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Appeal from Appellate Decree No. 747 of 1960, decided on 21st August 1964.

Ss. 2 (d), 4, 5, 21 & 23‑Money obtained by disposing of property in India "---Foreign exchange"‑---Using such money in India as consideration of kabala in respect of land situated in Pakistan without obtaining permission of State Bank‑Contravention of Ss. 4 & 5--- Contravention, however, does not render transaction in nature of sale out and out, void or voidable‑Purchaser on strength of his registered kabala in such case entitled to have his title declared and obtain possession‑Maxim: pari delicto potior est conditio possidentis (where each party is equally in fault, law favours him who is actually in possession)‑Not applicable in favour of trespasser.

Raja v. Karam Ali P L D 1951 Lah. 177 considered.

A. W. Chaudhry for Appellant.

Moin ul Haq and Moazzem Hussain for Respondents.

This second appeal at the instance of the plaintiff is from the decision of the District Judge, Faridpur in Title Appeal No. 289 of 1959, affirming that of the Munsif, Additional Court, Madaripur in Title Suit No. 87 of 1959.

The subject‑matter of this suit are the lands described in Schedule Ka' and Kha' of the plaint. There are structures on the land of Schedule Ka' but the land of Schedule Kha' is a vacant land on which there are some date‑trees.

The plaintiff's case is that the suit lands, among other lands, belonged to Shailabala Devi. The total area of these lands is 2 acres. On her death, her interest devolved on her heirs who are the defendants Nos. 2 to 8 (respondents Nos. 2 to 8 in this appeal). The plaintiff purchased the said 2 acres of lands including the suit lands of Schedule Ka' and Kha' from the defendants Nos. 2 to 8 by a kabala, dated the 2nd Aswin, 1362 B. S. He got possession of all the lands of the kabala except the suit land of Schedule Ka'. According to the plaintiff, Shailabala Devi leased out the land of Schedule Ka' to one T. N. Chose, a pleader, for a term of 9 years from 1352 to 1360 B. S. at an annual rental of Rs. 130. The said T. N. Chose constructed structures on the land of Schedule Ka' and was residing there. After the independence in 1947, T. M. Ghose abandoned the land of Schedule Ka' and sold the standing structures to Upendra Chandra Chose, another pleader. Upendra Chandra Chose also left the land of Schedule Ka'. Since then the defendant No. 1 has been in unauthorised occupation of the said land and the structures. As regards the land of Schedule Kha', it is alleged by the plaintiff that he has been dispossessed therefrom by the defendant No. 1. On these facts, the plaintiff brought the suit for the establishment of his title to the lands of Schedule Ka' and 'Kha' of the plaint and for recovery of possession of those lands after evicting the defendant No. 1 therefrom and for recovery of Rs. 685 from him as compensation for use and occupation.

The defendant No. 1 alone contested the suit challenging the plaintiff's title and denying the allegations against him. His defence was that Upendra Chandra Chose sold to him the structures on the land of Schedule Ka' on the 4th Sravan, 1357 B. S. (20‑7‑1950) and placed him in possession thereof for the un-expired period of the lease of T. N. Chose. Thereafter, the defendant No. 8 and his father leased out the land of Schedule Ka' to him at an annual rental of annas 0‑12‑0 by granting an Amalnama, dated the 16th Baisakh, 1368 B. S. and since then he has been in possession of the land of Schedule Ka' with the structures thereon in his own right. As regards the land of Schedule Kha', he did not claim any interest therein and denied to have dispossessed the plaintiff therefrom. This contesting defendant filed an additional written statement attacking the validity of the plaintiff's kabala on the ground that he paid the consideration of the kabala lands to his vendors in Calcutta in violation of the provisions of the Foreign Exchange Regulation Act, 1947, and also on the ground that the power‑of‑attorney on the basis of which the plaintiff's vendors, (sic) attorney admitted execution of the kabala at the time of its registration, was not duly stamped in accordance with the provision of section 18 of the Stamp Act.

The parties led evidence‑both oral and documentary. On the basis of the materials on record, the trial Court held that the plaintiff's kabala Exh. I (a) was duly executed and registered, but the kabala was obtained by him on payment of consideration in contravention of the Foreign Exchange Regulation Act, 1947. The trial Court further held that the defendant No. 1 purchased only the structures on the land of Schedule Ka' from Upendra, but acquired no right, title and interest in the land of that Schedule and that he is a trespasser in respect of the lands of both the Schedules Ka' and Kha'. As the plaintiff's kabala, in the opinion of the trial Court, was in contravention of the Foreign Exchange Regulation Act, 1947, and against public policy, that Court took the view that no right, title and interest vested in the plaintiff on the basis of that kabala. Accordingly, the trial Court refused to give any relief to the plaintiff and dismissed the suit.

The plaintiff appealed against the judgment and decree of the trial Court. The contesting defendant filed no cross‑objection, but pressed before the lower appellate Court the defence taken by him in the trial Court.

