Himachal Pradesh High Court
Vinoj Kumar Sharma & Another vs State Of H.P. & Another on 8 April, 2025
2025:HHC:9585
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Cr. Revision Nos. 18 and 108 of 2012
Reserved on: 28.03.2025
Date of Decision: 8th 04.2025
1. Cr. Revision No.18 of 2012
Vinoj Kumar Sharma & another
...Petitioner
Versus
State of H.P. & another ...Respondents
2. Cr. Revision No. 108 of 2012
Ashutosh Gupta
...Petitioner
Versus
Vinoj Kumar Sharma & others
...Respondents
Coram
Hon'ble Mr Justice Rakesh Kainthla, Judge.
Whether approved for reporting?1 Yes
For the Petitioner(s) : Mr. N.S. Chandel, Senior
Advocate with Ms. Shwetima
Dogra and Mr. Digvijay Singh,
Advocates for the petitioners
in Cr. Revision No. 18 of
2012 and for respondents Nos
1 and 2 in Cr. Revision No. 108
of 2012.
1
Whether reporters of Local Papers may be allowed to see the judgment? Yes.
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Mr. Nitin Thakur, Advocate,
for the petitioner in
Cr. Revision No. 108 of 2012
and for respondent No.2 in
Cr. Revision No. 18 of 2012.
For the Respondents/State Mr. Ajit Sharma, Deputy
Advocate General, for
respondent-State in both the
petitions.
Rakesh Kainthla, Judge
Since both these revision petitions emanate out of a
common order dated 11.01.2012, passed by learned Special Judge,
Sirmour at Nahan, (Learned Trial Court) hence, the same are
taken up together for consideration and disposal by way of a
common judgment.
2. The present revision petitions are directed against
the order dated 11.01.2012, passed by learned Special Judge,
Sirmour at Nahan, Himachal Pradesh, vide which an amount of
₹14,50,000/- along with interest was ordered to be paid to
Ashutosh Gupta (Petitioner in Cr. Revision No. 108 of 2012)
(applicant before the learned Trial Court) subject to furnishing
indemnity and surety bonds with an undertaking to pay the
amount to the person held entitled to it by the Civil Court, High
Court or Hon'ble Supreme Court and the applications filed by
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Vinoj Kumar Sharma and Vijay Laxmi (petitioners in Cr.
Revision No. 18 of 2012) (applicants before learned Trial Court)
were dismissed. (The parties shall hereinafter be referred to in the
same manner as they were arrayed before the learned Trial Court for
convenience)
3. Briefly stated the facts giving rise to the present
revision petitions are that an F.I.R. No. 233 of 2006 dated
09.11.2006 was registered at Police Station Nahan against Vinoj
Kumar Sharma for the commission of an offence punishable
under Section 13(1) (e) of the Prevention of Corruption Act, 1988
(for short P.C. Act). The police investigated the matter. Vinoj
Kumar issued a cheque in the name of Atin Bansal, who
transferred the amount mentioned in the cheque to the account
of M/s Shubham Finance & Insurance at the instance of
Ashutosh Gupta. The police checked the accounts and found that
no cognizable offence was committed. Accordingly, the police
filed a final report seeking the cancellation of the F.I.R.
4. Ashutosh Gupta and Vinoj Kumar Sharma filed
separate applications claiming the amount of ₹14,50,000/-
deposited in the bank. Ashutosh Gupta asserted that his account
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was seized by the police. He had no connection with Vinoj
Kumar Sharma. He had collected the money for his business and
was unable to withdraw it due to the freezing of his account;
therefore, he prayed that he be permitted to utilize the money by
de-freezing his account.
5. Vinoj Kumar Sharma also applied for the release of
the amount, asserting that Vijay Laxmi had issued a cheque of
₹14,50,000/- in favour of Atin Bansal with instructions to
deposit the amount mentioned in the cheque in the account of
Ashutosh Gupta. This amount was handed over to Ashutosh
Gupta as a trustee. Atin Bansal deposited the amount in his
account and transferred the money to the account of
M/s Shubham Finance & Insurance. The applicant, Vinoj Kumar
Sharma, and his wife were the owners of the money and
Ashutosh Gupta was the custodian of the amount on their behalf.
