27 October 1964
Supreme Court


Case number: Appeal (civil) 158 of 1964






DATE OF JUDGMENT: 27/10/1964


CITATION:  1965 AIR 1364            1965 SCR  (1) 861

ACT: Benami  transaction-Income-tax  evaded-True  owner-Right  to recover possession.

HEADNOTE: The  plaintiff (respondent) was employed at Calcutta in  the Court  of Wards and the service rules did not permit him  to start or carry on any trade or business of his own.  It  was therefore  arranged  with the defendant that  the  defendant should  be held out to be the owner of a boarding house  the suit  property--of which the plaintiff was the  true  owner, and  the  plaintiff  was to be  in  possession  as  manager. Plaintiff had to leave Calcutta on medical advice and he put the defendant in possession on the understanding that on the plaintiff’s return the defendant would hand over possession. When the defendant refused to so hand over, plaintiff  filed the suit, for recovery of possession.  His claim was decreed by the trial Court and in appeal. , In appeal to the Supreme Court, defendant’s successor in interest contended, that the suit  should  have  been  dismissed  because  the  plaintiff admitted in his evidence, that he escaped payment of income- tax by submitting a separate return for the salary earned by him in service, and by showing that the business income from the  suit  property  belonged to  the  defendant;  and  that therefore,  the Court should not countenance his, claim  and assist him in obtaining possession of the suit property. HELD  (Per Gajendragadkar, C. J. and Shah J.) : It  was  not the  object of the parties at the time when the  transaction was  entered into to circumvent or defeat the provisions  of the Income-tax Act.  It is true that the plaintiff  obtained benefit  of a lower rate of tax for the business income  and his personal income escaped taxation.  But it cannot on that account be held that the transaction on which he founded his claim  was  unlawful.  In claiming a decree  for  possession from  the  defendant,  the  plaintiff  did  not  plead   any invalidity of the transaction under which possession of  the business was entrusted to the defendant.  The plaintiff., as the owner of the business, was therefore not prevented  from enforcing  his  title against the defendant there  being  no taint  attached to the entrustment in the  circumstances  of the case. [868 D-F, G]



Per  Ayyangar J.-The plaintiff having adopted the device  of purchasing the property benami in the name of the defendant, for  the  purpose,  even at the inception,  of  evading  the provisions  of the Income-tax Act, would not be entitled  to recover  possession  of  the property on the  basis  of  his title.   But  the  plaintiff’s  claim  on  the  footing   of possession  was not open to any objection because the  basis of his claim was independent and wholly dissociated from the illegal transaction of the original benami purchase and fell into  line with the decision of the Privy Council  in  Sajan Singh v.   Sardara Ali [1960] A.C. 167. [876 F; 882 D-E]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 158 of 1964. Appeal  by special leave from the judgment and decree  dated August 30, and September 2, 1963 of the Calcutta High  Court in appeal from Original decision No. 125 of 1960. 862 S.   K. Hazara and P. K. Mukherjee, for the appellant. G.   S. Chatterjee and S. C. Mazumdar, for the respondent. The Judgment of P. B. GAJENDRAGADKAR C.J. and J. C. SHAH  J. was  delivered by SHAH J., AYYANGAR J. delivered a  separate Judgment. Shah  J.  An action instituted by Phanindra  Mohan  Majumdar hereinafter  called ’the plaintiff’ on the original side  of the High Court of Calcutta for a declaration that he "is the sole  proprietor ,of and absolutely entitled to  a  boarding house  business  carried  on  in  the  name  and  style   of International Home at 42, Harrison Road, Calcutta and for an order  for  delivery  of possession of  the  boarding  house business"  was decreed by a single Judge of the High  Court, and  the decree was confirmed in appeal under cl. 15 of  the Letters Patent by a Division Bench of the High Court. Surasaibalini  Debi  a  trustee appointed under  a  deed  of settlement  dated August 23, 1952 executed by the  defendant Prabhendra Mohan Gupta her father, was impleaded as a  party on’  the death of the defendant has appealed to  this  Court with special leave. The case of the plaintiff set out in his plaint was that  in or ,about the year 1941 he took a lease of No. 42,  Harrison Road, ,Calcutta and had started a boarding house business in the premises under the name and style of International Home, that  he  conducted the business with his  own  funds  which belonged. to him absolutely from the date of its  inception, that  he was personally managing the business and  utilising the  profits  thereof  for his own purposes,  that  when  he started  the business he was in the employment of the  Court of  Wards  and  by  the service  rules  governing  the  said employment  he  was not permitted to start or carry  on  any trade  or  business of his own and on that  account  it  was ,arranged with the defendant Prabhendra Mohan Gupta--herein- after  called  ’Gupta’-that the latter be held  out  as  the nominal  owner  of the said business and  pursuant  to  that arrangement  the lease of the premises for the business  was taken in the name of Gupta and licences from the police  and the  municipal  authorities were also taken in the  name  of Gupta, that from the very inception he was in possession and management  of  the  business and exercised  all  rights  of ownership  over the same being absolutely entitled  thereto, that Gupta had never made a claim to title in the  business, that  towards  the end of the year  1948  he-the  plaintiff- suffered a serious illness and was advised to leave Calcutta



