Lacha Reddi and others vs Venkamma and others

Chandra Reddy, J.—The plaintiffs are the appellants. Originally there were eleven plaintiffs. But, as plaintiffs 1 to 4 were unwilling to prosecute the suit they were transposed as defendants 17 to 20. The suit giving rise to this appeal was instituted "in forma pauperis'''' in the subordinate Judge''s Court, Nellore, for partition and separate possession of plaintiffs'' share in the property set out in schedules A to D of the plaint and to recover mesne profits as mentioned in the plaint E schedule and for other incidental reliefs.

The undisputed facts may be stated briefly in order to appreciate the contentions of the parties.

Some time in the year 1904 the creditors of the family of the plaintiffs filed O.S. 1 of 1904 in the District Court, Nellore, for recovery of money due to them and obtained a decree. In execution of this decree, the properties covering about 120 acres of the land were brought to sale and they were purchased by two persons by name Y. Raghavareddy and N. Ramayya Chetty. The auction purchasers sold the properties to one Rebala Subbareddy on 11-8-1908 under Ex. A-4 for a sum of Rs. 5,000.

Subbareddy entered into an agreement for sale Of the same properties for Rs. 5,000 with one Magonta Raghavareddy the father-in-law of Venkatareddy the grandfather of the plaintiffs and defendants 17 to 20. Under the terms of this agreement the vendee should pay the purchase price within ten years, get into possession of the properties and pay Sircar Cist, and also rental at Rs. 375 per annum to the vendor. It was also agreed that on payment of the full purchase price within ten years the vendor should execute a sale deed to the vendee and if the vendee commits default in respect of the above, the vendor should take possession of the properties.

As there was default in payment of rental, Subbareddy filed a suit O.S. 18/1914 for recovery of possession of the properties. The suit was decreed on 8-2-1915 and possession was taken by him in execution of the decree. Subsequently on 4-10-1916, this Subbareddy executed a sale deed in respect of the very properties which formed the subject-matter of agreement with Magonta Raghavareddy to Seshamma the daughter of the said Raghavareddy under Ex. A-2 for a sum of Rs. 8,100/-.

The consideration for sale was found by mortgaging the very same properties to one Bulla Venkatasubbareddy on 9-10-191G under Ex. E-37. Under this instrument a sum of Rs. 10,000/- was borrowed for the purpose of paying off the vendor and for buying some property. On 2-8-1921, Seshamma executed a will bequeathing all the properties covered by Ex. A-2 to her daughter-in-law Venkamma defendant 1 herein, with absolute rights subject to some liabilities such as the discharge of the mortgage evidence by Ex. B-37 performing the marriages of unmarried members of the family and education of her children.

The mortgage to Bulla Venkatasubbareddy was discharged by sale of a portion of the hypotheca. Sometime later Venkamma the legatee under the Will of Seshamma sold the properties in dispute under various sale deeds to various persons who are arrayed as defendants 5 to 16. It is these transactions of Venkamma that are sought to be impugned in the present suit.

The main recitals in the plaint are that the purchase in the Court auction in execution of the decree in O.S. No. 1 of 1904 was benami for the members of the plaintiffs'' family, that the vendee under Ex. A-1 (i.e. the agreement between Subbareddy and Magonta Raghavareddy) was a benamidar the beneficiaries being the members of the family that the sale by Subbareddy in favour of Seshamma in 1916 was also a benami transaction and that lastly the will executed by Seshamma in favour of her daughter-in-law also partook of the same character.

It is alleged in the plaint that it became necessary for the parties to resort to these benami transactions because the family of the plaintiffs was in involved circumstances and these various devices were hit upon to put the property beyond the reach of the creditors of the family.

Defendant 1, as already stated, is the mother of the present defendants 17 to 20. Defendant 2 is the father of the present plaintiffs 1 to 3, defendant 3 being the father of the present plaintiffs 4 to 7. Defendant 4 is the brother of defendants 2 and 3. Defendants 5 to 13 are either the original alienees from defendant 1 or subsequent purchasers from them. The real contesting defendants to the suit are defendants 5, 7 and 13, the other defendants allowing the suit to proceed ex parte.

The claim of the plaintiffs was resisted by the contesting defendants by denying the benami nature of any of the transactions referred to above and pleading that even otherwise the suit was not maintainable for the reason that the fraudulent purpose for which the transactions referred to above were entered into was achieved, and that in any event the contesting defendants'' predecessors-in-interest being bona fide purchasers for value without notice of the benami nature of the transactions and having taken reasonable care to ascertain that their vendor had the right to make the transfer, the transfer in their favour could not be impeached.