The police seized the bank account but subsequently filed a
cancellation report. The report was accepted by the Court.
Ashutosh Gupta had earlier applied for releasing the amount, but
his application was dismissed on 09.07.2018. Ashutosh Gupta
had also filed a Civil Suit titled Ashutosh Gupta vs. Punjab
National Bank, which was pending disposal before learned Civil
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Judge (Jr. Division) Nahan, H.P. He also filed a writ petition
before the High Court, which was pending disposal. The
applicants Vinoj and Vijay Laxmi were the legal owners of the
amount, therefore, it was prayed that the amount be released in
their favour.
6. Learned Trial Court held that the police had
submitted a cancellation report, which was accepted by the
Court. The order passed in the interim application will not
prevent the Court from passing an appropriate order regarding
the disposal of the money after the conclusion of the trial. The
investigating officer had categorically stated that the money was
not tainted. There was no entrustment. Vinoj Kumar Sharma
was a stranger to the amount deposited in the account of
Ashutosh Gupta. Therefore, money was ordered to be released in
favour of Ashutosh Gupta, subject to the furnishing of the bonds.
7. Being aggrieved by the orders passed by learned Trial
Court, both Ashutosh Gupta and Vinoj Kumar Sharma & Vijay
Laxmi have filed separate revisions. It was asserted in the
revision petition filed by Ashutosh Gupta that the learned Trial
Court erred in imposing a condition. The police had specifically
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stated that the money was not tainted and Ashutosh Gupta was
entitled to use it. No offence was committed regarding the
money, and no condition could have been imposed. Therefore,
the conditions imposed by the learned Trial Court should be set
aside, and the amount should be ordered to be paid to petitioner
Ashutosh Gupta without any condition.
8. In the revision petition filed by Vinoj Kumar Sharma
and Vijay Laxmi, it was asserted that money was held in trust by
Ashutosh Gupta. The Court had earlier refused to release the
money to Ashutsoh, and it was not competent to review the
order passed by a criminal court. The Investigating Officer had
reported that the money was not tainted and applicants were
entitled to the same. Therefore, it was prayed that the present
petition be allowed and the amount be released in favour of Vinoj
Kumar Sharma and Vijay Laxmi.
9. I have heard Mr. N.S. Chandel learned Senior Counsel,
assisted by Ms. Shwetima Dogra and Mr. Digvijay Singh, learned
counsel for the petitioner in Cr. Revision Petition No.18 of 2012
and for respondents Nos . 1 and 2 in Cr. Revision No. 108 of 2012,
Mr. Nitin Thakur, learned Counsel for the petitioner in Cr.
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Revision No. 108 of 2012 and for respondent No.2 in Cr. Revision
18 of 2012 and Mr. Ajit Sharma, learned Deputy Advocate
General, for the respondent-State.
10. Mr. N.S. Chandel learned Senior Counsel for the
petitioners Vinoj Kumar Sharma and Vijay Laxmi in Cr. Revision
Petition No.18 of 2012 and for respondents Nos. 1 and 2 in Cr.
Revision No. 108 of 2012 submitted that the Investigating Officer
had found that a cheque was issued in the name of Atin Bansal,
who had deposited money in two accounts. The money belongs
to applicants Vinoj and his wife. It was held in trust by Ashutosh
Gupta. The Learned Trial Court erred in releasing the money to
Ashutosh Gupta. Therefore, he prayed that the present petition
be allowed, the order passed by the learned Trial Court be set
aside and the amount be released in favour of Vinoj Kumar
Sharma and his wife Vijay Laxmi.