temporarily, that on or about December 8, 1948 he  entrusted the management                             863 of the business of the boarding house to Gupta with all  its assets  on  the  understanding  that  upon  his  return   to Calcutta,  Gupta  would  hand over  to  him  possession  and management of the said business and of all papers, documents and books of account relating thereto and render accounts of the  receipts  and disbursements during the  period  of  his management,  that in or about December 1949 he  returned  to Calcutta and occupied one of the rooms in the boarding house and called upon Gupta to hand over possession and management of the business, and to return all papers, documents,  books of  account relating thereto and to render accounts  of  the management  of the business by Gupta during his absence  but the  latter  wrongfully  and  in breach  of  the  trust  and confidence  reposed in him refused to hand  over  possession and  management  of  the business  and  moreover  wrongfully denied  the  plaintiff’s right, title and  interest  in  the premises and in the business. Gupta  by his written statement submitted that the  business was  started by him with his own funds in premises  obtained on  lease by him and that he had appointed the plaintiff  as his  manager  or  agent  in respect  of  the  business.   He asserted  that  he was the real owner of the  business,  and denied that the management of the business was entrusted  to him  by  the  plaintiff when the  latter  left  Calcutta  an account  of his illness on December 8, 1948 or at any  time. He  also denied that there was any understanding that  Gupta would  hand  ’over  the  management  or  possession  of  the business to the plaintiff as alleged. On these pleadings the only substantial issue raised by  the Trial Court was about the plaintiff’s title to the  Boarding House known as International Home.  A subsidiary issue about a claim for accounts of the business from Gupta was given up at the trial and need not be considered. On  a review of the evidence the Trial Judge held  that  the plaintiff  had  started the business of  International  Home with his own funds and that the defendant Gupta was held out as an ostensible owner of that business.  In coming to  that conclusion the learned Trial Judge relied upon the following circumstances.   The  plaintiff  Majumdar  was  carrying  on business as owner of "Sunny lodge" a boarding house business between  the years 1938-41, and that business was closed  in or about February 1941 because the landlord of the  premises in  which  it was conducted obtained  a  decree-in-ejectment against the plaintiff and compelled him to 864 vacate the premises.  Thereafter tenancy was obtained of 42, Harrison  Road on May 1, 1941 and in July the  International Home  was started and the furniture and utensils which  were used in the Sunny Lodge were used in the new business.   The case  of Gupta that he had purchased the furniture  and  the utensils  from  the plaintiff for a sum of Rs. 900  and  had started  the business for himself ’Was disbelieved  for  the reason that Gupta was always in straitened circumstances and had often to borrow small surns of money from the  plaintiff who  was at all material times gainfully employed.   At  the commencement  of the business, for diverse purposes such  as deposit  with  the  landlord  towards  rent,  provision  for furniture, utensils and other things for the boarding  house Rs.’   -4,000  were  needed  and  this  Gupta  who  was   in impecunious  circumstances  could not  have  procured.   The defendant’s sons Dwipendrla and Samaren were boarders in the boarding house and had to pay charges to the boarding  house



for  service  rendered to them, whereas the members  of  the plaintiff’s  family boarded and lived in the boarding  house and  no  charges were levied from them.  The  plaintiff  was till December 1948 managing the boarding house  ,exclusively and  all  the earnings were taken by him.   The  defendant’s story  that payments were made to him by the plaintiff  when he visited Calcutta was unreliable.  There were between  the years  1941  and 1948 no letters from the defendant  to  the plaintiff which supported his case. that he was the owner or that  he was claiming -either to receive the profits of  the business or even asking for accounts.  The defendant was  in the  year 1941 a man of about 70 years of age and he had  no means  to  start a business.  The books of accounts  of  the business  which admittedly were maintained bad been  removed by  the  defendant  and he had failed to  produce  the  same before  the Trial Court.  The letters written by the  defen- dant after December 8, 1948 when the plaintiff was away from Calcutta due to his illness gave detailed information to him about the business and its progress.  From time to time  the defendant had written letters asking the plaintiff to return to Calcutta and take over the management of the business. The Trial Court recognised that the lease of the premises in which  the  business  was carried on stood in  the  name  of Gupta,  that  the  licences from the  police  and  municipal authorities  for  conducting the business were also  in  the name  of Gupta, that in the staff register- of the  business the  plaintiffs  name  was  shown  as  manager,  ,that   the plaintiff submitted the returns for the purposes of  income- tax of the profits of the business in the name of Gupta  and he  dealt with the authorities as if he was the manager  and not the 865 owner of the business.  But these circumstances were, in the view  of  the  Trial Judge, consistent with  Gupta  being  a nominal   owner   of  the  business,   whereas   the   other circumstances were consistent with the plaintiff alone being the  owner  of the business of International Home.   In  his view  the  motive  for holding out Gupta as  owner  was  the existence of the service rules which governed the  plaintiff when  he  was employed with the Court of Wards  between  the years  1941  and  1944 and by virtue of  which  he  was  not permitted  -to  conduct  any  business  of  his  own.    The appellate Court agreed with the view of the Trial Court. In  this appeal with special leave this Court normally  does not  seek  to  re-appreciate the  evidence,  and  Concurrent findings of the Courts below are not allowed to be re-opened unless   there  are  special  circumstances   justifying   a departure from that course.  Counsel appearing on behalf  of the  appellant has not seriously attempted to challenge  the finding of the Courts below on the first issue.  But counsel submitted  that  assuming  that  on  the  evidence  it   was established  that  the real owner of the  business  was  the plaintiff,  his suit must still fail, for the plaintiff  had with a view to circumvent the service rules of the Court  of Wards, entered into an unlawful agreement with Gupta and had held  out  the  latter as owner of the  business,  it  being settled law that the Court will not countenance the claim of the plaintiff who was on his own admission guilty of an  act prohibited by law and assist him in obtaining possession  of the  business.   In  addition, counsel  submitted  that  the arrangement  for  holding out Gupta as a nominal  owner  was made  between the plaintiff and Gupta to evade liability  to pay income-tax and thereby to defeat the provisions of  the. Income-tax Act and on that account also the agreement  under which  the  business was to be held by Gupta  as  a  nominal



