Chandra Shekhar v. Manohar Lal

Iqbal Ahmad, C.J:— This is an appeal by Chandra Shekhar and Balak Ram plaintiffs arising out of a suit for a declaration that the house in dispute was liable to attachment and sale in execution of a decree for costs obtained by them in suit No. 36 of 1928. Three persons were arrayed as defendants in the present litigation. Manohar Lal was defendant No. 1 and his two minor sons Ganesh Datta and Chandra Datta were defendants Nos. 2 and 3.

Suit No. 36 of 1928 was brought by Ganesh Datta and Chandra Datta minors against Chandra Shekhar and Balak Ram for recovery of a certain amount of money. Manohar Lal acted as next friend of Ganesh Datta and Chandra Datta in that suit. That suit was based on the allegation that Ganesh Datta and Chandra Datta had advanced by way of loan the amount claimed to Chandra Shekhar and Balak Ram. Chandra Shekhar and Balak Ram, however, pleaded that the amount in suit was not advanced to them by way of loan but was, as a matter of fact, deposited with them by Manohar Lal as his (Manohar Lal's) contribution to the funds of a particular partnership in which Manohar Lal had entered with them (Chandra Shekhar and Balak Ram).

The trial court decreed suit No. 36, but on appeal this Court accepted the defence put forward by Chandra Shekhar and Balak Ram and dismissed that suit with costs.

Chandra Shekhar and Balak Ram applied for the execution of the decree for costs by attachment of the house in dispute alleging that Ganesh Datta and Chandra Datta judgment-debtors were owners of the house. Manohar Lal then objected under order XXI, rule 58 of the Code of Civil Procedure claiming that the house belonged exclusively to him and was not liable to attachment and sale in execution of the decree for costs held by the plaintiffs. The objection of Manohar Lal was allowed and the house was released from attachment.

The suit giving rise to the present appeal was then brought by Chandra Shekhar and Balak Ram. Manohar Lal contested the suit mainly on the allegation that the house was his self acquired property and was not liable to sale in the decree for costs obtained by the plaintiffs in suit No. 36. Both the courts below agreed in holding that Manohar Lal purchased the house “from his own private savings” and was, as such, the sole owner of the house. This finding cannot the, and is not, challenged in second appeal.

It was, however, contended by the plaintiffs in the court below that as Ganesh Datta and Chandra Datta were mere benamidars for Manohar Lal with respect to the deposit that formed the subject of dispute in suit No. 36, the real plaintiff of that suit must be deemed to be Manohar Lal even though that suit was filed in the names of Ganesh Datta and Chandra Datta. They, therefore, urged that Manohar Lal was liable to satisfy the decree for costs passed in their favour in suit No. 36. This contention of the plaintiffs was overruled by both the courts below and the suit was dismissed.

The plaintiffs then filed the present second appeal and it came for hearing before my brothers Ganga Nath and Dar and it was contended before them that a decree for costs passed against a benamidar is executable against the real beneficial owner. As the question raised was of general importance the case was referred by them to a Full Bench.

On the facts stated above the only question that arises for consideration is whether a decree for costs against a benamidar is executable against the beneficial owner and on the answer to that question depends the decision of this appeal. The answer to the question is not free from difficulty and much can be said on both sides. But after giving the matter my best consideration I have arrived at the conclusion that the answer to the question must be in the negative.

In arriving at this conclusion I have not overlooked the long series of decisions which establish that a benamidar, even though he has no beneficial interest in the property standing in his name, is competent to sue in his own name and that the decision in such, a suit operates as res judicata against the beneficial owner, vide Gopi Nath Chobey v. Bhugwat Pershad(1), Khub Chand v. Nardin Singh, Nand Kishore Lal v. Ahmad Ata(2), Yad Ram v. Umrao Singh(3) and Gar Narayan v. Sheolal Singh(4). Speaking generally these decisions are based on the principle that the benamidar must be deemed to have instituted the suit with the full authority and consent of the beneficial owner, and, as such, must be presumed to be suing on behalf of the beneficial owner. Similarly a decree obtained against a benamidar has been held binding on the beneficial owner even though he (the beneficial owner) was not a party to the suit, vide Kaniz Fatima v. Wali-ullah(5).

