Siddnath vs M/s. Chhotelal and Company

Plaintiff-appellants have preferred this appeal against the judgment and decree dated 31.7.1978 passed by the Third Additional District Judge, Indore, in Civil Suit No. 8-A of 1977, whereby the suit filed by plaintiffs had been dismissed.

According to plaintiffs, House bearing No. 1756 situated in Cantonment Area, Show, was purchased by them on 31.12.1963 from one Balaram and his son Nathulal for a consideration of Rs. 5000/-. Admittedly defendants -respondents were in occupation of the suit house as tenants, at the time of purchase. According to plaintiffs, they obtained possession of one room on the first floor of the house. Plaintiff earlier filed a suit for eviction of defendants asserting that defendants are living in the house in question as tenant. Defendants resisted the prayer of plaintiffs in the earlier suit and their stand was that the suit house was purchased by defendants firm from Balaram and Nathualal as ''Benami'' in the name of plaintiffs and defendants were real owner of the suit house and were occupying the same as its owner and not tenant. Defendants also denied the assertions of plaintiffs that they are in possession of the one rooms. It was further stated by defendants that prior to its purchase, the suit house was occupied by the firm as tenant from the date of purchase i. e. 31.12.1963, they became owners and occupied the house in question as owners there of. This suit No. 111-A / 1965 was dismissed by the Trial Court and the appeal preferred against the said judgment and decree was also dismissed by the appellate Court.

After the dismissal of the earlier suit the plaintiffs filed the present suit for declaration of title, possession and manse profit in relation to the same house.

In the present suit defendant - respondent No. 2 averred that the house in question was purchased by the firm and the consideration was also paid by cheque. According to the defendant No. 2, he and defendant No. 3 were partners of the firm and for its business purposes the suit house was taken on rent from Balaram about 30 years prior to filing of written statcnienl on 2.5.1972. This house was purchased by the firm for consideration of Rs. 5000/-. a written agreement was executed on 7.3.1960 and amount of Rs MX)/- was paid as advance and the balance of Rs. 4000/- was paid by cheque. Ii is the assertion of the aforesaid defendants that although the house in question was purchased in the name of plaintiffs, it was a ''Benami'' transaction.

As stated earlier by judgment and decree dated 31.7.1978, the suit filed by plaintiffs was also dismissed. While dismissing the suit the learned trial Judge held that the property was purchased by defendant No. 1 in the names of plaintiffs and the Trial Judge found the transaction to be ''Benami''. The trial Judge negatived the stand of defendants that the suit is barred by principle of resjudicata.

Appeal preferred by plaintiffs came up for consideration before this Court and this Court by its judgment and decree dismissed the appeal. Finding recorded by the Trial Court that the suit is not barred by principle of resjudicata has been reversed in this Court by its judgment dated 9.3.1992. This Court decedent the appeal only on question of resjudicata. It is relevant here to state that the Trial Court dismissed the suit of plaintiffs also on the ground that it was defendant No. 1 who has purchased property in the name of plaintiffs and plaintiffs were ''Benamidar'' of defendant No. 1.

Against the aforesaid judgment of the learned Single Judge of this Court, plaintiffs-appellant preferred L. P. A. No. 6 of 1992. The aforesaid appeal was allowed by a Division Bench of this Court by its judgment dated 30.08.1995. While allowing the appeal the Division Bench set aside the finding of the learned Single Judge and held that the decision of earlier suit filed by plaintiffs as land-lord for eviction of defendants shall not operate as resjudicata in the present suit. As stated earlier, the learned Single Jude of this Court dismissed the appeal solely on the ground that the suit is barred by principle of resjudicata and did not record any finding regarding the plea of defendants of Benami transaction in veiw of Section 4 of Benami Transaction Act. The Division Bench, however, after review of judgment of the Apex Court came to the conclusion that as the suit was filed before, coming into force of Benami transaction. Act and, therefore the force of Benami Transaction is available to defendants in the case. Consequently, the Division Bench gave directions in the following words.

"The Learned Single Judge has not decided this issue in view of the decision in Mithilesh Kumari''s case, therefore, it will not be appropriate to decide this issue by this Division Bench while hearing L. P. A. the appropriate course in the case would be to remand the case for decision by a learned Single Judge on this issue.