owner  was  invalid and the plaintiff was  not  entitled  to claim  possession  of  the business  relying  upon  his  own unlawful conduct. Before  the  Trial  Court neither of  these  two  pleas  was raised.   In  appeal  the High Court pointed  out  that  the object of the arrangement whereby Gupta was held out as  the owner was to avoid the service rules of the Court of  Wards, but  there was no evidence to prove that the  service  rules which  prohibited  an employee of the Court  of  Wards  from carrying  on  business belonging to himself  were  statutory rules.  Disregard of the rules did not therefore necessarily taint the arrangement with immorality or illegality and that the plaintiff in suing to recover possession of his business was  not seeking to enforce an illegal arrangement.  In  the view of 866 the  High  Court  evasion of income-tax was  again  not  the object or the consideration for the arrangement. The service rules were not tendered in evidence.  It is  not disputed however that the service rules did not prohibit  an employee  of the Court of Wards from carrying on a  business as  a manager or agent of another.  What was prohibited  was carrying  on  business as an owner.   An  arrangement  which facilitated conduct of a business, contrary to the rules, by holding  out  a  third  person as a  nominal  owner  of  the -business,  was in the view of the High Court  not  illegal, and no argument has been advanced before us challenging that view.   But  the  legality of the  arrangement  between  the plaintiff and Gupta was challenged on the ground that it was intended  or  designed to circumvent the provisions  of  the Income-tax  Act.   In  support of this plea,  there  was  no pleading, no issue was raised about it, and this part of the appellant’s  case was not even relied upon before the  Trial Court.   In  this  appeal  Mr.  Hazara  for  the  appellants submitted  that on the admissions made by plaintiff  in  his evidence  the  Court  was bound to  non-suit  him.   In  his evidence before the Court the plaintiff admitted that he had submitted  returns of income earned in the business for  the years  1943, 1944, 1945 and 1946 and assessment of  tax  was made  in  the  year 1947 and on  demand  by  the  Income-tax Officer  he  had filed an affidavit stating that  he  was  a manager of the business.  Plaintiff also admitted that  when called upon he had submitted a separate personal return  for the salary earned by him, but that income was not taxed  and tax was assessed on the business income as if it belonged to Gupta.   The  plaintiff  also admitted that  his  object  in filing the affidavit was to get rid of tax liability on  his personal income. By  the device of making an untrue statement  the  plaintiff has  undoubtedly  evaded  tax.  The  plaintiff  was  earning salary  as  an  employee  of  the-Court  of  Wards  and  had presumably some other income which in the aggregate amounted to  Rs. 1,800 per annum.  If the business  of  International Home  was  disclosed  as belonging- to  the  plaintiff,  the aggregate of the personal and business income was liable  to be  charged to tax under the Income-tax Act, 1922.   By  the expedient  of  holding out the defendant  as  an  ostensible owner  of  the business the plaintiff evaded  liability  for payment  of tax on his personal income and even tax  on  the business  income was charged at a lower rate.  But  on  that account  we  are unable to hold, disagreeing with  the  High Court, that the object in entering into the arrangement  for holding  out  Gupta as owner of the business  was  to  evade payment of income-tax. 867



As found by the Courts below the purpose of the  arrangement was to circumvent the service rules.  It is true that having started  the  business  in the name of  the  defendant,  the plaintiff  was  able to evade payment of tax, which  if  the true  state of affairs was known, he would have been  liable to  pay.   The plaintiff might have  incurred  penalties  by failing  to disclose the true state of affairs, he may  also be liable for that conduct to be proceeded against under the provisions  of the Income-tax Act or under the Indian  Penal Code.   We  are,  however,  unable to  hold  that  from  the inception the object of the arrangement was to enter into an unlawful arrangement. The  plaintiff’s  case  was that he was  in  management  and possession of the business as owner till December 1948  when he  left  Calcutta after entrusting the  management  of  the business  to  Gupta, subject to the understanding  that  the possession and management of the business was to be restored to the plaintiff when he returned to Calcutta and sought  to resume  management.   There  is nothing illegal  in  such  a contract.  The plaintiff’s cause of action as set out in the plaint  was  that  he sought to  obtain  possession  of  the business  which belonged to him, and which he had  entrusted to his agent or trustee.  Gupta denied that he was an  agent or  trustee  of  the  plaintiff, and set  up  title  to  the business  and claimed that he was not liable to  return  the business.   Once the plea of Gupta that he was the owner  of the business failed, there was no other defence which  could be held out against the plaintiff’s claim.  It is true  that if  the  plaintiff  seeks the assistance  of  the  Court  to effectuate  an unlawful transaction, the Courts will  refuse to assist him.  Where, however, the plaintiff is seeking  to enforce his title to property and it is not an integral part of  his  pleading  which her must prove to  entitle  him  to relief  that  there  was between him and  the  defendant  an unlawful  transaction  or  arrangement  which  he  seeks  to enforce, the plaintiff will be entitled to the assistance of the  Court,  even if the initial title of the  plaintiff  is rooted in an illegal transaction. On  the finding of the High Court the proved object for  the arrangement  to hold out Gupta as owner of the business,  is not  shown to be in fraud of the public administration,  and the   alternative  object  suggested  by  counsel  for   the appellant  is  not proved.  It is unnecessary  therefore  to enter  upon  a discussion of the authorities  which  make  a distinction between claims in which a party to an action has to  rely  essentially  upon a conspiracy  to  effectuate  an illegal  or fraudulent purpose, to support his claim to  the property  transferred  to or held out in the  other  party’s name, 2 Sup./65-12 868 and  claims  in  which the unlawful or  unworthy  object  is fulfilled,  the property is owned by the claimant,  and  the claimant,   seeks  the  assistance  of  the  Court  not   to effectuate his unlawful purpose, but in substance to enforce his title by a plea in detinue under a transaction which  is not tainted by illegality.  A.R.P.L. Palanianna Chettiar  v. P.L.A.R.  Arunasalam  Chettiar(1)  illustrates  the   former principle.  In that case the Judicial Committee declined  to assist  the  enforcement of a claim in fraud of  the  public administration  in  Malaya,  because the  plaintiff  had  of necessity  to disclose before he could obtain a  decree  for restoration  of  his property transferred to  the  defendant that  he had practised deceit on the public  administration. Sajan  Singh  v.  Sardara Ali (2 )  illustrates  ,the  other



