Civil Appeal No 1537 of 1970
Appeal by special leave from the judgment and order dated the 1030th June 1969 of the Bombay High Court Nagpur Bench Nagpur in Appeal No 90 of 1962
1178 U R Lalit and A G Ratnaparkhi for the Appellant
section section Khanduja for the Respondent
The respondent filed a suit in the Court of the Second Joint Civil Judge Amrawati alleging that the house situated near Saraf Bazar in Amrawati had been purchased by her in 1950 for Rs 4000 and thereafter improvements had been affected by her to the property
Being in need of money she entered into an agreement with the appellant for a loan of Rs 2000 and it was decided that simultaneously she should execute a nominal document of sale and a rent note
These documents were executed on January 7 1953
She alleged that the documents were never intended to be acted upon and that the rent paid by her represented in fact interest at 18 on the loan
She continued in possession of the house property throughout and it is said carried on repairs from time to time
It was stated that the appellant was attempting to enforce the document as a sale deed by filing suits in the Court of Small Causes for recovery of rent
As two suits had resulted in decrees she considered it necessary to file the present suit for a declaration that she was and continued to be owner of the house property
In defence the appellant maintained that the sale deed represented a genuine transaction and ownership of the house property had passed to the appellant
It was pleaded that the decrees passed by the Court of Small Causes operated as res judicata barring the respondent from pleading that the sale deed was merely a nominal transaction
Reliance was also placed on section 92 of the Indian Evidence Act
The trial court held that the sale deed was never intended to be acted upon and decreed the suit
The appellant appealed to the District Court Amravati but the learned District Judge did not accept the case that a sale had taken place
He held however that the transaction between the parties constituted a mortgage
He modified the trial court decree to conform to that finding
The High Court of Bombay in second appeal did not agree with the finding of the lower appellate court that the transaction was a mortgage and affirmed the findings of the trial court that the sale deed and rent note were sham documents that the decrees of the 1179 Court of Small Causes did not operate as res judicata and that section 92 of the Indian Evidence Act did not prevent the respondent from establishing the true nature of the transaction
Accordingly the High Court set aside the decree of the lower appellate court and resorted that of the trial court
When this appeal was heard by us it appeared that the parties may settle the dispute by negotiated compromise
It seems however that no compromise has been possible
Accordingly we proceed to dispose of the appeal on its merits
Two points have been raised before us
The appellant urges that the Small Causes Court decrees in view of the general principles of res judicata precluded the trial of the question whether the sale transaction was a genuine transaction
The other point concerns the operation of section 92 of the Evidence Act
The successive suits were filed by the appellant against the respondent in the Court of Small Causes for recovery of arrears of rent
In each suit the appellant contended that she was owner of the property and the respondent was her tenant
The tenancy was alleged on the basis of the document dated January 7 1953 which on its terms purported to be a sale deed by the respondent in favour of the appellant
The respondent resisted the suits
The court decreed the suits on the finding that the document was a sale deed and therefore the respondent was not the owner of the property but merely a tenant of the appellant
The question is whether this finding operates as res judicata in the instant suit
The High Court repelled the plea of res judicata on the ground that section 11 of the Code of Civil Procedure governed the case and that as a Court of Small Causes is not competent to try a suit for a declaration of title to immovable property the court which passed the decrees relied on by the appellant was not competent to try the present suit and therefore an imperative condition of section 11 was not satisfied
It is contended before us on behalf of the appellant that the High Court erred in applying the statutory provisions of section 11 of the Code and should have invoked instead the general principles of res judicata
On that it is submitted all that was necessary to find was whether the Court of Small Causes was competent to try the two earlier suits and decide the issues arising therein
We have been referred to Gulabchand Chhotalal Parikh v State of Bombay where 1180 this Court has taken the view that the provisions of section 11 of the Code are not exhaustive with respect to an earlier decision operating as res judicata between the same parties on the same matter in controversy in a subsequent regular suit and that on the general principles of res judicata any previous decision on a matter in controversy decided after full contest or after affording fair opportunity to the parties to prove their case by a Court competent to decide it will operate as res judicata in a subsequent regular suit
It is not necessary it was said that the Court deciding the matter formerly be competent to decide the subsequent suit or that the former proceeding and the subsequent suit have the same subject matter
The observations were made in considering the question whether decisions on matters in controversy in writ petitions under Article 32 or Article 226 of the Constitution could operate as res judicata in subsequent regular suits on the same matters in controversy between the same parties
A number of other cases have been cited on behalf of the appellant in support of the plea of res judicata
We have considered them and we do not think that they help the appellant
In Muhammad Abdul Ghafur Khan vs Gokul Prasad and others the Allahabad High Court limited itself to observing that a Court of Small Causes possessed a discretion on whether to return the plaint under section 23 Provincial Small Cause Courts Act on a finding that the relief claimed depended on proof of title
The same High Court in Madan Kishor and Another vs Mahabir Prasad and others merely observed that it was for the Court of Small Causes to decide under section 23 of the Provincial Small Cause Courts Act whether a question of title was involved in the suit and on finding so it was open to it to return the plaint
That was also the view expressed by it in Ram Dayal Sonar vs Sukh Mangat Kalwat
So also in Ganga Prasad vs Nandu Ram the Patna High Court said that the Court of Small Causes had power under section 23 to return the plaint where it was of opinion that the question of title raised was so intricate that it should not be decided summarily
To the same effect was the view expressed by the Lahore High Court in Ganesh Das vs Feroze Din 1181 In Puttangowda Mallangowda Patil vs Nikanth Kalo Deshpande the Bombay High Court declared that a Court of Small Causes could render a finding on an issue as to title to immovable property but only in a suit which did not ask for that relief and merely for payment of a sum of money