The trial Court dismissed the suit holding that the sale in favour of Seshamma as also the will executed by the latter were real, that assuming the plaintiffs'' case is proved in that behalf they could not recover the property for the reason that fraud was perpetrated to defeat the creditors and that lastly in any event the alienations were binding upon the plaintiffs as they were effected for discharging debts incurred by the manager of the family and for other family necessities.

The plaintiffs who are aggrieved by the above judgment have preferred this appeal. In this appeal all the conclusions of the Subordinate Judge have been assailed before us. The main contention for the appellants was that the Subordinate Judge has misunderstood the scope of the various documents placed before him and the oral evidence. The only inference to be drawn from the documents and the attendant circumstances, according to the appellants is that all the transactions impugned are from start to finish benami.

Before we deal with this aspect of the matter we have to mention one circumstance at the outset which goes to the root of the plaintiffs'' case. In the plaint, it is recited that the purchase in Court auction in execution of the decree in O.S. No. 1 of 1904 was benami for the plaintiffs'' family. This case was stuck to even in the oral evidence adduced for the plaintiffs.

P. W. 1 had asserted that the auction-purchasers bid for the properties only for the benefit of the family. On this case, the plaintiffs have to be non-suited by reason of S. 66, C.P.C. Realising this difficulty and to overcome the effect of Ex. A-4 which shows the purchasers in the Court auction were different persons from those mentioned in the plaint, and that Subbareddy bought this property from them under the document for a sum of Rs. 5,000 at a later stage of the trial a change of front was adopted and this, was maintained before us.

Normally a Court will not permit the parties to set up a case inconsistent with that in the pleadings. In this case, the conflict is between the case as set up in the pleadings and that sought to be made out at subsequent stages of the trial. But that will not form a ground for dismissal of the suit as no issue seems to have been raised nor had the Judge rested his decision thereon.

We will now proceed to deal with the case of benami. The relevant documents in this context are Exs. A-1, A-2 and A-3 the contents of which have already been referred to. As already stated under Ex. A-4 Subbareddy purchased properties which are mostly involved in the present suit for Rs. 5,000/-. There is no indication in the sale deed that they were conveyed in favour of Subbareddy for the benefit of the family of the plaintiffs.

It is not shown that the consideration for the sale was supplied by the plaintiffs'' ancestors. Nor is such allegation made anywhere. So only possible conclusion is that Subbareddy purchased the properties for himself and was not a name-lender. Nor does the agreement Ex. A-1 throw any light on this issue. No circumstance surrounding this agreement has been pointed out to help us to arrive at the conclusion that the vendee under Ex. A-1 was a benamidar for the plaintiffs'' family excepting that he was the father of Seshamma the paternal grand-mother of the plaintiffs.

As already stated, this agreement did not result in a sale for the reason that the vendee defaulted in carrying out the terms thereof. It is not out of place to remember in this context that in the suit filed by Subbareddy for recovery of the property from Raghavareddy the theory that he was only a benamidar for the plaintiffs'' family was not even suggested.

The most important document is Ex. A-2 i.e., the sale deed by Subbareddy in favour of Seshamma. The case of the plaintiffs largely depends upon the nature of the transaction evidenced by Ex. A-2. The essence of a benami is the intention of the parties. The source of sale-price also plays a large part in the determination of the nature of the transaction.

As regards the latter the money required for the purchase was found by mortgaging the very properties which are the subject-matter of Ex. A-2, to Bulla Venkatasubbareddy and this debt was discharged by sale of some of the properties covered by it. So, that cannot be traced to persons other than Seshamma and therefore one of the essential ingredients of a benami transaction is lacking.

Now, turning to the question of intention what counts is that of the vendor and the vendee. In this case, there is nothing to reveal the intention of Subbareddy the vendor to benefit the person other than the vendee. The document does not disclose any such idea of the vendor. The two circumstances relied on as supporting the plaintiffs'' case of benami are that the vendee under Ex. A-2 is no other than the daughter of the vendee under Ex. A-1 and secondly that the property which was so purchased for Rs. 8,100/- was mortgaged by Seshamma for a sum of Rs. 10,000/- a portion of which was utilised by her for buying other properties. As regards the first, we are unable to see how that is consistent only with Seshamma being a mere name-lender to that family. It may be that the vendee under Ex. A-1 requested the vendor to sell the properties to his daughter for the same price and the vendor might have consented to it as the original transaction in favour of Raghavareddy fell through. The fact that ultimately the children of Seshamma might derive a benefit from this transaction is not synonymous with the transaction being a benami one. The second circumstance also does not point to the inference which the appellants want us to draw. The answer to the first one applies with equal force to this also.

