Himachal Pradesh High Court
Tenzin Jigme vs . Norbu Bodh & Anr. on 5 August, 2024
Tenzin Jigme Vs. Norbu Bodh & Anr.
.
OMP No. 133 of 2024 in Civil Suit No.56 of 2023 Reserved on: 18.07.2024 05.08.2024 Present: Ms. Ruchika Khachi and Mr. C.D. Negi, Advocates, for non-applicant/ plaintiff.
Mr. R.L. Sood, Senior Advocate with Mr. Akash Thakur, Advocate, for the applicants/defendants.
OMP No. 133 of 2024 The non-applicants/defendants have filed the present application for rejection of the plaint. It has been asserted that the suit is not maintainable and the plaint is liable to be rejected. It was required to be filed under the Commercial Courts Act, 2015. The address of the non-applicant/plaintiff was falsely reflected as a resident of House No. 167, Gurudwara Road Manali, Tehsil Manali, District Kullu, H.P. which is not the correct address. The non-applicant/plaintiff is a resident of Washington DC, United States of America and his address in India is G-3, B-37, Dekling Tabtian Colony, Sahastradhara Road, Dehradun, Uttarakhand.
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He has not filed his Aadhar Card and PAN card which would have disclosed the true addresses of the non-
applicant/plaintiff. The registered sale deed dated 06.12.1988, records defendant No. 1 as the exclusive owner in possession of the property. It further r to mentions that defendant No. 1 was paid a sale consideration of ₹75,000/-. The revenue record also shows defendant No. 1 as the exclusive owner of the property. The names of Mr. Samten or Ms. Dolkar are not found in the sale deed and the revenue records. The non-applicant/plaintiff wrongly claimed the inheritance of these persons. The suit is hopelessly barred by limitation. Mr. Samten expired on 16.11.1999 and the cause of action, if any, accrued on his death.
The non-applicant/plaintiff is not the successor of Mr. Samten or Ms. Dolkar. The non-applicant/plaintiff has not disclosed any cause of action. A suit for specific performance is only maintainable regarding the immovable property. Therefore, it was prayed that the present application be allowed and the plaint be rejected.
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2. The application is opposed by filing a reply asserting that the suit complies with the various provisions of the Civil Procedure Code.
Applicant/Defendant No. 1, Norbu Bodh entered into an agreement with the late Mr Samten (uncle of non-
applicant/plaintiff)
r to
on 29.10.1992 regarding
purchase of the land measuring 0-6 Biswa comprised the over Khata Khtauni No. 73 Khasra No. 1920 Min, 186 Min Salam, measuring 0-6 Biswa situated in Mohal Phati and Kothi, Tehsil Manali, District Kullu, HP for a consideration of ₹75,000/-. Mr. Samten joined as co-
purchaser and he contributed more than half of the sale consideration; however, the sale was executed in the name of applicant/defendant No. 1, even though 50% of the sale consideration was paid by Mr. Samten. The plaintiff is residing at House No. 167, Gurudwara Road Manali, Tehsil Manali, District Kullu, H.P. and visits the United States of America for his business engagement.
The non-applicant/plaintiff is the only legal heir of Ms. Dolkar. The cause of action accrued to the non-
applicant/plaintiff firstly on 24.02.2023 after the death of Ms Dolkar when the applicants/defendants had ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 4 .
leased out the Hotel Tibet and refused to share the profits with the non-applicant/plaintiff, who is the successor/legal heir of late Mr. Samten & Ms. Dolkar.
The cause of action also accrued to the non-applicant/plaintiff on 20.09.2023, when a legal r to notice was issued by the non-applicant/plaintiff and is continuing. The suit is within the limitation. The non-
applicant/plaintiff is the only legal heir of late Mr. Samten & Ms. Dolkar and he had performed their last rites. The suit is maintainable and has been filed for specific performance of the Partnership Deed related to the Hotel, which is an immovable property. Therefore, it was prayed that the present application be dismissed.
3. I have heard Mr R.L. Sood, learned Senior Counsel assisted by Mr Akash Thakur, learned counsel for the applicants/defendants & Ms Ruchika Khachi and Mr C.D. Negi, learned counsel for the non-applicant/plaintiff.
4. Mr R.L. Sood learned Senior Counsel submitted that the suit is not maintainable. As per the plaint, late Mr Samten had contributed 50% of the ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 5 .
amount for the purchase of the land, which was purchased in the name of defendant No. 1. This plea shows that late Mr Samten was the actual owner and the defendant was a benami owner. Such a plea is hit by Benami Transaction (Prohibition) Act, 1988. The r to agreement shows that late Mr. Samten was a non-
agriculturist and his name was not reflected as a purchaser because he was not competent to purchase the property in Himachal Pradesh in view of Section 118 of the Himachal Pradesh Tenancy & Land Reforms Act.
The relief prayed by the plaintiff cannot be granted to him. Hence, he prayed that the application be allowed and the plaint be rejected. He relied upon the judgments of the Hon'ble Supreme Court in Dahiben Vs. Arbindbhai Kalyanji Bhanusali (Gajra) (2020) 7 SCC 366 and Rajendra Bajoria Vs. Hemant Kumar Jalan (2022) 12 SCC 641 in support of his submission.
