M/S FAIR COMMUNICATION AND CONSULTANTS & ANR. versus SURENDRA KERDILE on 20 January 2020

1. This appeal by Special Leave challenges a decision ofthe Madhya Pradesh, High Court, by which a suit for recoveryof Rs. 80,000/- was decreed in appeal. The impugned judgment setaside the judgment and decree of the XIII Additional District Judge,Indore (hereafter “trial court”).

2. The plaintiff (respondent in the present case, referred tohereafter as “Surendra”) is the maternal uncle of the defendant-secondappellant (hereafter referred to by his name as “Sanjay”). Sanjay isalso the sole proprietor of first appellant/defendant (M/s FairCommunication & Consultants). Surendra filed a suit for claimingrecovery of Rs. 1,08,000/- alleging that Sanjay and his proprietorshipfirm owed money lent. Surendra apparently was a resident of Nashik,but had completed his education at Indore. He was an Engineer employedat Nashik and owned some land and a flat (MIG Scheme No. 54, Indore).As Surendra wished to settle eventually in Nashik, he appointed Sanjaywho used to reside in Indore as Power of Attorney and executed a deedof General Power of Attorney (GPA) in favour of Sanjay on 30.09.1989for that purpose. Sanjay entered into an agreement to sell the propertyto one Niranjan Singh Nagra (“buyer”) on 30.11.1989 and received a A

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Asum of Rs. 50,000/- as earnest money. Surendra alleged that Sanjaycalled him to Indore on 29.01.1990 and requested that the agreement tosell ought to be executed in favour of the buyer directly and that at thetime of executing the agreement, the buyer had paid Rs. 80,000/-. Thisamount was returned by Sanjay. Surendra also alleged that the buyerrequested for cancellation of the Power of Attorney which was given toBSanjay. Sanjay requested Surendra for an advance in the sum ofRs. 80,000/- for the expansion of his business, which he was carrying onunder the style of the first respondent proprietorship concern. Sanjayassured the plaintiff that he would return the amount shortly. Accordingly,Rs. 80,000/- was given by the plaintiff (Surendra) to Sanjay.C

3. Sanjay issued three post-dated cheques for the sum of Rs.16,500/-, Rs. 3,500/- and Rs. 60,000/- all dated 16.02.1990, drawn on theState Bank of India, Indore Branch. Before the due date, Sanjay requestedthe plaintiff (Surendra) not to present the cheques for collection for afew months; this request was complied with. The cheques, whenDpresented, were returned by the banker to the plaintiff (Surendra). Inthese circumstances, the suit for recovery of a sum of Rs. 80,000/-(together with interest @ 12% till the date of the filing of the suit and forfuture interest, consequently, was instituted.

4. Sanjay, in his written statement denied the suit allegations.EHowever, the written statement did not dispute the execution of theGPA or that he had entered - on behalf of the plaintiff, into the agreementto sell with Niranjan Singh Nagra and obtained Rs. 50,000/- as earnestmoney. The written statement also did not deny that Sanjay requestedSurendra for a loan of Rs. 80,000/- which was given to him. However,in the defense, Sanjay alleged that Surendra asked him to return theFamount on the same day i.e. 30.01.1990, which he did. The writtenstatement then alleged that Sanjay repeatedly asked for the return of thethree cheques but being the maternal uncle, the plaintiff insisted onkeeping the three instruments, and prevailed upon him as the elder relative.It was also alleged in the written statement that Sanjay was assured thatGthe cheques would be returned on the next day; however they werenever returned.

5. After framing issues and recording evidence, the trial courtdismissed this suit. The trial court was of the opinion that the evidenceclearly showed that a sum of Rs. 80,000/- had been deposited by Surendra H

in his bank account and that this circumstance, supported Sanjay’s pleathat the amount was returned immediately. The trial court was also ofthe opinion, that the discrepancy in the amount received towards thesale consideration, casts doubt regarding the veracity of the plaintiff’sclaim. Aggrieved by the dismissal of the suit, Surendra appealed to theHigh Court. During the course of appeal, two applications seeking toamend the pleading and relief clause in the plaint were sought.

