A. Rakkiyana Gounder vs Chinnu Goundan and Another

The plaintiff, who was unsuccessful in both the lower courts is the appellant in this second appeal. He sued to recover possession of the

properties described in schedule A appended to the plaint for an account of the management by the first defendant of the properties specified in

schedule B and of the sums received by him by sale of the properties as per schedule C. The second defendant is the father and the plaintiff is the

son and they constitute members of a joint family. The first defendant is the brother-in-law i.e., the sister''s husband of the. second defendant. The

family of the plaintiff and the second defendant was indebted to several people by 1930. On 12-12-1930, the second defendant and the plaintiff

executed in favour of a third party a trust deed for discharging the debts of the family. After the lapse of two years, it was discovered that the trust

created was not very useful to achieve the object and it was consequently cancelled on the 27-8-1932. On 29-8-1932 three sales were effected

by the father and the son to discharge certain debts. There yet remained several debts which had to be discharged.

Within three days after the cancellation of the trust deed, i.e., on 30-8-1932, what purports to be a sale deed Ex. D. 1 was executed by the

plaintiff and the second defendant in favour of the first defendant for a stated consideration of Rs. 29500, & the properties conveyed under the

deed are the properties specified in schedule B appended to the plaint. The deed covered the entire properties of the family then remaining. The

consideration, as stated in the deed, was the obligation, which the first defendant undertook to discharge the debts of the family aggregating to Rs.

29500. After the execution of the sale deed, the first defendant sold certain properties comprised in the deed and the particulars of the sales

effected by him are given in schedule C attached to the plaint. After the sale, there were still some properties left, which are described in schedule

A; and by the sales effected by the first defendant, all the debts of the family were discharged and there were no more debts.

The plaintiff now sues to recover the balance of the property left unsold and described in schedule A and also claims an account of the

management of the properties by the first defendant and also of the sale proceeds received by the sales effected by the first defendant and

particularised in schedule C. The basis on which the claim is rested is set out in paragraph 8 of the plaint. That portion of the plaint was extracted in

the two judgments of the courts below and it is also printed in the pleadings in the case. In 1939, the plaintiff''s sons through their mother as next

friend instituted O.S. No. 61 of 1939 District Munsif''s Court, Karur, in ''forma pauperis'' for partition of the plaint schedule properties and for

allotment of 3/8th share of the properties to the plaintiffs free of encumbrances. In that suit, the alienations made by the plaintiff and the 2nd

defendant were impeached as not binding on the plaintiffs. That suit was however unsuccessful and was dismissed on 30-3-1940. The first

defendant in the written statement filed by him in the present suit pleaded that the sale was an absolute sale, which was fully supported by

consideration and that it was not open in law to the plaintiff and the second defendant to plead that a trust was created thereby and that they were

also precluded from adducing oral evidence to contradict or vary the terms of the sale deed. He also raised, the further plea that the present suit

was barred by ''res judicata'' by reason of the decision in O. S. No. 61 of 1839. The trial Judge overruled the plea of ''res judicata'' and it was not

repeated in the lower appellate court. The main Issue in the case, which was heard as a preliminary issue by the courts below was whether the plea

that the document dated 30-8-1932 is a trust is open to the plaintiff. It was ruled by both the courts that u/s 92, Evidence Act, the plaintiff was

precluded from establishing a trust by oral evidence and the suit was accordingly dismissed without trial. Hence this second appeal.

On behalf of the appellant, it was contended that it was open to the plaintiff to establish a trust u/s 92, Evidence Act, and also u/s 81 of the

Trusts Act. Though reference was made in paragraph 8 of the plaint that the deed was a nominal one, in substance and in effect the plea was that

under the circumstances set forth in that paragraph, the first defendant was holding the property for the purpose of discharging the debts by the sale

of the properties and that there was a resulting trust for the balance of the undisposed of property and for the balance of sale proceeds if any in the

hands of the first defendant. A reconveyance of the A Schedule property was claimed.

The arrangement pleaded really seeks to establish that the first defendant had no beneficial interest in the property though legal title was fully to

vest in him for the purpose of selling the properties and discharging the debts. u/s 92, Evidence Act, no evidence of any oral agreement or

statement is admissible as between the parties to an instrument or their representatives in interest for the purpose of contradicting, varying, adding

to or subtracting from its terms. But under proviso 2, the existence of any separate oral agreement as to any matter on which a document is silent

and which is not inconsistent with its terms may be proved. In considering whether or not this proviso applies, the court shall have regard to the

degree of formality of the document.

