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PETITIONER: SITA RAM

       Vs.

RESPONDENT: RADHABAI AND ORS.

DATE OF JUDGMENT: 16/10/1967

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SIKRI, S.M. SHELAT, J.M.

CITATION:  1968 AIR  534            1968 SCR  (1) 805

ACT: Contract-Principle  of  in  pari  delicto-When   applicable- --Parties  not  in pari delicto-Right of less  guilty  party when arises. Hindu Law-Avyavaharika debt-Burden of proof.

HEADNOTE: The plaintiff-respondent filed a suit demanding that certain jewellery which- she had entrusted to her deceased  brother- appellant’s father-for safe custody be returned to her.  The appellant  replied that his father during his life-time  had returned  the jewellery to the plaintiff.  The  trial  Court dismissed the suit, but on appeal the High Court decreed the suit.   In  appeal to this Court, the  appellant  contended, that (i) the suit was not maintainable, because the jwellery was  left  with his father with the object of  defrauding  a third  party,  who had filed a 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 a  person who  is  himself  a  party to  an  illegality  or  fraud  is expressed in the maxim in pari delicto, portior est conditio defendentis.  But there are exceptional cases in which a man will be relieved of the cvonsequences of An illegal contract into  which he has entered.  To those cases the  maxim  does not  apply.   They  fall into three classes  (a)  where  the illegal purpose 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  delicto 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  pad delicto, the less guilty party may be, able,to recover money paid,  or property transferred, under an unlawful  contract. This possibility may arise in three situations.  First,, the contract  may  be of a kind made illegal by statute  in  the interests  of’  a particular class of persons  of  whom  the

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plaintiff  is  one.  Secondly, the  plaintiff  may  havebeen induced  to  enter into the contract,, by  fraud  or  strong pressure Thirdly, a person who is under a fiduciary duty  to the plaintiff win 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 proceeds of an illegal transaction, [812 A-D]. The   plaintiff’s  case  was  that  at  the  pursuation   of appellant’s  father the jewellery was entrusted to him.   On the  plaintiff’s  case the appellant’s father  was  under  a fiduciary  duty to the plaintiff and he could  not  withhold the  property  entrusted  to him on the  plea  that  it  was delivered with the object of defeating the claim of a  third party. [812 D-B]. 806 (ii) The  burden of proving that there was a 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 avyavaharika or illegal. [813 A-C] Toshanpal  Singh  v. District Judge of, Agra, L.R.  61  I.A. 350, distinguished.

JUDGMENT: 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. 1. The Judgment of the Court was delivered by- Shah, J.-Lachhmi Narain father of Sitaram appellant in  this appeal-was the brother of Radhabai---respondent herein.   On April 15, 1942, Radbabai-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  Lachmi  Narain had  during  his  life time returned the  jewellery  to  the plaintiff.  The plaintiff 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 ordering delivery of the jewellery or for payment  of its  value.  The Trial Court dismissed the  action.upholding the case of the appellant that the jewellery was returned to the  plaintiff  by  Lachhmi Narain on April  23,  1942.   In appeal,  the  High Court of Allahabad  reversed  the  decree passed by the Trial Court and passed a decree directing 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 appellant  and  his  son Ghanshyam  to pay Rs. 32,379/6/- together 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, Ghanshyam who was at all material  times  a minor  died  unmarried  during 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 appellant, however,  submitted that  the jewellery was returned to the plaintiff by  Lachmi

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Narain on 807 April  23, 1942.  The burden of proving that case  lay  upon the appellant’ In support of that case the appellant  relied upon a receipt Ext.  A-4 which it was claimed the  plaintiff had given acknowledging 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:               (1)   On  receiving a telegram ’on  April  20,               1942, froth Lachhmi Narain, the plaintiff  and               her  son-in-law  Radha  Kishen  proceeded   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 the 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 of jewellery some  items               of  jewellery  entrusted by the  plaintiff  to               Lachhmi Narain are included;               (4)   That the plaintiff did not make a demand               for  the  jewellery  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  a telegram from Lachhmi Narain that 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 returned 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 unreliable, and the record of his Dispensary, untrustworthy.  Put from the presence of the plaintiff  at Kanpur on April 23, 1942. no inference 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;  shestated that  the  jewellery was handed over to  Lachhmi  Narain  in "baskets",  and she carried the empty steel-box with her  to Jhansi. The letter Ext.  A-2 is admitted 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 jewellory entrusted- to: Lachhmi Narain 808 does  not  lead to the inference that  after  receiving  the jewellery  from Lachhmi Narain the plaintiff sent it to  her daughter  Shyamabai.  Radha Charan with whom  the  jewellery was sent to Shyamabai has not been examined as a witness and the  testimony  of  Banwari  Lal-husband  of   Shyamabai-who deposed  about the circumstances in which the jewellery  was sent. to Shyamabai goes against the case of the appellant. In  view  of  the confidence reposed  by  the  plaintiff  in Lachhmi  Narain  absence  of a, demand  for  return  of  the jewellery   during  the  lifetime  of  the  latter  is   not