principle.  In that case the Court’s assistance was given to the plaintiff to restore to him his property of which he was wrongfully dispossessed by the defendant, even though  title to the property was acquired by the plaintiff by an unlawful transaction, between the defendant and the plaintiff. In the present case as we have already observed, it was  not the  object of the parties at the time when the  transaction which is called in the High Court benami was entered into to circumvent or to defeat the provisions of the Income-tax Act by  taking advantage of the fact that the business stood  in the name of Gupta.  It is true that -the plaintiff  obtained benefit  of a lower rate of tax for the business income  and his personal income escaped taxation.  But it cannot on that account be held that the transaction on which he founded his claim  was  unlawful.  In claiming a decree  for  possession from   the  defendant  the  plaintiff  did  not  plead   any invalidity of the transaction under which possession of  the business  was  entrusted to Gupta.  He  merely  pleaded  his title  to  the business, entrustment thereof  to  Gupta  and refusal on the part of the latter to deliver possession when demanded.   On the findings recorded by the Trial  Court  as well  as by the High Court the plaintiff’s title is  proved. Entrustment of the business when the plaintiff left Calcutta in  1948 is also established by the evidence, and Gupta  has admittedly refused to deliver possession when demanded.  The plaintiff   as  the  owner  of  the  business  was  in   the circumstances  not  prevented  from  enforcing  that   title against  Gupta,  there  being  no  taint  attaching  to  the entrustment. The appeal therefore fails and is dismissed.  Having  regard to  the  circumstances of the case, we make no order  as  to costs. (1) L.R. [1962] A.C. 294. (2) L.R. [1960] A.C. 167.  869 Ayyangar  J. I agree with the order proposed by  my  learned brother  Shah  J.  that  the  appeal  fails  and  should  be dismissed  as  also in regard to the order for  costs.   As, however,  I am unable to agree with certain of the  findings recorded by my learned brother  propose shortly to  state my reasons for the decision. The facts of the case have all been set out in the  judgment just  now  pronounced and it is needless for  me  to  repeat them.   The main point in controversy in the suit was as  to whether Phanindra Mohan Majumdar the respondent, who was the plaintiff  in the suit out of which this appeal arises,  had established that he was the proprietor of the Boarding House carried on in the name and style of "International Home"  at 42, Harrison Road, Calcutta.  That property admittedly stood under   the  registered  conveyance  in  the  name  of   his father-in-law,  defendant Gupta and that business  was  also conducted by the defendant.  The case set up by the  respon- dent  was  that the purchase of the property  was  with  his funds  and that the defendant-Gupta was merely a  benamidar. The  evidence on this point was examined elaborately by  the learned Single Judge at the trial and by the Division  Bench on  appeal and they concurrently found that  the  defendant- Gupta was merely a benamidar for the respondent and that the purchase  of the property in the name of the  defendant  and the  carrying on of the hotel business by the defendant  was really  on behalf of the respondent.  That finding  was  not challenged  before  this  Court  and  does  not,  therefore, require any examination. Accepting  that finding, however, two questions were  raised by the learned Counsel for the appellant.  One was that  the



purpose  for which this benami transaction was entered  into by  the respondent was, on his own case, to  circumvent  the Service  Rules  of  the Court of Wards of which  he  was  an employee.  Though no argument based upon the effect of  this admission  was  urged before the learned  trial  Judge,  the question whether the respondent was entitled to maintain the suit  for  the  recovery of possession  from  the  defendant having regard to this object of the benami transaction viz., to evade the Service Rules of the Court of Wards and in view of  the  circumstance  that object had  been  achieved,  was raised  before  the  Division Bench.   The  learned  Judges, however, rejected the contention by pointing out that  those Rules were not shown to be statutory and, in fact, the Rules themselves   were   not   before  the   Court.    In   those circumstances, they considered that a breach of the rule  or an  attempt  to  evade it would  not  necessarily  make  the transaction  unlawful so as to preclude the respondent  from recovering  the property title to which he had  established. Learned Counsel 870 for  the  appellant repeated this argument before us  but  I agree  that it is not tenable having regard to the state  of the evidence and  to the fact that the Rules were not statutory. There was, however, another illegality which came out in the course  of the evidence of the respondent and which, it  was submitted,  was  another object for which the  property  was purchased in the name of the defendant--Gupta which requires more  serious attention.  This relates to the claim  of  the appellant  that it had been established that the  object  of putting  the property benami in the name of  the  defendant- Gupta was to evade income-tax and that as a matter of  fact, the tax liability for certain of the years of assessment had thereby been successfully evaded by the respondent. The evidence in relation to this matter was this : The  suit property  was purchased and the Boarding House business  was started in 1941, so that from the calendar year 1942 onwards i.e.,   from  the  assessment  years  1943-44  onwards   the respondent if the beneficial owner would have been liable to income  tax on the income derived from the  hotel  business. During  this period the respondent was also employed in  the Court of Wards, so that he would have been liable to  income tax  on the aggregate of the incomes he was  receiving  from these two sources.  In respect of the assessment years 1943- 46  he received in 1947 a notice calling upon him to  submit returns  on  the  basis that he was the real  owner  of  the International  Home, 42, Harrison Road, The respondent  then asserted  that the property and the business did not  belong to him, but to the defendant Gupta and that he was merely  a manager  under Gupta.  In connection with this assertion  to the  Income-tax  department he swore two affidavits  one  in December  1947  and the other in January  1948,  before  the Presidency   Magistrate,  Calcutta  which  contained   these representations.   In  his  cross-examination   respondent’s attention was drawn to the affidavits and to their  contents and his answer was this :               A.    "Then I was charged with the amounts  as               I was asked by the Income-tax Officer to  file               an affidavit.  Then I made the first affidavit               which  is here in the file.  I showed  him  my               first   affidavit  whereupon  the   Income-tax               Officer told me something.  Pursuant to that I               told him, ’I rejected the first affidavit  and               made a second affidavit which was accepted  by               them’.-(In the second affidavit dated  January