A slight extension of the principle underlying the decisions just quoted is illustrated by the decision in Lachman Singh v. Collector of Moradahad(6). In that case a certain zamindari share was recorded benami in the name of the mother of the beneficial owner and the mother was appointed lambardar. Another co-sharer brought a suit for profits against the mother and obtained a decree. The share recorded in the name of the mother was sold in execution of the decree and purchased by the co-sharer decree-holder. The beneficial owner (the son) then brought a suit for possession of the share on the ground that as he was no party to the decree his interest in the property sold did not pass by the auction sale to the auction purchaser. The suit was dismissed on the ground that the mother, who was the benamidar, must be deemed to have represented the beneficial owner in the litigation and the decree obtained against her was binding on the beneficial owner (the son).

But these decisions, in my opinion, have no bearing on the question that is the subject of consideration in the present appeal. All that these decisions lay clown is that a decision as to the right or title to a property that is litigated in a suit, to which the benamidar is a party but the beneficial owner is not, is binding on the beneficial owner. But the principle underlying these decisions cannot, in my judgment, without the risk of introducing great confusion in the execution department, be extended to the question of costs awarded by a decree against a benamidar when the beneficial owner is no party to the decree.

The question of costs is regulated and governed by section 35 of the Code of Civil Procedure and by that section the court is given “full power to determine by whom or out of what property and to what extent such costs are to be paid”. As I read that section it appears to me that the “court may, in exceptional cases, award costs even against a stranger to the litigation. The court of course will not, and cannot, award costs against a person without giving him an opportunity of being heard. It follows that if a party to a litigation desires costs to be awarded against a stranger to that litigation, he must, at an appropriate stage of the litigation, raise the point before the court, so that the court may, if it thinks proper to do so, implead the stranger as a party to the litigation and give him an opportunity of being heard.

Instances of suits by a benamidar or by a mere puppet in the hands of a speculator are not wanting. It is pen to a defendant in such a suit to say that the real plaintiff is a person other than the person in whose name the suit has been filed, and to ask the court to implead the real plaintiff and award him costs as against the real plaintiff but, if the defendant in such a suit does not adopt such a course, he cannot, in my opinion, after the termination of the litigation, raise the question of costs by a separate suit. The question of costs of a particular suit is a matter incidental to that suit and cannot, therefore, be made the subject of a separate suit. To hold otherwise would be to introduce great, confusion in the execution department.

A suit by a benamidar is no doubt deemed to have been instituted with the consent and approval of the beneficial owner, and, as such, the benamidar represents in fact the real owner in the suit. But this fact, in the event of the dismissal of the suit and costs being awarded to the defendant, cannot entitle the defendant to execute the decree for costs both against the benamidar and the beneficial owner. It may be that he has a right to recover costs either from the beneficial owner or from the benamidar, but he cannot recover the same from both. It follows that if the right to file a separate suit against the beneficial owner for the costs awarded by the decree be conceded to the defendant, it will have to be held that the benamidar, against whom the decree awards costs, will also be entitled to plead in execution that he being a mere benamidar is not liable for the costs which the defendant must recover from the beneficial owner. This would be destructive of the well established principle that a court executing the decree cannot go behind the decree. As the decree, on the free of it, awards costs against the benamidar, it is not open either to the decree holder or to the benamidar in such a case to ask the execution court to make the beneficial owner liable for the costs. If the question of the liability of the beneficial owner cannot be raised in the execution department much less can it be enforced by means of a separate suit. This Court in Kamta Prasad v. Indomati and the Madras High Court in Palaniappa Chettiar v. Subramania Chettiar held that where a decree has been transferred to a particular person under an instrument on writing, no other person, claiming that he was the real owner under the transfer and that the transferee named therein was a mere benamidar for him, can apply for execution of the decree, under the terms of order XXL rule 16 of the Code of Civil Procedure. The ratio decidendi of these cases is that the execution court is to execute the decree as it stands and cannot be asked to enter into a discussion of, or to decide, the question as to who is beneficially entitled under the decree or against whom the decree is to be executed. It follows that in the case before us the execution court could execute the decree only against Ganesh Datta and Chandra Datta. It would be anomalous, therefore, to decree the present suit and thus allow the plaintiffs to ask the execution court to execute the decree against Manohar Lal—a step which the execution court could not, as stated above, take.