In these circumstances, we feel that there is no sufficient material furnished by the documents to warrant the conclusion that all the transactions were impressed with benami character. 13-14. The oral evidence led by the plaintiffs does not carry them any further.

After discussing the evidence of P.W. 1, the judgment continues as under:

We have no doubt that he has come forward to help his nephews and grand-nephews by speaking to something of which he was utterly ignorant.

The other witnesses seek to prove that under the will of Seshamma the real beneficiaries were members of the plaintiffs'' family. If the plaintiffs have not succeeded in establishing that Seshamma was merely a namelender, Venkamma, the legatee under the will, cannot be described as a trustee for her husband and his brothers and their children.

Further there is no tangible evidence to establish the case of trust. Again the story of the plaintiff is also contradicted by Ex. B-5 dated 30-4-1927 a deed of relinquishment by defendant 3 in favour of Venkatanarasimha Reddy wherein the recital that the family has no immovable property is found, and also by Ex. B-35 a document of release by another son of Seshamma (4th defendant) on 31-8-1939 which also shows that the family was not possessed of any immoveable property.

Even on the footing that all the transactions were of a character suggested for the plaintiffs, the plaintiffs cannot have a decree. As already stated, it is alleged in the plaint that the reason for the benami transactions was to screen the properties from the creditors.

The same version was put forward in the evidence of P.W. 1. If so, we think the maxim "in pari delicto" comes into operation. It is argued that where fraud has not been effected or there has not been even substantial performance of it the real owners of property can get it back in spite of the original fraudulent intention. This proposition is indisputable. The principle is stated succinctly by their Lordships of the Judicial Committee in - ''Petherpermal Chetty v. Muniandy Servai'', 35 Cal 551 (PC) (A) thus:

xx xx to enable a fraudulent confederate to retain property transferred to him in order to effect a fraud, the contemplated fraud must, according to the authorities, be effected. Then, and then alone, does the fraudulent grantor, or giver, lose the right to claim the aid of the law to recover the property he has parted with.

The facts of the above case are these. The estate of one Muniandi Maitry developed on his two cousins who were brothers and members of an undivided family Challam Servai and Muniandi Servai on the death of the last maleholder''s mother. In order to get rid of an equitable mortgage existing over this property Muniandi Servai executed a document purporting to be a sale in favour of one Pether Permal Chetty.

In a suit instituted by the mortgagee, it was found that the vendee had notice of the equitable mortgage and the mortgagee''s claim was decreed. Thereafter, the mortgage decree was satisfied by the money raised on the security of the very property. Subsequently Muniandi Servai brought a suit for the recovery of property conveyed to Pettier Permal Chetty on the ground that it was a benami transaction. Two defences were raised to the action that the sale was a real one and that in any event the object of the transaction being to perpetrate fraud the plaintiff could not get back the property.

But the objections were negatived. It was found that the document of sale was benami and brought into existence to defraud the mortgagee and so inoperative against the real owner. On the other question, their Lordships expressed the opinion that since the purpose of fraud was not carried out the plaintiff was not prevented from repudiating the transaction as a benami one. The reason of the rule is put thus in the judgment:

xx xx tire plaintiff in suing to recover possession of the property is not carrying out. the illegal transaction but is seeking to put every one as far as possible, in the same position as they were in before that transaction was determined upon. It is the defendant, who is relying upon the fraud and is seeking to make a title to the lands through and by means of it. And despite his anxiety to effect great moral ends lie cannot be permitted to do this. And further the purpose of the fraud having not only not been effected but absolutely defeated there is nothing to prevent the plaintiff from repudiating the entire transaction revoking all authority of his confederate to carry out the fraudulent scheme and recover possession of his property.

It is urged for the appellants that the principle stated in the above decision applies to the instant case for the reason that the fraud had not been carried out either wholly or substantially.

There is no evidence on record that any of the creditors of the family were defeated or defrauded, so argues Mr. Kuppuswami. We do not think we can give effect to this argument. The whole case of the appellants proceeded on the assumption that it was for the express purpose of defrauding creditors that the properties were put in the name of different persons by way of cloak.

According to the plaintiff?, it goes back to the time when the sale took place in execution of the decree in O.S. 1/1904 and it extended up to 1937, The recitals even in Exs. B-5 and B-35 in the years 1927 and 1939 respectively, that the family had no immoveable property are explained away on the basis that they were made to defraud the creditors.