The scope of this section received judicial interpretation very recently by the Privy Council in -- AIR 1949 32 (Privy Council) . In that case, the

father and the son, who were in urgent need of money to save their lands from sale in execution proceedings, sold the properties to the

respondents and executed a sale deed, which was registered. On the same day, the properties were leased back to the father which was

subsequently renewed. A suit for specific performance of the alleged oral agreement to reconvey the properties, which was contemporaneous with

the execution of the sale deed, if the vendors were to repay the purchase price within a period of five years was instituted. The respondent denied

the oral agreement but it was found to be true by the Judicial Committee. The further question that was raised was whether in the face of the

absolute nature of the sale, an oral agreement to reconvey could be proved and whether such evidence was excluded by Section 92, Evidence

Act.

Ever since the decision of the Judicial Committee in -- ''Balkishandas v. Legge'', 23 All 149 (PC) (B), it has been consistently held that it was not

open to the parties to a sale deed to seek to establish by oral evidence that the sale was in fact intended to be a mortgage, for such evidence would

directly contradict the terms of the sale deed as it reduces the interest conveyed from that of an absolute sale to that of mortgage. A

contemporaneous oral agreement, which has the effect of reducing a sale to a mortgage was not provable in view of Section 92, Evidence Act.

The same position was reiterated by the Judicial Committee in the aforesaid recent case. If, however, the parties did not seek to establish a

mortgage by oral evidence, but intend to prove an oral agreement to reconvey which is a distinct transaction, Section 92, Evidence Act, does not

stand in the way. If the arrangement pleaded amounts to a single transaction of the nature of a mortgage, and if the agreement to reconvey is oral, it

is hit at by Section 92, Evidence Act.

If the agreement is in writing but not registered, it is excluded by the provisions of the Registration Act as held in --'' Haridsandas Bhagwandas v.

Bai Dhanu'', AIR 1923 Bom 497 (C), which was approved by the Privy Council in the aforesaid case. On the facts of the case, their Lordships

pointed out that there was an arrangement contemplated by the parties, which provided for the lease of the property and also for reconveyance as

well as for the sale to the original respondents. All these were parts of the same arrangement and were contemporaneous. If they are part of a

single transaction of the nature of a mortgage, the oral agreement would obviously contradict the terms of the sale deed, and therefore would be

excluded by Section 92, Evidence Act. In the case before their Lordships, neither party attempted to establish a mortgage and there is no

indication in the evidence that the relationship of mortgagor and mortgagee ever existed between the parties.

The situation that arose in that case was therefore described by their Lordships in these words at page 34:

In their Lordships'' opinion, the correct way of stating the position is to say that the agreement reached covered several matters but that, the

intention was that each of these should be effected as a separate and independent transaction. There was to be an outright sale and that, upon the

happening of a certain event, was to be followed by a reconveyance of what had been sold. The second transaction, by its very nature, premised

the previous completion of the first. Both, it is true may be taken as arranged at the same time and agreement upon one part of the bargain may

well have promoted agreement as to the rest, but such considerations do not necessarily affect the final result of the bargaining.

The determining factor lies in the ultimate shape of the agreement rather than in the process by which it is reached. An oral stipulation may be

purely collateral to the written agreement which it has induced and that though both touch on a common subject matter ...... Such being the

character of the agreement in question their Lordships find it impossible to hold that it contradicted, varied or subtracted from the terms of the sale

deed. On the contrary, it left those terms and the interests passing thereunder to the purchaser entirely unaffected.

The further question raised was whether the agreement does not really add to the terms of the sale deed and therefore does not fall within the

scope of Section 92, Evidence Act. The answer given by their Lordships was that in order to faring the agreement within the expression ""adding

to"" occurring in Section 92

it must bear in some one or more of the ways specified in the section upon the terms of the sale as contained in the instrument. To add stipulation,

which is quite unconnected with the terms of sale is not in the view of their Lordships an addition of the kind struck at by the section.

So that the addition contemplated must be an addition to the terms of the sale deed and not a collateral matter, which is added on by the

agreement. It was therefore held that the oral agreement to reconvey in the case was provable, on the same reasoning, it would follow as was held

in -- ''Mottayappan v. Palani Gounden'', AIR 1915 Mad 855 (D), that an out and out gift cannot be altered by oral evidence into a will to take

effect after the death of the donor. If the parties to a written agreement however wish to establish that they never agreed to contract on the terms

set forth in the written document or that they did not intend to act upon the document oral evidence could be adduced to establish the same. Vide -

- AIR 1936 70 (Privy Council) . In -- ''Hanifunnisa v. Faizunnissa'', 33 All 340 (F), the parties were allowed to prove that a sale was really a gift.

