S.M. Wahi v. Reeta Wahi

Madan B. Lokur, J.:— The Plaintiffs are husband and wife. Plaintiff No. 2 has since passed away and her legal representative, Plaintiff No. 1, is now pursuing the suit as the sole Plaintiff.

2. In the plaint, as originally filed, the prayer was for a decree of declaration in favour of the Plaintiffs and against the sole Defendant (Reeta Wahi—niece of Plaintiff No. 1) that Plaintiff No. 1 is the owner of property bearing No. 13, Kautilya Marg, New Delhi (the suit property). The other two substantive prayers were for a decree of permanent injunction restraining the Defendant from leasing out portions of the property belonging to the Plaintiffs or from otherwise alienating the property or dispossessing the Plaintiffs from the suit property and for a decree seeking cancellation of sale deeds dated 16th May, 1997, 19th May, 1997 and 30th June, 1997.

3. The Plaintiffs subsequently amended the plaint and two other Defendants were added, namely, Sajit Bakshi (Defendant No. 2) who, it is alleged, in connivance with Reeta Wahi (Defendant No. 1) attempted to take forcible possession of the suit property. Punjab National Bank (Defendant No. 3) was also added as a party because a company called Vaishali International Management and Resources Ltd. (VIMAR) of which the Plaintiff is a major shareholder had mortgaged the suit property with it. The title deeds of the suit property are said to be lying with Defendant No. 3 and it is alleged that Defendant No. 1 is trying to obtain the title deeds from Defendant No. 3 so as to induct Defendant No. 2 into the suit property.

4. In view of the changed circumstances, two additional prayers were also made by the Plaintiff, namely, for a permanent injunction restraining Defendant No. 3 from releasing the title deeds of the suit property and a decree of possession in favour of the Plaintiff and against Defendant No. 2.

5. Defendant No. 1 has filed a detailed written statement and has also made a counter claim against the Plaintiff. In the counter claim, it is prayed that a declaration be given that Defendant No. 1 owns the suit property absolutely and for a mandatory injunction directing the Plaintiff to remove himself from the suit property and a prohibitory injunction restraining him from entering the suit property.

6. After pleadings were complete, a large number of issues were framed on 7th September, 2005 and Issues No. 1 and 13 read as follows:

“1. Whether the suit is barred by the provisions of Benami Transaction (Prohibition) Act, 1986, as alleged in the written statement? If so, to what effect?

13. Whether the suit of the Plaintiff is barred under the provisions of Benami Transactions (Prohibition) Act, 1988 and the plaint is liable to be rejected under Order 7 Rule 11 of the CPC?”

7. On 7th September, 2005, it was directed that Issue No. 1 shall be treated as a preliminary issue since learned counsel appearing for Defendant No. 1 stated that he wished to argue that issue on the strength of the provisions of Order VII Rule 11 of the CPC and for that purpose and to that extent, the averments made in the plaint may be treated to be prima facie correct.

8. On 17th April, 2006 when the matter was listed for arguments, it was agreed between learned counsel for the parties that both these issues are effectively the same and, accordingly, Issue No. 13 may be deleted from the order dated 7th September, 2005.

9. Consequently, arguments on the preliminary issue were advanced by learned counsel for the parties on 17th and 18th April, 2006 when orders were reserved.

10. The broad facts that may be culled out from a reading of the plaint and the documents filed therewith are that the suit property was leased out by the Land & Development Officer (L & DO) to Rai Sahib Kharaiti Ram Bedi, who died in 1961 leaving behind five legal heirs, who each then had 1/5th share in the suit property.

11. The Plaintiff was a tenant in the suit property and in 1978 he entered into an agreement to sell with three of the legal heirs for purchase of a total 3/5th share in the suit property. Soon thereafter, he nominated Defendant No. 1 in whose favour the sale deed was to be executed and registered as transferee owner.