5. Ms. Ruchika Khachi and Mr. C.D. Negi, learned counsel for the non-applicant/plaintiff submitted that the power under Order VII Rule 11 of CPC is drastic and should be exercised sparingly. The plaint ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 6 discloses a cause of action. The plaintiff is seeking to enforce the Partnership Deed entered between his .
predecessor and defendant No. 1. Such a suit is maintainable before the Civil Court; therefore, they prayed that the application be dismissed.
6. I have given considerable thought to the records carefully.
submissions at the bar and have gone through the
7. The principles for exercising jurisdiction under Order VII Rule 11 were laid down by the Hon'ble Supreme Court in Eldeco Housing & Industries Ltd. v.
Ashok Vidyarthi, 2023 SCC OnLine SC 1612 wherein it was observed:
"17. In Kamala v. K. T. Eshwara Sa 2008 (12) SCC 661, this Court opined that for invoking clause (d) of Order VII Rule 11 CPC, only the averments in the plaint would be relevant. For this purpose, there cannot be any addition or subtraction. No amount of evidence can be looked into. The issue of the merits of the matter would not be within the realm of the Court at that stage. The Court at that stage would not consider any evidence or enter a disputed question of fact of law. Relevant paragraphs thereof are extracted below:
"21. Order 7 Rule 11(d) of the Code has limited application. It must be shown that the suit is barred under any law. Such a conclusion must be drawn from the averments made in the plaint. Different ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 7 clauses in Order 7 Rule 11, in our opinion, .
should not be mixed up. Whereas in a given case, an application for rejection of the plaint may be filed on more than one ground specified in various sub-clauses thereof, a clear finding to that effect must be arrived at. What would be relevant for invoking clause (d) of Order 7 Rule 11 of the Code are the averments made in the plaint.
For that purpose, there cannot be any addition or subtraction. The absence of jurisdiction on the part of a court can be invoked at different stages and under different provisions of the Code. Order 7 Rule 11 of the Code is one, Order 14 Rule 2 is another.
22. For the purpose of invoking Order 7 Rule 11(d) of the Code, no amount of evidence can be looked into. The issues on merit of the matter which may arise between the parties would not be within the realm of the court at that stage. All issues shall not be the subject matter of an order under the said provision.
23. The principles of res judicata, when attracted, would bar another suit in view of Section 12 of the Code. The question involving a mixed question of law and fact which may require not only examination of the plaint but also other evidence and the order passed in the earlier suit may be taken up either as a preliminary issue or at the final hearing, but, the said question cannot be determined at that stage.
24. It is one thing to say that the averments made in the plaint on their face disclose no cause of action, but it is another thing to say that although the same discloses a cause of action, the same is barred by law.
25. The decisions rendered by this Court as well as by various High Courts are not uniform on this behalf. But, then the broad principle ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 8 which can be culled out therefrom is that the .
court at that stage would not consider any evidence or enter into a disputed question of fact or law. In the event, the jurisdiction of the court is found to be barred by any law, meaning thereby, the subject-matter thereof, the application for rejection of plaint should be entertained." (emphasis supplied)
18. Similar was the view expressed in Shakti Bhog Food Industries Ltd. v. Central Bank of India (2020) 17 SCC 260: 2020:INSC:413 and Srihari Hanumandas Totala v. Hemant Vithal Kama (2021) 9 SCC 99: 2011:INSC:387.
19. The law applicable for deciding an application under Order VII Rule 11 CPC was summed up by this Court in Dahiben v.
Arvindbhai Kalyanji Bhanusali (Gajra) dead through legal representatives (2020) 7 SCC 366: 2020: INSC:450. Relevant parts of paragraph 23 thereof are extracted below:
"23 to 23.1 x x x 23.2. The remedy under Order 7 Rule 11 is an independent and special remedy, wherein the court is empowered to summarily dismiss a suit at the threshold, without proceeding to record evidence and conducting a trial, on the basis of the evidence adduced, if it is satisfied that the action should be terminated on any of the grounds contained in this provision. 23.3. The underlying object of Order 7 Rule 11(a) is that if in a suit, no cause of action is disclosed, or the suit is barred by limitation under Rule 11(d), the court would not permit the plaintiff to unnecessarily protract the proceedings in the suit. In such a case, it would be necessary to put an end to the sham litigation, so that further judicial time is not wasted.::: Downloaded on - 05/08/2024 20:34:50 :::CIS 9
23.4. In Azhar Hussain v. Rajiv Gandhi, 1986 .
Supp SCC 315, this Court held that the whole purpose of conferment of powers under this provision is to ensure that a litigation which is meaningless, and bound to prove abortive, should not be permitted to waste judicial time of the court, in the following words:
"12. ... The whole purpose of conferment of such powers is to ensure that a litigation which is meaningless, and bound to prove abortive should not be rpermitted to occupy the time of the court and exercise the mind of the respondent. The sword of Damocles need not be kept hanging over his head unnecessarily without point or purpose.
Even in an ordinary civil litigation, the court readily exercises the power to reject a plaint, if it does not disclose any cause of action."
23.5. The power conferred on the court to terminate a civil action is, however, a drastic one and the conditions enumerated in Order 7 Rule 11 are required to be strictly adhered to.
23.6. Under Order 7 Rule 11, a duty is cast on the court to determine whether the plaint discloses a cause of action by scrutinising the averments in the plaint [Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I, (2004) 9 SCC 512], read in conjunction with the documents relied upon, or whether the suit is barred by any law.
xxxxxxxxx 23.9. In the exercise of power under this provision, the court would determine if the assertions made in the plaint are contrary to statutory law, or judicial dicta, for ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 10 deciding whether a case for rejecting the .
plaint at the threshold is made out.
