M GOVINDARAJAN Vs. INDIAN OVERSEAS BANK PONDICHERRY

JUDGEMENT

(1.) THE two defendants against whom the suit has been decreed is the appellants. THE plaintiffs-Indian Overseas Bank, Pondicherry , got a money decree against the second defendant-Ramaswamy Mudaliar on 18. 9. 1975 by a Judgment of the High court, for a sum of Rs. 33,893. In execution of that decree in E. P. No. 45 of 1976 the plaintiff attached the suit property-a house belonging to the second defendant on 24. 10. 1976. In the meanwhile, after filing of the suit on 19. 11. 1964, the second defendant on 21. 11. 1964 executed a sale deed in respect of the suit property in favour of the first defendant-his brother in law. First defendant filed a claim petition on the basis of the said sale deed, the certified copy of which is Ex. B-1 and claim petition was allowed on 16. 11. 1977. THE plain tiff filed the present suit for setting aside that claim order, pleading that the alleged sale deed executed by the second defendant in favour of the first defendant is a benami transaction and only'the second defendant was the owner in spile of the sale deed. 2 THE suit was resisted by the defendants contending inter alia that the sale deed is true and genuine one and not a benami transaction as alleged and the suit is barred by limitation. 3. THE learned trial Subordinate Judge who tried the suit accepted the plea of the plaintiff that the sale deed Ex. B-1 is benami and the title vests with the second defendant in spite of the sale deed. He further held that the suit is not barred by limitation. He answered the other issues raised in the suit also in favour of the plaintiff. In the result he decreed the suit as prayed for. 4. Mr. K. Yamunan, learned counsel for the appellant-defendants argued that (i) the finding of the trial court that Ex. B-1 sale deed is a benami one and no title has passed under it contrary to the evidence and erroneous; (ii) the sale deed in question comes within the mischief of Benami Transactions (Prohibition) Act, 1988 and therefore, the plaintiff cannot plead that the sale deed is a benami one; and (iii) the finding of the trial Court that the suit is not barred by limitation is incorrect. 5. Though the plaintiff has pleaded that Ex. B-1 sale deed is a benami transaction, on a careful reading of the case in the plaint, the real case appears to be that Ex. B-1 sale deed is a sham and nominal one executed for the purpose of defeating the plaintiff from recovery of the amount due by the second defendant to them. As stated above, Ex. B-1 sale deed is executed by the second defendant in favour of the first defendant, which according to the plaintiff is not a valid one but fictitious with an anterior motive. THErefore the transaction according to the plaintiff is sham and nominal and not a benami transaction since in the case of a benami transaction one person passes consideration for the sale and gets the sale deed in the name of another person. Be that as it may, the question is, did the second defendant execute the sale deed Ex. B-1 in favour of the first defendant without any intention of passing title to the first defendant and with ulterior motive of secreting the property from the creditors (plaintiff ). [after discussing the facts His Lordship proceeded:] 6. As regards the plea of limitation, it is contended that in view of Art. 2265 of the French Civil Code, the suit is barred by limitation. THE said Art. 2265 reads thus: 'a person who acquires an immovable in good faith and under an instrument which is on the face of it capable of giving a title, obtains a title by prescription to the land in ten years and district of the court of Appeal, in which the owner lives is the same district as that in which the land lies, and in 20 years if the true owner lives outside such district.' A close reading of the Article shows that the condition prescribed for application of the Limitation in this Article is that the person must acquire the properly in good faith. But as found above, Ex. B-1 sale deed is a sham ad nominal, and therefore the transaction is mala fide. . Hence the trial court has rightly held that the suit is not barred by limitation. 7. THE next contention of Mr. Yamunan is that in view of the Benami Transactions (Prohibition) Act, 1988, it is not open to the plaintiff to take the plea that Ex. B-1 is a sham and nominal sale. He submits that as per this Act it is not open to take a plea that a sale deed is sham and nominal, and no suit can be filed on such a plea. In support of this contention the learned counsel relies on a decision of a single Judge of this Court in kathoom Bivi Ammal v. S. Mohamad alias Sheik Mohamad, (1990)1 L. W. 284: (1990)2 m. L. J. 284, wherein it has been held to the effect that a plea that a transaction is sham and nominal cannot be taken since such a transaction is hit by the Benami Transactions (Prohibition) Act. This view has been arrived at mainly on the ground that Scc. 7 of the Act declares that Sec. 81 and Sec. 82 of the Indian Trusts Act, 1882 along with some other provisions have been repealed. 8. Sec. 81 of the Indian Trusts Act, 1882 is as follows;- 'where the owner of property transfers or bequeaths and it cannot be inferred consistently with the attendant circumstances that he intended to dispose of the beneficial interest therein,the transferee or legatee must hold such property for the benefit of the Owner or his legal representative.' And Sec. 82 of the Indian Trusts Act reads thus: '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.' A reading of Sec. 82 shows that it relates to benami transaction and therefore we are not concerned with that Sec. 81 relates to sham and nominal transactions. A reading of this only conveys the meaning that in a sham and nominal transaction the transferee or legatee must hold such property for the benefit of the owner or his legal representative. In other words this section creates a statutory obligation on the part of the transferee or the legatee towards the transferor or the testator or his legal representative. So such a statutory obligation is removed when this section is repealed. This does not mean that a sham and nominal transaction itself is prohibited or it is not open for'anyone to make a plea that a transaction is sham and nominal. 9. From the title of the Benami Transactions (Prohibition) Act, 1988 itself it could be seen that what is prohibited under the Act is benami transactions and not any other transactions like sham and nominal transactions. THE benami transaction has been defined in Sec. 2 (a) of the Act as meaning,'any transaction in which property is transferred to one person for a consideration paid or provided by any other person'. Certainly a sham and nominal transaction does not come within the meaning of this definition. THErefore with great respect 1 am unable to agree with the decision of the learned single Judge of this Court in the ease referred to above the sham and nominal transactions are also hit by the Benami Transactions (Prohibition) Act. 10. This view of mine is supported by a decision of the kerala High Court in Ouseph Chacko v. Raman Nair Raghavan Nair, A. l. R. 1989 ker. 317, wherein it has been held that, "a right under the general law for a declaration from a Court of law that a transaction is fictitious, sham or nominal and that it has not been acted upon and was never intended to be acted, is not taken away by the Benami Transactions (Prohibition) Act. That right survives. " In this view of mine, I think it would be necessary and appropriate to refer the matter to a Division Bench on the point where the benami Transactions (Prohibition) Act prohibits sham and nominal transactions also and it is not open to contend that a transact ion is sham and nominal and no title passed under it. 11. Hence, the office will place the matter before my lord the Chief Justice for necessary orders for posting the matter before a division Bench. After a decision on this point, the matter will be placed before me for final disposal of the appeal. This appeal having posted for answering a reference, before THE Honourable Mr. Justice Ratnam and THE honourable Mr. Justice Somasundaram, on Monday, the 1st day, Tuesday the 2nd day, Monday the 15th day, Tuesday the 16th days of April 1991, upon perusing the grounds of appeal, the judgment and decree of the lower Court and the material papers in the suit and upon hearing the arguments of Mr. K. Yamunan, advocate for the appellants and of Mr. V. Narayanaswami, Advocate for the respondent and having stood over for consideration till Tuesday the 11th day of june, 1991, THE Order of the Court was made by Ramam, J. : "whether the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) prohibits sham and nominal transactions also and it is not open to contend that a transaction is sham and nominal and no title passed under it. " is the question that has been referred to us for decision.