11. Mr Nitin Thakur, learned counsel for the petitioner
Ashutosh Gupta in Cr. Revision No. 108 of 2012 and for
respondent No.2 in Cr. Revision No. 18 of 2012 submitted that the
learned Trial Court had rightly ordered the release of the amount
in favour of Ashutosh Gupta, but erred in imposing a condition
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of furnishing indemnity and surety bonds. The proceedings had
concluded before the learned Trial Court and the learned Trial
Court had no jurisdiction to ask for the bond. Hence, he prayed
that the present petition be allowed and the amount be ordered
to be released in favour of Ashutosh without any condition.
12. Mr Ajit Sharma, learned Deputy Advocate General for
the respondent/State in both petitions submitted that the money
was deposited in the account of Ashutosh Gupta, and he is
entitled to its release.
13. I have given considerable thought to the submissions
made at the bar and have gone through the records carefully.
14. It was laid down by the Hon'ble Supreme Court in
Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204:
(2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that the revisional
court is not an appellate court and it can only rectify the patent
defect, errors of jurisdiction or the law. It was observed on page
207: -
"10. Before adverting to the merits of the contentions, at
the outset, it is apt to mention that there are concurrent
findings of conviction arrived at by two courts after a
detailed appreciation of the material and evidence
brought on record. The High Court in criminal revision
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against conviction is not supposed to exercise the
jurisdiction like the appellate court, and the scope of
interference in revision is extremely narrow. Section 397
of the Criminal Procedure Code (in short "CrPC") vests
jurisdiction to satisfy itself or himself as to the
correctness, legality or propriety of any finding, sentence
or order, recorded or passed, and as to the regularity of
any proceedings of such inferior court. The object of the
provision is to set right a patent defect or an error of
jurisdiction or law. There has to be a well-founded error
which is to be determined on the merits of individual
cases. It is also well settled that while considering the
same, the Revisional Court does not dwell at length upon
the facts and evidence of the case to reverse those
findings.
15. This position was reiterated in State of Gujarat v.
Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294, wherein it was
observed:
"13. The power and jurisdiction of the Higher Court under
Section 397 Cr. P.C., which vests the court with the power
to call for and examine records of an inferior court, is for
the purposes of satisfying itself as to the legality and
regularities of any proceeding or order made in a case.
The object of this provision is to set right a patent defect
or an error of jurisdiction or law or the perversity which
has crept into such proceedings. It would be apposite to
refer to the judgment of this court in Amit
Kapoor v. Ramesh Chandra, (2012) 9 SCC 460, where the
scope of Section 397 has been considered and succinctly
explained as under:
"12. Section 397 of the Code vests the court with the
power to call for and examine the records of an inferior
court for the purposes of satisfying itself as to the legality
and regularity of any proceedings or order made in a case.
The object of this provision is to set right a patent defect
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or an error of jurisdiction or law. There has to be a well-
founded error, and it may not be appropriate for the court
to scrutinise the orders, which, upon the face of it, bear a
token of careful consideration and appear to be in
accordance with the law. If one looks into the various
judgments of this Court, it emerges that the revisional
jurisdiction can be invoked where the decisions under
challenge are grossly erroneous, there is no compliance
with the provisions of law, the finding recorded is based
on no evidence, material evidence is ignored or judicial
discretion is exercised arbitrarily or perversely. These are
not exhaustive classes but are merely indicative. Each
case would have to be determined on its own merits.
13. Another well-accepted norm is that the revisional
jurisdiction of the higher court is a very limited one and
cannot be exercised in a routine manner. One of the
inbuilt restrictions is that it should not be against an
interim or interlocutory order. The Court has to keep in
mind that the exercise of revisional jurisdiction itself
should not lead to injustice ex-facie. Where the Court is
dealing with the question as to whether the charge has
been framed properly and in accordance with law in a
given case, it may be reluctant to interfere in the exercise
of its revisional jurisdiction unless the case substantially
falls within the categories aforestated. Even framing of
charge is a much-advanced stage in the proceedings
under the CrPC."
16. The present revision has to be decided as per the
parameters laid down by the Hon'ble Supreme Court.
