Parepalli Venkata Krishnayya vs Chakka Venkataratnam

Varadachariar, J.—This is an appeal by the second defendant, the first defendant (his father) having died during the pendency of the suit in

the trial Court. The plaintiff claimed the suit house and site as a pur-(Sic) 8, 1920, from one Ramanayya. The plaint alleged that the plaintiffs

tenants were won over by the defendants and the cause of action was stated to have arisen on March 15, 1924, when the defendants unjustly

entered upon the suit property and denied the plaintiffs right thereto. It ought to be mentioned that the plaintiff was the brother of the first

defendant''s wife who died some months after the date of Ex. A. A plaintiff could not produce the original of the sale-deed in his favour or of the

sale-deed in favour of his vendor, who in turn had a sale-deed from the defendants (vide Ex. IV) dated May 12, 1908). Both the original

documents have been produced by the defendant.

The first issue in the case raised the question whether the sale-deed in favour of the plaintiff was executed benami for the benefit of defendants

one and two. The Courts below were of opinion that this issue did not arise on the pleadings. But in para. 8, of the lower Appellate Court''s

judgment, that Court made some observations upon this point. I was not prepared graph as amounting to a finding given on the first issue, when the

Court started with the observation that the issue did not merit any consideration. I accordingly called for a finding upon that question and the lower

Appellate Court, after full discussion of the evidence and the probabilities of the case, has now returned a finding that both the sales under Ex. IV

and V were benami transactions and that Ex. V was executed for the benefit of defendants Nos. 1 and 2. I fully agree with that finding and accept

it.

With reference to a contention raised on behalf of the plaintiff in the course of argument both here and in the Courts below--though not made an

issue in the case--it has been found that Ex. IV, was executed with the object of defeating a creditor of the defendants, by name Pichayya, who

had obtained an instalment decree in O.S. No. 26 of 1905 for a large sum of money against the defendants and that on the strength of Ex. IV the

transferee defeated Pichayya''s attempt to attach the properties now in question. As is only natural, the claim proceedings were practically

conducted by the 1st defendant himself, though in the vendee''s name. A sum of money to meet one instalment of the decree would appear to have

been paid into Court by the first defendant through the decree-holder in part satisfaction. The claim order (dated October 13, 1914) said ''the title

having passed by the registered sale-deed to the petitioner, it is for the attaching creditor to avoid it in a regular suit.'' No such suit was filed, and

the evidence does not establish whether any and what further payments were made to Pichayya. The second defendant as D.W. No. 1, has given

inconsistent answers as to whether that decree has been satisfied or not.

The vendee under Ex. IV made the transfer to the plaintiff under Ex. V because, it is said, he was ill, and, before his death, desired to give back

the property to or for the benefit of the defendants. The story of the plaintiff that he paid consideration for the transfer and that the sale-deed which

was in his possession was stolen by defendants Nos. 1 and 2 has been disbelieved. It may fairly be taken that the first defendant was not free from

financial difficulties even in 1920 and accordingly got Ex. V, executed in the name of his brother-in-law the plaintiff. It is very doubtful if plaintiff

was present at the time or even knew of it till some years afterwards. The death of his sister, i.e., first defendant''s wife, some months after Ex. V,

naturally put an end to the relationship of confidence and goodwill between the plaintiff and the first defendant. It is, however, significant that even

in 1922, the tenant admittedly in possession executed a registered rent deed only in favour of the first defendant (see Ex. VI). It is only in 1924 that

the plaintiff got a rent deed (Ex. B) executed in his favour by the said tenant and also got the union registry transferred to his own name in the

manner stated in para. 6 of the Finding Order. This led to disputes between the parties and hence the statement in the plaint that the cause of action

for the suit arose in March 1921. The second defendant has been cross-examined at length about the object and effect of the benami sales. It does

not appear from his evidence whether the sale-deed in plaintiff''s name, i.e. Ex. V was in fact used to defeat and creditor. The discussion in the

judgments of the courts below is practically confined to the effect of Ex. IV, but as it seemed to me necessary also to see how Ex. V, has been

used, I have examined the evidence bearing upon that question. It is stated that Pichayya never attempted to execute his decree after 1911. The

only other creditors proceeding referred to in the course of the evidence is that of the decree-holder in 8. C. No. 1241 of 1920. This took place

during the pendency of this suit in the trial Court and in view of the defendant''s plea in the suit, i.e., that the property belonged to themselves, I

doubt if it will be proper to use what happened pendente, lite as proof that any creditor was deceived. Further the evidence of D.W. No. 1, and

the counter Ex. G filed by him in the Small Cause Proceeding show that the Small Cause decree-holder only attached certain movables and did not

attempt to proceed against the properties now in question. The statement in Ex. G, that the first defendant had no property and none of his

property passed to the second defendant may no doubt be used as pieces of evidence on the question of title but they do not serve to establish that