             31,  1948 he stated: ’I am an  employee  under               Gupta-proprietor of International ’Home, 42,                871               Harrison Road, Calcutta.  I have been  working               there  as  manager  since  July  1941  and  my               monthly  salary varied from Rs. 25 to Rs.  150               from my last appointment to this  date).......               Then  I stated that my money was  not  taxable               because  it amounted only to Rs. 1,800  and  I               asked them to exempt me and accordingly I  was               exempted from paying the income tax.               Court Question : Do I understand that in  1947               and 1948 your object of filing this  affidavit               was to get rid of the income-tax liability  if               possible   so  far  as  you   are   personally               concerned ? A : That is so." On the basis of this clear admission it was urged before the learned  Judges  of the Division Bench that  the  respondent made the purchase in the name of the defendant--Gupta really to  evade income tax which he would have been liable to  pay if  the property and business had stood in his own name  and that as he had successfully evaded the payment of income tax and  had thus achieved his unlawful object, the Court  would not  permit  him to assert title to the  suit  property  and would  not lend its aid to enable him to recover  possession of his property.  The learned Judges, however, rejected this submission for two reasons : (1) that the defendant had  not pleaded this illegality in the written statement and was not therefore entitled to urge this as a ground for  non-suiting the  plaintiff;  (2) That the evidence and the  admission  I have  extracted,  did not establish that the object  of  the respondent in effecting this purchase benami in the name  of the  defendant was, at its inception, to  evade  income-tax. In  other words, the learned Judges considered that  it  had not  been proved that at the inception of the  purchase  the object  was  to evade income tax, but  that  the  respondent merely  availed himself of the opportunity afforded  by  the benami purchase to evade tax when the same was sought to  be livid  on  him  some  5 or 6 years after  the  date  of  the original purchase. Learned counsel for the appellant challenged this  reasoning and submitted that the learned Judges had not approached the question correctly. First as to the point that in the absence of a pleading  the defendant  was  not  entitled  to  rely  on  the  taint   of illegality  in the transaction for persuading the  Court  to refuse  relief  to  the  plaintiff;  I  see  force  in   the submission  of  learned Counsel for the  appellant  an  this question.  The law on this point as to pleading is quite 872 clear  and  has  been stated in  decisions  of  the  highest authority  on  several  occasions and it  is  sufficient  to summarise  the underlying principles.  Where a  contract  or transaction ex facie is illegal there need be no pleading of the parties raising the issue of illegality and the Court is bound to take judicial notice of the nature of the  contract or transaction and mould its relief according to the circum- stances.  The case before us is, not however, of that  type. Even where the contract is not ex facie legal "if the  facts given in evidence clearly disclose the illegality the  Court is bound to take notice of this fact even if not pleaded  by the defendant" (Per Lindley L.J. in Scott v. Brown(1).   The enunciation  of the law on this point by Devlin J. in  Edler v.  Auerbach (2) though more elaborate and  summarising  the



principles formulated by the House of Lords in North-Western Salt  Company Ltd. v. Electrolytic Alkali Company  Ltd.  (3) does  not  contradict the statement by Lindley L.J.  In  the case  on hand there is a clear admission by  the  respondent himself  of  the facts on which illegality is sought  to  be made out.  The affidavits which he swore for. the purpose of evading the liability to tax are before the Court and in the circumstances I consider that it is clearly established that the  object  of the respondent was to evade the  payment  of income-tax. The  other ground on which the learned Judges rejected  this plea  of  illegality was that there was no  proof  that  the object which the respondent sought to achieve by the  benami was  not  proved  to have been the  evasion  of  income-tax. Counsel  for  the appellant contended that the  approach  of learned  Judges of the High Court to this question  was  not realistic and that their finding was not correct. I  see considerable force in this submission also.   It  was really an accident that the notice in respect of  income-tax as  regards the income from this property and business  came to  be  issued  to the respondent in  1947  or  thereabouts. Unless  one proceeded on the assumption that the  respondent was  not  aware that income-tax was payable on  income  from property or business, he could obviously have acted only  on the  footing that the defendant Gupta as the apparent  owner of the property would alone be made, liable for the  payment of  the tax.  In these circumstances it appears to me to  be clear that the object of the transaction of benami was  even in its inception to ensure that there was no aggregation  of the income from the property and the hotel business (1) [1892] 2 Q.B. 724 at 729.   (2) (1950] 1 K.B. 359, at P. 371. (3)  [1914] A.C. 461. 873 with  the salary or other remuneration which he was  getting from the Court of Wards. The  question  next to be considered is the  effect  of  the object  of  the benami being to evade the  provisions  of  a revenue  law  like  the Income Tax Act.  Now s.  23  of  the Indian Contract Act enacts that the consideration or  object of an agreement is lawful "unless it is forbidden by law  or is  of such a nature that if permitted, it would defeat  the provisions of any law".  On what I have stated earlier,  the object  of the agreement being to defeat the provisions:  of the Indian Income Tax Act would certainly not be lawful. In this connection I might briefly refer to the decision  in Emery v. Emery(1).  It was an action by the husband  seeking to  recover  from the wife one half  of  certain  securities which  the  husband had purchased in the name of  the  wife. The finding was that the bonds, a moiety of which was sought to be recovered were held in the name of the wife as trustee for  the  wife  and husband in equal shares so  far  as  the beneficial interest was concerned.  Wynn-Parry J. considered the evidence as to why the securities were purchased in  the name  of the wife -and why there was a complete  absence  in the  documents  of any reference to the husband  having  any beneficial  interest in those securities.  The evidence  led before the Court disclosed that under the law of the  United States, where the dividends on the bonds were payable if the payment  was to a non-resident alien the recipient would  be liable to a withholding tax.  The husband was a non-resident alien  and  if  his beneficial interest  was  disclosed  the dividend  payable in respect of this investment  would  have protanto suffered the deduction of tax, while the wife being an  American  would not have been so liable.   The  question