12. Since the vendors did not perform their part of the agreement, the Plaintiff and Defendant No. 1 filed two suits in this Court for a decree of specific performance. These two suits (Suit No. 2140 of 1987 and Suit No. 204 of 1983) were subsequently compromised and, as prayed in the compromise application, a decree of specific performance was granted in favour of Defendant No. 1.

13. It appears that one Smt. Bharti Rani Singh had also filed a suit for specific performance of an agreement in respect of the suit property. Those proceedings were finally disposed of (in appeal) on 6th May, 1997 leaving a clear title for purchase of the leasehold rights in the suit property.

14. The Plaintiff says that in the meanwhile, he transferred a sum of Rs. 1.6 lakhs to the account of Defendant No. 1 in 1996. He also says that his account in VIMAR was debited to some extent and that amount was also transferred to the account of Defendant No. 1. These amounts were utilized to pay the balance consideration to the vendors for purchase of the 3/5th portion of the suit property. Thereafter sale deeds were executed in favour of Defendant No. 1 as a nominee of the Plaintiff in respect of these portions of the suit property on 16th May, 1997, 19th May, 1997 and 30th June, 1997 (whose cancellation is prayed for by the Plaintiff).

15. From March, 1997 onwards the Plaintiff gave loans for considerable amounts to Defendant No. 1. These amounts were utilized for payment of charges to the L & DO for conversion of the suit property into freehold and for other payments also.

16. The Plaintiff says that subsequently, since Defendant No. 1 could not repay the loans given, it was decided to treat the amounts as a gift to her.

17. The Plaintiff says that he purchased the entire suit property and Defendant No. 1 was his nominee and was acting for him in a fiduciary capacity; and so, she cannot doubt his title to the suit property, of which he is in possession.

18. On these broad facts, the contention of learned counsel for Defendant No. 1 was that according to the Plaintiff himself, the sale transactions in respect of the suit property were in fact benami transactions and that is why, although the entire sale consideration actually flowed from the Plaintiff, the entire documentation was in the name of Defendant No. 1 as a benamidar. Now, since the parties have ‘fallen out’ the Plaintiff is claiming to be the real owner of the suit property. According to Defendant No. 1, he cannot assert his title to the suit property because of the bar of Section 4 of the Benami Transaction (Prohibition) Act, 1988 (the Act). The only way out for the Plaintiff is to plead the exclusion in Section 4(3)(b) of the Act, which is attempted in the plaint, though unsuccessfully. It was submitted that Defendant No. 1 had no fiduciary relationship with the Plaintiff and a bald assertion to the contrary by the Plaintiff is inadequate.

19. Section 4 of the Act reads as follows:—

“4. 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 allowedin any 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 coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or

(b) where the person in whose name the property is held is 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 stands in such capacity.”

20. The admitted position is that the entire sale consideration flowed from the Plaintiff, initially as a loan to Defendant No. 1, and that was later on converted into a gift. The admitted position also is that the entire documentation, including the sale deeds, has been written up in the name of Defendant No. 1 as the vendee and that is why the Plaintiff has prayed for cancellation of the sale deeds dated 16th May, 1997, 19th May, 1997 and 30th June, 1997.

21. Section 2(a) of the Act defines a benami transaction in the following words:

“2. Definitions.—In this Act, unless the context otherwise requires,-

(a) “Benami transaction” means any transaction in which property is transferred to one person for a consideration paid or provided by another person;

(b) and xxx xxx xxx”

A simple reading of the plaint in the context of this definition leaves no manner of doubt that the sale transactions were nothing but benami transactions. The sale consideration for the suit property was paid for or provided by the Plaintiff, while the suit property was transferred in the name of Defendant No. 1. Therefore, in terms of Section 4(1) of the Act, the suit filed against Defendant No. 1 by the Plaintiff claiming any right or seeking to enforce any right in respect of the suit property is prohibited.

22. The next question to be considered is whether Defendant No. 1 was standing in a fiduciary capacity towards the Plaintiff and held the suit property in that capacity, within the requirements of Section 4(3)(b) of the Act. In other words, there are two requirements to be fulfilled—firstly, that Defendant No. 1 was standing in a fiduciary capacity towards the Plaintiff and secondly, that Defendant No. 1 was holding the suit property for and on behalf of the Plaintiff as a fiduciary.