Ex. V, has in fact been used to defraud any creditor, Ex. G, which is dated February 13, 1928, must be read with the defendant''s explanation in

the witness-box that he made that statement because in this suit, which was then pending, the plaintiff was claiming the property as his own. It has

been contended for the plaintiff and held by the Courts below that it is not open to the defendants to set up the plea of benami because, that will be

allowing them to benefit by their own fraud after it has been carried oat. The latest decision of a Division Bench of this Court bearing on that point

is Koppula Katayya Naidu v. Chitrapu Mahalakshmamma 56 M 616 : 145 Ind. Cas. 308 : AIR 1933 Mad. 457 : 37 L.W. 615 : 61 M.L.J. 719 :

(1933) M.W.N. 652 : 6 R.M. 44, where the learned Judges point out that though the Calcutta, Allahabad and Lahore High Courts have taken a

different view, the course of decisions in this High Court since Vaddina Kamayya v. Gudisa Mamayya 32 M.L.J. 181 : 43 Ind. Cas. 352 : AIR

1918 Mad. 365, has been that even as against a transferee who has himself been a party to a scheme of fraud intended to defeat the creditors of

the transferor, the latter should not be permitted to defeat the transferee''s legal title by pleading the fraudulent scheme. According to the Madras

cases which followed Sidlingappa v. Hirasa 31 B 405 : 9 Bom. L.R. 542 it made no difference for this purpose whether the transferor sued as

plaintiff or merely attempted to defend his possession. I do not propose for the purpose of this case to question this line of authorities; but, as

Koppula Kotayya Naidu v. Chitrapu Mahalakshmamma 56 M 616 : 145 lnd. Cas. 308 : AIR 1933 Mad. 457 : 37 L.W. 615 : 61 M.L.J. 719 :

(1933) M.W.N. 652 : 6 R.M. 44 rests largely on the principle of stare decisis I do not in the circumstances feel called upon to extend its effect any

farther than the decisions have so far gone.

I must, however, take leave to point out that the considerations emphasised in the judgment of Jackson, J. in Koppula Kotayya Naidu v.

Chitrapu Mahalakshmamma 56 M 616 : 145 lnd. Cas. 308 : AIR 1933 Mad. 457 : 37 L.W. 615 : 61 M.L.J. 719 : (1933) M.W.N. 652 : 6 R.M.

44 are really matters for the legislature and not for the Court. However much one may regret the prevalence of benami transactions and attempts to

defeat creditors, I am unable to agree that they are anything peculiar to India. To take a few instances at random Taylor v. Bowers (1876) 1Q

B.D. 291 : 46 L.J.Q.B. 39 : 34 L.T. 938 : 22 W.R. 499 and Symes v. Hughes (1879) 9 Eq. 475 : 39 L.J. Ch. 304 : 22 L.T. 462 approved of and

followed by the judicial Committee in Pethaperumal Chetty v. Muniyandi Servai 35 C. 551 : 35 I.A. 98 : 10 Bom. L.R. 550 : 5 A.L.J. 290 : 19

C.W.N. 562 : 7 C.L.J. 528 : 14 Bur. L.R. 108 : 18 M.L.J. 277 : 4 M.L.T. 12 : 4 L.B.R. 266 must suffice to show that human nature is much the

same everywhere and their, Lordships ridicule the apparent anxiety of the transferee in such cases ''to effect great moral ends'' by insisting that the

transferor should not, be allowed to plead his own fraud. It must also be remembered that while the decisions in India tended to discourage benami

transactions, by holding that a benami transferee could not sue in ejectment, it is their Lordships of the ''Judicial Committee again who in Gur

Narayana v. Sheo Lal Singh 46 C 566 : 49 Ind. Cas. 1 : AIR 1 W 18 P.C. 140 : 46 I.A. 1 : 17 A.L.J. 66 : 36 M.L.J. 68 : 9 L.W. 335 : 23

C.W.N. 521 : I.U.P.L.R: 12 Bur. L.T. 122 affirmed his right of suit. They point to its analogous in the English system and add that ''there is nothing

inherently wrong in it'' and ''so long as a benami transaction does not contravene the provisions of the law, the Courts are bound to give it effect''. If

such transactions are to be condemned, that must be done plainly and directly by the legislature: on the other hand, Courts will only be helping

frauds instead of suppressing frauds if by their attitude they enable the benami transferees to retain the property for himself.

With due respect, I must also state that the view expressed by Coutts-Trotter, C.J. in more than one judgment of his cf. Nadupi and Others Vs.