The learned District Judge who heard the appeal held that the power‑of‑attorney on the basis of which the execution of the plaintiff's kabala was admitted, was duly stamped under section 18 of the Stamp Act and, agreeing with the trial Court, further held that the consideration money for the plaintiff's kabala was paid in Calcutta in contravention of the provisions of sections 4, 5 and 21 of the Foreign Exchange Regulation Act for which no title passed to the plaintiff under that kabala. Accordingly, the learned District Judge dismissed the appeal and affirmed the judgment and decree of the trial Court.

As regards the defence case, the learned District Judge agreed with the trial Court that the defendant No. 1 has no right, title and interest in the lands in suit and is a mere trespasser. This second appeal by the plaintiff is from the decision of the lower appellate Court.

It is undisputed that the lands of Schedules Ka' and Kha', among other lands, were inherited by the defendants Nos. 2 to 8 from Shailabala Devi. The defendants 2 to 8 executed the kabala Exh. I (a) in the plaintiff's favour in respect of 2 acres of lands including the suit lands for a consideration of Rs. 5,000 and it was duly registered. The plaintiff‑appellant admitted in his evidence that he entered into a contract in Calcutta with the defendants Nos. 2 to 8 for the purchase of their lands including the suit lands. He further admitted that he sold his Calcutta property for Rs. 7,500 and that with that money he paid the consideration of his kabala to the defendants 2 to 8. In view of these admissions of the plaintiff, both the Courts below took the view that the payment of the consideration for the plaintiff's kabala was made in contravention of the provisions of the Foreign Exchange Regulation Act. I think, both the Courts below took a correct view in this regard. The money obtained by the, plaintiff by disposing of his property in Calcutta is "foreign exchange" as defined in section 2 (d) of the Foreign Exchange Regulation Act. The foreign exchange earned by the plaintiff by selling his property in Calcutta could not be disposed of by him otherwise than in accordance with the provisions of the said Act. But the plaintiff spent the foreign exchange in Calcutta in paying A the consideration money of his kabala in respect of the lands in this Province. This he did without having obtained the permission of the State Bank of Pakistan or any other lawful authority. The spending of the foreign exchange in the above manner offended against the provisions of sections 4 and 5 of the Foreign Exchange Regulation Act.

Mr. A. W. Chaudhry, learned Advocate for the appellant, made a feeble attempt to bring it within the exemption under clause (b) of the subsection (2) of section 5, but, in view of the admissions of the plaintiff as to how he earned the Foreign Exchange and how he utilised it, the said clause (b) is not at all attracted.

The question then is what are the legal consequences of payment of consideration of the kabala of the plaintiff‑appellant m contravention of the provisions of the Foreign Exchange Regulation Act. In connection with this question, it is necessary to determine the nature of the transaction. In other words, it is necessary to determine whether the transaction as per kabala- Exh. I (a) is an executory contract or a completed out and out sale. The clear and unambiguous recitals in the kabala definitely show that the vendor's title to the subject‑matters of the kabala including the suit lands was conveyed to the plaintiff, that the possession of the lands was parted with in the plaintiff's favour and that no part of the contract of sale remained unperformed. The vendors' title to the kabala lands having been conveyed to the plaintiff, they, as the recitals in the kabala show, handed over to the plaintiff all their relevant title deeds. Thus, the transaction as per kabala‑Exh. I (a) is a completed out and out sale. But the learned District Judge, as the following passage from his judgment shows, appeared to have taken the transaction to be an executory contract:‑

"Pursuant to such rule of law we find that the contract of sale which was made in Calcutta and the purchase money said to have been paid in Calcutta cannot be honoured and enforced in Pakistan inasmuch as such transaction was made with the clear intention to evade and avoid the specific provisions of sections 4, 5 and 21 of the Foreign Exchange Regulation . . . . ."

The transaction in question, as has been already found by me, is a completed out and out sale and not an executory contract. Therefore, the question of enforceability of the contract of sale does not arise here. Nor has the plaintiff prayed for enforcement of any contract of sale. The plaintiff's definite prayer is for a declaration of his title on the basis of his kabala and for other consequential reliefs. The learned District Judge was not therefore, correct in his approach to the question on the basis that the transaction is an executory contract.