6. The High Court after an overall reading of the evidence framedthree points for consideration, while dealing first with the applications,and then the merits: they were firstly, the consideration of the sale of thesuit property – if it was for Rs. 2,30,000/- and not Rs. 1,30,000/- ; secondly,whether such fact had to be pleaded by the plaintiff in the suit and lastly,whether in the absence of such pleading, it was necessary to allow theapplication for amendment. The High Court after analyzing the natureof evidence led, concluded that since Sanjay had admitted the signatureon the agreement to sell, as well as the plaintiff’s GPA, even though thedocument was a photocopy, it could not be ignored.

7. The impugned judgment also reasoned that there was no disputethat another agreement to sell was executed on 30.01.1990 by the plaintiff(Surendra) in favour of Niranjan Singh Nagra, where the saleconsideration was showed to be Rs. 1,30,000/-. The sale was alsoundisputedly completed on 31.01.1990. It was held that in thesecircumstances, the plaintiff had Rs. 1,80,000/- as on 30.01.1990, whichclearly showed that the real consideration for the transaction wasRs. 2,30,000/-, though the document subsequently executed showed alesser value as Rs. 1,30,000/-. The court noted that Surendra had notrelied upon these circumstances to seek relief on the basis of the contract(for sale). The High Court then reasoned that these documents wereneeded only to consider their impact vis-a-vis the defendants’ claim forreturn of Rs. 80,000/-.

8. The High Court in its impugned judgment upheld the plaintiff’scontention that he possessed sufficient amount to advance Rs. 80,000/-to Sanjay. He also had sufficient funds to deposit amounts in the bankaccount, for which statement of account, Ex. D/1 was on therecord. Given that the real consideration for the transaction wasRs. 2,30,000/-, the fact that some amount was deposited in the bankaccount, did not in any way detract from the suit claim. The court, A

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Atherefore, held that the deposit by itself could not be relied on, that theamount was paid to Sanjay who issued three cheques. The High Courtthen concluded and held as follows:- “15. Since it is not disputed by the respondents that the loanamount of Rs 80,000/- was given by the appellant on 30/01/B90 and the dispute is only whether the amount was returnedby the respondent no. 2 to the appellant on that very day onnot, the important documents are Ex. P/1 to P/3, the chequesand the receipt of Rs 60,000/- Ex. P/9, which was issued bythe respondent no. 2 in favour of appellant. When the amountwas given back by the respondent no. 2 to the appellant onCthat very day then it is surprising why the receipt Ex. P/9 andthe cheques Ex. P/1 to P/3 were not taken back by therespondent no. 2 from the appellant and why the receipt ofrefund of the amount was not taken. Apart from this there isnothing on record to show that why the cheque ofDRs. 30,000/- Ex. P/8 was given by the respondent no. 2 to theappellant. These all documents goes to show beyond doubtthat the appellant who is maternal-uncle of the respondentno. 1 lent a sum of Rs 80,000 to the Respondent no. 2, in lieuof which the cheques EX. P/1 to P/3 were not taken back bythe respondent no. 2 as proprietor of respondent no. 1 andEthe amount was returned by the respondents to the appellant.

16. In view of this appeal stands allowed. The judgment anddecree dated 22/07/95 passed by learned XIIIth AdditionalDistrict Judge, Indore in Civil Suit No. 98-B/93 is set aside.Respondents are directed to pay Rs 80,000/- alongwith interestF@ 6% p.a w.e.f. 16/02/90 with a period of two months, failingwhich the respondents shall be liable to pay the interest onthe aforesaid amount @ 12% per annum. Respondents shallalso be liable for the costs through out.”

