantially carried into effect ~fore it is sought to recover money paid or goods delivered in u furt~rrce of it; (b) where the plaintiff is not in pari delicto with the d.efenlfant. (c) where the plaintiff does not have to rely on the illegality to make out bis claim.'

There was in this case no plea by the plaintiff that there was any illegal purpose in entrusting the jewellery to Lacbhmi Narain. It was 111so the plaintiff's case that Gomt;bai knew that the jewel-lery· in. dispute was, entrusted by the plaintiff to Lachbmi Narain, and if the avermenlS made in the plaint are tl:l be the sole basis for determining the contest, Gomtibai did not ·suffer any loa in consequenoe of the entrusbnent. Assuming that the Trial Court was competent without proper pleadinp, by the appellant and an issue to enter upon an enquiry into the question whether the plain-tiff could maintain an action 1for ·the jewcllcry entrusted by her to

Lachhmi Narain, the circumstances of the case clearly make out case that the parties were not "in pari delicto", It is settled law that 'where the parties are not in pari deNcto, the less guilty party may be able to recover money paid, or property transferred, under the contract. This possibility may arise in three situations.

First, the contract m&y be of kind made illegal by statute in the interests nf particular class of persons of whom the plaintiff is one.

Secondly, the plaintiff must have been induced to enter into the contract by fraud or strong pressure. . . . .

Thirdly, there is some authority for the view that person who fs under ru fiduciary duty to the plaintiff will not be allowed to retain property, or to refuse to account for moneys received, on the ground that the property or the moneys have come into his hands as the prticeeds of an illegal transa!Ction. See Anson's 'Principles of the English Law of Contract' p. 346. It was the plaintiff's case that it was at the persuation of Lachhmi Narain that the jewellery was entrusted to him:

Again on the plaintiff's case Lachhmi Narain was under fiduciary duty to the plaintiff and he could not withhold the pro-perty entrusted to him on the plea that it was delivered with the object of defeating the claim of third party.

Liability of the appellant was denied on one more ground. It was urged that Lachhmi Narain and the appellant were members of joint Hindu family andl the a1lpellant was not liable to pay out of the joint family property the debts of L&chhmi Narain which were avyavaharika or illegal. Counsel for the ~llant submitted that since Laahhmi Narain had misappropriated the jewellery en· trusted fa him by the plaintiff, no liability to discharge the liability r arising out of that misappropriation could be enforced against the joint family estate in the hands of the appellant. Reliance in this connection was placed' upon the decision of the Judicial Committee in Toshanpal Singh & Ors. v. District Judge of Agra & Ors.('). In that case the Secertary of sahool committee who was in charge of fund deposited at Bank was authorised to draw upon it only 0 fur specific purposes connected with the school. The Secretary mis-appropriated the fund, and after his death the committee sued bis sons to recover from them out of property left by their father, or out of the property of their joint Hindu family, the deficiency in the fund. It was held by the Judicial Committee that the drawings for unauthorised purposes were criminal breaches of trust, and under the Hindu law the sons to that extent were not liable to satisfy that liability out of the joint family estate. This case, in our judgment. does not support the contention raised by counsel for the appellant. Hindu son governed by the Mitakshara law

(') L.R. 61 I.A. 350.

is liable to pay the debts of his father even if they aire not incur· red for purposes of legal necessity or for benefit to the estate, pro-vided the debts are not avyavaharika or illegal. But there is no evidence that the appellant is sought to be rendered liable for debt which is avyavaharika or illegal. In raising his contention counsel assumes that Lachhmi Narain had misappropriated the jewellery en.trusted' to him, but for that there is no support. Grant-B ing that the appellant was, after the death of Lachhmi Narain, un-able to trace the jewellery entrusted by the plaintiff, it cannot be. inferred that the jewellery was misappropriated by Lachhmi Narain. The burdan of proving that there was debt and that the debt was avyavaharika or illegal lay upon the appellant. There is no evidence to prove that the debt was avyavaharika or illegal.

The appeal fails and is dismissed with costs.

Appeal dismi.Tsed.