Fraudulent benami transfer: plea of fraud can defeat possession claim, and general public policy governs beyond Trusts Act.

In a completed fraudulent benami transfer intended to defeat creditors, the transferor and persons claiming under him could resist the transferee's suit for possession by pleading fraud. Where both sides were equally involved in the fraud, the Court refused to assist either party and left the property where it was found, applying public policy rather than enforcing the unlawful bargain. Section 84 of the Indian Trusts Act was held inapplicable because the transferee was not in possession and the case did not fall within its scope; it was also not treated as an exhaustive code governing such disputes.

---

---

Issues: (i) Whether, in a completed fraudulent benami transfer intended to defeat creditors, the transferor and persons claiming under him can resist the transferee's suit for possession by pleading the fraud; (ii) Whether Section 84 of the Indian Trusts Act exhausts the remedy or governs such a case.

Issue (i): Whether, in a completed fraudulent benami transfer intended to defeat creditors, the transferor and persons claiming under him can resist the transferee's suit for possession by pleading the fraud.

Analysis: The transaction was found to be a mutual fraud by both sides and the intended fraud had been carried out. In such a case, allowing the transferee to recover possession would require the Court to assist a party who founded his claim on the fraudulent transaction. The more consistent rule of public policy is to refuse active to the claimant and to leave the parties where the property is found when both are equally guilty.

Conclusion: The plea of fraud was available as a defence, and the respondents could resist the claim for possession.

Issue (ii): Whether Section 84 of the Indian Trusts Act exhausts the remedy or governs such a case.

Analysis: Section 84 was held inapplicable because the transferee was not in possession and the case did not fall within the categories contemplated by that provision. The Court rejected the contention that the section was exhaustive and held that cases outside it are governed by general principles of public policy.

Conclusion: Section 84 of the Indian Trusts Act did not control the present dispute.

Final Conclusion: The decree in favour of the transferee was set aside and the suit was dismissed, with the parties left to bear their own costs.

Ratio Decidendi: Where both parties are equally guilty of a completed fraud and the transfer is void ab initio, the Court will not lend its aid to enforce the fraudulent transaction; instead, it will allow the property to remain where it lies.

---