Ratanlal Kesarachand and Others vs Bandulal Radhakishen and Others

Deshpande, J.—The facts out of which this second appeal has arisen are that Defendants Nos. 1 and 2, Kesarchand and Gulabchand, got a decree in a money suit against Defendants Nos. 3, 4 and 5, Sitaram, Jainarayan and Dhanraj and in execution of the decree, attached the house situated at Wasi, Taluqa Kalam, and in the Court sale it was purchased by Defendant. No. 6, Mudaliar. Bansilal, the Plaintiff, alleged in his plaint dated 6th Amardad, 1352 F., that the house along with other property was sold by Defendants Nos. 3 to 5 for Rs. 1,500/- for which they executed a registered sale-deed dated 1st Farwardi, 1349 F., and gave possession of it to the Plaintiff. It was further alleged that when he came to know of the attachment he filed a claim petition which was dismissed on the 27th Khurdad, 1352 F. Hence the present suit.

Defendants Nos. 1 and 2 in their written statements denied the fact alleged in the plaint and stated that the sale-deed by Defendants Nos. 3 to 5 in favour of Plaintiff was a nominal one without consideration and was brought into existence with a view to defraud the creditors. The suit remained ex parte so far as Defendant No. 3 was concerned and the court guardian on behalf of Defendants Nos. 4 and 5 denied any knowledge of the execution of the sale-deed and stated that the sale-deed was bad for want of legal necessity. Defendant No. 6, the auction-purchaser, resisted the claim on grounds similar to those advanced by Defendants Nos. 1 and 2 and further relied on a document alleged to be in the custody of one, Kanniahalal, evidencing true nature of the transaction between the ostensible vendors and vendee. It was further alleged that the Plaintiff had never been put in possession of the house in pursuance of the sale.

On behalf of Plaintiff three witnesses were examined and the Defendants Nos. 1 and 2 examined one witness and Defendant No. 6 examined one witness. Thus, in all five witnesses have been examined. On this evidence, the Court of first instance held that the saledeed in favour of the Plaintiff though proved, cannot be said to create a title in him because of the document produced by the witness, Kanniahalal, purporting to show the nominal nature of the sale-deed. The learned lower appellate court on the contrary held that the document required registration as it purported to extinguish the right created by the sale-deed. The document being'' inadmissible in evidence the right created by the sale-deed would remain unaffected giving the Plaintiff an unhampered right to a decree u/s 330, Hyderabad CPC It is against this judgment and decree that the Defendants Nos. 1, 2 and 6 have (filed?) the present appeal. During the pendency of this appeal Respondents Nos. 1 and 2 have died and are represented by their legal representatives.

It is argued on behalf of the Appellants that the agreement does not require registration as it merely declares the existing right and does not create or extinguish any right, title or interest to the property. Even supposing that it requires registration, this document can be relied upon for the collateral purpose of proving that the sale-deed was a sham one. In support of this contention, the learned Advocate has relied upon: � Ram Rao Singh and Others Vs. Ajodhya Pd. Singh and Others, (A); � Yerraguntla Seshacharlu Vs. Mukkitmalla Chinniah, (B); � Nomula Ramayya Vs. Nadipineni Appayya and Another, (C); � Abdul v. Arliu AIR 1926 Rang 94 (D); � Punjab & Sind Bank Ltd. v. Rustomji AIR 1935 Lah 821 (E); � Warkam Singh v. Sunder Singh AIR 1936 Lah 576 (F); Jafar Ali Khan v. Qamar-un-nissa AIR 1938 Oudh 119 (G). In reply the Advocate for the Respondent-Plaintiff strongly contends that the agreement filed by the witness, Kanhiaha-lal, clearly extinguishes the right of the Plaintiff and as such it requires registration and as it is not registered it is inadmissible in evidence even to show collaterally the nominal nature of the transaction because it affects the immovable property. In this connection he relies on Venkatachalpathi Garu v. Muthu Venkata-chalapathi AIR 1914 Mad 639(1) (H). So far as the cases cited on behalf of the Appellant are concerned, he concedes that the proposition of law laid down in cases cited by the learned Advocate for the Appellant is quite correct. But he contends that the sale-deed is not a sham one but a bona fide transaction by which the right to the disputed property was transferred in his favour. The contention oftheAppellant that u/s 53, T. P. Act, the sale should be regarded as executed in order to defraud the creditors does not help the Appellant in any way because u/s 53, such a sale does not become void but voidable and unless and until it is set aside the sale remains valid.

We have gone through the records of this case carefully. As held by both the lower courts the sale-deed and the agreement are proved to be executed by their respective executants, The only question which falls to be decided in this appeal is whether on a construction of the document it can be held that the sale-deed was a sham or a nominal transaction, In this agreement it is stated that the Plaintiff, as settled already, received back the consideration of the sale-deed and the assertion is that the Plaintiff had got no right in the property which is the subject-matter of the dispute. Taking into consideration the statement of the witness, Kanniahalal, and the two documents together, I am of the opinion, that the transaction of sale was merely a nominal and sham transaction. The intention of the parties was that the judgment-creditors'' property should be saved and in order to achieve this they staged a drama of executing a sale-deed and an agreement which together considered, conclusively proved that there was no intention of transferring the right, title and interest of the property in favour of the Plaintiff. Under such circumstances, I hold that no right was passed in favour of the Plaintiff in the property.

As regards the contention that the agreement requires registration, my opinion is, that the agreement does not require registration because it does not in itself create or extinguish any right, title or interest in the property. It merely shows the nature of the transaction so called as the sale-deed, as was held in � Yerraguntla Seshacharlu Vs. Mukkitmalla Chinniah, (B):

A document which simply proves that a document executed previously was only benami in its nature, is admissible in evidence even if unregistered.

