PAWAN KUMAR versus BABULAL SINCE DECEASED THROUGH LRS. AND ORS.

[2019] 5 S.C.R. 1141

PAWAN KUMAR

BABULAL SINCE DECEASED THROUGH

LRS. AND ORS.

(Civil Appeal No. 3367 of 2019)

APRIL 02, 2019

[UDAY UMESH LALIT AND INDU MALHOTRA, JJ.]

Code of Civil Procedure, 1908:

Or. VII r.11 – Application under – In suit for declaration oftitle – Seeking rejection of plaint on the ground that the suit wasbarred u/s. 4 of Benami Transaction (Prohibition) Act – Trial Courtallowing the application rejected the plaint – High Court upheldthe order of trial court – On appeal, plea that the case was coveredby s. 4(3) of the Benami Transaction Act – Held: The questionwhether the plaint was barred u/s. 4 of the Act or not could nothave been subject matter of assessment at the stage whenapplication u/Or. VII r.11 was taken up – The matter required fullerand final consideration after the evidence was led by the parties –Application u/Or. VII r.11 is dismissed.

Allowing the appeal, the Court

HELD : In the present case, the controversy has arisen inan application under Order VII Rule 11 CPC. Whether thematter comes within the purview of Section 4(3) of the BenanmiTransaction Act is an aspect which must be gone into on thestrength of the evidence on record. Going by the averments inthe Plaint, the question whether the plea raised by the appellantis barred under Section 4 of the Act or not could not have beenthe subject matter of assessment at the stage when applicationunder Order VII Rule 11 CPC was taken up for consideration.The matter required fuller and final consideration after theevidence was led by the parties. It cannot be said that the plea ofthe appellant as raised on the face of it, was barred under theAct. The approach must be to proceed on demurrer and see

Awhether accepting the averments in the plaint, the suit is barredby any law or not. [Para 13][1151-F-H; 1152-A]

Popat and Kotecha Property v. State Bank of India StaffAssociation (2005) 7 SCC 510 : [2005] 2 Suppl. SCR1030 – relied on.

Om Prakash and Another v. Jai Prakash (1992) 1 SCC710 : [1992] 1 SCR 15 – distinguished.

Marcel Martins v. M. Printer and Others (2012) 5SCC 342 : [2012] 5 SCR 480 ; R. Rajgopal ReddyCthrough LRs.v. Padmini Chandrasekharaiahthrough LRs. (1995) 2 SCC 630 : [1995] 1 SCR 715– referred to.

Case Law Reference

[2012] 5 SCR 480D[1992] 1 SCR 15[1995] 1 SCR 715[2005] 2 Suppl. SCR 1030

referred toPara 8

distinguishedPara 8referred toPara 12relied onPara 13

CIVIL APPEALLATE JURISDICTION: Civil Appeal No.3367of 2019

From the Judgment and Order dated 18.08.2017 of the High CourtFof Judicature for Rajasthan, Jaipur Bench, Jaipur in SBRFA No.511/2016.

R.K. Singh, Ms. Neeraj Singh, Kumar Gaurav, Ms. Ritu Reniwal,P. Dayal, Rahul Dr. Tripathi, Rameshwar Prasad Goyal, Advs. for theAppellants.G

Sarad Kr. Singhania, Milind Kumar, Ms. Rohini Musa, Advs. forthe Respondents.

The Judgment of the Court was delivered by

UDAY UMESH LALIT, J. 1. Leave granted.

2. This appeal questions the final judgment and order dated18.08.2017 passed by the High Court of Judicature for Rajasthan atJaipur in SBRFA No.511 of 2016.