In view of the various pronouncements of the Courts the test which could be laid for examination of Benami character of transaction can be enumerated as follows :-

(i) The source of consideration for acquisition of the property;

(ii) The possession of the property;

(iii) The conduct of the parties or their predecessors in relation to it;

(iv) Custody and production of the title deed;

(v) The motive for resorting to Benami transaction;

(vi) Relationship between the parties;

(vii) Present and subsequent conduct of the parties; These are the features which are required to be taken into consideration to decide whether the transaction in question is ''Benami'' or not.

Plaintiffs, as stated, earlier have alleged that the suit house was purchased by them for the consideration of Rs. 5000/- from Balaram and Nathulal vide registered sale-deed dated 31.12.1963. As against this stand of defendant No. 2 is that the house was actually sold to the firm, defendant No. 1. but the sale-deed was executed in the name of plaintiffs and thus the transaction is ''Benami'' The Trial Judge recorded the finding that Rs. 4000/- out of the entire consideration, money was paid by the firm, defendant No. I Chhotelal & Company. The trial Judge further found that substantial consideration, money for the sale of the suit house came from the defendant-firm, Chhotelal & Company. The learned Trial Judge further found that the nature of possession of the suit accommodation also indicate that although the house had been purchased in the name of the plaintiffs but the same remained in actual possession of the defendants'' firm, Who is in possession of the same as its owner. Defendants case that the defendant firm purchased the house in the names of plaintiff to avoid tax complication was accepted by the learned Trial Judge and according to him the same supports the Benami nature of the transaction. The learned Judge further recorded a finding that the relationship of the parties makes it probable that Benami Transaction could be made. The sale-deed was found in possession of the plaintiffs. The Trial Judge further recorded that the conduct of the parties i. e. the firm not paying any rent to the suit house of plaintiff, is a conduct which shows Benami nature of transactions. The Trial Judge found that although the suit house was ostensibly purchased in the name of plaintiffs but the trial purchaser was the defendant firm.

Shri Sanghi appearing on behalf of the appellants submits that the law governing Benami nature of transaction was correctly enunciated by the Trial Judge but wrongly applied. In the submission of learned counsel, even if the case of plaintiffs is not accepted even so onus lay on defendants to prove its case. In support of his submission Shri Sanghi, pleaded reliance on a large number of authorities. However, in my opinion, both the parties having laid evidence on the issue, the question of onus to prove is immaterial and as such it is not necessary to refer to the various authomes separately.

Now I shall discuss the case of the parties in the background of the test laid down and referred to above in determining the nature of transaction,

12 (i) The source of consideration for acquisition of the property :

On this point, plaintiff No. 2, Ramesh Chandra, deposed that he borrowed from his relation, Radhakrishan, a sum of Rs. 5000/- and he has further stated that no document was executed for the same nor he was to pay interest on the said amount. However, Radhakrishan did not come in the witness-box to corroborate the aforesaid statement of the plaintiff Remesh Chandra. As stated earlier it is not the case of plaintiff that any document was executed for the aforesaid transaction. Plaintiff, Ramesh Chandra, was also not engaged in any profession or business at the time when the purchase in question was effected. I am of the considered opinion that in case the plaintiff has borrowed the money from Radhakrishan, as claimed, by him, he ought to have examined him. Further failure on part of the plaintiff to place on record any document to substantiate his case clearly shows that the case put up by plaintiffs that money was borrowed from Radhakrishan is not correct. It is worthwhile here to mention that the seller, Nathulal, was paid the consideration money of Rs. 4000/- by a cheque (Ex. D/3). According to the cheque, the aforesaid amount of Rs. 4000/- was to be paid to Balaram Nathulal and it was drawn at Punjab National Bank Limited. Cheque was singed by Atmaram, defendant No. 3, the partner of defendant No. 1. Chhotelal & Company, and father of the plaintiffs, on 13th July, 1960. Nathulal, who has been examined as D. W. 3 stated to have received the cheque.

As stated earlier, Atmaram, was the partner of defendant No. 1 and is the father of the plaintiff and he in his evidence as P. W. 2. stated that the cheque was signed by him. However, he has not offered any explanation as to why the amount by cheque was paid to Balaram Nathulal on behall of the defendant firm. In this connection it is relevant here to refer to the copy of the Rokad (Ex. D. 1/2/3), which corroborates payment of Rs. 4000/- on Ivluil of defendant firm to Balaram Nathulal.