that  was  raised before the learned Judge  was  whether  in those  circumstances the husband could assert his  title  to the moiety of the securities to which he claimed  beneficial interest.   The learned Judge dismissed the  action  holding that  as the securities were put in the name of the wife  in order  to evade the law the husband who did not come  before the  Court  with clean hands could not claim his  title  and that  the  property  should  lie where  it  was.   The  main argument  raised  was that a breach of a Revenue  law  of  a foreign country stood on a footing different from an attempt to evade a law of the United Kingdom and this was negatived. We  are not, however, concerned with that  problem,  because here  what was intended to be circumvented by means of  this device was the Indian Income Tax Act.  That (1)  [19591] Ch. 410. 874 an  agreement  to defraud Revenue is manifestly  illegal  is beyond dispute but if authority were needed I might refer to Milkr  v.  Karlinski(1) and Alexander v.  Rayson  (2)  -(see Cheshire and Fifoot on Contract, 5th ed. 286). No doubt, for the purpose of deciding whether property could be  recovered  by the assertion of a real title there  is  a clear  distinction  between cases where only an  attempt  to evade  a  statute or to commit a fraud has taken  place  and cases  where the evasion or the fraud has succeeded and  the impermissible   object  has  beep  achieved.   The   leading decision  upon this point is that of’ the Privy, Council  in Petherpermal:  Chetty,  v.  Muniandi  Servai(3)  where  Lord Atkinson dealing with the effect of benami conveyances which are motivated by the design to achieve an illegal or fraudu- lent purpose, quoted from Mayne’s Hindu Law (7th ed. p. 595, para 466) the following as correctly setting out the law :               "Where a transaction is once made out to be  a               mere  benami it is evident that the  benamidar               absolutely  disappears  from the  title.   His               name is simply an alias for that of the person               beneficially interested.  The fact that A  has               assumed the name of B in order to cheat X  can               be  no  reason  whatever why  a  Court  should               assist  or  permit  B to cheat  A.  But  if  A               requires  the  help of the Court  to  get  the               estate back into his own possession, or to get               the  title into his own name, it may  be  very               material  to consider whether A  has  actually               cheated X or not.  If he has done so by  means               of his alias, then it has ceased to be a  mere               mask,  and  has become a reality.  It  may  be               very  proper for a Court to say that  it  will               not  allow  him to  resume  the  individuality               which he has once cast off in order to defraud               others.  If, however, he has not defrauded any               one,  there  can be no reason  why  the  Court               should  punish  his intention  by  giving  his               estate  away to B, whose roguery is even  more               complicated  than his own...... For  instance,               persons have been allowed to recover  property               which they had assigned away. . . . where they               had  intended  to defraud creditors,  who,  in               fact  were never injured...... But  where  the               fraudulent  or  illegal purpose  has  actually               been  effected  by  means  of  the  colourable               grant,  then  the  maxim  applies,  ’In   pari               delicto potior est conditio possidentis’.  The               (1)   62 T.L.R. 85.               (3) [1908] L.R. 35 1. A. 98.



             (2) [1930] 1 K.B. 169.                875 Court will help neither party.  ’Let the estate lie where it falls’." I  might point out that later decisions both of  the  Indian High Courts and of the Privy, Council have all proceeded  on the  acceptance  of  the  principles  which  Lord   Atkinson formulated in Petherpermals case. (1) Pausing here, it might be pointed out that exactly the -same conclusion has been reached by the Courts in England where a benami transaction was  entered into. for the purpose of de- frauding creditors.  It is hardly necessary to add that  the position in England under which a resulting trust is  deemed to arise when a purchase is made in the name of another with one’s  own money and without an intention of  conferring  on him  a  beneficial  title is identical with the  law  as  to benami  in India.  In Gascoigne v. Gascoigne (2 ) a  husband took  a lease of lands in his wife’s name and built a  house upon it with his own money.  The reason why he entered  into this  type  of transaction was that he was in debt  and  was desirous of protecting his property from his creditors.   He then  brought an action against the wife for  a  declaration that she held the property as trustee for him.  The  husband succeeded in the County Court.  On appeal to the  Divisional Court, Lush J. allowing the appeal stated that it was proved that  the  plaintiff was guilty of a fraud upon the  law  to evade and disappoint the provision of the legislation and he could not come in equity to be relieved against his own act, though   the  defence  also  was  dishonest,  and   in   the circumstances,  the  Court would say, "Let  the  estate  lie where it falls". Learned  Counsel  for  the  respondent  submitted  that  the English  decision just now referred to as well as  Emery  v. Emery(3)  proceeded upon the peculiarity of the English  law in which there is a presumption of an ’advancement but  that as there was no such presumption in India the position would be different where the Court has to deal with the effect  of benami  transactions brought about in order to effectuate  a fraud  or to evade the provisions of a statute.  I  do  not. however, think that could make any material difference.   We start  with  the  position that the Court  will  presume  an ostensible title to be the real title unless a plaintiff who seeks  to  assert the contrary pleads and  proves  that  the ostensible owner is not the real owner.  In other words, the onus is on the person who alleges a transaction to be benami to make               (1)   [1908] L. R. 35 I.A. 98.               (2) [1918] 1 K.B. 223.               (3) [1959] 1 Ch. 410               876 it  out.  Of course, the source of the funds from which  the purchase  is made coupled with the manner of  its  enjoyment would be a very material factor for establishing the case of benami  but  the mere proof of the source  of  the  purchase money  would not finally establish the benami nature of  the defendant’s  title.   Even  where  the  plaintiff  purchases property  with  his  own  funds  in  the  name  of  ’B’  the surrounding circumstances, the mode of enjoyment might still indicate  that  it was intended to be a gift to ’B’  and  it would then not be a case of benami notwithstanding that  the purchase  money did not proceed from the defendant.   There- fore as observed in Mayne’s Hindu Law (Eleventh Edn.1) page 876.               "While the source from which the money came is               undoubtedly  a  valuable test,  it  cannot  be