3. The appellant filed suit for declaration of title with respect topremises in Kasba Fatehpur’s main market which were more particu-larly described in the plaint and prayed that he be declared owner of thepremises and that the sale deed dated 24.07.2006 executed by the firstdefendant in favour of the second defendant be cancelled. The materialaverments in the plaint were:

(a) shop in said premises was held by the first defendant, namely,father of the appellant on rent from the erstwhile owner;

(b) The first defendant having become old, it was the appellantwho had been looking after the entire business;

(c) The erstwhile owner had filed suit for possession which mat-ter came right upto this Court;

(d) There was compromise between the erstwhile owner andthe first defendant under which the premises where the shop is situate,were agreed to be sold in favour of first defendant;

(e) The first defendant was not having enough money and assuch it was the appellant who arranged all the money on his own afterborrowing from money lenders on interest;

(f) At the time of preparing the sale deed, the first defendant hadindicated that the premises be taken in his name;

(g) Even after purchase of the premises in the name of the firstdefendant, the appellant was conducting the business in the said shop;

(h) The first defendant had executed document on stamppaper on 14.03.2002 in the presence of witnesses which was verified byNotary Public acknowledging that the appellant had paid the entire con-sideration towards purchase of the premises.

A(i) The second defendant was also tenant in the premises andafter the purchase as aforesaid he was making payment of rent to theappellant.

(j) Taking undue advantage of the old age and fragile health of thefirst defendant, the second defendant got written document in his favourBwith respect to first floor of the disputed shop from the first defendanton 19.07.2002.

With the case as aforesaid, Civil Suit No.126 of 2006 was filed bythe appellant in the court of District Judge, Sikar.

4. The second defendant filed his written statement denying theCcase pleaded by the appellant. Nine years later, the second defendantsubmitted an application under Order VII Rule 11 of the Code of CivilProcedure (for short ‘CPC’) praying for rejection of the plaint on theground that the suit was barred under Section 4 of the Benami Transaction(Prohibition) Act, 1988 (hereinafter referred to as ‘the Act’).

D5. The trial court allowed said application under Order VII Rule11, CPC and by its order dated 23.09.2016 rejected the plaint. Therelevant portion of true translation of the decision of the trial court wasas under:

“11. In this way in the present case, the Plaintiff in his Plaint hasEhimself stated that he wants to purchase the disputed property inthe name of his father from his own income or by the moneywhich he had taken on interest. In my humble opinion underSection-4 of the Benami Transaction (Prohibition) Act, 1988 filingof present Suit is prohibited. Hence, the judgment of the Hon’bleCourt produced on behalf of the Applicant/Defendant areFapplicable on the present case. The Plaint of the Plaintiff isprohibited under Order-7 Rule-11(3) C.P.C.”

6. The appellant, being aggrieved filed SBRFA No.511 of 2016 inthe High Court which appeal was dismissed by the High Court vide itsjudgment and order dated 18.08.2017. It was observed by the HighGCourt as under:

“From the averments made in the plaint it is clear that plaintiff isseeking declaration in his name in respect of suit property with aclear stipulation that he purchased the said property from his own

funds/sources in the name of his father and his father was notreal owner of the suit property, the Act of 1988 provides that nosuit, claim or action to enforce any right in respect of any propertyheld benami against the person in whose name the property isheld, shall lie by or on behalf of person claiming to be the realowner of such property. It is not the case of the plaintiff thatproperty in question was held by the defendant No.1 – father, forjoint benefit/joint ownership. The suit was clearly hit by section 4of the Act of 1988 and the learned trial court rightly allowed theapplication under Order 7 Rule 11 CPC.”7. The decision rendered by the High Court is presently underappeal. Mr. Abhishek Gupta, learned Advocate appearing for the appellantinvited our attention to the documents on record including the writingdated 14.03.2002 executed by First Defendant and father of the Appellant.The relevant portion of said document dated 14.3.2002 was as under:

“I, Babu Lal Son of late Shri Tara Chand Meharishi, Caste –Brahmin, am the Resident of Near Laxminath Press, Fatehpur,District-Sikar (Raj.)

In my name in Kasba Fatehpur near Saraswati Library there isshop along with rooms made over its terrace. Since this property(shop) was purchased by my elder son Pawan Kumar by themoney earned with his own income, but in order to give respect tome he had got the Registry of this shop in my name. Hence, overthis entire property only his right. In future neither mine nor anyof my other successors shall have any right in this property.

