R. Rathnappa and Ramasami vs V. Lakshmma

S. Nagamuthu, J.—The Defendants in O.S. No. 433 of 1996 on the file of the learned Subordinate Judge, Hosur are the Appellants. The

Respondent herein is the Plaintiff in the Suit. The said Suit was filed for declaration of title and for consequential relief of injunction to restrain the

Defendants from in any manner interfering with his peaceful possession and enjoyment of the suit property. Subsequently, the Suit was amended to

include the prayer for recovery of possession and for mesne profits instead of permanent injunction.

The Suit was dismissed by the Trial Court. As against the same, an Appeal was preferred by the Defendants in A.S. No. 102 of 1998 on the

file of the III Additional District Judge, Dharmapuri District at Krishnagiri. The Appeal was dismissed thereby confirming the decree and judgment

of the Trial Court. As against the same, the Defendants are before this Court with this Appeal.

The case of the Plaintiff in brief is as follows: The suit property was originally owned by one Uchappa. According to the Plaintiff, she purchased

the same by means of a Registered Sale Deed dated 20.11.1978 for a valuable consideration of Rs. 1,000/- under Ex.A. 1. From the date of

purchase she was in possession and enjoyment of the property. The Defendants have got no title whatsoever over the suit property. Since the

Defendants made attempts to trespass into the suit property, the Suit was filed for declaration of title and for permanent injunction. However,

during the tendency of the Suit, according to the Plaintiff, the Defendants trespassed into the suit property and dispossessed him. Therefore, the

Suit was amended suitably so as to include the prayer for recovery of possession and for mesne profits instead of permanent injunction.

In the Written Statement filed by the Defendants, it is contended as follows: It is true that the Suit was originally owned by Uchappa. The

Plaintiff is the younger sister of the first Defendant. She has been all along living with her husband at Karnataka. She never resided in the suit

village. On 20.11.1978 for a valuable consideration of Rs. 1000/- the suit property was purchased only by the First Defendant from Mr. Uchappa.

Since the brother of the First Defendant was likely to claim title, the First Defendant arranged for the execution of the Sale Deed in the name of the

Plaintiff. Thus, the entire consideration for the purpose was paid only by the First Respondent. In other words, the property was purchased by the

First Defendant benami in the name of the Plaintiff. Subsequently, by spending huge amounts, he constructed a house on the same and he has been

in occupation of the same continuously. The Plaintiff was never in possession of the property and she never enjoyed the same. He further

contended that the allegation that he trespassed into the suit property is absolutely false, as according to him, he has been in possession and

enjoyment of the suit property from the date of purchase on 20.11.1978. Therefore, the Suit is liable to be dismissed, he contended.

Based on the above pleadings, the Trial Court framed appropriate issues. The main issue was regarding the maintainability of the plea of benami

by the First Defendant. On the side of the Plaintiff, three witnesses were examined and as many as 16 documents were exhibited. On the side of

the Defendants four witnesses including the First Defendant were examined and as many as 18 documents were exhibited.

The Trial Court held that in view of Section 4 of the Benami Transactions (Prohibition) Act, 1988, such plea raised on the part of the First

Defendant is not maintainable. Therefore, the Trial Court held that as per the Sale Deed dated 20.11.1978 under Ex.A. 1, the Plaintiff is the

absolute owner. Accordingly, the Trial Court decreed the Suit both for declaration of title as well as for recovery of possession. The Lower

Appellate Court also concurred with the same. That is how, the Appellants are before this Court with this Appeal.

When the Second Appeal was admitted, this Court framed the following substantial questions of law:

Whether the Courts below are right in applying the Benami Prohibition Act when the Act does not apply to those transactions that had taken

place earlier to its promulgation?

Whether the Courts below are right in not rejecting the Plaint when the Plaintiff had admittedly added new relief and fresh allegations without

securing the leave of the Court?

I have heard the learned Counsel on either side and also perused the records carefully.

The learned Counsel for the Appellants would submit that the provisions of the Benami Transactions (Prohibition) Act, 1988 (Hereinafter

referred to as ""Act"") is prospective in operation and the same shall not void the past transactions. In this case, according to him, the benami

pleaded by the Appellants is of the year 1978, much prior to the coming into force of the Act. Therefore, according to the learned Counsel, the

Courts below were not right in holding that the plea of benami as raised by the First Defendant is not sustainable.

The learned Counsel appearing for the Respondent would submit that the Act is retroactive and so, the plea of benami raised by the

Defendants cannot be allowed to sustain.