23.10. At this stage, the pleas taken by the defendant in the written statement and application for rejection of the plaint on the merits, would be irrelevant, and cannot be adverted to, or taken into consideration.
[Sopan Sukhdeo Sable v. Charity Commr., (2004) 3 SCC 137] entirety,
23.11. The test for exercising the power under Order 7 Rule 11 is that if the averments made in the plaint are taken in r in conjunction with the documents relied upon, would the same result in a decree being passed. This test was laid down in Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I [Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I, (2004) 9 SCC 512] which reads as : (SCC p. 562, para 139) "139. Whether a plaint discloses a cause of action or not is essentially a question of fact. But whether it does or does not must be found out from reading the plaint itself. For the said purpose, the averments made in the plaint in their entirety must be held to be correct. The test is as to whether if the averments made in the plaint are taken to be correct in their entirety, a decree would be passed."
23.12. In Hardesh Ores (P) Ltd. v. Hede & Co. [Hardesh Ores (P) Ltd. v. Hede & Co., (2007) 5 SCC 614] the Court further held that it is not permissible to cull out a sentence or a passage and to read it in isolation. It is the substance, and not merely the form, which has to be looked into. The plaint has to be construed as it stands, without addition or subtraction of ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 11 words. If the allegations in the plaint prima .
facie show a cause of action, the court cannot embark upon an enquiry whether the allegations are true in fact. D. Ramachandran v. R.V. Janakiraman, (1999) 3 SCC 267; See also Vijay Pratap Singh v. Dukh Haran Nath Singh, AIR 1962 SC 941]. 23.13. If on a meaningful reading of the plaint, it is found that the suit is manifestly vexatious and without any merit, and does not disclose a right to sue, the court would be justified in exercising the power under Order 7 Rule 11 CPC.
23.14. The power under Order 7 Rule 11 CPC may be exercised by the court at any stage of the suit, either before registering the plaint, after issuing summons to the defendant, or before the conclusion of the trial, as held by this Court in the judgment of Saleem Bhai v. State of Maharashtra, (2003) 1 SCC 557. The plea that once issues are framed, the matter must necessarily go to trial was repelled by this Court in Azhar Hussain v. Rajiv Gandhi, 1986 Supp SCC 315. Followed in Manvendrasinhji Ranjitsinhji Jadeja v. Vijaykunverba, 1998 SCC OnLine Guj 281: (1998) 2 GLH 823.
23.15. The provision of Order 7 Rule 11 is mandatory in nature. It states that the plaint "shall" be rejected if any of the grounds specified in clauses (a) to (e) are made out. If the court finds that the plaint does not disclose a cause of action, or that the suit is barred by any law, the court has no option, but to reject the plaint."
20. The same view was reiterated in Kum. Geetha v. Nanjundaswamy2023 SCC OnLine SC 1407: 2023 INC 964."
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8. In the present case, the plaintiff filed a Civil Suit seeking specific performance of the agreement dated 29.10.1992, vide which the parties agreed to execute the Partnership Deed regarding the construction of Hotel Tibet. It was pleaded that late Mr. r to Samten was joined as a co-purchaser. He contributed the half amount of the sale consideration of ₹75,000/-.
The land was purchased in the name of defendant No. 1 with a sale consideration paid by late Mr. Samten. A hotel was constructed by defendant No. 1 in which he spent 40% and late Mr. Samten spent 60% of the cost of construction. A partnership deed was entered between the wives of late Mr. Samten and defendant No. 1 in which the share of the parties was defined. Late Mr. Samten died on 16.11.1999. His wife continued his business. The building had two residential sets one of which was in possession of Ms Dolkar wife of late Mr Samten and another was in possession of defendant No.
1. Ms Dolkar died on 24.02.2023. The plaintiff is her successor and sole legal heir. The defendant No. 1 leased the hotel and refused to pay the money to the plaintiff.
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Hence, the suit was filed to seek the specific performance of the Partnership Deed.
9. The agreement dated 29.10.1992 (Annexure P1) reads that an agreement was executed between defendant No. 1 and Mr. Samten. Defendant No. 1 purchased the land vide the sale deed dated 06.12.1988 for a consideration of ₹75,000/-. Mr Samten was a non-
agriculturist and could not join as a co-purchaser because he was a non-agriculturist but he had contributed half of the consideration amount for the purchase of the land. Defendant No. 1 contributed 40% and Mr Samten contributed 60% amount for the construction of Hotel Tibet. Defendant No. 1 acknowledged the half share of Mr. Samten in the land and 60% of his share in the hotel. Defendant No. 1 would execute the necessary documents and General Power of Attorney authorizing Mr. Samten to deal with the land and structure. Defendant No. 1 recognised the right of Mr. Samten to deal with the property in any manner he liked.
::: Downloaded on - 05/08/2024 20:34:50 :::CIS 1410. It is apparent from the agreement that late .
Mr. Samten was a non-agriculturist and incapable of purchasing the property. Section 118 of Himachal Pradesh Tenancy and Land Reforms Act provides that no transfer of land by way of sale, gift, Will, exchange, lease, or mortgage with possession in any manner shall be valid in favour of a person who is not an agriculturist.
Thus, Section 118 of the Himachal Pradesh Tenancy and Land Reforms Act creates an absolute bar for the sale of the property in favour of a non-agriculturist. Mr. Samten could not have purchased the property because he was a non-agriculturist. Any deed acknowledging that he had contributed 50% of the amount and that he is entitled to the benefit of such contribution is contrary to the provisions of the Himachal Pradesh Tenancy and Land Reforms Act and cannot be enforced.