Shri Sanghi appearing on behalf of appellants submits that this amount of Rs. 4000/- might have been paid to Balaram Nathulal towards some other dealings, simply the facts that sum of Rs. 4000/- was paid to the vendor Balaram Nathulal by cheque does not mean that it was the consideration money of the alleged transaction. He further submits that defendant No. 3 adjusted the aforesaid amount of Rs. 4000/-, towards his own account, and therefore, the consideration money was paid from the amount of Defendant No. 3.

It is relevant here to state that according to Plaintiff No. 2, the consideration money of Rs. 4000/- was borrowed by him from Radhakrishan and it is not their case that it was paid by defendant No. 3, Atmaram, their father. Further in the Rokad entry there is no mention that the amount debited to Atmaram was taken by him for payment of consideration of the house to vendor Balaram Nathulal. It is further relevant here to state that P. W. 2, Atmaram has not stated any thing in his evidence that the amount debited from his account was taken for payment of consideration money. It appears that Atmaram later on tried to adjust Rs. 4000/- towards his personal account but at the time when the payment was made to the vendor, he did not have any such intention.

It is relevant here to state that the total consideration money paid to the vendor for the suit house was Rs. 5000/- and as stated earlier sum of Rs. 4000/-was paid by a cheque to D, W. 2, Nathulal. He has stated in his evidence that a sum of Rs. 1000/- was paid to him by Atmaram, P. W. 2, when the agreement for sale of the suit house was executed. However, there is no document on the record to show the payment of Rs. 1000/- by Atmaram on behalf of the firm, defendant No. 1, to the vendor. P. W. 2, Atmaram, has however, admitted in his evidence that in the year 1960, he had agreed to purchase the suit house from Balaram, but later on the same was cancelled. Reading of the sale-deed Ex, D. 1/2/2, clearly shows that the sale-deed was executed in pursuance of the agreement made with Atmaram. The recital in the sale-deed is in tune with the statement of Nathulal that the sale-deed was executed in pursuance of the earlier agreement between him and Atmaram. Thus, the statement of P. W. 2 Atmaram, that the agreement was cancelled is neither supported by statement of nathulal nor from the recital in the sale-deed.

D. W. 2, Nathulal, is the vendor of the suit house and he in no way gains by either supporting the plaintiffs or defendants Nos. 1 and 2. As stated earlier, he has stated that sum of Rs. 1000/- was was paid by Atmaram and there being no evidence that the same sum was also paid by that defendant firm. I am inclined to believe that a sum of Rs. 1000/- was paid by Atmaram, defendant No. 3.

Shri Sanghi, appearing on behalf of the plaintiffs - appellants, submits that even if it is assumed that a sum of Rs. 4000/- was paid by the defendant firm for the purchase of the suit house, it does not lead to necessary conclusion that the property is of the firm. He submits that the partner, defendant No. 3, borrowed that amount from the firm and purchased the property in the name of the plaintiff, who are his sons. My attention has been drawn to the account-book of the firm in which a sum of Rs. 4000/- has been debited from the account of defendant No. 3 to show that the defendant No. 3, became debtor of the firm. In this connection Shri Sanghi draw my attention to section 14 of the Indian Partnership Act. My pointed attention has been drawn to illustration No. (2) if the said section. Section 14 of the Indian Partnership Act reads as follows -

Section 14:

Subject to contract between the parties, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm or acquired by purchase or otherwise, by or for the firm or acquired, by purchase or otherwise, by or for the firm, or for the purpose and in the course of the business of the firm, and includes also the goodwill of the business.

Unless the contrary intention appears property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.

Illustration No. (2)

A and B are partners. A buys land with partnership moneys, for his sole benefit Thereafter A debits himself in the firm books and becomes a debtor to the firm for the amount of the purchase money. The land is not partnership property, because there was clearly a contrary intention.

To me, it appears to be plain, that rights and interest in the property acquired with money belonging to the firm shall be deemed to be the property acquired by the firm. The plaintiff has neither pleaded nor proved any contrary intention. P. W. 2, Atmaram, has not stated that the purchase was made by him in the names of plaintiffs after debiting the sum of Rs. 4000/- in the accounts of the firm.