Before referring to the judgments of the Hon''ble Supreme Court as well as this Court on the subject, let us first extract the relevant provisions

of the Act, namely, Sections 3 & 4 of the Act.

Probhition of Benami Transactions:

(1) No person shall enter into any benami transaction.

(2) nothing in sub-section (1) shall apply to:

(a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved,

that the said property had been purchased for the benefit of the wife or the unmarried daughter;

(b) the securities held by a:

(i) Depository as registered owner under sub-section (1) of Section 10 of the Depositories Act, 1996;

(ii) participant as an agent of a depository.

Explanation: The expressy assigned to them in clauses (e) & (g) of sub-section (1) of Section 2 of the Depositories Act, 1996.

(3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or

with both.

(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974) an offence under this Section shall be non-

cognizable and bail able.

Prohibition of the right to recover property held benami:

(1) No Suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or

against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

(2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or

against any other person, shall be allowed in Suit, claim or action by or on behalf of a person claiming to be the real owner of such property.

(3) Nothing in this Section shall apply:

(a) where the person in whose name the property is held is a co-parcener in Hindu undivided family and the property is held for the benefit of the

coparceners in the family;

(b) where the person in whose name the property is held in a trustee or other person standing in a fiduciary capacity, and the property is held for

the benefit of another person for whom he is a trustee or towards whom he stand in such capacity.

A plain reading of Section 3 would make it manifestly clear that the said provision is prospective since it only prohibits future benami

transactions. To that extent, there is no contra opinion among the Counsel. So far as Section 4 of the Act is concerned, according to the learned

Counsel for the Appellant, it is only prospective, which will govern only the benami transactions, which have taken place after the coming into force

of the Act.

Admittedly, the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 (Ordinance 2 of 1988) came into being

on 19.5.1988 and the Benami Transactions (Prohibition) Act, 1988 came into being with effect from 5.9.1988 which has repealed the said

Ordinance.

The question whether Section 4 of the Act is prospective or retrospective came up for consideration on several occasions before the Hon''ble

Supreme Court. The earliest one is the case of Mithilesh Kumar and Another Vs. Prem Behari Khare, , wherein the Hon''ble Supreme Court held

that the defence could not be decided after 19.5.1988 even though the plea of benami was raised before 19.5.1988, since Section 4 is

retrospective in operation. This view was not found to be correct in another case in R. Rajagopal Reddy and Others (deceased by legal

representatives) Vs. Padmini Chandrasekharan (deceased by legal representatives), . This case was decided on 31.1.1995. A Bench of three

Hon''ble Judges of the Supreme Court in Rajagopal Reddy''s case, while over-ruling the view taken in Mithilelsh Kumari case, held as follows:

Before we deal with these six considerations which weighed with the Division Bench for taking the view that Section 4, will apply retrospectively in

the sense that it will get telescoped into all pending proceedings, howsoever earlier they might have been filed, if they were pending at different

stages in the hierarchy of the proceedings even upto this Court, when Section 4 came into operation, it would be apposite to recapitulate the salient

feature of the Act. As seen earlier, the preamble of the Act itself states that it is an Act to prohibit benami transactions and the right to recover

property held benami, for matters connected therewith or incidental thereto. Thus, it was enacted to efface the then existing right of the real owners

of properties held by others benami. Such an Act was not given any retrospective effect by the legislature. Even when we come to Section 4, it is

easy to visualise that sub-section (1) of Section 4 states that no Suit, claim or action to enforce any right in respect of any property held benami

against the person in whose name the property is held or against any other shall lie by or on behalf of a person claiming to be the real owner of

such property. As per Section 4(1) no such Suit shall thenceforth lie to recover the possession of the property held benami by the Defendant.

Plaintiff''s right to that effect is sought to be taken away and any Suit to enforce such a right after coming into operation of Section 4(1) that is

19.5.1988, shall not lie. The legislature in its wisdom has nowhere provided in Section 4(1) that no such Suit, claim or action pending on the date

when Section 4 came into force shall not be proceeded with and shall stand abated. On the contrary, clear legislative intention is seen from the

words ""no such claim, Suit or action shall lie"" meaning thereby no such Suit, claim or action shall be permitted to be filed or entertained or admitted

to the portals of any Court for seeking such a relief after coming into force of Section 4(1). In Collins English Dictionary, 1979 Edition as reprinted

subsequently, the word ''lie'' has been defined in connection with Suits and proceedings. At page 848 of the Dictionary while dealing with Topic