11. Section 23 of the Indian Contract Act,1872 defines the consideration or object of an agreement as lawful. It provides that if the consideration or the object of an agreement is forbidden by law or is of such nature that if permitted. It would defeat the provisions of any law; the consideration of the object is unlawful and ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 15 every agreement of which the object or consideration is unlawful is void. In the present case, the object of the .
agreement is to confer the ownership of a 50% share upon late Mr. Samten, who was a non-agriculturist, any purchase by a non-agriculturist is prohibited by Section 118 of the Transfer of Property Act and such an agreement recognition.
is
r void
and incapable of any legal
12. Ms. Ruchika Khachi, learned counsel for the plaintiff submitted that defendant No. 1 acknowledged the title of Mr. Samten and he is bound to return the benefits of the funds received by him. This submission cannot be accepted. It was laid down by the Hon'ble Supreme Court in Loop Telecom & Trading Ltd.
v. Union of India, (2022) 6 SCC 762: (2022) 3 SCC (Cri) 733 : (2022) 3 SCC (Civ) 563: 2022 SCC OnLine SC 260 that where both the parties were party to an illegal agreement, the restitution cannot be claimed. It was observed:
"60. Section 65 of the Contract Act recognises the principle of restitution, particularly when a contract is discovered to be or becomes void. It stipulates thus:::: Downloaded on - 05/08/2024 20:34:50 :::CIS 16
"65. Obligation of person who has received advantage under void agreement, or contract .
that becomes void.--When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it."
61. In Pollock & Mulla's seminal treatise on the Contract Act [R. Yashod Vardhan and Chitra Narayan, Pollock & Mulla's Indian Contract and Specific Relief Acts, Vol. I (16th Edn., LexisNexis).], it has been noted that Section 65 does not operate in derogation of the maxim in pari delicto potior est conditio possidentis:
"Section 65 is not in derogation of the common law maxims ex dolo malo non oritur actio and in pari delicto potior est conditio possidentis; and only those cases as are not covered by these maxims can attract the application of the provision of Section 65 on the footing that when an agreement in its inception was not void and it was not hit by the maxims but is discovered to be void subsequently, right to restitution of the advantage received under such agreement is secured on equitable consideration. The section has been held not to apply where both parties knew of the illegality at the time the agreement was made and were in pari delicto."
Thus, the application of Section 65 of the Contract Act, 1872 has to be limited to those cases where the party claiming restitution itself was not in pari delicto.
62. In Principles of Law of Restitution [ Graham Virgo, Principles of the Law of Restitution (3rd Edn., OUP) p. 710.], it has been noted that all claims for restitution are subject to a defence ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 17 of illegality. The genesis of this defence is in the legal maxim ex turpi causa non oritur .
actio (no action can arise from a bad cause). A court will not assist those who aim to perpetuate illegality. This rule was initially recognised by the House of Lords in its decision in Holman v. Johnson [Holman v. Johnson, (1775) 1 Cowp 341 at p. 343: 98 ER 1120 at p. 1121]. Lord Mansfield held: (ER p. 1121) "The objection, that a contract is immoral or illegal as between the plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the Court says he has no right to be assisted."
(emphasis supplied)
63. The Principles of Law of Restitution subsequently notes that in pari delicto potior est conditio possidentis is a way of qualifying the ex turpi causa defence [ Graham Virgo, The Principles of the Law of Restitution (3rd Edn., OUP) p. 711.]:
"This in pari delicto principle enables the court to analyse the particular circumstances of the case to determine whether the claimant is less responsible for the illegality than the defendant, for then, ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 18 as between the claimant and the defendant, the just result is that the claimant should .
not be denied relief, since the parties are not in pari delicto. But where the claimant is more responsible for the illegality or the parties are considered to be equally responsible, the in pari delicto principle applies and restitution will be denied."
(emphasis supplied)
64. Thus, when the party claiming restitution is equally or more responsible for the illegality of a contract, they are considered in pari delicto.
65. In the decision of the UK Supreme Court in Patel v. Mirza [Patel v. Mirza, (2016) 3 WLR 399: 2016 UKSC 42], Lord Sumption, JSC has succinctly explained the nature of the inquiry to determine whether a party is in pari delicto:
(WLR pp. 466-67, paras 241-43) "241. To the principle that a person may not rely on his own illegal act in support of his claim, there are significant exceptions, which are as old as the principle itself and generally inherent in it. These are broadly summed up in the proposition that the illegality principle is available only where the parties were in pari delicto in relation to the illegal act. This principle must not be misunderstood. It does not authorise a general inquiry into their relative blameworthiness.
The question is whether they were [Ed. : The word between two asterisks has been emphasised in the original as well.] legally [Ed. : The word between two asterisks has been emphasised in the original as well.] on the same footing. The case law discloses two main categories of cases where the law regards the parties as not being in pari delicto, but both are based on the same principle.
::: Downloaded on - 05/08/2024 20:34:50 :::CIS 19242. One comprises cases in which the claimant's participation in the illegal act is .
treated as involuntary: for example, it may have been brought about by fraud, undue influence or duress on the part of the defendant who seeks to invoke the defence.
...
