Andhra HC (Pre-Telangana)
P. Ramachandra Rao vs G. Jangaiah And Ors. on 29 June, 1988
Equivalent citations: [1989]179ITR438(AP)
Author: K. Ramaswamy
Bench: K. Ramaswamy
JUDGMENT K. Ramaswamy, J.
1. The appellant is the unsuccessful plaintiff in O.S. No. 208 of 1974. The suit is based on an oral contract of sale to convey the suit property for valuable consideration to the appellant. It is his case that G. Jangaiah, the first defendant is the real owner of the property and that Natraj, his minor son, and V. Dayanand, the fourth defendant, the son-in-law, are benamidars for the benefit of the first defendant. He received valuable consideration as earnest money and entered and entered into the contract, but he refused to execute the sale deed despite several legal notices, constraining the appellant to lay the suit for specific performance. The trial court framed issue No. 1. "Whether the first defendant purchased the plaint schedule property in the names of defendants Nos. 2 and 4 benami for his own benefit ?" and additional issue framed on September 4, 1979 - "Whether the plaintiff has locus standi to question the sale transaction as benami ?" On a consideration of the evidence, it was held that that is not a benami transaction and defendants Nos. 2 and 4 are the owners of the property and refused specific performance and granted a decree for refund of the earnest money. We need not go into those questions. The very case of the appellant is that it is a benami transaction and that the real owner is the first defendant who entered into the agreement of sale with the appellant and that defendants Nos. 2 and 4 are only his benamidars. Sri Poornaiah, learned counsel for the respondents, contended that, in view of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 (ordinance No. 2 of 1988, for short "the Ordinance"), the suit is not maintainable and the appellant cannot succeed by virtue of section 2 of the Ordinance. Sri Nagaseshaiah, learned counsel for the appellant, contended that the Ordinance has no application to establish rights secured by a third party under a contract of sale. The appellant being a third party, the prohibition does no apply to the facts in this case. The Ordinance is inapplicable to suit transactions. The question, therefore, is whether, by the operation of section 2 of the Ordinance, the right to specific performance is barred ? The title of the Ordinance itself is "Benami Transactions (Prohibition of the Right to Recover Property) Ordinance". It was made manifest in its object in the preamble, namely, "An ordinance to prohibit the right to recover property held benami and for matters connected therewith or incidental thereto". Sub-section (1) of section 2 of the Ordinance reads :
"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. Sub-section (2) is not relevant. Sub-section (3) is the saving clause which reads thus :
"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."
3. Sections 3 and 4 are not relevant for the purpose of this appeal and are hence omitted. A reading thereof clearly manifests the legislative intention that the Ordinance intends to prohibit the right to recover property held benami and "incidental matters". The prohibition is to lay the suit or to enforce any claim or action based on benami transaction against a person in whose name the property is held or against any other person and such a suit shall not lie by operation of sub-section (1) of section 2 of the Ordinance. Section 23 of the Contract Act prohibits any transaction which is opposed to the public policy to be void and is unenforceable. The word "benami" has been considered in Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28, 52 (SC), thus :
"The word benami is used to denote two classes of transactions which differ from each other in their legal character and incidents. In one sense, it signifies a transaction which is real, as for example, when A sells properties to B but the sale deed mentions X as the purchaser. Here, the sale itself is genuine, but the real purchaser is B, X being his benamidar. This is the class of transactions which is usually termed as benami. But the word 'benami' is also occasionally used, perhaps not accurately, to refer to a sham transaction, as for example, when A purpose to sell his property to B without intending that his title should cease or pass to B. The fundamental difference between these two classes of transactions is that, whereas in the former there is an operative transfer resulting in the vesting of title in the transferee, in the latter there is none such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed. It is only in the former class of cases that it would be necessary, when a dispute arises as to whether the person named in the deed is the real transferee or B, to enquire into the question as to who paid the consideration for the transfer, X or B,"
4. Therefore, when there is an acute dispute as to who is the person, namely, whether the first respondent or the second respondent and the fourth respondent, i.e., defendants Nos. 2 and 4 are the real owners of propery and whether the the latter held the suit land for the bene fit of the formar who is claimed to be the real owner is the question and the real title to the property is in question. Befere decreeing specific performance, it is to be derermined whether the transction between the first respondent and respondent Nos. 2 and 4 inter se is benami; whether the first respondent paid the purchese monety in that transactio n belong to the first respondent and he paid in the same of respondent Nos. 2 and 4 who ostensibly are benami owner for the benefit of the respondent. The burden to establish these facts lie on the appellant. The ratio in Sree Meenakshi Mills' case [1957] 31 ITR 28 (SC) squarely applies to the facts of this case. The only saving under sub-section (3) of section 2 of the Ordinance is of property held by the Karta of a Hindu undivided family or a trustee. The karta has no absolute title in any particular parcel of the land, it being coparcenary property, and every coparcener has absolute right, title and interest in the entire coparcenary property, and in the latter case where he is a trustee or a person standing in a fiduciary capacity, he does not claim any title or right in himself but he represents, in a fiduciary capacity, the real owner. The real owner of property, in all such situations, has been saved by operation of sub-section (3) of section 2 of the Ordinance. Therefore, saving clauses (a) and (b) of sub-suction (3) of section of the Ordinance are inapplicable to the facts in this case. Sub-section (1) of section 2 of the Ordinance squarely applies. Therein,"any other person" includes a purchaser claiming that the suit property is benami transaction and he would clearly come within the ambit of the expression "any other person" occurring in sub-section (1) of section 2 of the Ordinance. Therefore, the suit, at the instance of the appellant, purchased from the first defendant who is claimed to be the real owner and defendants Nos. 2 and 4 claimed to be the benamidars, is not maintainable and the issue cannot be gone into. In that view, the suit for specific performance does not lie as it has been prohibited by operation of sub-section (1) of section 2 of the Ordinance. In this view, it is not necessary to go into the merits of the matter.
5. However, the decree of the trial court against the first respondent granting refund of the earnest money paid is confirmed. The suit does not lie for specific performance. The decree of the trial court is accordingly confirmed. It is open to the appellant to withdraw the amount which is deposited in the court below. In the circumstances, each party is directed to bear its own costs in this appeal.