ISSUE:
Whether the suit was maintainable despite the alleged illegal purpose behind the entrustment of jewellery to Lachhmi Narain?
Whether the jewellery was returned to the plaintiff, and if not, whether the appellant was liable to return it or its value?
Whether the liability arising from the alleged misappropriation of the jewellery by Lachhmi Narain was enforceable against the joint family property in the hands of the appellant?
RULE:
The principle of in pari delicto does not apply where the parties are not equally at fault. A person who entrusts property to another, even in furtherance of an improper purpose, may still recover it if the illegal purpose was not carried into effect, if they were less guilty, or if their claim does not require reliance on the illegality. A fiduciary cannot refuse to return entrusted property on the ground that it was given to defeat another’s claim.
A debt is not avyavaharika merely because it arises from a fiduciary obligation. The burden of proving that a debt is avyavaharika (illegal or immoral) rests on the person contesting liability. A son is liable for his father’s debts unless they are illegal. Mere inability to trace entrusted property does not establish misappropriation or illegality, and therefore, the liability remains enforceable against the joint family property.