If for a period of nearly 35 years the device of benami has been adopted to cheat the creditors and that as admitted for the plaintiffs there were no other properties excepting those involved in these transactions, the only reasonable inference to be drawn is that the purpose has been achieved. There is not a single factor which could be consistent with any of the creditors having been paid his dues.

It was next contended for the appellants that this case cannot he brought within the operation of the doctrine of In PARI DELICTO because the persons that are seeking to recover the property are not parties to the fraud & it is only a person who had participated in the fraudulent scheme that could be precluded from setting back the property from the benamidar. This seems to be bare of authority as it does not seem to have arisen directly in any case. At any rate, none has been brought to our notice.

In this context, our attraction was called to Koppula Kotayya Naidu and Others Vs. Chitrapu Mahalakshmamma, The facts of that case are these. Defendants 2 and 3 were the sons of defendant 1. In order to defeat an anticipated claim of defendant 1''s brother''s son one Ranganayakulu for partition the property involved in that suit was put in the name of Deft. 4 Some time thereafter Ranganayakulu filed a suit for division of the property alleging that the sale in favour of defendant 4 was benami. This was denied by the defendants.

That suit was compromised as a result of which Ranganayakulu got some property but less than what was due to him, as portion of the property put in the name of defendant 4 was sold later to a third party. When a suit was filed by this vendee for recovery of the property from the defendants he was sought to be non-suited on the plea that the Plaintiffs'' vendor had no title to the suit property, he being only a benamidar for them This defence was disallowed because defendant 1 defrauded Ranganayakulu of some portion of the suit property by raising the plea that the property belonged to defendant 4.

It is pointed out that though it was defendant 1 that set up the false plea that the property belonged to defendant 4 as a result of the auction purchase, defendants 2 and 3 who did not claim through defendant 1 were also held disentitled to recover the property. But the facts on that aspect of the matter are not clear.

Though it is stated in the judgment at p. 648 of (56 Mad) (at p. 458 of AIR) that defendant 1 raised the false plea, at D. 647 (of 56 Mad) (at p. 457 of AIR) it is stated that allegation by Ranganayakulu that the sale of the land to defendant 4 was benami was denied by the defendants. In the absence of a clear statement of facts it is difficult to say that defendant 1 alone was a party to the fraud and yet the learned Judges thought that defendants 2 and 3 his sons were prevented from recovering their share of the property by reason of the doctrine in PARI DELICTO.

It may be noted here that in 35 Cal 551 (PC) (A) it appears that both Chellam Servai and Muniandi Servai became heirs to the estate of Muniandi Maistry on the death of the latter''s mother, but the letters of Administration seem to have been granted only to Chellam Servai the elder of the two. The fraudulent intention in that case could not be attributed to Muniandi Maistry as he was not a party to the document in favour of Pether Permal Chetty.

Be that as it may, we are inclined to take the view that the Court would not extend its help to plaintiffs in this case to recover the property saved by the fraud perpetrated by the members of that family. At the time when the fraud was contemplated and carried out all the co-parceners then surviving were parties to the fraud contemplated and carried out. At that time none of the plaintiffs was in existence.

The maxim is based on public morality and when a sole surviving co-parcener or all the coparceners then in existence save property by resorting to benami transactions in order to deprive the creditors of their dues and the fraud is carried out, it will not be open to the subsequent born coparceners to recover that very property especially when it in the hands of alienees from the ostensible owner. In such a situation, the principle "Let the estate lie where it falls" takes effect.

There is yet another and more formidable defence to the suit. There is abundant evidence that the sales in favour of the various defendants were effected for purposes binding on the plaintiffs, assuming that the properties in suit are the joint family properties in which the plaintiffs could claim a share.

23-34. (His Lordship then considered the transfers relating to items in Schedules A & C and proceeded as under:) From what precedes, the alienations of most of the items of property having been either for family necessity or for discharging debts incurred by the managing members of the family cannot be questioned by the plaintiffs. Some of the sales took place before the plaintiffs were born and on that ground also the plaintiffs will have no locus standi to impeach them.

It has to be observed that this is a combined effort by the plaintiffs, their fathers, defendant 1 and her children to get back the properties for the family and to defraud the alienees who paid full consideration for the various sales and are bona fide purchasers for value. They could not also be imputed with any knowledge of the benami character of the various transactions assuming there is any foundation for the theory of benami. The plaintiffs'' suit was rightly dismissed by the lower Court.

In the result the appeal fails and is dismissed with costs.