I have written my this script in my full senses, with healthy andsound mind, without under any coercion or influence in the presenceof two witnesses to my elder son Pawan Kumar, so that it shallremain as proof and in future during their mutual partition amongstbrothers, in connection with this shop any kind of dispute wouldnot arise.”

8. Mr. Abhishek Gupta, learned Advocate relied upon the decisionof this Court in Marcel Martins v. M. Printer and others[1] and submittedthat the case pleaded of the Appellant was fully covered by Section 4(3) of the Act and that the courts below were not justified in rejecting

Athe plaint under Order VII Rule 11, CPC. Mr. R.K. Singh, learnedAdvocate appearing for the respondent, on the other hand, contestedthe submission and relied upon decision of this Court in Om Prakashand another v. Jai Prakash[2].

9. Before we consider the rival submissions, we must note SectionB4 of the Act, as it stood before it was amended by Act 43 of 2016, wasas under:

“4. Prohibition of the right to recover property heldbenami.—

(1) No suit, claim or action to enforce any right in respect of anyCproperty held benami against the person in whose name theproperty is held or against any other person shall lie by or onbehalf of person claiming to be the real owner of such property.

(2) No defence based on any right in respect of any property heldbenami, whether against the person in whose name the propertyDis held or against any other person, shall be allowed in any suit,claim or action by or on behalf of person claiming to be the realowner of such property.

(3) Nothing in this section shall apply,—

(a) where the person in whose name the property is held is aEcoparcener in Hindu undivided family and the property is heldfor the benefit of the coparceners in the family; or

(b) where the person in whose name the property is held is atrustee or other person standing in fiduciary capacity, and theproperty is held for the benefit of another person for whom he isFa trustee or towards whom he stands in such capacity.”

10. In Marcel Martins[1] suit was filed in the year 1990 prayingfor declaration that the plaintiffs were co-owners of certain propertiesto the extent of their contribution. After full-fledged trial, the Suit wasdismissed by the Trial Court but the judgment was reversed by the HighGCourt. While considering the question whether the case of the plaintiffswould come within the purview of Sub-Section (3) of Section 4 of theAct, the matter was dealt with by this Court as under:-

“28. The critical question then is whether sub-section (3) ofSection 4 saves transaction like the one with which we areconcerned.

29. Sub-section (3) to Section 4 extracted above is in two distinctparts. The first part comprises clause (a) to Section 4(3) whichdeals with acquisitions by and in the name of coparcener in aHindu Undivided Family for the benefit of such coparceners inthe family. There is no dispute that the said provision has noapplication in the instant case nor was any reliance placed uponthe same by the learned counsel for the respondent-plaintiffs.

30. What was invoked by Mr Naveen R. Nath, learned counselappearing for the respondents was Section 4(3)(b) of the Actwhich too is in two parts viz. one that deals with the trustees andthe beneficiaries thereof and the other that deals with the personsstanding in fiduciary capacity and those towards whom he standsin such capacity. It was argued by Mr Nath that the circumstancesin which the purchase in question was made in the name of theappellant assumes great importance while determining whetherthe appellant in whose name the property was acquired stood in afiduciary capacity towards the respondent-plaintiffs.

31. The expression “fiduciary capacity” has not been defined inthe 1988 Act or any other statute for that matter. And yet there isno gainsaying that the same is an expression of known legalsignificance, the import whereof may be briefly examined at thisstage.

32. The term “fiduciary” has been explained by Corpus JurisSecundum as under:

“A general definition of the word which is sufficientlycomprehensive to embrace all cases cannot well be given. Theterm is derived from the civil or Roman law. It connotes theidea of trust or confidence, contemplates good faith, rather thanlegal obligation, as the basis of the transaction, refers to theintegrity, the fidelity, of the party trusted, rather than his creditor ability, and has been held to apply to all persons who occupya position of peculiar confidence toward others, and to include

those informal relations which exist whenever one party trustsand relies on another, as well as technical fiduciary relations.