The view that I take is not in conflict with the decisions in Nil Kanta Ghosal v. Ram Chand Roy and Raj Narain v. Ahmadi Jan. These decisions are authorities for the proposition that after the death of a benamidar decree-holder the beneficial owner is entitled to be substituted in his place. This is so because on the death of the decree-holder his legal representative has the right to be brought upon the record and, as the benamidar is a mere trustee for the beneficial owner, the beneficial owner, on the death of the benamidar, is entitled to be substituted in his place.

For the reasons given above I would affirm the decisions of the courts below and dismiss this appeal with costs.

Ganga Nath, J.:— I concur.

Dar, J.:— This is an appeal against a judgment and decree, dated 29th January, 1938, of the District Judge of Cawnpore by which he affirmed a judgment and decree, dated 8th December, 1936, of the Civil Judge of Cawnpore in a suit for declaration that a certain house in the city of Cawnpore was liable to attachment and sale in execution of a decree.

Two Hindu minors, Ganesh Datta and Chandra Datta by their next friend, Manohar Lal, who was their father, raised an action in the court of the Subordinate Judge of Cawnpore, suit No. 36 of 1928, against Chandra Shekhar and Balak Ram for recovery of a large sum of money. The claim of Ganesh Datta and Chandra Datta shortly stated was that the sum claimed was their father's money which was lent to or deposited with Chandra Shekhar and Balak Ram in the names of Ganesh Datta and Chandra Datta, minors, which in the events that had happened they were entitled to recover as money lent or money deposited. On 22nd December, 1928, the Subordinate Judge of Cawnpore passed a decree in favour of Ganesh Datta and Chandra Datta, but on appeal to this Court by a judgment and decree, dated 24th October, 1932, the claim of Ganesh Datta and Chandra Datta was dismissed and they were ordered to pay a sum of Rs. 2,158-13-0 as costs to Chandra Shekhar and Balak Ram.

Chandra Shekhar and Balak Ram put the decree for costs in execution and attached a house in the city of Cawnpore. Manohar Lal, the I next friend of the minors Ganesh Datta and Chandra Datta, raised an objection to this attachment on the ground that the house was his personal property and the decree for costs being against Ganesh Datta and Chandra Datta, the said house was not liable for sale in execution of the said decree. Chandra Shekhar and Balak Ram, the decree-holders, on the other hand, contended that Ganesh Datta and Chandra Datta were joint owners of the house as it was a joint family property of Ganesh Datta and Chandra Datta and Manohar Lal and even if it be assumed that it was a personal property of Manohar Lal the house was liable to be sold in execution of the decree because in the said decree Ganesh Datta and Chandra Datta were nominal parties and the real party was Manohar Lal, the two minor boys being his benamidars. The executing court allowed Manohar Lal's objection and released the house from attachment. Chandra Shekhar and Balak Ram thereupon made an “appeal to this Court and this Court dismissed the appeal of Chandra Shekhar and Balak Ram on the ground that as Manohar Lal was not a party to the decree, his objection to the attachment of the house came under order XXI, rule 58 and not under section 47 of the Civil Procedure Code and no appeal lay to this Court. Incidentally this Court also observed—“The court executing the decree cannot go behind the decree which, on the face of it, is against the minor plaintiffs. Manohar Lal is not made liable by the terms of the decree for the costs awarded to the successful defendants. It is clear that the court executing the decree will materially alter the terms of the decree if it finds that the party really liable for costs is Manohar Lal. We think that the lower court was right in holding that the decree-holders cannot execute their decree for costs against Manohar Lal, who is not shown in the decree as a party.” [See Chandra Shekhar v. Manohar Lal].