(2.) INASMUCH as the reference has arisen in the course of the hearing of an appeal, which still awaits consideration and disposal at the hands of the learned single Judge who made the reference, we have refrained from referring to the factual background giving rise to the pending appeal with a view to enable the learned Judge to further deal with the matter in the light of the answer to the reference and on the facts as may be found on the evidence.

(3.) LEARNED counsel for the appellants next contended that the words'benami'and'held benami'occurring in secs. 3 and 4 of the Act have to be read differently and that while it may be that the definition of'benami transaction'occurring in Sec. 2 (a)of the Act may apply to Sec. 3 of the Act, it may not apply to Sec. 4 of the Act, as the expression'benami transaction'docs not occur therein, but only the words'held benami'have been used. It has earlier been noticed that the twin objects of the Act are to prohibit benami transactions and also the establishment of rights over property held benami, either on a cause of action or defence, based on benami. The prohibition of benami transactions is sought to be achieved by preventing persons from entering into such transactions and making it a punishable offence, except in cases provided for under Sec. 3 (2) of the Act. The prohibition contained in Sec. 4 of the Act is aimed at securing the other object of the Act, viz. , to put an end to the right to recover property held benami and to vest the title to the property in the benamidar or the ostensible owner. In other words, in order to accomplish the twin objects earlier referred, provision has been made in the Act to prohibit the entering into of benami transactions and also to put an end to the right of a person claiming to be the real owner, either on a cause of action or by way of defence, and it is with reference to the latter class of cases, the words used are'held benami'. Those words would mean the state of holding property, as a result of entering into a benami transaction or pursuant to such a transaction and necessarily, the definition of a'benami transaction'found in Sec. 2 (a) of the Act, has to be read into and applied in interpreting the words'property held benami'occurring in Sec. 4 of the Act. In view of that, this argument of learned counsel for the appellants also cannot be accepted.