             considered  to  be  the  sole  or   conclusive               criterion.    For,  the  question  whether   a               particular  transaction is benami or  not,  is               one  of  intention  and  there  may  be  other               circumstances  to  negative  the  prima  facie               inference  from  the fact  that  the  purchase               money was supplied by or belonged to  another.               The position of the parties, their relation to               one  another, the motives which  could  govern               their actions and their subsequent conduct may               well rebut the presumption." Even  where  the benami is established effect  will  not  be given  to the real title if the result of doing so would  be to  violate the provisions of a statute or to work  a  fraud upon innocent persons -Gur Narayan v. Sheo Lal Singh(1).  On this  reasoning it would prima facie appear to  follow  that the respondent having adopted this device of purchasing  the property  benami  in the name of his father-in-law  for  the purpose  of evading the provisions of the Indian Income  Tax Act  would  not be entitled to recover the property  on  the basis of his title. Two  points  were  made  by  the  learned  counsel  for  the respondent for avoiding this result.  In the first place, he submitted  that the respondent had instituted the  suit  and was seeking relief on the basis of his proprietary  interest in  the property and that as he did not, in fact, plead  nor was  it  necessary for him to plead the  illegality  of  the transaction  in order to sustain his title to the  property, he was not precluded by reason of the illegality established from  succeeding  in  the suit.  For  this  purpose  learned Counsel relied upon the principle laid down by the Court of (1)  [1918] L.R. 46 I.A.I.  877 Appeal  in  Bowmakers v. Barnet Instruments(1)  and  of  the Privy  Council in Sajan Singh v. Sardara Ali(2).  It is  not necessary  to  narrate the facts of  Bowmakers’  case(3)  in detail  and it would be sufficient to extract the  head-note for the purpose of understanding the ratio of the decision:               "No claim founded on an illegal contract  will               be enforced by the court but as a general rule               a  man’s  right  to  possession  of  his   own               chattels  will  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 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." It  is perhaps not irrelevant to notice that the  illegality which  was  there  pleaded as a defence  to  the  claim  for damages  for conversion of certain machine tools  which  was the  property of the plaintiffs was the contravention of  an executive order under the Defence Regulations regarding  the maximum  price that might be charged.  There was  besides  a finding  that neither the plaintiffs nor the defendants  had any knowledge of the order, so that if they erred’ the error was  involuntary.   These form the background in  which  the decision  has  to be appreciated.  The  defendant,  however, contended that the ignorance was immaterial and that as  the order  of  the  Minister  rendered  any  violation  of  its,



provisions criminal the parties must be deemed to have  been engaged  in  a criminal conspiracy and that  the  defendants were  therefore entitled to retain the machine  tools  which were with them on hire without returning them to the bailor. Du Parcq L.J. who delivered the judgment of the Court, after quoting the maxim "In pari delicto" on which the defence was based, observed:               "The  Latin  maxim must not be  understood  as               meaning  that where a transaction is  vitiated               by illegality the person left in possession of               goods  after its completion is always  and  of               necessity  entitled  to keep them.   Its  true               meaning  is that, where the circumstances  are               such  that  the Court will  refuse  to  assist               either party, the               (1)  [1945] 1 K.B. 65.               (2) [1960] A.C. 167.               878               consequence  must,  in fact, follow  that  the               party in possession will not be disturbed.  As               Lord   Mansfield  said,  the  defendant   then               obtains  an  advantage ’contrary to  the  real               justice’, and, so to say, ’by accident’,"  and               finally added :               "We are satisfied that no rule of law, and  no               considerations  of public policy,  compel  the               court to dismiss the plaintiff’s claim in  the               case before us. and to do so would be, in  our               opinion, a manifest injustice." In view of these observations, I am unable to hold that  the decision  is authority for the position that a suit for  ion on  the basis of title could never be dismissed even if  the object  for which the transfer was effected was illegal  and that object has been achieved.  The maxim ex turpi causa non oritur actio is still a rule of law and property transferred under  a contract which is illegal or to achieve an  illegal object  where  the  object  has,  been  achieved  cannot  be recovered  for the reasons that the court will not lend  its aid to such a plaintiff.  In other words, I do not read  the decision  in  Bowmaker’s case(1) as contradicting  what  was stated by Lord Atkinson in Petherpermal’s case(2)  extracted earlier. There  is one feature regarding the facts  in  Bowmaker’s(1) case to which attention might be drawn.  The plaintiff there had  delivered  the machine tools to  the  defendants  under three  hire  purchase agreements which  were  illegal.   The defendants  had  sold the tools delivered under two  of  the agreements  and refused to redeliver those under  the  third which  were  still in their So far as the claim  related  to those  covered by the two agreements wherein the  defendants had  parted with the goods Cheshire & Fifoot on the  Law  of Contract* explain the decision thus :               "The significant feature of the wrongful sales               was that they constituted an act of conversion               that ipso facto terminated the bailment.   The               plaintiffs might therefore argue that,  unlike               the case of pledge in Taylor v. Chester  which               was  still  in existence at the  time  of  the               action, there was here no longer any  existing               contract upon which the defendants could found               a  possessory right.  The right  to  immediate               possession  had automatically revested in  the               plaintiffs.  Could it not thus be said, as  in               the case of an illegal but expired lease, that               owing  to the termination of the bailment  the



             plaintiffs had an (1) (1945) 1 K. B. 65.  (2) [1908] L.R. 35 1. A. 98.  879               independent cause of action in virtue of their               admitted ownership?........ It was  completely               irrelevant  that the chattels  had  originally               come into the possession of the defendants  by               virtue of the illegal contract.  That contract               was  now  defunct.  It formed no part  of  the               cause of action.  Thus, with the disappearance               of  the only transaction that  could  restrict               their rights, the plaintiffs could base  their               claim   to   possession  solely   upon   their               ownership of the chattels." As  regards the other agreement where the goods  were  still with the defendant the same authors say:               "In the case of this agreement the cause of action        was the  refusal of the defendants to comply with        the demand for   the return of the chattels.                Since effective possession had   passed to the defendants by virtue of the contract,               the   sole  justification for this demand  was               their failure to pay the agreed  installments.               The  plaintiffs,  therefore,  were  inevitably               driven back to the contract in order to  prove               the amounts of the installments, the dates  at               which  they were due and the agreed effect  of               their  non-payment.   This part  of  the  case               would  therefore seem to be on as  fours  with               the   action  by  a  lessor  to  enforce   the               forfeiture of the lease for condition broken. This  difficult decision turned upon the effect of  a  bail- ment.   It would seem, however, that if the ownership  of  a chattel, as distinguished from a mere possessory right, were to be transferred under an illegal contract, it would remain perpetually  irrecoverable.  In such a case  the  transferor would have no title irrespective of the illegal transaction. His only mode of obtaining relief would be to terminate  the contract  under which he purported to transfer title to  the defendant,  and  he  could not  take  proceedings  for  this purpose without showing that he was particeps criminis." I consider these remarks correctly set out the  difficulties created by the decision and its true ratio. Sajan  Singh’s case(1) was concerned with the right  of  the plaintiff  who was a lorry driver who could not,  under  the then  existing regulations of Malaya, obtain a  lorry.   The defendant, (1)  [1960] A.C. 167. 880 on  the other hand, was one who was qualified to purchase  a lorry  and  accordingly  an  arrangement  was  entered  into between the plaintiff and the defendant under which a  lorry was to be acquired by the plaintiff to be registered in  the name of the defendant with a permit in his own name but  the intention  being that it should belong to the plaintiff  and to  be used by him on his own account.  The result was  that the lorry belonged to the plaintiff but was operated in  the name  of  the  defendant.  After the parties  fell  out  and correspondence was passing between them, the defendant,  one day,  entered  the  plaintiff’s house when  the  latter  was absent  and took away the lorry which he refused  to  return claiming  that  it  belonged to  him.   The  plaintiff  then brought  the suit out of which the appeal before  the  Privy Council  arose, for a declaration that he was the owner  and