9. It is argued by Mr. Santosh Kumar, learned counsel for theGappellant that the high court committed an error in appreciation of theevidence and that the plaintiff had come forward with an entirely newcase, in the cross-examination which was not backed by the pleadings.He further submitted that the impugned judgment was in error becauseit placed reliance on inadmissible documents and rendered findingsHexclusively based upon their appreciation. It was highlighted, that the impugned judgment was conjectural inasmuch as the court connectedthe receipt issued by Sanjay with the agreement, showing the saleconsideration to be Rs. 2,30,000/-. It was emphasized that the originalagreement was never produced or made part of the record.

10. Mr. Santosh Kumar next submitted that being a prohibitedtransaction, the story put forward by the plaintiff that the realvalue of the sale of Rs. 2,30,000/- as against the declared value ofRs. 1,30,000/- could not be countenanced by the court as it was contraryto the public policy. He also relied on the Benami Transactions (Prohibition)Act, 1988 (hereafter “the Benami Act”) to submit that any plea basedon benami transactions could not be canvassed in courts. It was arguedthat as on 30.01.1990 or soon thereafter, the plaintiff did not have anyamount in his bank account. Counsel lastly argued that consistent positionof the defendant, Sanjay was that the three cheques were issued to theplaintiff at the latter’s insistence and that despite repeated requests, theywere not returned. This was clearly stated in the written statement andwas consistently reiterated during the course of the oral deposition. Thehigh court, it was urged, fell into error in completely overlooking thisaspect.

11. It is submitted on behalf of the plaintiff/respondent that thebasis for dismissal of the suit by the trial court was that the amount inquestion was part of the sale consideration of a sum ofRs. 1,30,000/- for the plot belonging to the respondent which has beensold and from which Rs. 50,000/- had been received earlier, and theremaining Rs. 80,000/- was received on the day when the loan had beengiven to the appellants. The trial court observed that the sum ofRs. 80,000/- was received by the plaintiff and was deposited in the bankaccount on the next day, i.e. 31.1.1990. It is further argued that whenthis question was put to the plaintiff, it was explained that theentire transaction was for a consideration of Rs. 2,30,000/- and notRs. 1,30,000/- and therefore, the amount deposited in the bank accounthad nothing to do with the loan advanced to the appellants.

12. It is argued that the first agreement dated 03.7.1989 wasexecuted for a sum of Rs. 2,30,000/- by the first appellant himself onbehalf of the plaintiff, and in fact that agreement was put to the firstappellant/defendant in cross-examination where he stated that:

“…..it is corrected that my signature appears below at pageno. 3 of stamp papers purchased on 3[rd] July. Witness himself A

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448SUPREME COURT REPORTS

Astated that no any such agreement had been executed. Stamppaper only had been purchased in the name of faircommunication. My signature appears for A to A on the pageno. two and three annexed with the stamp paper dated 3[rd]July 1989’ (Copy of the said agreement dated 3.7.1989 isAnnexed herewith and marked as Annexure R-2)B

13. It is urged that the first appellant admitted his signature on thesaid document in his cross-examination; thus, clearly, the fact wasestablished. The original of the document was with the buyer of theproperty and this fact was admitted by the appellant in his statement;therefore, its photocopy was produced. The document was relevant onlyCto show that the plaintiff had the funds to advance to Sanjay and whenextension of the loan to the appellant was admitted, the document is ofno consequence.