The word ‘fiduciary’, as noun, means one who holds thing intrust for another, trustee, person holding the character of atrustee, or character analogous to that of trustee with respectto the trust and confidence involved in it and the scrupulous goodfaith and condor which it requires; person having the duty, createdby his undertaking, to act primarily for another’s benefit in mattersconnected with such undertaking. Also more specifically, in astatute, guardian, trustee, executor, administrator, receiver,conservator or any person acting in any fiduciary capacity forany person, trust or estate.”

33.Words and Phrases, Permanent Edn. (Vol. 16-A, p. 41) defines“fiducial relation” as under:

“There is technical distinction between ‘fiducial relation’which is more correctly applicable to legal relationships betweenparties, such as guardian and ward, administrator and heirs,and other similar relationships, and ‘confidential relation’ whichincludes the legal relationships, and also every other relationshipwherein confidence is rightly reposed and is exercised.

Generally, the term ‘fiduciary’ applies to any person whooccupies position of peculiar confidence towards another. Itrefers to integrity and fidelity. It contemplates fair dealing andgood faith, rather than legal obligation, as the basis of thetransaction. The term includes those informal relations whichexist whenever one party trusts and relies upon another, aswell as technical fiduciary relations.”

34. Black’s Law Dictionary (7th Edn., p. 640) defines “fiduciaryrelationship” thus:

“Fiduciary relationship.—A relationship in which one personis under duty to act for the benefit of the other on matterswithin the scope of the relationship. Fiduciary relationships—such as trustee-beneficiary, guardian-ward, agent-principal, andattorney-client—require the highest duty of care. Fiduciaryrelationships usually arise in one of four situations: (1) whenone person places trust in the faithful integrity of another, whoas result gains superiority or influence over the first, (2) when

one person assumes control and responsibility over another,(3) when one person has duty to act for or give advice toanother on matters falling within the scope of the relationship,or (4) when there is specific relationship that has traditionallybeen recognised as involving fiduciary duties, as with lawyerand client or stockbroker and customer.”

35.Stroud’s Judicial Dictionary explains the expression “fiduciarycapacity” as under:

“Fiduciary capacity.—An administrator who [had] receivedmoney under letters of administration and who is ordered topay it over in suit for the recall of the grant, holds it ‘in afiduciary capacity’ within the Debtors Act, 1869 so, of the debtdue from an executor who is indebted to his testator’s estatewhich he is able to pay but will not, so of moneys in the handsof receiver, or agent, or manager, or moneys due on anaccount from the London agent of country solicitor, orproceeds of sale in the hands of an auctioneer, or moneys whichin the compromise of an action have been ordered to be heldon certain trusts or partnership moneys received by partner.”

36.Bouvier’s Law Dictionary defines “fiduciary capacity” asunder:

“What constitutes fiduciary relationship is often subject ofcontroversy. It has been held to apply to all persons who occupya position of peculiar confidence towards others, such as atrustee, executor, or administrator, director of corporation orsociety, medical or religious adviser, husband and wife, an agentwho appropriates money put into his hands for specificpurpose of investment, collector of city taxes who retainsmoney officially collected, one who receives note or othersecurity for collection. In the following cases debt has beenheld to be not fiduciary one: factor who retains the moneyof his principal, an agent under an agreement to account andpay over monthly, one with whom general deposit of moneyis made.”

37. We may at this stage refer to recent decision of this Courtin CBSE v. Aditya Bandopadhyay[3], wherein Raveendran, J.3 (2011) 8 SCC 497

speaking for the Court in that case explained the terms “fiduciary”and “fiduciary relationship” in the following words: (SCC pp. 524-25, para 39)

“39. The term ‘fiduciary’ refers to person having duty toact for the benefit of another, showing good faith and candour,where such other person reposes trust and special confidencein the person owing or discharging the duty. The term ‘fiduciaryrelationship’ is used to describe situation or transaction whereone person (beneficiary) places complete confidence in anotherperson (fiduciary) in regard to his affairs, business ortransaction(s). The term also refers to person who holds athing in trust for another (beneficiary). The fiduciary is expectedto act in confidence and for the benefit and advantage of thebeneficiary, and use good faith and fairness in dealing with thebeneficiary or the things belonging to the beneficiary. If thebeneficiary has entrusted anything to the fiduciary, to hold thething in trust or to execute certain acts in regard to or withreference to the entrusted thing, the fiduciary has to act inconfidence and is expected not to disclose the thing orinformation to any third party.”