No.9 under the definition of term ''lie'' it is stated as under:

for an action, claim Appeal, etc. to subsist; be maintainable or admissible

The word ''lie'' in connection with the Suit, claim or action is not defined by the Act. If we go by the aforesaid dictionary meaning it would mean

that such Suit, claim or action to get any property declared benami will not be admitted on behalf of such Plaintiff or applicant against the

Defendant concerned in whose name the property is held on and from the date on which this prohibition against entertaining of such Suits comes

into force. With respect, the view taken that Section 4(1) would apply even to such pending Suits which were already filed and entertained prior to

the date when the Section came into force and which has the effect of destroying the then existing right of Plaintiff in connection with the Suit

property cannot be sustained in the face of the clear language of Section 4(1). It has to be visualised that the legislature in its wisdom has not

expressly made Section 4 retrospective.

Subsequently, the same question arose again for consideration before another Full Bench of three Hon''ble Judges of the Supreme Court in

(1996) 7 SCC 55 Sankra Hali and Sankara Institute v. Kishori Lal Goenka . This case was decided by the Hon''ble Supreme Court on

6.12.1994. This was reported after reporting of Rajagopal Reddy''s case. In Sankara Hali''s case, the Hon''ble Supreme Court in paragraph 5 held

as follows:

A reading of Section 4 of the Act shows that the real owner is precluded from claiming title to the property against the person holding the same

benami either by way of assertion or defence. Under the Act, any transaction entered into prior to the coming into force of the Act, between the

ostensible owner and the real owner is not voided by any provision, whatsoever.

At this juncture, I may also refer to Section 7 of the Act, which has repealed Sections 81, 82 & 94 of the Indian Trusts Act, 1882. Section 7

of the Act reads as follows:

Repeal of provisions of Certain Acts. -- (1) Sections 81, 82 & 94 of the Indian Trusts Act, 1882 (2 of 1882), Section 66 of the Code of Civil

Procedure, 1908 (5 of 1908) and Section 281-A of the Income Tax Act, 1961 (433 of 1961) are hereby repealed.

(2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall affect the continued operation of Section 281-A of the

Income Tax Act, 1961 (43 of 1961) in the State of Jammu and Kashmir.

Section 82 of the Indian Trusts Act, 1982 reads as follows:

Transfer to one for consideration paid by another.-- Where property is transferred to one person for a consideration paid or provided by another

person, and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee

must hold the property for the benefit of the person paying or providing the consideration.

As per Section 82 of the Indian Trusts Act, before repealing, transfer to one for consideration paid by another was declared as a valid

transaction. Thus, a Benami Transaction was recognised as legal u/s 82 of the Indian Trusts Act. In view of the repealing of the said provision with

effect from 19.5.1988 by the Benami Transactions (Prohibition) Act 1988 and because of Section 3 of the said Act, there can be no more benami

transaction. But, at the same time, Benami transactions which had already taken place before 19.5.1988, have not been declared as void by any of

the provisions of the Benami Transactions (Prohibition) Act, 1988 Transactions (Prohibition) Act, 1988. But a close reading of Section 4 of the

Benami Transactions (Prohibition) Act, 1988 would only say that after coming into force of the Act, no claim can be made to enforce any right in

respect of any property held benami against the person in whose name the property is held. A plain reading of Section 4 would make one to

clearly understand that any claim or action alone has been prohibited from being taken on the basis of benami in respect of any property held as

benami. Therefore, after coming into force of the Act, either by way of Suit, or by way of any claim or by means of Written Statement, a plea of

benami can not be taken.

Having analysed such position, the Hon''ble Supreme Court in Rajagopal Reddy''s case held that a claim made in respect of the property held

in benami already i.e. prior to coming into force of Section 4 of the Act, can be continued. This is because the benami transactions held already

have not been declared as void by any of the provisions of the Act. In a Suit where a claim on the basis of benami is made in the Written Statement

filed subsequent to the crucial date i.e. 19.5.1988, the same shall not be allowed to sustain. That is what has been made abundantly clear in

Rajagopal Reddy''s case. In Sankara Hali''s case, the facts are distinguishable. In my considered opinion, the said case does not reflect any

conflicting view. That was a case where the benami transaction took place in the year 1950. But subsequently, Declaration-cum-Release Deed

was executed in the year 1967 by the person who was holding the property in benami, thereby releasing his title in favour of the real owner. In the