The result of the aforesaid discussion leads to concludes that the sum of Rs. 4000/- was we paid to Balaram Nathulal by defendant''s firm Choottelal & Co. It is further established that a sum of Rs. 4000/- out of the entire consideration money was paid by the defendant firm. Thus, the substantial consideration for the sale of the suit house is proved to have come from the defendant firm. In the light of Section 14 of the Indian Partnership Act, I am further inclined to hold that the suit house which was acquired with the money belonging to the firm and so acquired by the defendant firm.

(ii) THE POSSESSION OF THE PROPERTY :

As stated earlier to ascertain the nature of transaction, the possession of the property is also relevant consideration. According to the plaintiffs, one of the rooms, of the suit house was locked by them and they are in possession of the rest of the house. However, according to the defendant firm, the entire house is in actual possession of the firm. It is relevant here to state that plaintiffs admitted possession of the defendant firm in the suit house, but according to them they are in occupation as tenant. It is further relevant here to state that plaintiffs filed a suit for eviction against the defendant firm in which the stand of the defendant firm was that they are owners of the property and ultimately suit filed by plaintiffs for eviction was dismissed.

Shri Sanghi in support of the appeal drew my attention to the copy of Rokad (Ex. D 1 -2/7) to demonstrate that for the period 1.11.63 to 31.10.63, rent at the rate of Rs. 25/- per month was paid to plaintiff Ramesh Chandra.

Shri Chafpekar appearing on behalf of respondent submits that the Rokad entry was made by defendant No. 3. Atmaram, a partner of the firm as also the father of plaintiffs and the aforesaid entries made by him while winding up the business of the defendant firm to suit the interest of plaintiffs and no reliance can be placed on such entries.

It is worthwhile here to mention that the sale-deed was executed on 31.12.1963 and as such the claim made by plaintiffs of receipt of the rent prior to date of sale does not appeal to me. The Rokad entries shows that Ramesh-Chandra recovered the ret even prior to the date of sale. In my opinion, it cannot be expected that plaintiff, who was not actually the owner of the house, shall be paid rent by defendant firm for the said period. Thus, I am not prepared to place any reliance on the entries made in the Rokad regarding the payment of rent for the month of November and December, it is not the case of plaintiff that the vendor had authorised them to collect the rent prior to the execution of the sale-deed.

In my opinion, defendant No. 3 Atmaram, who was partner of the firm and was making entries in the Rokad-Khata, deliberately made entries so as to create evidence to show possession of plaintiff over the suit house through the tenant I do not find on the record any oral and documentary evidence other than referred to above to establish payment of rent by the defendant firm, to the plaintiff. A reading to the plaint also does not show that any averment has been made that plaintiffs used to recover rent from defendant firm. Thus, it appears to me that the payment of rent by defendant firm to the plaintiff is an after thought. Plaintiff, Ramesh Chandra, has also not stated any thing in his evidence that he has ever received rent from the defendant firm.

As stated earlier, plaintiffs have admitted that defendant firm is in actual occupation of the suit house excepting one room on the first floor which is locked. The evidence led on behalf of plaintiffs also does not prove plaintiffs'' possession over the one room of the first floor of the suit in question. The result of the aforesaid discussion leads me to conclude that plaintiffs never received rent of the suit house from the defendant firm and the possession of the defendant firm over the suit house is not in the capacity of tenant but defendant is in possession in the assertion of their own right. Thus, I find that actual possession of the suit house is with the defendant as its owner.

(iii) The conduct of the parties or their predecessors in relation to it:

Now, I advert to consider this aspect of the matter. As stated earlier, defendant is admittedly in possession of the suit house and according to my finding they are not paying any rent to the plaintiff. It is worthwhile here to mention that the plaintiffs have not adduced any evidence to show that any expenditure was incurred by them for repairs of the suit house except, the two receipts showing the payment of tax to the Cantonment Board the receipts of the years 1965 and 1977. As stated earlier the dispute carped up between the parties before the aforesaid period and in order to create evidence, these documents seem to have been prepared.

Shri Sanghi appearing on behalf of appellants, draw my attention to the entries made in the General Land Register maintained by the Cantonment Board to show that the property has been registered in the names of plaintiffs. The entries referred to above show that the same was made on 23.6.64 on the basis of the transfer of the house in names of plaintiffs. However, it does not show that at the time when the entries was made, the vendors were noticed to confirm the same. In my opinion, plaintiffs on the basis of the sale-deed approached cantonment authority for mutation of their names and on the basis of the sale-deed mutation entries were made in the General Land Registrar. Plaintiff as held earlier were not in possession of the property nor they incurred any expenditure for repair of the house. The defendant firm was in occupation of the house in assertions of their own right and did not pay any rent to plaintiffs. Thus, in my opinion, mere entries in the register of the Cantonment Board does not go establish that plaintiffs are the real owners of the property.