On 7th September, 1934, Chandra Shekhar and Balak Ram raised an action in the court of the Civil Judge of Cawnpore against Manohar Lal, Ganesh Datta and Chandra Datta for a declaration that the house in Cawnpore mentioned above was liable to attachment and sale in execution of the above decree for costs and for a further declaration that the real plaintiff in suit No. 36 of 1928 was Manohar Lal and Ganesh Datta and Chandra Datta were mere benamidars for him and they had no real interest of their own. Chandra Shekhar and Balak Ram again alleged that the house in dispute was the joint property of Manohar Lal and his two sons, Ganesh Datta and Chandra Datta, and even if it was taken to be the separate property of Manohar Lal, the house was still liable to sale because Manohar Lal was the real plaintiff in suit No. 36 of 1928 in which the decree for costs was passed and Ganesh Datta and Chandra Datta were mere benamidars for Manohar Lal. The trial court found that the hope was a personal property of Manohar Lal acquired by his personal funds and that being so the said house could not be sold in execution of the decree for costs which was passed not against Manohar Lal, but against his two sons, Ganesh Datta and Chandra Datta. The trial court further found that if Chandra Shekhar and Balak Ram wanted to make Manohar Lal responsible for their costs they ought to have taken steps about it in suit No. 36 of 1928 before or at the time when the decree for costs was passed and it was not open to Chandra Shekhar and Balak Ram after the decree for costs had been passed against Ganesh Datta and Chandra Datta to seek a declaration that Manohar Lal was responsible for costs which was decreed against Ganesh Datta and Chandra Datta. On appeal this judgment was affirmed by the District Judge of Cawnpore and against that judgment the plaintiffs have made this second appeal which has been referred for decision to this Bench.

The only question for my consideration in this case is whether the decree for costs passed against Ganesh Datta and Chandra Datta in favour of Chandra Shekhar and Balak Ram can be executed against Manohar Lal on the ground that Ganesh Datta and Chandra Datta were the benamidars for Manohar Lal and they were the nominal parties and Manohar Lal was the real party.

It may now be taken to be settled by authority that there is nothing illegal in a benami transaction and that a benamidar can sue and be sued and a decree in favour of the benamidar or against the benamidar enures in favour of the real owner and binds the real owner as the case may be. In Gur Narayan v. Sheolal Singh Mr. Ameer Ali in delivering the judgment of the Judicial Committee made the following observations (at page 574):

“On the question whether a person who has no beneficial interest in the property which stands in his name or is acquired in his name can maintain an action in respect thereof, there seems to be considerable diversity of judicial opinion in India. The system of acquiring and holding property and even of carrying on business in names other than those of the real owners, usually called the benami system, is and has been a common practice in the country. There is nothing inherently wrong in it, and it accords within its legitimate scope, with the ideas and habits of the people. The rule applicable to benami transactions was stated with considerable distinctness in a judgment of this Board delivered by Sir George Farwell [Bilas Kunwar v. Desraj Ranjit Singh.] Referring to a benami dealing, their Lordships say: ‘It is quite unobjectionable and has a curious resemblance to the doctrine of our English law that the trust of the legal estate results to the man who pays the purchase money, and this again follows the analogy of our common law that where a feoffment is made without consideration the use results to the feoffor.’ So long, therefore, as a benami transaction does not contravene the provision of the law the Courts are bound to give it effect. As already observed, the benamidar has no beneficial interest in the property or business that stands in his name; he represents, in fact, the real owner, and so far as their relative legal positions concerned he is a mere trustee for him. Their Lordships find it difficult to understand why, in such circumstances, an action cannot be maintained in the name of the benamidar in respect of the property although the beneficial owner is no party to it. The bulk of judicial opinion in India is in favour of the proposition that in a proceeding by or against the benamidar, the person beneficially entitled is fully affected by the rules of res judicata. With this view their Lord ships concur. It is open to the latter to apply to be joined in the action; but whether he is made a party or not, a proceeding by or against his representative in it's ultimate result is fully binding on him. In case of a contest between an alleged benamidar and an alleged real owner, other considerations arise with which their Lordships are not concerned in the present case.”