243. The other category comprises cases in which the application of the illegality principle would be inconsistent with the rule of law which makes the act illegal. The paradigm case is a rule of law intended to protect persons such as the plaintiff against exploitation by the likes of the defendant.
Such a rule will commonly require the plaintiff to have a remedy notwithstanding that he participated in its breach."
(emphasis supplied) Thus, in determining a claim of restitution, the claiming party's legal footing in relation to the illegal act (and in comparison, to the defendant) must be understood. Unless the party claiming restitution participated in the illegal act involuntarily or the rule of law offers them protection against the defendant, they would be held to be in pari delicto and therefore, their claim for restitution will fail.
66. The position in India is similar to that of Kuju Collieries Ltd. v. Jharkhand Mines Ltd. [Kuju Collieries Ltd. v. Jharkhand Mines Ltd., (1974) 2 SCC 533], where a Bench of three learned Judges of this Court relied on a judgment [Budhulal v. Deccan Banking Co., 1954 SCC OnLine Hyd 187: AIR 1955 Hyd 69: ILR 1955 Hyd 101] of a five-Judge Bench of the then Hyderabad High Court. While construing the provisions of Section 65, this Court held: (Kuju Collieries case [Kuju Collieries Ltd. v. Jharkhand Mines Ltd., (1974) 2 SCC 533], SCC pp. 536-37, para 8) ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 20 "8. A Full Bench of five Judges of the .
Hyderabad High Court in Budhulal v. Deccan Banking Co. [Budhulal v. Deccan Banking Co., 1954 SCC OnLine Hyd 187: AIR 1955 Hyd 69:
ILR 1955 Hyd 101] speaking through our Brother, Jaganmohan Reddy, J. as he then was, referred with approval to these observations [Harnath Kuar v. Indar Bahadur Singh, 1922 SCC OnLine PC 64] of the Privy Council. They then went on to refer to the observations of Pollock and Mulla in their treatise on Indian Contract and Specific Relief Acts, 7th Edn. to the effect that Section 65 of the Contract Act, 1872 does not apply to agreements which are void under Section 24 by reason of an unlawful consideration or object and there being no other provision in the Act under which money paid for an unlawful purpose may be recovered back, an analogy of English law will be the best guide. They then referred to the reasoning of the learned authors that if the view of the Privy Council is right, namely, that "agreements discovered to be void" apply to all agreements which are ab initio void including agreements based on unlawful consideration, it follows that the person who has paid money or transferred property to another for an illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carried into execution and both the transferor and transferee are in pari delicto. The Bench then proceeded to observe: (Budhulal case [Budhulal v. Deccan Banking Co., 1954 SCC OnLine Hyd 187: AIR 1955 Hyd 69: ILR 1955 Hyd 101], SCC OnLine Hyd paras 33-36) '33. In our opinion, the view of the learned authors is neither supported by any of the subsequent Privy Council decisions nor is it consistent with the ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 21 natural meaning to be given to the provisions of Section 65. The section .
using the words "when an agreement is discovered to be void" means nothing more nor less than when the plaintiff comes to know or finds out that the agreement is void. The word "discovery" would imply the pre-existence of something which is subsequently found out and it may be observed that Section 66, Hyderabad Contract Act makes the knowledge (Ilm) of the agreement being void as one of the pre-requisites for restitution and is used in the sense of an agreement being discovered to be void. If knowledge is an essential requisite even an agreement ab initio void can be discovered to be void subsequently. There may be cases where parties enter into an agreement honestly thinking that it is a perfectly legal agreement and where one of them sues the other or wants the other to act on it, it is then that he may discover it to be void. There is nothing specific in Section 65 of the Contract Act, 1872 or its corresponding section of the Hyderabad Contract Act to make it inapplicable to such cases.
34. A person who, however, gives money for an unlawful purpose knowing it to be so, or in such circumstances that knowledge of illegality or unlawfulness can as a finding of fact be imputed to him, the agreement under which the payment is made cannot on his part be said to be discovered to be void. The criticism is that if the aforesaid view is right then a person who has paid money or transferred property to another for an illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carried into ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 22 execution, notwithstanding the fact that both the transferor and transferee are in .
pari delicto, in our view, overlooks the fact that the courts do not assist a person who comes with unclean hands. In such cases, the defendant possesses an advantage over the plaintiff -- in pari delicto potior est conditio defendentio.
35. Section 84 of the Trusts Act, 1882, however, has made an exception in a case:
"84. Transfer for illegal purpose. -- Where the owner of property r transfers it to another for an illegal purpose and such purpose is not carried into execution, or the transferor is not as guilty as the transferee or the effect of permitting the transferee to retain the property might be to defeat the provisions of any law, the transferee must hold the property for the benefit of the transferor."
36. This specific provision made by the legislature cannot be taken advantage of in derogation of the principle that Section 65, Contract Act, is inapplicable where the object of the agreement was illegal to the knowledge of both parties at the time it was made. In such a case the agreement would be void ab initio and there would be no room for the subsequent discovery of that fact.' We consider that this criticism as well as the view taken by the Bench is justified. It has rightly pointed out that if both the transferor and transferee are in pari delicto the courts do not assist them."
(emphasis supplied) ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 23 While upholding the view of the Hyderabad High Court, this Court held "it [the Full Bench .
[Budhulal v. Deccan Banking Co., 1954 SCC OnLine Hyd 187: AIR 1955 Hyd 69: ILR 1955 Hyd 101] of the Hyderabad High Court] has rightly pointed out that if both the transferor and transferee are in pari delicto the courts do not assist them".