17. Mr. N.S. Chandel, learned Senior Counsel for Vinoj
Kumar Sharma and Vijay Laxmi submitted that the learned Trial
Court had declined to release the amount in favour of Ashutosh
Gupta vide order dated 09.07.2008. The learned Trial Court could
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not have reviewed its earlier order and released the amount to
Ashutosh Gupta while passing the impugned order. This
submission is not acceptable. It is apparent from the copy of the
order (Annexure P-1) that the same was passed during the
pendency of the proceedings till the final disposal of the case. It
is undisputed that the police had filed a cancellation report,
which was accepted by the Court. Hence, the case was finally
disposed of. Any interim order effective till the final disposal of
the case ceased to exist after the disposal of the case and the
Court was competent to release the amount. The Court had
earlier made an arrangement for the disposal of the case
property during the pendency of the proceedings and would not
be bound by such an arrangement after the disposal of the case.
18. It is an admitted case that police had registered the
F.I.R. against Vinoj Kumar Sharma. The status report filed by
the police before the learned Trial Court also shows that money
was transferred to Ashutosh Gupta to prevent it from being
seized by the police. Thus, the purpose of the transfer was to
defeat the provision of law namely the seizure of the amount by
the police. Vinoj Kumar Sharma had transferred the money to
Ashutosh Gupta with the understanding that it would be
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retained by Ashutosh Gupta for the benefit of Vinoj Kumar
Sharma, and the money would be saved from the attachment by
the police. 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:
"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
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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,
of 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 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)
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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, 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
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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.
242. 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
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Court held: (Kuju Collieries case [Kuju Collieries
Ltd. v. Jharkhand Mines Ltd., (1974) 2 SCC 533], SCC pp.
536-37, para 8)
"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
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consistent with the 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 execution,
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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 purposes. --
Where the owner of property 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)
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:
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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 oritur
actio 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 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.,
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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 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 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
21
2025:HHC:9585
in Narayanamma v. Govindappa [Narayanamma v. Govin
dappa, (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 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
22
2025:HHC:9585
defendant), there shall be no cause for restitution. This
has to be determined by the facts of each case.
19. Similar is the judgment G.T. Girish v. Y. Subba Raju,
(2022) 12 SCC 321, wherein it was observed:-
In pari delicto potiorestconditiodefendentis
67. The principle of in pari delicto
potiorestconditiodefendentis is a maxim which we must
bear in mind. We need only notice the following
discussion by this Court. The decision of this Court
in Kedar Nath Motani [Kedar Nath Motani v. Prahlad Rai,
AIR 1960 SC 213: (1960) 1 SCR 861] comes to mind: (AIR
p. 216, para 9)
“9. … Where both parties do not show that there
was any conspiracy to defraud a third person or to
commit any other illegal act, the maxim, in pari
delicto, etc., can hardly be made applicable.”
68. This Court in Kedar Nath Motani [Kedar Nath
Motani v. Prahlad Rai, AIR 1960 SC 213 : (1960) 1 SCR
861] also referred to the following statement by Lord
Mansfield in Holman v. Johnson [Holman v. Johnson,
(1775) 1 Cowp 341: 98 ER 1120], wherein it was held as
follows : (Kedar Nath Motani case [Kedar Nath
Motani v. Prahlad Rai, AIR 1960 SC 213 : (1960) 1 SCR
861], AIR pp. 217-18, para 12)
“12. The law was stated as far back as 1775 by
Lord Mansfield
in Holman v. Johnson [Holman v. Johnson, (1775) 1
Cowp341: 98 ER 1120], Cowp at p. 343, ER at p. 1121
in the following words : (ER p. 1121)
‘… The principle of public policy is this: ex
dolomalo non orituractio. 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
23
2025:HHC:9585action 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. It is upon that ground the Court goes; not
for the sake of the defendant, but because they will
not lend their aid to such a plaintiff. So if the
plaintiff and defendant were to change sides, and
the defendant was to bring his action against the
plaintiff, the latter would then have the advantage
of it; for where both are equally in fault,
potiorestconditiodefendentis.’