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significant.  After the death of Lachhmi.  Narain it appears that oral demands were made return of the jewellery from the appellant:: see the lawyer’s notice Ext.. 24. The, circumstances taken. either individually or. collect do not make out the case of the: appellant. Counsel  for the appellant contended that in any  event  the suit filed., by the plaintiff was not maintainable,  because on  her own case the jewellery was left with Lachhmi  Narain with  the object of defrauding Gomti Bai--widow of  the  son ’of  the plaintiff.  The facts which have a bearing  on  the plea may be set out.  Ram Sewak son of the plaintiff died in November  1941  leaving  him surviving  his  wife  Gomtibai. Between  Gomtibai  and the plaintiff there  arose  disputes, which were referred to arbitration, and during the  pendency ’of the arbitration proceeding, the plaintiff entrusted  the jewellery to Lachhmi Narain.  The appellant contends that on the  averments  made in the plaint, the suit  filed  by  the plaintiff  was liable to be dismissed on the maxim "in  pari delicto, portior est conditio defendentis". In paragraph 5 of the plaint it *as averred by the plaintiff that  after  the  death of Ram’ Sewak,  his  Widow  Gomtibai demanded  partition of the property of the family,  and  she made  a claim to the plaintiff’s ornaments.  In paragraph  6 it was stated that the Plaintiff’s brother Lachhimi Narain " gave her to understand and assured her" that it was not safe to Keep her jewellery at Jhansi and that she should de posit 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               defendant  Nos.  1 to 7,  the  plaintiff  also               thought  it  proper to deposit  her  ornaments               will Lachhhmi Narain and defendants for  their               sakty.   Accordingly after coming from  Jhansi               City.   the  plaintiff  on,  April  15,   1942               deposited  her jewellery with  Lachhmi  Narain               and got a writing in respect of the deposit of               the  ornaments  by Shyania  Charan  and  Priya               Charan in the presence of and in  consultation               with defendant’s Nos. 1 and 7 and also made  a               note on the same in his own ’hand with respect               to the deposit of the, ornaments. 810                     "The   alleged   entrustment   of    the               ornaments 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 hid not  the               scent of the ornaments, which do not seem  ’to               have  been  considered  at  the  time  of  the               adjustment  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 determined 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  Narain, and  it was agreed between the contesting parties  that  the

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jewellery was to be retained by the plaintiff.  No  argument was  apparently addressed before the High Court on 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 agreement at the instance of a person who is himself a 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 exceptional  cases in  which a man will be relieved of the consequences  of  an illegal  contract into which be has entered cases  to  which the maxim does not apply.  They fall into three classes: (a) where  the  illegal purpose 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 delicto with the  defendant.  (c) where the plaintiff does not have to rely on the  illegality to make out his claim.’ There  was in this case no plea by the plaintiff that  there was  any  illegal  purpose in entrusting  the  jewellery  to Lachhmi Narain. It was also the plaintiff’s case that  Gomti bai knew that the jewellery in dispute was entrusted by the, plaintiff to Lachhmi Narain I and if the avernments made  in the  plaint  are to be the sole basis  for  determining  the contest, Gomtibai did not suffer any loss In consequence  of the   entrustment.   Assuming  that  the  Trial  Court   was competent without a proper pleading by the appellant and  an issue to enter upon an enquiry into the question whether the plain.  tiff  could  maintain an action  for  the  jewellery entrusted by her to 811 Lachhmi  Narain, the circumstances of the case clearly  make out a case that the parties were not "in pari delicto".   It is  settled  law  that ’where the parties are  not  in  pari delicto, 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 may be of a kind made illegal by statute in  the interests ’of a 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 a  person who  is under a 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  proceeds  of  an illegal transaction.  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  a fiduciary  duty to the plaintiff and he could  not  withhold the  property  entrusted  to him on the  plea  that  it  was delivered with the object of defeating the claim of a  third party. Liability  of the appellant was denied on one  more  ground. It  was  urged that Lachhmi Narain and  the  appellant  were members  of a joint Hindu family and’ the appellant was  not liable to pay out of the joint family property the debts  of

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Lachhmi Narain which were avyavaharika or illegal.   Counsel for  the appellant submitted that since Lachhmi  Narain  had misappropriated  the  jewellery  entrusted  to  him  by  the plaintiff.  no liability to discharge the liability  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.(1). In that case the Secertary  of  a school committee who was in charge. of a, fund deposited  at a,  Bank  was authorised to draw upon it only  for  specific purposes  connected  with the school.   The  Secretary  mis- appropriated  the  fund, and after his death  the  committee sued  his 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.  A Hindu son  governed  by  the Mitakshara law (1)  L.R. 61 I.A. 350. 812 is  liable to pay the debts of his father even if  they  are not incurred for purposes of legal necessity or for  benefit to  the estate, provided the debts are not  avyavaharika  or illegal.   But there is no evidence that ’the  appellant  is sought   to  be  rendered  liable  for  a  debt   which   is avyavaharika or illegal.  In raising his contention  counsel assumes   that  Lachhmi  Narain  bad   misappropriated   the jewellery  entrusted  to  him,  but for  that  there  is  no support.   Granting that the appellant was, after the  death of  Lachhmi Narain, unable 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  a 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. Y.P.                      Appeal dismissed. 813