Subbaraya Chetty and Others, and Vaddina Kamayya v. Gudisa Mamayya 32 M.L.J. 181 : 43 Ind. Cas. 352 : AIR 1918 Mad. 365 goes touch

farther than the Privy Council decision. In the case before their Lordships the execution of benami conveyance compelled the creditor to take

proceedings against the transferee. Their Lordships nevertheless say that as these proceedings proved successful, the creditor was not ultimately

defrauded and that therefore, the fraud had not been carried out so as to disentitle the transferor to recover the property from the transferee,

treating him as a benamidar. This would seem to justify the view of Sundaram Chettiar, J. in Subbaraya Naicker and Others Vs. Venkatesa

Naicker and Another, that the mere fact of the creditor having been delayed in obtaining satisfaction will not preclude the transferor from pleading

the benami character of the transaction as against his transferee (see also Bai Devamani v. Ravisankar Ogadbhai 53 B 321 : 116 Ind. Cas. 236 :

AIR 1929 Bom. 147 : 31 Bom. L.R. 109. Much less will the ''mere intention to effect an illegal object, when the assignment was executed (per

Lord Romilly in Symes v. Hughes (1879) 9 Eq. 475 : 39 L.J. Ch. 304 : 22 L.T. 462 preclude the true owner from asserting his rights.

The question for consideration in the present case is how the decision in Koppula Kotayya Naidu v. Chitrapu Mahalakshmamma 56 M 616 :

145 Ind. Cas. 308 : AIR 1933 Mad. 457 : 37 L.W. 615 : 61 M.L.J. 719 : (1933) M.W.N. 652 : 6 R.M. 44 is to be applied consistently with the

principle of the decision of the Judicial Committee in Pethaperumal Chetty v. Muniyandi Servai 35 C 551 : 35 I.A. 98 : 10 Bom. L.R. 550 : 5

A.L.J. 290 : 19 C.W.N. 562 : 7 C.L.J. 528 : 14 Bur. L.R. 108 : 18 M.L.J. 277 : 4 M.L.T. 12 : 4 L.B.R. 266 . It is here that the importance of the

circumstances comes in that it has not been shown that Ex. V the transfer in plaintiff''s name has been actually used to effect a fraud on any creditor

of the defendants. In accordance with the authorities, I shall assume that as against the original transferee under Ex. IV, the defendants are

debarred from asserting, in a Court of law their own title or the benami character of the transaction, because the fraud contemplated at the time of

the execution of Ex. IV has been carried out. But this would not compel that transferee to claim the property for himself or preclude him from

voluntarily giving back the property to his transferors. Where, however, he makes the transfer to a third'' person, three types of cases may arise

and they must be kept distinct. (1) If the second transferee is a bona fide purchaser for value, he will, for that very reason, acquire an absolute title

and need not invoke the aid of the principle now under consideration (See per Mellish, L.J. in Taylor v. Bowers (1876) 1Q B.D. 291 : 46

L.J.Q.B. 39 : 34 L.T. 938 : 22 W.R. 499 (2). If he is not a bona fide purchaser, but the object of the transaction was to transfer the beneficial

interest to him, he may claim to stand in the shoes of his transferor, i.e. the first transferee and rely to the same extent as the latter can, on the rule

that precludes the original transferor from asserting his own title. It is on this footing that the decisions in Sidlingappa v. Hirasa 31 B 405 : 9 Bom.

L.R. 542 and Koppula Kotayya Naidu v. Chitradu, Mahalakshmamma 56 M 616 : 145 lnd. Cas. 308 : AIR 1933 Mad. 457 : 37 L.W. 615 : 61

M.L.J. 719 : (1933) M.W.N. 652 : 6 R.M. 44 have proceeded. In Taylor v. Bowers (1876) 1Q B.D. 291 : 46 L.J.Q.B. 39 : 34 L.T. 938 : 22

W.R. 499 and Symes v. Hughes (1879) 9 Eq. 475 : 39 L.J. Ch. 304 : 22 L.T. 462 there was not enough to create an estoppel even as against the

original transferee and the second transferee was held to be in no better position. 31 B 405 : 9 Bom. L.R. 542 A third conceivable case stands on

a wholly different footing. The original transferee may merely re-transfer the property to a nominee or friend of himself or the original transferor,

with the avowed object or understanding that the new transferee should hold the property for the benefit of the original transferor. In such a case,

the new transferee cannot, it seems to me, claim to stand in the shoes of the first transferee. It often happens in this country that a benami transferee

is not even aware that a transfer has been made or taken in his name. In such cases he cannot be regarded as a party to any contract or transfer

and it is doubtful if even the legal estate can be regarded as vested in him. [See Kuthaperumal Rajali v. The Secretary of State for India 30 M. 245