There is also authority for the view that in the absence of any evidence to the contrary it is to be presumed that the benamidar institutes the suit or defends it with the full knowledge of the beneficial owner and also for the view that the benamidar is only another name for the real owner and as such the real owner himself must be deemed to be a party for the purposes of section 11 of the Civil Procedure Code.

But there is a conflict of judicial authority on the question whether the real owner or benamidar or both can execute a decree and on the question whether the real owner can take steps to substitute himself under section 47 of the Civil Procedure Code or by an independent suit and further on the question whether the doctrine of benami transactions should be confined to suits or should be extended to execution proceedings. In Palaniappa Chettiar v. Snbramania Chettiar which is a Full Bench decision, in one of the judgments at pages 558 and 559, it was stated—“It is also clear that the Civil Procedure Code did really intend to prevent benamidars coming in and making applications to the court on the general basis of the law relating to benami transactions…. It would lead to very serious consequences if we should allow the law of benami to have any operation with regard to suits and proceedings and records of court, and if only on that ground, it would be desirable to disallow any such contention.”

The “benamidar” in the above quotation is used to signify the real owner and opinions may differ as to whether this is the true meaning of the word. It may be so in Madras, but it some places “benamidar” means the nominal person and not the real person. However, the meaning of the passage is perfectly plain and it expresses the view that the Civil Procedure Code contemplated that where proceedings have been taken in the names of nominal parties, real parties should not be allowed to disturb the nominal array of parties.

In Nil Kanta Ghosal v. Ram Chand Roy the Calcutta High Court has expressed the view that the time owner can execute a decree obtained in the name of his benamidar.

In Minakshi Iyer v. Noor Muhammad a Bench of the Madras High Court after citing the passages quoted above by me from the earlier judgment of the same Court in Palaniappa Chettiar's case observed as follows:

“The language here employed is very wide, suggesting as it does that it would be proper to ignore a plea of benami if it tends to affect suits, proceedings and records of court. The facts of the case itself did not, so far as we could see, call for such a sweeping observation and we are unable, with the utmost respect, to treat it as any better than an obiter dictum. The learned Judge himself in this connexion refers in support of the proposition only to section 66 of the Civil Procedure Code which in terms limits the prohibition to an attack on the title of the person claiming title under a purchase certified by the court, and expressly saves the right of a third person to proceed against the property ostensibly sold to the certified purchaser if in fact and truth it is liable to satisfy acclaim of such third person against the real owner. We cannot see any warrant in the provisions of the Code for enlarging the prohibition so as to cover suits and proceedings or the records of court in general. To do so would result in many cases in the promotion and not in the suppression of fraud. Provisions of this character, restrictive as they are of the rights of parties and the jurisdiction of the courts, should, we think, be strictly construed, and ought not to be extended beyond the plain language of the rule.

It may be sound policy to discourage benami transactions in general tending, as they very often do, to the effective concealment of fraud to the embarrassment of courts. But unless statutorily bound, the court must continue to do its duty of unravelling the truth however cleverly hidden by false or fictitious trappings, and administer justice according to the true rights of parties such as they may be found to be on inquiry. It may again be a desirable end to thwart the attempt frequently made by unscrupulous debtors to throw obstacles in the way of a successful litigant realising the fruits of his decree, and prevent the court from being side tracked into a long and tedious inquiry having the effect of clearing or defeating a bona fide decree-holder. Even if such were the obvious purpose of the obstruction, the court must still do its duty by holding the inquiry and get at the truth, subject, no doubt, to such rules of procedure as the legislature has laid down.” (Page 1012.)