for  return  of the lorry and for damages etc.   The  claim, thus,  before the Court was in retinue and Lord Denning  who spoke for the Board emphasised this aspect observing :               "In   detinue   their   Lordships   think   he               succeeded.   Although the transaction  between               the  plaintiff and the defendant was  illegal,               nevertheless it was fully executed and carried               out:  and on that account it was effective  to               pass   the  property  in  the  lorry  to   the               plaintiff.......   Me  plaintiff  had   actual               possession of the lorry at the moment when the               defendant  seized it.  Despite the  illegality               of  the contract, the property had  passed  to               him  by  the sale and delivery of  the  lorry.               When  he  commenced this action,  he  had  the               right   to   immediate   possession.     Their               Lordships  think that in these,  circumstances               he had a claim in detinue." It  would thus be seen that besides the claim based  on  his title to the lorry, the plaintiff had also established  that while  the chattel was in his possession, the defendant  had unlawfully  taken it away, without his consent.  Insofar  as his  claim was based on this deprivation of  possession,  it was  really an independent cause of action wholly  separated from  the  original  purchase  of the  lorry  which  was  to circumvent  the law, and as to this claim in  detinue  there was no question of its being tainted with any illegality. Besides  this, Lord Denning himself pointed out  that  there were  many  cases  which showed that  where  a  transfer  of property was effected in order to achieve an illegal purpose and  that purpose was achieved, the plaintiff  was  disabled from  recovering the property for the reason that the  Court will not assist him in that endeavour.  881 Pausing here, I need only add that there is no question here of  the legislation whose avoidance or contravention  stamps the  transaction  as  illegal  being  one  enacted  for  the protection of persons like the plaintiff.  Such was the case of Amar Singh v. Kulubya(1) where the principle explained in Kearley v. Thomson (2) by Fry L.J.               "In these cases of oppressor and oppressed, or               of  a class protected by statute, the one  may               recover  from the other, notwithstanding  that               both   have  been  parties  to   the   illegal               contract." as  an  exception  to the rule in pari  delicto  potior  est canditio possidentis was applied. Two  questions thus arise which have to be  separately  con- sidered: (1) If nothing more had happened in this case  than that the respondent had purchased the property benami in the name of the defendant-Gupta can the respondent lay claim  to possession of the suit property based upon the fact that the purchase money came from him notwithstanding the illegal and unlawful  purpose  which  he sought to  accomplish  by  that transaction and which he succeeded in achieving; (2) Whether the  respondent can rest his claim to recover possession  of the  property  on a title wholly independent of  the  benami purchase  which is tainted with illegality.  The  answer  to the  first question would depend upon whether he can  assert title  to the property, decors the illegal object  which  he achieved  by purchasing the property benami in the  name  of the defendant-Gupta.  Prima facie the answer would appear to be in the negative on the principle laid down by Lord Atkin- son  Petherpermal  v. Muniandi(3)  already  cited.   Learned Counsel  for the respondent, however, submitted  that  under



the  Indian  law  though the onus  of  establishing  that  a transaction is benami is on the person who so asserts it and that  unless this is strictly made out the ostensible  title would prevail, but when once the plaintiff establishes  that the consideration proceeded from him, the onus shifts to the defendant  to establish that the transaction was not  benami and that a beneficial interest was intended to pass to  him. I do not consider it necessary to finally decide this  point on which turns the question as to whether the respondent  is entitled  to  succeed  on the basis of  his  title  notwith- standing the illegality attending the transaction, though it must  be  pointed out that if the object which  the  parties have in view (1) [1963] 3 W.L.R. 513.  (3) [1908] I-R. 35 1. A. 98. (2) 24 Q.B.D. 742. 882 cannot  be  carried out unless a real title  passed  to  the defendant  the presumption arising out of the  consideration proceeding from the plaintiff would be over-borne.  I say it is  not necessary to pronounce upon this difficult  question because  in  the  present’ case the  respondent’s  claim  to possession  is  based not merely on the basis of  his  title emerging   from  the  source  of  purchase  money  for   the acquisition  of property but also on an  alternative  ground and  this  is  the  second  of  the  grounds  on  which  the respondent rested his claim to recover possession, and  that was as follows. While  the respondent himself was in phvsical Possession  of the  property he had to leave Calcutta on medical advice  in or  about  December  8, 1948 and at that  date  he  put  the defendant Gupta into possession on the understanding that on the respondent’s return to Calcutta the defendant would hand over  to  the plaintiff possession of the premises  and  the management  of the business.  The respondent further  stated that he returned to Calcutta in or about December, 1949  and occupied  one  of the rooms of the suit  property  and  made demands  on  the  defendant  to  hand  over  possession  and management  which  he  failed  to  do.   This  case  of  the respondent  has been concurrently found to be true  by  both the  Courts.   It  would  be seen  that  the  basis  of  the respondent’s  claim  to  possession is  independent  of  and wholly  dissociated  from  the illegal  transaction  of  the original  benami  purchase and falls into  line  with  Sajan Singh’s  case(1).   Not being tainted with  illegality,  the respondent’s claim on this footing is not open to  objection and  as it has been upheld by both the Courts I  agree  that the appeal should stand dismissed and also to the order  for costs proposed by my learned brother. Appeal dismissed. (1) [1960] A. C. 167. 883