It is manifest that while the expression “fiduciary capacity” maynot be capable of precise definition, it implies relationship thatis analogous to the relationship between trustee and thebeneficiaries of the trust. The expression is in fact wider in itsimport for it extends to all such situations as place the parties inpositions that are founded on confidence and trust on the one partand good faith on the other.

38. In determining whether relationship is based on trust orconfidence, relevant to determining whether they stand in afiduciary capacity, the court shall have to take into considerationthe factual context in which the question arises for it is only in thefactual backdrop that the existence or otherwise of fiduciaryrelationship can be deduced in given case. Having said that, letus turn to the facts of the present case once more to determinewhether the appellant stood in fiduciary capacity vis-à-vis therespondent-plaintiffs.”

11. The factual aspects of the matter were, thereafter, consideredand in paras 42 and 43 it was observed:-

“42. … …That conclusion gets strengthened by the fact that theparties had made contributions towards the sale consideration paidfor the acquisition of the suit property which they would not havedone if the intention was to concede the property in favour of theappellant.

43. … … Reposing confidence and faith in the appellant was inthe facts and circumstances of the case not unusual or unnaturalespecially when possession over the suit property continued to beenjoyed by the plaintiffs who would in law and on parity ofreasoning be deemed to be holding the same for the benefit of theappellant as much as the appellant was holding the title to theproperty for the benefit of the plaintiffs.”

12. It was, thus, concluded that the transaction was completelysaved from the mischief of Section 4 of the Act by reason of the samefalling under Sub-Section (3)(b) and that the Suit was not barred underthe Act. This judgment was rightly relied upon by Mr. Abhishek Gupta,learned Advocate. On the other hand, the reliance placed by Mr. R.K.Singh on the decision in Om Prakash[2], in our view, is completelymisplaced. The issue there was whether prohibition under Section 4would apply in relation to actions initiated before the coming into forceof the Ordinance or not? In any event of the matter, the issue whetherthe provisions of the Act are retrospective has already been settled[4].13. In the present case, the controversy has arisen in an applicationunder Order VII Rule 11 CPC. Whether the matter comes within thepurview of Section 4(3) of the Act is an aspect which must be gone intoon the strength of the evidence on record. Going by the averments inthe Plaint, the question whether the plea raised by the appellant is barredunder Section 4 of the Act or not could not have been the subject matterof assessment at the stage when application under Order VII Rule 11CPC was taken up for consideration. The matter required fuller andfinal consideration after the evidence was led by the parties. It cannotbe said that the plea of the appellant as raised on the face of it, wasbarred under the Act. The approach must be to proceed on demurrerand see whether accepting the averments in the plaint the suit is barred

4 R. Rajgopal Reddy through LRs. Vs. Padmini Chandrasekharaiah through LRs. (1995) 2 SCC 630

Aby any law or not. We may quote the following observations of thisCourt in Popat and Kotecha Property vs. State Bank of India StaffAssociation[5]:

“10. Clause (d) of Order 7 Rule 7 speaks of suit, as appears fromthe statement in the plaint to be barred by any law. DisputedBquestions cannot be decided at the time of considering anapplication filed under Order 7 Rule 11 CPC. Clause (d) of Rule11 of Order 7 applies in those cases only where the statementmade by the plaintiff in the plaint, without any doubt or disputeshows that the suit is barred by any law in force.”

14. We, therefore, allow this appeal, set aside the view taken bythe courts below and dismiss the application preferred by the seconddefendant under Order VII Rule 11 CPC. Since the Suit has beenpending since 2006, we direct the Trial Court to expedite the matter anddispose of the pending Suit as early as possible and preferably within sixDmonths from today. Needless to say that the merits of the matter will begone into independently by the Trial Court.

15. The appeal stands allowed in aforesaid terms. No costs.

EKalpana K. Tripathy

Appeal allowed.

H5(2005) 7 SCC 510