: 17 M.L.J. 174. But assuming that he is in some sense a ''legal'' owner, he certainly cannot claim the beneficial interest, because the avowed object

of the transaction was only to make him a trustee for the original owner. In this class of cases, the Court is no longer concerned with the effect of

the first transfer, because that transferee has chosen to give back the property to the transferor. It may be assumed that the object of taking the re-

transfer in the name of another instead of directly in the original owner''s name is to continue the scheme of defrauding creditors. In the present case

Mr. Satyanarayana Row suggests, that the object must have been to retain the benefit of the claim order (Ex. C.) against Pichayya. But, once it is

realised that the former transfer is out of the way and the new transferee has himself undertakell a trust for the benefit of the original owner, the new

trustee cannot seek to shut the mouth of the owner unless the new transaction has gone beyond the stage of fraudulent intention and has in turn

been actually used to effectuate the contemplated fraud.

For these reasons, I am of opinion that Koppula Kotayya Naidu v. Chitrapu Mahalakshmamma 56 M 616 : 145 lnd. Cas. 308 : AIR 1933

Mad. 457 : 37 L.W. 615 : 61 M.L.J. 719 : (1933) M.W.N. 652 : 6 R.M. 44 and the authorities there reviewed do not entitle the plaintiff in this

case to contend that defendants are precluded from pleading the benami character of the transfer to the plaintiff under Ex. V.

The other question argued in the second appeal is a point of limitation. The defendants contended that notwithstanding the execution of Exs. IV

and V, they had all along continued in possession of the suit property. Having regard to the frame of the suit, it must be held to be governed by

Article 142 of the Limitation Act, but in view of the evidence in the case, it would seem to make no difference whether Article 142 or Article 144

applied. The learned Subordinate Judge who heard the appeal dealt with this question in paras. 9 and 10 of his judgment, but his reasoning is

vitiated by so many mistakes that it is impossible for me to accept his conclusion. It makes considerable difference in the approach of the evidence

on the question of possession, whether Exs. IV and V are taken to be real transactions or only benami transactions. The main basis of the

conclusion of the learned Subordinate Judge is the statement in Ex. C.-l the claim petition of 1914, that the claim petitioner was entitled to and was

in enjoyment of the suit property on the date of the claim petition. In view of the second defendant''s evidence that it was the first defendant that got

this petition put in and conducted that proceeding, the learned Subordinate Judge treats that as an admission of the transferee''s enjoyment by the

first defendant and he adds that the present suit is within 12 years from that date. Exhibit C.-l is signed only by the claim petitioner and not by the

first defendant. It cannot, therefore, operate as an acknowledgment within the meaning of Section 19 of the Limitation Act. It is difficult to

understand what the learned Judge means by describing it as an ''admission''. At the worst it can only be regarded as a statement made by the

transferee to the knowledge of the first defendant. If, on the other hand, it is looked upon as a statement which it then suited the first defendant So

put into the transferee''s mouth, there is even less justification for treating it as an ''admission''. The learned Subordinate Judge attributes a very

curious effect to the order on the claim petition. As stated already, it expressly proceeded on the footing that there being a registered sale deed in

the claimant''s favour, the decree-holder must have it set aside by a regular suit. The learned Subordinate Judge would read into it an implied

adjudication that the claimant was in possession; and by an extension of the doctrine of disability arising from fraud, he would hold that the

defendants could not be permitted to go behind what the first defendant then got the Court to believe, namely, that he was neither entitled to, nor in

possession of, the property.

With reference to the plaintiff''s possession, it is stated'' in the printed copy of the judgment that from 1914 onwards the taxes were paid by the

plaintiff. This is evidently a mistake for 1924. It is, however, clear that the learned Judge did not realise that the attempt of the plaintiff to get the

union registry transferred to his name, his taking the rent deed Ex. B., and his payment of union tax all begin in 1924 and that was the time when

admittedly disputes arose between the plaintiff and the defendants in respect of the suit property. The learned Subordinate Judge makes no

reference whatever to the bearing of this aspect of the matter when relying upon the tax receipts as evidence of possession.

In dealing with the question of benami character on which I called for a finding, the new Subordinate Judge has discussed the question of

possession also and has come to the conclusion that possession has all along remained with defendants Nos. 1 and 2. I have considered whether I

should call for a finding again on the question of possession in reference to the plea of limitation; but to avoid further delay, I have preferred to deal

with the matter myself u/s 103 of the Civil Procedure Code. I have the more readily done so because a bare perusal of the deposition of the

plaintiff was sufficient to show that his evidence was wholly untrustworthy. I have examined the other evidence in the case and come to the

conclusion that the defendants have all along continued in possession. I accordingly hold that the suit is also barred by limitation. I am not aware of

any rule which precludes the defendants from proving the fact of their possession and relying upon a plea of limitation. On both the grounds,

therefore, the second appeal must be allowed and the suit dismissed with costs throughout.