In the case of � Nomula Ramayya Vs. Nadipineni Appayya and Another, (C) it was clearly held that:

An unregistered document which merely shows that a registered sale-deed executed previously in respect of certain Immovable property was only nominal in its nature is admissible in evidence inasmuch as it is not used as evidence of any transaction affecting Immovable property".

In the present case also the agreement is being used to show that the sale-deed was a nominal one and therefore it is admissible in evidence as in the Madras case above referred to. In the case of � AIR 1926 Rang 94 (D) it was held that:

Where a person who has executed a document seeks to show that the document is a here sham deed and represents nothing, he is not seeking to vary or contradict any of the terms of the document, and oral evidence is admissible to prove that there was no such agreement between the parties.

This case supports the contention of the Appellant that in spite of the document being unregistered evidence can be led to prove the sham or nominal nature of the transaction. In the case of � AIR 1932 55 (Privy Council) (I), the Privy Council has held that:

A document which merely acknowledges as a fact that a right is vested in a particular person, does not require registration.

The agreement in this case also simply acknowledges the fact that the sale-deed was a sham transaction. Therefore, it does not require registration. In: the case of AIR 1935 .Lah 821 (E) it was held that:

the letters which merely contain an acknowledgment of the past transaction will not require registration.

Similarly in the case of � AIR 1936 Lah 576 (F) it was held that an agreement which was a mere recital of existing fact and which did not of itself declare any rights which did not previously exist, did not require registration. And in the case of � AIR 1938 Oudh 119 (G) it was held that a document, which amounts merely to an admission of a pre-existing state of affairs and does not operate to create title is admissible in evidence, though unregistered. Thus, in view of these cases, it is my opinion, that the agreement does not require registration and can be used in evidence to show that the transaction was a sham or nominal one. The case of � AIR 1914 Mad 639 (1) (H)'' does not in any way help the Respondent, because in that case the document was an out-and-out sale and the Plaintiff sought relief alleging that it was a mortgage. So, it would appear that in that case claim of the Plaintiff was never that there was a sham transaction but that the sale was in reality a mortgage. As the letter which was to be proved affected the transfer of the right which was admitted by the Plaintiff, the latter was held to require registration. But, in the present case, the facts are different. The Defendants do not state that title passed to the Plaintiff, and therefore, this case does not help the Respondent.

The evidence of Kanniahalal clearly goes to prove that the intention of the party was that none should claim any right in the property. In view of this evidence and in view of both the sale-deed and the agreement taken together, it is clearly proved that the transaction of sale was a sham and a nominal transaction transferring no right or title in the property. Such a deed does not require to be set aside, as it creates no right, title and interest. In view of these facts, I am of the opinion that the court of first instance was right in dismissing the suit. Therefore, I allow the appeal with costs throughout and restore the judgment and decree of the trial Judge.

Section Qamar Hassan, J.

I agree through out in the conclusions of my learned brother.I, however, wish to add a few observations of my own. In the judgment of the Privy Council reported in � Narsingerji Gyangerji v. P. Parthasaradhi Rayanim AIR 1924 PC 226 at p. 228 (J), their Lordships observed:

Thus informed of the circumstances surrounding the execution of X and U, their Lordshipsare now in a position to examine these documents so as to ascertain from their provisions and necessary implications the real nature of the transaction to which they give effect.

Later on at page 230 it is stated:

When all these provisions of the documents are viewed in the light of the surrounding circumstances, the inference is, in their Lordships'' view irresistible that here a mortgage and a mortgage only was in the direct contemplation & intention of both parties to the transaction.

Similarly in the case reported in � ''Baijnath Singh v. Hajee Vally Mohomed AIR 1925 PC 75 (K), the Privy Council remarked:

Section 92 of the Evidence Act merely prescribes a rule of evidence; it does not fetter the Court''s power to arrive at the true meaning and effect of a transaction in the light of the surrounding circumstances.

In this connection proviso 6, Section 76, Hyderabad Evidence Act, which applies to this case should be kept in mind; Any tact may be proved which shows in what manner the language of a document is related to existing facts.

For this purpose, the learned trial Judge took the impugned document into consideration and on evidence came to the conclusion that the sale-deed of 1st Ferwardi, 1349 F., Ex. No. 2, though ostensibly evidenced a sale, yet the document of 3rd Ferwardi, 1349 F. unmistakably went to show the sham and fictitious nature of the sale-deed. The learned District Judge ignored the document as, in his opinion, it purported to extinguish the right created by the sale-deed. But it is to be observed that the Appellants exhibited the document not to prove a reconveyance but to show the fictitious and fraudulent purpose of the sale-deed. Had they used it for the purpose of showing the extinguishment of title created by the sale-deed, the observations of the Full Bench in The case of AIR 1914 Mad 639(1) (H) would have applied with full force. What they desired to make out was that the sale transaction was meant to save the property from being sold in execution of the decrees. In this they are supported by the recital in the impugned document that by reason of certain decrees the vendors had sought the assistance of the vendee and a deed of sale had been executed, but the vendee had taken back and received the consideration money paid before the Registrar and the earnest money as well. There is no explanation on the part of the executant why such a document came into existence two days after the formal sale-deed. It is also significant that the document was left in the custody of D. W. 5 to prevent the vendee from raising any adverse claim to the property ostensibly sold. I am satisfied that the questioned document in its attendant circumstances cannot be said to evidence a reconveyance. It was brought into existence to keep the property safe for the vendor after the danger of its being sold in execution of the decree was over and to evidence the nominal nature of the sale transaction. For this purpose, the document can be used and no question of registration arises. The appeal, therefore, succeeds with costs throughout.