There are, however, some exceptions or “supposed
exceptions” to the rule of turpi causa. In Salmond and
William on Contracts, four such exceptions have been
mentioned, and the fourth of these exceptions is based
on the right of restitutio in integrum, where the
relationship of trustee and beneficiary is involved.
Salmond stated the law in these words at p. 352 of his
book (2nd Edn.):
‘So if A employs B to commit a robbery, A cannot
sue B for the proceeds. The position would be the
same if A were to vest the property in B upon trust
to carry out some fraudulent scheme: A could not
sue B for an account of the profits. But if B, who
is A’s agent or trustee, receives on A’s account
money paid by C pursuant to an illegal contract
between A and C the position is otherwise and A can
recover the property from B, although he could not
have claimed it from C. In such cases, public policy
requires that the rule of turpis causa shall be
excluded by the more important and imperative
rule that agents and trustees must faithfully
perform the duties of their office.’
Williston in his Book on Contracts (Revised Edn.), Vol.
VI has discussed this matter at p. 5069, Para 1785 and
24
2025:HHC:9585in paras 1771 to 1774, he has noted certain exceptional
cases, and has observed as follows:
‘If recovery is to be allowed by either partner or
principal in any case, it must be where the illegality
is of so light or venial a character that it is deemed
more opposed to public policy to allow the
defendant to violate his fiduciary relation with the
plaintiff than to allow the plaintiff to gain the
benefit of an illegal transaction.’
Even in India, certain exceptions to the rule of turpi
causa have been accepted. Examples of those cases are
found in Palaniyappa Chettiar v. Chockalingam
Chettiar [Palaniyappa Chettiar v. Chockalingam Chettiar,
1920 SCC OnLine Mad 152 : ILR (1921) 44 Mad 334]
and Bhola Nath v. Mul Chand [Bhola Nath v. Mul Chand,
1903 SCC OnLine All 21: ILR (1903) 25 All 639] .”
(emphasis supplied)
69. We may also notice the following statement by
this Court in Kedar Nath Motani [Kedar Nath
Motani v. Prahlad Rai, AIR 1960 SC 213 : (1960) 1 SCR
861] : (AIR pp. 218-19, para 15)
“15. The correct position in law, in our opinion,
is that what one has to see is whether the illegality
goes so much to the root of the matter that the
plaintiff cannot bring his action without relying
upon the illegal transaction into which he had
entered. If the illegality be trivial or venial, as
stated by Williston and the plaintiff is not required
to rest his case upon that illegality, then public
policy demands that the defendant should not be
allowed to take advantage of the position. A strict
view, of course, must be taken of the plaintiff’s
conduct, and he should not be allowed to
circumvent the illegality by resorting to some
subterfuge or by misstating the facts. If, however,
the matter is clear and the illegality is not required
25
2025:HHC:9585to be pleaded or proved as part of the cause of
action and the plaintiff recanted before the illegal
purpose was achieved, then, unless it be of such a
gross nature as to outrage the conscience of the
Court, the plea of the defendant should not
prevail.”
71. In Narayanamma [Narayanamma v. Govindappa,
(2019) 19 SCC 42 : (2020) 4 SCC (Civ) 363], this Court
was considering a suit for specific performance, which
was resisted on the ground that the agreement to sell
was contrary to the provisions of the statute. Section
61 of the Karnataka Land Reforms Act, 1961 provided
that no land for which occupancy was granted, shall
within 15 years of the order of the Tribunal, be
transferred by sale, inter alia. A partition was
permitted. Equally, a mortgage could be effected to
secure a loan. Drawing support from the judgment of
this Court in Kedar Nath [Kedar Nath Motani v. Prahlad
Rai, AIR 1960 SC 213 : (1960) 1 SCR 861], this Court,
inter alia, as follows : (Narayanamma
case [Narayanamma v. Govindappa, (2019) 19 SCC 42 :
(2020) 4 SCC (Civ) 363], SCC pp. 52-53, paras 15-16)
“15. The three-Judge Bench [Kedar Nath
Motani v. Prahlad Rai, AIR 1960 SC 213 : (1960) 1 SCR
861] of this Court, after referring to the aforesaid
judgments, speaking through M. Hidayatullah, J.