67. In an earlier decision of this Court in Immani Appa Rao v. Gollapalli Ramalingamurthi [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC 370] ("Immani Appa Rao"), a three-Judge Bench held that where both the parties before the Court are confederates in the fraud, the Court must lean in favour of the approach which would be less injurious to public interest. P.B. Gajendragadkar, J. (as he then was), speaking for the Court, held: (AIR p.
375, para 12) "12. Reported decisions bearing on this question show that consideration of this problem often gives rise to what may be described as a battle of legal maxims. The appellants emphasised that the doctrine which is pre-eminently applicable to the present case is ex dolo malo non orituractio or ex turpi causa non oritur actio. In other words, they contended that the right of action cannot arise out of fraud or out of transgression of law; and according to them it is necessary in such a case that possession should rest where it lies in pari delicto potior est conditio possidentis; where each party is equally in fraud the law favours him who is actually in possession, or where both parties are equally guilty the estate will lie where it falls. On the other hand, Respondent 1 argues that the proper maxim to apply is nemo allegans suam turpitudinum audiendum est, whoever has ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 24 first to plead turpitudinum should fail; that party fails who first has to allege fraud in .
which he participated. In other words, the principle invoked by Respondent 1 is that a man cannot plead his own fraud. In deciding the question as to which maxim should govern the present case it is necessary to recall what Lord Wright, M.R. observed about these maxims in Berg v. Sadler [Berg v. Sadler, (1937) 2 KB 158 (CA)], KB at p. 162. Referring to the maxim ex turpi causa non oritur actio Lord Wright observed that : (KB p. 162) '... This [maxim], though veiled in the dignity of learned language, is a statement of a principle of great importance; but like most maxims, it is much too vague and much too general to admit of application without a careful consideration of the circumstances and of the various definite rules which have been laid down by the authorities.' Therefore, in deciding the question raised in the present appeal it would be necessary for us to consider carefully the true scope and effect of the maxims pressed into service by the rival parties, and to enquire which of the maxims would be relevant and applicable in the circumstances of the case. It is common ground that the approach of the Court in determining the present dispute must be conditioned solely by considerations of public policy. Which principle would be more conducive to, and more consistent with, public interest, that is the crux of the matter. To put it differently, having regard to the fact that both the parties before the Court are confederates in the fraud, which approach would be less injurious to the public interest. Whichever approach is adopted one party would succeed and the other would fail, and so it is necessary ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 25 to enquire as to which party's success would be less injurious to the public interest."
.
(emphasis supplied)
68. The principle which was enunciated in the judgment in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC 370] has been more recently applied in a decision of a three-Judge Bench of this Court in Narayanamma v. Govindappa [Narayanamma v. Govindappa, (2019) 19 SCC 42: (2020) 4 SCC (Civ) 363]. The Court held: (Narayanamma case [Narayanamma v. Govindappa, (2019) 19 SCC 42 : (2020) 4 SCC (Civ) 363], SCC p. 59, para
28) "28. Now, let us apply the other test laid down in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC 370]. At the cost of repetition, both parties are common participators in the illegality. In such a situation, the balance of justice would tilt in whose favour is the question. As held in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC 370], if the decree is granted in favour of the plaintiff on the basis of an illegal agreement which is hit by a statute, it will be rendering an active assistance of the court in enforcing an agreement which is contrary to law. As against this, if the balance is tilted towards the defendants, no doubt that they would stand to benefit even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 26 Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC 370], the first course would be clearly and .
patently inconsistent with the public interest whereas, the latter course is lesser injurious to the public interest than the former."
69. Hence, in adjudicating a claim of restitution under Section 65 of the Contract Act, the court must determine the illegality which caused the contract to become void and the role the party claiming restitution has played in it. If the party claiming restitution was equally or more responsible for the illegality (in comparison to the defendant), there shall be no cause for restitution. This has to be determined by the facts of each case.
13. Thus, the plaintiff cannot fall back upon the Principle of Restitution to claim the benefits arising out of an illegal contract where he knew the illegality of the contract. In the present case, the agreement shows that Mr. Samten was aware of the fact that he could not purchase the property being a non-agriculturist and thus, he was a party to the illegality of acquiring the land in contravention of Section 118 of Himachal Pradesh Tenancy & Land Reforms Act; hence, no restitution can be claimed by him or on his behalf.
14. A perusal of the agreement shows that the land was purchased in the name of defendant No. 1 but 50% of the contribution was made by Mr. Samten.
::: Downloaded on - 05/08/2024 20:34:50 :::CIS 27Section 3 of the Benami Transaction (Prohibition) Act, 1988, defines the Benami Transaction as any .
transaction in which property is transferred to one person for a consideration paid or provided by another person. In the present case, the property was transferred to defendant No. 1 exclusively, whereas 50% of the contribution as per the plaint and agreement was made by Mr. Samten. Hence, the transaction was Benami regarding the 50% of the share within the meaning of Section 2(a) of the Benami Transaction (Prohibition) Act, 1988.
15. Section 4 (1) of the Benami Transaction (Prohibition) Act provides that no suit, claim or action to enforce any right in respect of any property held Benami lies against the person in whose name the property is held or against any other person by or on behalf of a person claiming to be a real owner of such property. In the present case, the suit filed by the plaintiff (the successor of Mr Samten -real owner of the half share) seeking to establish his right over the property and claiming the benefits is hit by Section 4 (1) of the Benami Transaction (Prohibition) Act and does ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 28 .
not lie before the Court. It was laid down by Chattisgarh High Court in Saurabh Sharma v. Bankelal, 2020 SCC OnLine Chh 1472, that there is a total prohibition for any suit based on the Benami transaction and the plaintiff is not entitled to get any decree in such suit or any appeal.