The preponderance of authority seems to be in favour of the view that if a decree has been assigned to a benamidar, then the benamidar alone will be able to execute the decree and the real owner will not be permitted to take proceedings under order XXI, rule 16 of the Civil Procedure Code and if a question of set—off arises under order XXI, rule 18 of the Civil Procedure Code it will have to be worked on the basis of nominal parties and not with reference to the right of real owners.

For the purpose of enforcing rights and liabilities of real owners in benami transactions? it is possible to draw a distinction between decrees determining the rights of parties and decrees for costs only. By the Indian statute costs are in the discretion of the court and very often they are awarded on personal considerations which apply to nominal parties which are before the court. Some time they may be of penal nature. It is further possible to draw a distinction between costs awarded to a benamidar and costs awarded against a benamidar. In cases relating to costs in favour of benamidar money which as spent in litigation by the real party and which has resulted in a decree for costs may possibly be regarded as money held in trust by the benamidar for the real owner or the real plaintiff and the decree for costs may be regarded as a fruit of the money spent by the real owner or the real plaintiff and there may be some injustice in allowing the benamidar to take away and appropriate this money in cases where it might not be possible to recover this money from benamidar if he had once realized it. But these considerations do not arise in case of a decree for costs against a benamidar which is sought to be executed against the property of the real party to the litigation. In such a case the benamidar is not holding any property in trust for the real party which the decree-holder seeks to recover nor there is any question of there being a binding decree against the real owner. In a case where the decree is for payment of costs against A and the decree-holder seeks to recover costs from B on the ground that B is liable to pay the costs because B promoted the litigation and was the real party and A was only a nominal party, very different questions arise for consideration than the simple question of recognising benami transactions in matters relating to execution. The question which arises in such a case is not that the decree passed against benamidar is binding on the real owner, but the question which arises is whether costs can be recovered from a person who was not a party to the litigation but who promoted and financed the litigation. As a general rule, liability to pay costs for unsuccessfully carrying on litigation nominally in the name of another person by the person who thus carries on the litigation, can only be determined and imposed in the litigation itself and cannot be determined in execution of decree passed in that litigation against a nominal party or by an independent action. I am not aware of any procedure in this country by which costs awarded against nominal parties can be recovered from real parties in execution of the decree and in my opinion if it is intended to make any other person than the nominal party responsible for costs this should be done before or at the time of the passing of the decree for costs and not in the execution of that decree.

In the case before me, Manohar Lal was acting as the guardian of Ganesh Datta and Chandra Datta in the suit in which decree for costs was passed against Ganesh Datta and Chandra Datta. The fact that Manohar Lal was financing the litigation and that the litigation was carried on by Manohar Lal in the names of Ganesh Datta and Chandra Datta was fully brought out in suit No. 36 of 1928 and was known to Chandra Shekhar and Balak Ram. They took no steps at the time or before the decree for costs was passed to secure their costs against Manohar Lal and they were content with a decree against nominal parties. Later on Chandra Shekhar and Balak Ram triecl to execute the decree by attaching the house of Manohar Lal and on an objection taken by Manohar Lal the house was released and it was held that Manohar Lal not being a party to the suit, the decree for costs should not be executed against him. The plaintiffs have now brought a suit for a declaration that Manohar Lal is liable under the said decree. In my opinion; such an action cannot lie on the ground that Chandra Shekhar and Balak Ram's remedy was to make Manohar Lal liable in the suit itself in which the decree for costs was passed and also on the ground that rightly or wrongly an application of Chandra Shekhar and Balak Ram to execute the decree against Manohar Lal was dismissed by the executing court and the order has become final. In my opinion, if Chandra Shekhar and Balak Ram had any right to execute the decree against Manohar Lal this could only be done by proceedings under section 47 of the Civil Procedure Code which they had already taken unsuccessfully and not by a separate suit.

For the reasons given above I would dismiss this appeal with costs.

By the Court:— The appeal is dismissed with costs.