Suit, the main issue was whether the real owner had acquired title and interest under the document of Declaration-cum-Release Deed dated

24.12.1964. The said document was executed long before the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance,

1988 came into force. In those circumstances, the Hon''ble Supreme Court held that it was not open to the partnership firm (real owner) to

contend that Surender Kumar (benamidar) was merely the ostensible owner and the real owner was the partnership firm. In paragraph 5 of the

Judgment, the Hon''ble Supreme Court has held that under the Act, any transaction entered before coming into force of the Act, between the

Ostensible owner and the real owner is not void by any provision whatsoever. It is on this principle, the Hon''ble Supreme Court held that the

Release Deed dated 27.4.1967 is not void. Thus, the Hon''ble Supreme Court held that the release of property held benami by the holder in favour

of real owner is valid. Thus, the question as to whether Section 4 is prospective or retrospective, came up for consideration only in Rajagopal

Reddy case and not in Shanara Hali''s case.

Shankara Hali''s case as well as Rajagopal Reddy''s case came to be considered by a Division Bench of the Hon''ble Supreme Court in Rebti

Devi (Smt) Vs. Ram Dutt and Another, . After having analysed both the cases, the Division Bench, in paragraphs 13 & 14 has held as follows:

Sankara Hali & Sankara Institute of Philosophy and Culture v. Kishori Lal Goenka is by a three-Judge Bench. It was decided before R. Rajagopal

Reddy case but is reported later. In a way it took the same view as in Rajagopal Reddy case. It noticed that Sections 3, 5 & 8 of the Act came

into force at once i.e. on 5.9.1988 and the remaining provisions came into force from 19.5.1988. It was held that the plea of benami was raised

before 19.5.1988 and that the objection that the Deed of Release dated 24.2.1964 by the benamidar in favour of the firm was invalid because of

the Act, could not be permitted to be raised after 19.5.1988. In that case, the Rent Control proceedings started around 1970 and the plea of

benami was raised and was also proved by the firm, the real owner, by relying on the Release Deed dated 24.12.1964 executed by the

benamidaar in favour of the firm. The objection that the deed was invalid because of the provisions of the Act was raised after 19.5.1988, relying

upon Mithilesh Kumari case which held that the Act was retrospective. That judgment has since been reversed in R. Rajagopal Reddy case. It is

clear that the conclusion arrived at in Sankara Halt case can now be easily justified by R. Rajagopal Reddy case overruling Mithilesh Kumari case

and on the basis of the principles laid down in the said case.

For the aforesaid reasons, we hold that the decision in R. Rajagopal Reddy case is not in any manner shaken by anything said in Nand Kishore

Mehra Case and that both cases deal with different aspects of the Act as stated above and each of the cases continues to govern different

provisions of the Act.

(Emphasis applied)

Thus, the Hon''ble Supreme Court has made it very clear that both the cases deal with different aspects of the Act as stated above, and each

of the cases continues to govern different provisions of the Act. Thus, there is no conflict in these two judgments and as held by the Hon''ble

Supreme Court in Rebti Devi case, the law laid down in R. Rajagopal Reddy case holds good. Very recently, a Division Bench of the Hon''ble

Supreme Court had an occasion to consider the judgment in R. Rajagopal Reddy case in Samittri Devi and Another Vs. Sampuran Singh and

Another, , wherein, it has again followed the law laid down in R. Rajagopal Reddy case. Similar view has been taken by a learned Single Judge of

this Court in Narayanasamy Gounder and another v. K. Sekar, 2009 (1) CTC 452. Therefore, as has been emphatically held by the Hon''ble

Supreme Court, even in respect of a pending Suit, the Defendant cannot make a claim for suit property on the basis of a benami transaction, if he

has not already filed a Written Statement claiming title under a benami transaction before coming into force of Section 4 of the Act. In the case on

hand, admittedly, the Written Statement was filed by the Defendants only on 25.3.1992 i.e. long after the coming into force of the Act. In view of

the law laid down by the Hon''ble Supreme Court, such claim cannot be allowed. Thus, in my considered opinion, the Courts below were right in

dismissing the claim of the Defendants and to decree the Suit as prayed for.

In view of the above conclusion, the other contentious issues as to whether any sale consideration was paid by the Plaintiff for the First

Defendant need not be gone into.

In the result, the Appeal fails and the same is, accordingly, dismissed. Considering the facts and circumstances of the case, there shall be no

order as to costs.