It was observed:
r to "5. The plaintiff claimed that his father purchased the suit property on 08/05/1981 in the name of defendant No. 1 and claimed a decree for declaration of title.
6. The Benami Transaction (Prohibition) Act, 1988 came into force w.e.f. 05/09/1988. Section 4 of the Act provides for prohibition of the right to recover property held benami.
Section 4 (1) of the Act provides that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.
7. The Supreme Court, in the matter of Om Prakash v. Jai Prakash (1992) 1 SCC 710: AIR 1992 SC 885 has held that by virtue of Section 4 of the Act, there is a total prohibition against any suit based on benami transaction and the plaintiff/respondent is not entitled to get any decree in such a suit or appeal.
8. Thus, the suit filed by the plaintiff seeking a declaration of title on the basis that the suit property was purchased by his father on 08/05/1981 in the name of defendant No. 1 by making payment of the consideration amount to the seller Ameena Bai is totally barred by ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 29 Section 4(1) of the Act of 1988. In view of that, .
I do not find any illegality or perversity in the finding recorded by both the Courts below that plaintiff has failed to prove that his father purchased the suit property on 08/05/1981 in the name of defendant No. 1 and therefore, he is not entitled for a decree for declaration of title."
16. Therefore, the suit for specific performance of the agreement providing that 50% of the amount was contributed by Mr Samten and the property was purchased in the name of defendant No. 1 will be hit by Section 4 of Benami Transaction (Prohibition) Act and cannot be maintained before the Civil Court.
17. The plaintiff claimed that a Partnership Deed was executed between Ms Sonam and Ms Dolkar regarding Hotel Tibet. The plaintiff is the successor of Ms Dolkar and is entitled to enforce the partnership. In Rajendra Bajoria v. Hemant Kumar Jalan, (2022) 12 SCC 641, the plaintiff filed a civil suit for the enforcement of the partnership executed by the predecessor of the parties claiming the assets, representation, dissolution of the firm and disclosure of full particulars. The plaint was rejected by Calcutta High Court on the ground that it did not disclose the cause of action. It was held by the ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 30 .
Hon'ble Supreme Court that the relief claimed by the plaintiff could not be granted because only the partners of the firm were entitled to the representation and dissolution. It was observed:-
"11. It will also be relevant to refer to Clauses 4, 6 and 7 of the partnership deed dated 6-12-1943:
"4. That upon the death of any partner, the partnership shall not be automatically dissolved but the surviving partners may admit the legal representative of the deceased unto the partnership by mutual consent.
5. ***
6. In case of the death of any partner or retirement during the continuance of the partnership shall be deemed to exist only up to the end of the accounting period of the year during which the death or retirement occurs and the estate of the deceased partner or the retiring partner shall be entitled to receive and be responsible for all profits and losses of the partnership up to the end of the accounting period as the case may be.
7. This indenture further witnesseth that the said parties hereto hereby mutually covenant and agree that they will carry on the said business in partnership until dissolution under and in accordance with the provisions and stipulation hereinbefore stated or contained in the said indenture dated the 1st day of September 1938 so far as the same respectively are now subsisting and capable of taking and are applicable to the altered circumstances hereinbefore appearing and any dispute in relation to the said partnership shall be decided by arbitration according to the provisions of the Indian Arbitration Act and for ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 31 that purpose, each of the disputing parties may .
nominate one arbitrator. Provided however that none of the parties hereto shall at any time be entitled to apply to any court of law for the dissolution of the partnership or appointment of a Receiver over the partnership or any portion of its assets."
12. From the perusal of the plaint, it could be gathered that the case of the plaintiffs is that in spite of the demise of the three original partners of the partnership firm, through whom the plaintiffs were claiming, the defendants have been carrying on the business of the partnership firm. It is their case that the accounts of the partnership firm have not been finalised and that the share of the profits of the partnership firm has not been paid to them. It is also the case of the plaintiffs that the defendants are seeking to represent the partnership firm to the exclusion of the plaintiffs and that the defendants are siphoning off funds of the partnership firm. It is their case that they along with the defendants are entitled to the assets and properties of the partnership firm as legal heirs of the original partners of the partnership firm, reconstituted under the partnership deed dated 6-12-1943.
xxxxxx
18. Therefore, the question that will have to be considered is as to whether the reliefs as claimed in the plaint by the plaintiffs could be granted or not. We do not propose to do that exercise, inasmuch as the Division Bench of the High Court has elaborately considered the issue as to whether, applying the provisions of the said Act read with the aforesaid clauses in the partnership deed, the reliefs, as claimed in the plaint, could be granted or not. The relevant discussion by the High Court reads thus:
(Hemant Kumar Jalan case [Hemant Kumar Jalan v. Rajendra Bajoria, 2018 SCC OnLine Cal 6331], SCC OnLine Cal paras 32-37) ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 32 "32. Let us take the prayers one by one. The first .
prayer is for a declaration that the plaintiffs and the defendants are entitled to the assets and properties of the said firm as the legal heirs of the original partners. It is trite law that the partners of a firm are entitled only to the profits of the firm and upon dissolution of the firm they are entitled to the surplus of the sale proceeds of the assets and properties of the firm, if any after meeting the liabilities of the firm, in the share agreed upon in the partnership deed. The partners do not have any right, title or interest in respect of the assets and properties of a firm so long as the firm is carrying on business. Hence, the plaintiffs as legal heirs of some of the original partners cannot maintain any claim in respect of the assets and properties of the said firm. Their prayer for declaration of co-ownership of the assets and properties of the said firm is not maintainable in law.