14. What can be gleaned from the above narrative and submissionsis that the plaintiff wished to dispose of his property at Indore, where theDsecond defendant, nephew resided and carried on business. Since theparties were related, the plaintiff relied on the defendant and constitutedhim as his attorney. An agreement to sell was entered into for the sale ofthe said property (a flat) on 03.07.1989: this fact is not disputed; equally,it is undisputed that the consideration for the flat in terms of this agreementEwas Rs. 2,30,000/-. This was admitted by Sanjay, the defendant in hisdeposition. It is also not disputed that the original agreement with thepurchaser (who ultimately finalized the transaction), is dated i.e.03.07.1989. A second agreement was entered into on 30.11.1989.However, this showed a lesser consideration of Rs. 1,30,000/-. It is alsonot disputed that Sanjay, the second appellant received Rs. 50,000/- fromFthe buyer and handed over that amount to Surendra. Furthermore, on29.01.1990, Surendra went to Indore at Sanjay’s behest to conclude thetransaction directly with the purchaser, Niranjan Singh Nagra. He alsoreceived the amount agreed. Also, there is no dispute that Sanjay wantedRs. 80,000/- and was given it, by his uncle, the plaintiff, Surendra, for theGpurpose of expansion of his business. This is where the version of thetwo parties diverges: Sanjay alleged that the amount was returned thenext day and that Surendra did not return the post dated cheques issuedby him; Surendra alleges that Sanjay in fact never returned the amount.The trial court was persuaded by arguments on behalf of Sanjay and thecircumstance that the sum of Rs. 80,000/- was deposited in Surendra’sH

account on the same day. The High Court, however, took note of theplaintiff’s stand, with respect to the real consideration, which wasRs. 2,30,000/- as against what was shown in the document, to say thatthe amount deposited in Surendra’s account had nothing to do with themoney lent to Sanjay.

15. The defendant/appellants arguments are two-fold: one, thatthe document on which the High Court returned its findings was aphotocopy and was therefore, inadmissible; and two, that the questionwhether the sale consideration was Rs. 2,30,000/- or Rs. 1,30,000/-could not have been gone into, since that argument was based on aprohibited transaction, outlawed by the Benami Act.

16. As far as the first question goes, this court notices that theplaintiff had put the matter, during the course of cross examination, tothe appellant/defendant. The latter, unsurprisingly, admitted the document,despite the fact that it was a photocopy. The plaintiff had argued thatthe original of that document was with the purchaser: this was not denied.Once these were admitted, the plaintiff could not be faulted for seekinga consequential amendment, that was purely formal, to back his argumentthat there was sufficient money, after lending Rs. 80,000/- to thedefendant, which was deposited in his account.The appellant’s argument,in the opinion of this court, is insubstantial: the impugned judgment cannotbe faulted on this aspect.

17. Now as to the second argument by the appellant, which is thatthe plaintiff’s plea that the real consideration for the sale wasRs. 2,30,000/- entails returning findings that would uphold a plea basedon a benami transaction, this court is of the opinion that the argumentis unmerited. Benami is defined by the Act as a transaction where (a) where a property is transferred to, or is held by, a person, andthe consideration for such property has been provided, or paid by, anotherperson; and (b) the property is held for the immediate or future benefit, director indirect, of the person who has provided the consideration.

Benami transactions are forbidden by reason of Section 3; noaction lies, nor can any defense in a suit be taken, based on any benamitransaction: in terms of Section 4 of the Act.

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A18. In the opinion of this court, the argument that the plaintiff’splea regarding the real consideration being barred, has no merit. Theplaintiff did not claim return of any amount from the buyer; the suit is notbased on any plea involving examination of a benami transaction. Besides,the plaintiff is not asserting any claim as benami owner, nor urging adefense that any property or the amount claimed by him is a benamiBtransaction. Therefore, the defendant appellant’s argument is clearlyinsubstantial.

19. The relevant provisions of law, i.e. Sections 3 and 4 of theBenami Act, read as follows:

C“Prohibition of benami transactions.

3. (1) No person shall enter into any benami transaction.

(2) Whoever enters into any benami transaction shall bepunishable with imprisonment for a term which may extend tothree years or with fine or with both.

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(3) Whoever enters into any benami transaction on and afterthe date of commencement of the Benami Transactions(Prohibition) Amendment Act, 2016, shall, notwithstandinganything contained in sub-section (2), be punishable inaccordance with the provisions contained in Chapter VII.]

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Prohibition of the right to recover property held benami.