(as his Lordship then was), observes thus : (Kedar
Nath Motani case [Kedar Nath Motani v. Prahlad Rai,
AIR 1960 SC 213 : (1960) 1 SCR 861], AIR pp. 218-19,
para 15)
’15. The correct position in law, in our
opinion, is that what one has to see is whether
the illegality goes so much to the root of the
matter that the plaintiff cannot bring his action
without relying upon the illegal transaction into
which he had entered. If the illegality be trivial
or venial, as stated by Williston and the plaintiff
26
2025:HHC:9585
is not required to rest his case upon that
illegality, then public policy demands that the
defendant should not be allowed to take
advantage of the position. A strict view, of
course, must be taken of the plaintiff’s conduct,
and he should not be allowed to circumvent the
illegality by resorting to some subterfuge or by
misstating the facts. If, however, the matter is
clear and the illegality is not required to be
pleaded or proved as part of the cause of action
and the plaintiff recanted before the illegal
purpose was achieved, then, unless it be of such
a gross nature as to outrage the conscience of
the Court, the plea of the defendant should not
prevail.’
16. It could thus be seen, that this Court has held that
the correct position of law is that, what one has to see is
whether the illegality goes so much to the root of the
matter that the plaintiff cannot bring his action without
relying upon the illegal transaction into which he had
entered. This Court further held, that if the illegality is
trivial or venial and the plaintiff is not required to rest his
case upon that illegality, then public policy demands that
the defendant should not be allowed to take advantage of
the position. It has further been held, that a strict view
must be taken of the plaintiff’s conduct and he should
not be allowed to circumvent the illegality by resorting
to some subterfuge or by misstating the facts.
However, if the matter is clear and the illegality is not
required to be pleaded or proved as part of the cause of
action and the plaintiff recanted before the illegal
purpose is achieved, then, unless it be of such a gross
nature as to outrage the conscience of the Court, the
plea of the defendant should not prevail.”
(emphasis supplied)
27
2025:HHC:9585
72. In Narayanamma [Narayanamma v. Govindappa,
(2019) 19 SCC 42 : (2020) 4 SCC (Civ) 363], this Court
further held as follows : (SCC pp. 58-59, paras 24-26)
“24. The transaction between the late Bale
Venkataramanappa and the plaintiff is not
disputed. Initially, the said Bale Venkataramanappa
had executed a registered mortgage deed in favour
of the plaintiff. Within a month, he entered into an
agreement to sell wherein, the entire consideration
for the transfer as well as handing over of the
possession was acknowledged. It could thus be
seen, that the transaction was nothing short of a
transfer of property. Under Section 61 of the
Reforms Act, there is a complete prohibition on
such mortgage or transfer for 15 years from the
date of grant. Sub-section (1) of Section 61 of the
Reforms Act begins with a non-obstante clause. It
is thus clear that the unambiguous legislative
intent is that no such mortgage, transfer, sale, etc.
would be permitted for 15 years from the date of
grant. Undisputedly, even according to the plaintiff,
the grant is of the year 1983, as such, the transfer in
question in the year 1990 is beyond any doubt
within the prohibited period of 15 years. Sub-
section (3) of Section 61 of the Reforms Act makes
the legislative intent very clear. It provides, that
any transfer in violation of sub-section (1) shall be
invalid and it also provides for the consequence for
such invalid transaction.
25. Undisputedly, both, the predecessor-in-title
of the defendant(s) as well as the plaintiff, are
confederates in this illegality. Both, the plaintiff
and the predecessor-in-title of the defendant(s)
can be said to be equally responsible for the
violation of law.
