Party to retain property transferred to him in order

party to retain property transferred to him in order to effect a fraud must, according to the
authorities, be effected. Then alone, does the fraudulent grantor or transferor, lose the
right to claim the aid or support of the law to recover the property he has parted with. The
principle however will not apply in the case if the transferor seeks for possession from the
transferee before the fraud is effectuated.
6 A.I.R 1982 All. 316..
7 (1907-08) LR 35 IA 98.
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In the case of Immani Appa Rao v. Gollapalhili Rama Lingamurthi 8 , a sale of property
was made with the mutual consent of the vendor and the vendee to defraud the creditors
of the vendor. There was no consideration and the transferee also agreed to act as a
benamidar until the transferor required him to reconvey the property to his sons. The
transferor and his sons trespassed and occupied the property, as the creditors were
defrauded. The transferor, in defence, urged that the transferee has no rights in the
property as the transfer was a fraudulent transfer. So in this case the court observed that:-
The transferors emphasized that the doctrine which is pre-eminently applicable to the
present case is ex dolo malo non oritur action or ex turpi causa non oritur
actio . It means they contended that the right of action cannot arise out of fraud or out of
transgression of law. According to them it is necessary that the possession should lie
where it lies, in pari delicto potior est condition possidentis. The law favors
him who is actually in possession in case where there is guilty of fraud on both the
parties. The principle of public policy is that no court will lend its aid to a man who
founds his cause of action upon an immoral or illegal act. If the cause of action arises
from the plaintiff’s side, the court says that he has no right to be assisted; it is same in the
case of defendants. The Court also said that there is no question of estoppels in such a
case because the fraud in question was agreed by both the parties and both the parties
have assisted each other in carrying out fraud. It also said, in such a cases the transferee
would be guilt for liability of double fraud, as he joined transferor joined in the fraudulent
scheme and participated in commission of the transfer and he committed another fraud by
suppressing from the Court the fraudulent character of the transfer when he made out the
claim for the recovery of the properties conveyed to him. The transfer was not supported
by any consideration and therefore no title is transferred to him.
So in the view of public interests, the Court held that the plea of fraud is allowed and tried
and it is upheld that the estate should lie where it rests.
Notwithstanding the rights of transferor and a benami transferee, if the transfer was made
to defeat the creditors, a creditor himself can ignore a benami transaction and can proceed
against the property as it was of the transferor. The creditor need not have to set it aside
under this section because, benami transaction is not a transfer at all.