4. (1) No suit, claim or action to enforce any right in respectof any property held benami against the person in whose nameFthe property is held or against any other person shall lie byor on behalf of a person claiming to be the real owner ofsuch property.

(2) No defence based on any right in respect of any propertyheld benami, whether against the person in whose name theproperty is held or against any other person, shall be allowedin any suit, claim or action by or on behalf of a personclaiming to be the real owner of such property…”

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20. In Valliammal (D.) by L.Rs v Subramaniam & Ors. (2004) 7SCC 233, this Court held that the onus of establishing that a transactionHis benami is upon one who asserts it:

M/S FAIR COMMUNICATION AND CONSULTANTS & ANR. v.SURENDRA KERDILE [S. RAVINDRA BHAT, J.]

“13. This Court in a number of judgments has held that it iswell established that burden of proving that a particular saleis benami lies on the person who alleges the transaction to bea benami. The essence of a benami transaction is the intentionof the party or parties concerned and often, such intention isshrouded in a thick veil which cannot be easily piercedthrough. But such difficulties do not relieve the personasserting the transaction to be benami of any part of theserious onus that rests on him, nor justify the acceptance ofmere conjectures or surmises, as a substitute for proof. Referto Jaydayal Poddar v. Bibi Hazra, Krishnanand Agnihotri v.State of M. P., Thakur Bhim Singh v. Thakur Kan Singh, PratapSingh v. Sarojini Devi and Heirs of Vrajlal J. Ganatra v. Heirsof Parshottam S. Shah. It has been held in the judgmentsreferred to above that the question whether a particular saleis a benami or not, is largely one of fact, and for determiningthe question no absolute formulas or acid test, uniformlyapplicable in all situations can be laid. After saying so, thisCourt spelt out the following six circumstances which can betaken as a guide to determine the nature of the transaction :

(1) the source from which the purchase money came ;

(2) the nature and possession of the property, after thepurchase ;

(3) motive, if any, for giving the transaction a benamicolour ;

(4) the position of the parties and the relationship, if any,between the claimant and the alleged benamidar ;

(5) the custody of the title deeds after the sale ; and

(6) the conduct of the parties concerned in dealing with theproperty after the sale. (Jaydayal Poddar v. Bibi Hazra1, SCCp 7, para 6).

14. The above indicia are not exhaustive and their efficacyvaries according to the facts of each case. Nevertheless, thesource from where the purchase money came and the motivewhy the property was purchased benami are by far the mostimportant tests for determining whether the sale standing in A

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the name of one person, is in reality for the benefit of another.We would examine the present transaction on the touchstoneof the above two indicia.

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18. It is well-settled that intention of the parties is the essenceof the benami transaction and the money must have beenprovided by the party invoking the doctrine of benami. Theevidence shows clearly that the original Plaintiff did not haveany justification for purchasing the property in the name ofRamayee Ammal. The reason given by him is not at allacceptable. The source of money is not at all traceable to thePlaintiff. No person named in the plaint or anyone else wasexamined as a witness. The failure of the Plaintiff to examinethe relevant witnesses completely demolishes his case.”

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These observations were reiterated in Binapani Paul vs. PratimaDGhosh & Ors. 2007 (6) SCC 100.

21. In the present case, the appellants did not prove that thetransaction (to which they were not parties) was benami; on the contrary,the appellant’s argument was merely that the transaction could not besaid to be for a consideration in excess of Rs. 1,30,000/-: in the contextEof a defense in a suit for money decree. The defendant/appellantsnever said that the plaintiff or someone other than the purchaser wasthe real owner; nor was the interest in the property, the subject matter ofthe recovery suit. Therefore, in the opinion of this court, the conclusionsand the findings in the impugned judgment are justified.

F22. For the foregoing reasons, this court is of opinion that there isno merit in the appeal; it is accordingly dismissed, without order on costs.

Divya Pandey

Appeal dismissed.

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