(IV) Custody and production of the title deed :

As stated earlier, one of the relevant consideration to determine the nature of transaction is the custody and production of the title-deed by parties after sale. The sale-deed Ex. D. 1-2/2, no doubt, has been produced by plaintiffs but in view of the back-ground of the case it is of no consequence. As stated earlier Atmaram was the partner of the firm and naturally must have been interested to advance the interest of his sons, plaintiffs, Said Atmaram is now not associated with the business of the firm and I am of the opinion that while disassociating with the firm, the took away the sale-deed and gave it to his sons. I am of the considered opinion that he possession of the sale-deed by plaintiffs is not sufficient to prove that the transaction was not Benami.

(v) The motive for resorting to Benami transaction.

Now I will consider the motive, if any, for giving the transaction Benami colour. In this connection evidence of Chhotelal, D. W. 2, is worthwhile mentioning. He has stated in his evidence that the sale-deed was executed in the names of plaintiffs as there was complication about the taxes. Shri Sanghi, appearing on behalf of appellants, submitted that the purchase was made in the names of plaintiffs because they did not want to show it as purchase from the income of the firm which clearly shows that this method was resorted to avoid the payment of taxes. As such in the submission of the learned counsel, the defendant firm should not be allowed to take benefit of such transaction. When I look to the position of the parties in the case, I find that the plaintiffs who are ostensible purchasers are none other than the sons of defendant No. 3, Atmaram who was partner of the firm and looking after the accounting and other works of the firm. Thus, Atmaram, had dominance and capability of writing account of the firm in the manner suiting to his interest. He has confidence of his sons. In my opinion, the defendant form purchased the house in the names of plaintiffs so that complication about the taxes may not arise. In my opinion, relation of the parties in this case makes it probable for resorting to Benami transaction, for avoiding tax complication.

(vi) Relationship between the parties :

It is relevant here to state that Chhotelal, Defendant No. 2, partner of the defendant firm, in the agreement of reference to arbitration, has admitted that initially the house in question belonged to Balram thereafter it was purchased by Siddhanath.

Shri Sanghi submits that, defendant No. 2, is bound by his admission and plaintiffs claim is proved by his admission. In support of the aforesaid submission my attention has been drawn to the judgment of the Apex Court in the case of Narayan Bhagwantrao Gosavi Balajiwale Vs. Gopal Vinayak Gosavi and Others, . My attention has been drawn to following portion of para 11 of the judgment.

"An admission is the best evidence that an opposing party can rely upon, and though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous''''.

However, in the present case the document (Ex. D/3/8) is an agreement for reference to the dispute to arbitration. The aforesaid document does not show that the business of the firm was being conducted in the suit house which belong to Balram and later on purchased by plaintiffs. As stated earlier, the property was purchased in the name of plaintiffs, who are ostensible owner and in my opinion mentioning of the aforesaid fact that the plaintiffs purchased the house, does not lead to the conclusion that defendant admitted that plaintiffs are owners of the property. This, in my opinion, cannot be regarded as admission of Chottelal about the ownership of the suit house, as plaintiffs being ostensible owner of the disputed property is not in dispute.

Thus, the so called admission does not preclude defendant No. 3 from establishing that the transaction is Benami. I am of the considered opinion that the purported admission of defendant No. 2 about the ownership of plaintiffs is not admission of plaintiffs ownership and the property. As such the authority relied on by the learned counsel is clearly distinguishable on facts.

According I hold that the consideration money was paid by defendant No. 2, he is in possession of the property and the conduct of the parties establish that the transaction was ''Benami'' in nature. I have also found that the relationship between the parties, their conduct and motive clearly show that the transaction in question was Benami. Custody and production of the title deed although is with plaintiffs but as I have explained earlier there were reasons for the same. Considering the entire facts and circumstances of the case, I am of the view that the transition is Benami and the trial Judge rightly held it be so.

In the result, I do not find any substance in this appeal and it is dismissed with costs.