23. Learned counsel for Defendant No. 1 relied upon ITC Ltd. v. Debts Recovery Appellate Tribunal, AIR 1998 SC 634 to contend that while dealing with an application under Order VII Rule 11 of the CPC, it is essential to see whether a real cause of action has been set out in the plaint or something purely illusory has been stated. Clever drafting creating illusions of a cause of action are not permitted in law and a clear right to sue should be shown in the plaint.

24. What are the averments made in the plaint? It seems to me that the plaint, and the documents filed alongwith the plaint, clearly show that Defendant No. 1 was the nominee of the Plaintiff with regard to the purchase of the suit property. In the suit filed as far back as in 1983 being Suit No. 204 of 1983 for specific performance against one of the vendors of a portion of the suit property, Defendant No. 1 was arrayed as one of the plaintiffs in her capacity as a nominee of the Plaintiff. Subsequently, in the compromise application filed in that suit apparently in 1984 (as it appears from the sale deed dated 16th May, 1997) it is clearly stated that Defendant No. 1 is the nominee of the Plaintiff since 10th October, 1978. The prayer in that application is to the effect that a decree of specific performance be passed in favour of Defendant No. 1. Paragraph 2 of the application states:—

“That on 10.10.1978, Shri S.M Wahi (Plaintiff No. 1) nominated Miss Reeta Wahi, his niece, in whose favour the sale deed is to be executed and registered as transferee owner of 2/5th share of the said property. Possession of the property that is 2/5th share of No. 13, Kautilya Marg, New Delhi, was given to the said nominee on 20.10.1978”

It is important to note that Defendant No. 1 is not described simply as a nominee of the Plaintiff but the intention is made clear that she is to be a transferee owner. There can be no doubt that the Plaintiff treated Defendant No. 1 as his nominee at least from October, 1978 onwards, if not from 1983-1984. The position was the same in Suit No. 2140 of 1987 in respect of another share in the suit property. That suit was compromised on 15th December, 1987 on the same terms as Suit No. 204 of 1983.

25. The above documents clearly go to show that the actual purchaser of the suit property was the Plaintiff and Defendant No. 1 was his nominee for the purpose of executing the sale deed. But, is that enough for the purposes of Section 4(3)(b) of the Act? I don't think so because the Act requires the existence of a fiduciary relationship and not merely that of a nominee. Although there is no cut and dried distinction between the two terms, a good idea can be obtained from the decision of the Supreme Court in Southern Roadways Ltd., Madurai v. S.M Krishnan, (1989) 4 SCC 603, in which it was said in paragraph 17 of the Report:

“We wish to add that it is not every agent who is in a fiduciary position vis-a-vis his principal. For example if A appoints B to be his agent merely to sign a memorandum and places no particular trust in B, the doctrine of fiduciary relations would not apply. Likewise, where the principal authorises an agent to do particular or specified acts, the doctrine of fiduciary relation may not arise. What we want to emphasise is, in all cases of general agency, the relation may be generally fiduciary, but in other kinds of agencies, the relation may vary with the confidence which the principal chooses to repose in the agent. It may also depend upon the power which the agent exercises over the subject matter under the terms of the contract of agency or by virtue of the incident of law and usage of the business which the relationship implies. Thus the fiduciary element in agency, though the key to much of the law governing this relation, is not the essential element in the relation.”

Thus, every nominee may not be a fiduciary.

26. The heart and soul of a fiduciary relationship was described by the Supreme Court as one person being bound to protect the interests of the other. (See Canbank Financial Services Ltd. v. Custodian, (2004) 8 SCC 355). The aspect of confidence and trust was also adverted to in State Of Gujarat v. Jaswantlal Nathalal, AIR 1968 SC 700 (cited with approval in Pratibha Rani v. Suraj Kumar, (1985) 2 SCC 370) in the following words:

“The expression ‘entrustment’ carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them.”