26. However, the ticklish question that arises in
such a situation is:’the decision of this Court would
28
2025:HHC:9585
weigh on the side of which party’? As held by
Hidayatullah, J. in Kedar Nath Motani [Kedar Nath
Motani v. Prahlad Rai, AIR 1960 SC 213 : (1960) 1 SCR
861], the question that would arise for
consideration is as to whether the plaintiff can rest
his claim without relying upon the illegal
transaction or as to whether the plaintiff can rest
his claim on something else without relying on the
illegal transaction. Undisputedly, in the present
case, the claim of the plaintiff is entirely based
upon the agreement to sell dated 15-5-1990, which
is clearly hit by Section 61 of the Reforms Act. There
is no other foundation for the claim of the plaintiff
except the one based on the agreement to sell,
which is hit by Section 61 of the Act. In such a case,
as observed by Taylor, in his “Law of Evidence” which
has been approved by Gajendragadkar, J. inImmani
Appa Rao [Immani Appa Rao v. Gollapalli
Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC
370], although illegality is not pleaded by the
defendant nor sought to be relied upon him by way of
defence, yet the Court itself, upon the illegality
appearing upon the evidence, will take notice of it and
will dismiss the action ex turpi causa non orituractio
i.e. no polluted hand shall touch the pure fountain of
justice. Equally, as observed in Story’s Equity
Jurisprudence, which again is approved in Immani
Appa Rao [Immani Appa Rao v. Gollapalli
Ramalingamurthi, (1962) 3 SCR 739: AIR 1962 SC
370], where the parties are concerned with illegal
agreements or other transactions, courts of equity
following the rule of law as to participators in a
common crime will not interpose to grant any
relief, acting upon the maxim in pari delicto potiorest
conditio defendentiset possidentis.”
(emphasis supplied)
29
2025:HHC:9585
73. This Court in Narayanamma [Narayanamma v.
Govindappa, (2019) 19 SCC 42 : (2020) 4 SCC (Civ) 363]
finally found as follows : (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 the parties are
common participator 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 benefited 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
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.”
20. Therefore, when both parties are at fault, the money
lies where it is and it cannot be claimed through the intervention
of the Court. In the present case, Vinoj Kumar Sharma and Vijay
Laxmi transferred the money to Ashutosh to prevent it from its
seizure by the police and they (Vinoj Kumar Sharma and Vijay
30
2025:HHC:9585
Laxmi) will not be entitled to claim the amount on the ground
that they had transferred it in trust to Ashutosh Gupta. The
purpose of the transfer was to defeat the law and the law will not
assist them in regaining the amount.
21. As per the case of applicants Vinoj Kumar Sharma
and Vijay Laxmi, the money is owned by them and is held in the
name of Ashutosh Gupta. This is a Benami transaction because
the money was held in the name of a person on behalf of
another. Section 3 of the Benami Transaction Prohibition Act
1988 (for short ‘Act’) prohibits the Benami transaction and
Section 4 of the Act bars the right to recover the property held
Benami with the intervention of the Court. Therefore, even if the
plea of applicants Vinoj Kumar Sharma and Vijay Laxmi is
accepted as correct that they had transferred the money in the
name of Ashutosh Gupta to be retained by him for their benefit,
they cannot seek the recovery of the money in view of Act (ibid).
Hence, their claim cannot be allowed on this ground as well.
22. Learned Trial Court noticed that a civil suit was
pending between the parties. Therefore, the dispute had not
attained finality and the learned Trial Court was justified in
31
2025:HHC:9585
imposing the condition. It was submitted that the civil suit has
been withdrawn, however, this will not make any difference
because the rights and liabilities of the parties are to be
determined as they existed on the date of commencement of lis
and any development during the pendency of the proceedings
will not make any difference. The rights of the parties were yet
to determined and the learned Trial Court was justified in
imposing the condition of furnishing of indemnity as well as
surety bond.
23. Therefore, there is no infirmity in the order passed
by the learned Trial Court and the present petitions fail and the
same are dismissed.
24 The present revision petitions are disposed of in
aforesaid terms, so also pending application(s), if any.
25. Records of the learned Courts below be sent back
forthwith along with a copy of this judgment.
(Rakesh Kainthla)
08 April 2025
th
Judge
(ravinder)
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