It is however not open to the parties to a deed to prove by oral evidence an agreement in defeasance of the contract but there is no objection to

prove a collateral agreement suspending the coming into force of the contract; in other words, that a condition precedent not mentioned in the

document should be established before the written contract can be given effect. Vide --''-- AIR 1938 198 (Privy Council) .

These decisions have been adverted to, to show the limitations under which the rule relating to the exclusion of oral evidence u/s 92, Evidence

Act, has been applied. If, therefore, in the present case, the plaintiff wishes to establish an oral arrangement to reduce an out and out sale into a

trust so as to take away the right of the first defendant to enjoy the properties, it cannot but be said that such an agreement would be hit at by

Section 92. It is no doubt true that in cases where people seek to establish that a particular transaction is benami, the ostensible owner is deprived

by oral (evidence?) of the beneficial interest in the property. The question of benami nature of a transaction may arise as between three persons or

only between two. If A & B seek to establish as between themselves that a transfer of property by A to C was benami, there can be possibly no

objection to adduce oral evidence in that behalf as Section 92 applies only as between parties to a transaction and not between a party and a

stranger. That does not present therefore any difficulty.

But then, if A transfers benami his property to B and subsequently wishes to recover it, it may be said that Section 92, Evidence Act, would pre

vent A from proving the real nature of the transaction. In such a situation Section 81, Trusts Act, comes to aid of A. It says,

Where the owner of property transfers or be queaths it and it cannot be inferred consistent ly with the attendant circumstances that he intended to

dispose of the beneficial interest therein, the transferee or legatee must hold such property for the benefit of the owner or his legal representative.

It is open to A to prove that he executes a sale deed benami in favour of B in order to defeat the claims of a creditor. In such a case, it has been

held by the Privy Council in -- ''Petherperumal Chetty v. Muniandi Servai'', 35 Cal 551 (PC) (H), that if the contemplated fraud was not carried

out and was not effected in whole or in part, there is nothing preventing the plaintiff from repudiating the transaction as being benami and recovering

possession of the property. In such a case, the question really is not one u/s 92, Evidence Act, regarding proof of a collateral oral agreement under

which B is to hold the property for the benefit of A but it is really a case where the transferor seeks to establish by attendant circumstances that he

did not intend by his deed to dispose of the beneficial interest in the property to the transferee, and that therefore he must hold the property for his

benefit.

In the light of these principles and notwithstanding the wide allegations in the pleadings, there does not seem to be any objection for the plaintiff

to establish, if he can, that by reason of the attendant circumstances there was no intention to dispose of the beneficial interest in the property to the

first defendant and that there was a resulting trust so far as the balance of the property is concerned. The agreement to re-convey pleaded relates

only to the balance of property i.e., to the undisposed of property and which was not required for the discharge of the debts. The attendant

circumstances such as the previous execution of the trust deed, its failure, the position occupied by the first defendant, the value of the property

being Rs. 45000, i.e., much more than the price for which the property was sold were adverted to in the plaint. The learned District Judge

adverted to Section 81, Trusts Act, in his judgment, but thought that it has no application because the transfer was fully supported by

consideration.

That it is open to establish by evidence that the consideration was really different from the consideration recited in the deed was not disputed as, it

is not a term of the sale deed. It may be open to the plaintiff to show that the only consideration contemplated was not the payment of cash by the

first defendant but also of the properties sufficient to discharge the debts. The obvious intention, if the plaintiff''s case were true, was that the first

defendant should be in a position to convey full title to the purchasers and therefore it was that legal title which was vested in him. The

circumstances adverted to in the plaint do not in any way detract from the full legal title which is vested in him and they do not either contradict,

vary or add to that title. The only objection is that it is not open to the plaintiff to show by oral evidence that the beneficial interest was not intended

to be conveyed but this result can be achieved not by any direct agreement but by establishing attendant circumstances which are consistent with

the case that there was no intention to transfer the beneficial interest within the meaning of Section 81, Trusts Act. For these reasons, we are of

opinion that the dismissal of the suit ''in limine'' on the first issue by the courts below was not justified.

The second appeal is therefore allowed, the decrees of the courts below vacated and the suit is remanded for trial on all the issues. Costs will

follow and abide the result. Court fee paid in this and in the lower courts will be refunded.