It was argued before the learned District Judge that the transfer of lands having been affected by a registered kabala, the plaintiff, on the strength of the kabala itself, was entitled to have his title declared even if the mode of payment of the consideration money was contrary to the provisions of the Foreign Exchange Regulation Act. The learned District Judge rejected this contention holding that the consideration money having been paid in contravention of the provisions of the said Act, "the mere registration of the sale‑deed does not operate to pass title to the plaintiff". This view of the learned District Judge does not appear to be correct. The Foreign Exchange Regulation Act does not. contain any provision arresting the vesting of title in a case where the consideration of the property under sale is paid in contravention of the provisions of that Act. Nor does the Act provide that the sale of the property in such a case is void and voidable. The only legal consequences of anything done in violation of the provisions of the said Act are laid down in section 23 of that Act according to which the author of the offending act is only criminally liable. Mr. Moin ul Haq, learned Advocate for the respondent concedes this legal position obtaining under the Foreign Exchange Regulation Act, but contends that the plaintiff having intentionally violated the provisions of the said Act in securing the transfer in his favour is not entitled to any assistance from the Court and that the Court should refuse to grant him any relief on the principles of public policy. In support of this contention, the learned Advocate has cited the case of Raja v. Karam Ali (P L D 1951 Lah. 177). In the cited case, two persons joined hands in securing a transfer of lands in their favour in contravention of the provision of section 19 of the Punjab Colonization of Government Lands Act, which declared such a transfer to be void. One of the transferees sold a part of these lands to a third person who brought a suit for a declaration of title and possession. The suit was decreed by the trial Court, but, on appeal, the High Court of Lahore non‑suited the plaintiff on a number of grounds. One of these grounds was as follows:

"It seems to me however, that the plaintiffs should have been non‑suited in the present case on another ground. The facts have revealed that both Khuda Bakhsh and Raja Khan were in pari delicto in respect of the transaction, which was in contravention of section 19 of Punjab Act V of 1912. By an arrangement between them, they agreed to defeat the provisions of that law, and put their illegal agreement into effect. Raja Khan paid Rs. 11,000 to Khuda Bakhsh and the latter delivered possession of one square of land to the former. Now that the facts have come to light, neither Raja Khan nor Khuda Bakhsh or his successor‑in‑interest could seek the assistance of the Court in getting back their properties as the maxim, in pari delicto potior est conditio possidentis (where each party is equally in fault the law favour him who is actually in possession) would apply in full force. For a discussion of this maxim reference may be made to Broom's Legal Maxims page 486 et seq. This maxim is established not for the benefit of plaintiffs or defendants but is founded on the principles of public policy, which will not assist a plaintiff who has paid over money or handed over property in pursuance of an illegal or immoral conduct to recover it back. The exceptions to the application of this maxim are provided by cases where the illegal contract has not yet been executed and locus penitentiae still exists, or where one party is the oppressor and the other oppressed . . . No plea, it is true, was raised in the trial Court or in the grounds of appeal in this Court, based on this maxim but once the facts are established, it would be the duty of the Court to stay its hand and refuse any relief to a party that comes to the fountain of justice with sullied hands."

As stated in the cited case, the application of the maxim in pari delicto potior est conditio possidentis' is subject to certain exceptions. The exceptions are provided by cases where the illegal contract has not yet been executed and locus ponitentiae still exists, or where one party is the oppressor and the other oppressed. In the present case, the transfer is a completed transaction, and there is no subsisting executory contract. Again, the transfer in the present case, unlike the transfer in the cited case, is not void. Moreover, the plaintiff in the present case is the oppressed party, the oppressor being the defendant No. 1 who has been held by both the Courts below to be a trespasser in respect of the suit lands. If the plaintiff is denied the relief, namely, the declaration of his title to the suit lands and recovery of possession thereof, this will amount to an indirect assistance by the Court to the defendant No. 1, a trespasser to continue to maintain his unlawful possession and thereby to enable him to acquire title to the suit lands by adverse possession. This will be the eventual result of the Court's refusal to grant the said relief to the plaintiff, for, the plaintiff's vendors who have already transferred their interest by the kabala‑Exh. I (a) have no more locus standi to eject the defendant No. 1. It is also on the principles of public policy that no such assistance should be given by the Court to the defendant No. 1 who, as already said, is the oppressor, the party oppressed being the plaintiff. This brings the present case within the exception to the aforesaid maxim. Therefore, having regard to the fact that title passed to the plaintiff under his kabala‑Exh. I (a) and the further fact that the transaction as per said kabala is not void or voidable under any provision of the Foreign Exchange Regulation Act, the plaintiff is entitled to have a declaration of his title to the suit lands and to eject the defendant No. 1 therefrom.

As regards the claim for compensation for unauthorised use and occupation. of the suit lands by the defendant No. 1, Mr. A. W. Chaudhry, learned Advocate for the plaintiff‑appellant submits that his client will not pursue this claim and abandons it.

In the result, the appeal succeeds and is allowed in part. The judgments and decrees passed by the Courts below are set aside. The plaintiff's title to the suit lands described in Schedules Ka' and Kha' of the plaint is hereby declared, and he shall get khas possession of those lands after evicting the defendant No. 1 therefrom. The defendant No. 1 is directed to remove his structures from the land of Schedule 'Ka' within two months from this date, failing which the plaintiff shall be entitled to cause those structures removed in execution of the decree in which case the plaintiff shall get from the defendant No. 1 the costs of removal of the structures. The plaintiff's claim for compensation for use and occupation of the suit land having been abandoned is disallowed.

Having regard to the facts and circumstances of the case, I direct the parties to bear their own costs throughout.

Leave under clause 15 of the Letters Patent is prayed for, but refused.

K. B. A. Appeal accepted.

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