33. The second prayer in the plaint is for a declaration that the plaintiffs along with the defendants are entitled to represent the firm in all proceedings before the authorities concerned of the State of Bihar for the acquisition of its Bhagalpur land. The framing of this prayer shows that this is a consequential relief claimed by the plaintiffs which can only be granted if the first prayer is allowed. Since, in our opinion, Prayer (a) of the plaint cannot be granted in law, Prayer (b) also cannot be granted.
34. Prayer (c) is also a consequential relief. Only if the plaintiffs were entitled to claim Prayer (a), they could claim Prayer (c). We are not on whether or not the plaintiffs will succeed in obtaining Prayer (a). According to us, the plaintiffs are not even entitled to pray for the first relief indicated above as the same cannot be granted under the law of the land. Consequently, Prayer (c) also cannot be granted.
::: Downloaded on - 05/08/2024 20:34:50 :::CIS 3335. Prayers (d) and (e) both pertain to the .
dissolution of the firm. Prayer (e) is for a decree of dissolution and for winding up of the affairs of the firm. Prayer (d) is for full accounts of the firm for the purpose of its dissolution. However, it is settled law that only the partners of a firm can seek dissolution of the firm. Admittedly, the plaintiffs are not partners of the said firm. Section 39 of the Partnership Act provides that the dissolution of a partnership between all the partners of a firm is called "the dissolution of the firm". Section 40 provides that a firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.
Section 41 provides for the compulsory dissolution of a firm. Section 42 stipulates that the happening of certain contingencies will cause the dissolution of a firm but this is subject to a contract between the partners. A partnership-at- will may be dissolved by any partner giving notice in writing to the other partners of his intention to dissolve the firm, as provided in Section 43 of the Act. Section 44 empowers the court to dissolve a firm on the grounds mentioned therein in a suit of a partner.
36. Thus, it is clear that it is only a partner of a firm who can seek dissolution of the firm. The dissolution of a firm cannot be ordered by the court at the instance of a non-partner. Hence, the plaintiffs are not entitled to claim dissolution of the said firm. Consequently, they are also not entitled to pray for accounts for the purpose of dissolution of the firm.
37. What should the Court do if it finds that even taking the averments in the plaint at face value, not one of the reliefs claimed in the plaint can be granted? Should the Court send the parties to trial? We think not. It will be an exercise in futility. It will be a waste of time, money and energy for both the plaintiffs and the defendants as well as an unnecessary consumption of the ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 34 Court's time. It will not be fair to compel the .
defendants to go through the ordinarily long-
drawn process of trial of a suit at huge expense, not to speak of the anxiety and un-peace of mind caused by litigation hanging over one's head like Damocles's sword. No purpose will be served by allowing the suit to proceed to trial since the prayers as framed cannot be allowed on the basis of the pleadings in the plaint. The plaintiffs have not prayed for leave to amend the plaint. When the court is of the view just by reading the plaint alone and assuming the averments made in the plaint to be correct that none of the reliefs claimed can be granted in law since the plaintiffs are not entitled to claim such reliefs, the Court should reject the plaint as disclosing no cause of action. The reliefs claimed in a plaint flow from and are the culmination of the cause of action pleaded in the plaint. The cause of action pleaded and the prayers made in a plaint are inextricably intertwined. In the present case, the cause of action pleaded and the reliefs claimed are not recognised by the law of the land. Such a suit should not be kept alive to go to trial."
(emphasis in original) xxxxx
21. We are in agreement with the Division Bench of the Calcutta High Court which, upon an elaborate scrutiny of the averments made in the plaint, the reliefs claimed therein, the provisions of the said Act and the clauses of the partnership deed, came to the conclusion that the reliefs as sought in the plaint, cannot be granted.
18. In the present case, the Partnership Deed (Annexure P-2) specifically mentions in Clause 10 that the duration of the firm shall be "Partnership at Will".
As per Section 42 of the Partnership Act, a partnership ::: Downloaded on - 05/08/2024 20:34:50 :::CIS 35 is dissolved by the death of a partner unless there is a contract to the contrary. Since there is no contract to .
the contrary, therefore, the partnership dissolved on the death of Ms Dolkar and is incapable of enforcement after her death.
19. Therefore, even if all the allegations in the r to plaint are taken to be correct, the plaintiff cannot be granted any relief because of the prohibition contained in Section 118 of the Transfer of Property Act, Section 4 of the Benami Transaction (Prohibition) Act and the partnership, if any, stood dissolved on the death of Ms Dolkar and cannot be enforced by the legal heir. It is a futile exercise to continue with the suit. Hence, the plaint is ordered to be rejected.
20. The present application stands disposed of.
Civil Suit No. 56 of 2023 In view of the order passed in OMP No. 133of 2024, the Civil Suit is disposed of, so also pending miscellaneous application(s), if any.
(Rakesh Kainthla) Judge 05th August, 2024(Shamsh Tabrez) ::: Downloaded on - 05/08/2024 20:34:50 :::CIS