27. To determine whether the relationship in the present case was a fiduciary relationship, it may be worthwhile to notice some of the specific averments made in the plaint and then to recap all the facts from the plaint and the documents filed alongwith it.

28. The Plaintiff has averred in paragraph 10 of the amended plaint that when the sale deed in respect of the suit property was executed, Defendant No. 1 “was to hold the suit property as a nominee and in a fiduciary capacity for the benefit of the plaintiffs and who were to reside in the said property.” Paragraph 11 of the amended plaint refers to transfer of money in 1997 “to protect and pay” for the suit property and transfer of money in 1999 to convert the suit property from leasehold to freehold. Paragraph 12 of the amended plaint refers to an agreement dated 15th December, 1999 between the wife of the Plaintiff and Defendant No. 1 in which it is stated:

“As long as I and my husband are living you shall not disturb the facilities, which we have established in the premises nor shall you dispose off the house 13, Kautilya Marg, or rent it out without our concurrence.”

Then in paragraph 13 of the amended plaint, it is averred that Defendant No. 1 gladly accepted the condition about disposal and renting out of the suit property. Finally, in paragraph 15 of the amended plaint it is averred:

“That since the plaintiffs Nos. 1 and 2 have paid for the entire property, the defendant No. 1 as a nominee and by virtue of the fiduciary capacity does not have the right, title or interest to put clouds on the rights of the plaintiff Nos. 1 and 2 to live in the said property or to dispose of the property.”

For the purposes of deciding the preliminary issue in terms of Order VII Rule 11 of the CPC, these averments are deemed to be correct.

29. A recap of all the facts shows that:

In 1978, the Plaintiff entered into an agreement to purchase 3/5th of the suit property, for which he paid. Soon thereafter, he appointed Defendant No. 1 as his nominee in whose favour the sale deed was to be executed as a transferee owner.

When the suits pertaining to the above 3/5th share in the suit property were compromised, the decree was passed in favour of Defendant No. 1, his nominee.

Sale deeds were executed in respect of the suit property in favour of Defendant No. 1.

The Plaintiff gave huge amounts to Defendant No. 1 to purchase the leasehold rights in the suit property from the L & DO.

It was made clear to Defendant No. 1 that as long as the Plaintiff and his wife are alive, she will not dispose of the suit property or rent it out without their concurrence. This was acceptable to Defendant No. 1.

30. Finally, and most importantly, reference may be made to a letter dated as recently as 10th June, 2004 in which Defendant No. 1 writes to the Plaintiff, inter alia, as under:

“I will look after the property as trustee, which belongs to both-of you, even though it was registered in my name, as arranged as a nominee. Once again I assure that there is no plan of doing anything otherwise in your lifetime or and without your approval.”

Taking into consideration all the averments made in the amended plaint and the facts disclosed from the documents filed alongwith it, there is no escape from the conclusion that the Plaintiff has made out a case that Defendant No. 1 was standing in a fiduciary capacity vis-vis the Plaintiff and was much more than a mere nominee. It is also quite clear that Defendant No. 1 was holding the suit property for and on behalf of the Plaintiff. In this regard, one cannot overlook what the Supreme Court has said in Ganara Financial Services (in paragraph 66 of the Report):

“The Benami Transactions Act is not a piece of declaratory or curative legislation. It creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transactions and for whom new liabilities are created by the Act. A statute which takes away the rights of a party must be strictly construed.” The attempt of Defendant No. 1 is to invoke the bar under the Act and there by take away the right of the Plaintiff. To this extent, the statute must be strictly construed and consequently the exclusionary clause must be given its full play. Looked at from this perspective also, it is not possible to conclude that the Plaintiff has not made out any case or that the plaint requires summary rejection.

31. Under the circumstances, Issue No. 1 is answered in the negative.

32. Needless to say, any observations made are only for deciding the preliminary issue. Evidence has yet to be recorded in the case and, therefore, the observations made will not prejudice any of the parties at the trial.