Our attention was drawn to Asgarali Roshanalli and another vs Kayumalli Ibrahimji but we find nothing there of assistance to the appellant
Reliance was placed on the decision of the Allahabad High Court in Lala Jageshwar vs Shyam Behari Lal
There a learned Single Judge took the view that as a Court of Small Causes is a Court of exclusive jurisdiction the restrictive conditions imposed by s 11 of the Code of Civil Procedure requiring two fold competency of the Court whose decision is to operate as res judicata cannot be invoked
It was sufficient he observed that the decision had been rendered by a court of competent jurisdiction and it was not necessary that that court should also be competent to decide the subsequent suit
The judgment was brought in appeal to this Court but while disposing of the appeal Shyam Behari Lal vs Lala Jageshwar Prasad this Court declined to decide whether a Court of Small Causes could be regarded as a Court of exclusive jurisdiction
We find however that the view taken by the High Court in Lala Jageshwar Prasad supra was expressly overruled by a Full Bench of the High Court in Manzurul Haq and another vs Hakim Mohsin Ali and it was laid down that a Court of Small Causes could be described as a court of preferential jurisdiction but not as court of exclusive jurisdiction
It was also held by the Full Bench that a decision rendered by a Court of Small Causes in a suit for arrears of rent would not operate as res judicata in a subsequent suit filed in the Court of the Munsif for recovery of arrears of rent for a different period and for ejectment
That the principle of res judicata could not be availed of where a decision given by a Court of Small Causes was relied on in a subsequent regular civil suit was the view also taken by the Punjab High Court in Pateshwar Parshad Singh vs A section Gilani
It seems to us that when a finding as to title to immovable property is rendered by a Court of Small Causes res judicata cannot 1182 be pleaded as a bar in a subsequent regular civil suit for the determination or enforcement of any right or interest in immovable property
In order to operate as res judicata the finding must be one disposing of a matter directly and substantially in issue in the former suit and the issue should have been heard and finally decided by the court trying such suit
A matter which is collaterally or incidentally in issue for the purposes of deciding the matter which is directly in issue in the case cannot be made the basis of a plea of res judicata
It has long been held that a question of title in a Small Cause suit can be regarded as incidental only to the substantial issue in the suit and cannot operate as res judicata in a subsequent suit in which the question of title is directly raised
Poholi Mullick vs Fukeer Chunder Patnaik Chet Ram and others vs Ganga Anwar Ali vs Nur Ul Haq and Another Khandu valad Keru vs Tatia valad Vithoba
See also Mohd Yusuf and another vs Abdul Wahid and SAA Annamallai Chettiar vs Molaiyan and others
Our attention has been drawn to Explanation VIII to section 11 in the Code of Civil Procedure recently inserted by the Code of Civil Procedure Amendment Act 1976
Section 973 of the Amendment Act declares that the new provision applies to pending suits proceedings appeals and applications
In our opinion the Explanation can be of no assistance because it operates only where an issue has been heard and finally decided in the earlier suit
Accordingly we hold that the finding rendered by the Court of Small Causes in the two suits filed by the appellant that the document executed by the respondent is a sale deed cannot operate as res judicata in the present suit
The next contention on behalf of the appellant is that sub s1 of section 92 of the Evidence Act bars the respondent from contending that there was no sale and it is submitted the respondent should not have been permitted to lead parole evidence in support of the contention
Section 91 of the Evidence Act provides that when the terms of contract or of a grant or of any other disposition of property have been reduced to the form of a document and in all cases in which any matter is required by law to be reduced to the form of a document no evidence shall be given in proof of the 1183 terms of such contract grant or other disposition of property or of such matter except the document itself
Sub section
1 of section 92 declares that when the terms of any contract grant or other disposition of property or any matter required by law to be reduced to the form of a document have been proved according to the last section no evidence of any oral agreement or statement shall be admitted as between the parties to any such instrument or their representatives in interest for the purpose of contradicting varying adding to or subtracting from its terms And the first proviso to section 92 says that any fact may be proved which would invalidate any document or which would entitle any person to any decree or order relating thereto such as fraud intimidation illegality want of due execution want of capacity in any contradicting party want or failure of consideration or mistake in fact or law
It is clear to us that the bar imposed by sub section
1 of section 92 applies only when a party seeks to rely upon the document embodying the terms of the transaction
In that event the law declares that the nature and intent of the transaction must be gathered from the terms of the document itself and no evidence of any oral agreement or statement can be admitted as between the parties to such document for the purpose of contradicting or modifying its terms
The sub section is not attracted when the case of a party is that the transaction recorded in the document was never intended to be acted upon at all between the parties and that the document is a sham
Such a question arises when the party asserts that there was a different transaction altogether and what is recorded in the document was intended to be of no consequence whatever
For that purpose oral evidence is admissible to show that the document executed was never intended to operate as an agreement but that some other agreement altogether not recorded in the document was entered into between the parties
Tyagaraja Mudaliyar and another vs Vedathanni
The Trial Court was right in permitting the respondent to lead parole evidence in support of her plea that the sale deed dated January 7 1953 was a sham document and never intended to be acted upon
It is not disputed that if the parole evidence is admissible the finding of the court below in favour of the respondent must be accepted
The second contention on behalf of the appellant must also fail
In the result the appeal is dismissed with costs
SR Appeal dismissed


Summary:
Being in need of money respondent entered into an agreement with the appellant for a loan of Rs 2000 and it was decided that simultaneously she should execute a nominal document of sale and rent note of her house situated near Sarafa Bazar in Amravati
These documents were executed on January 7 1953
The respondent continued in the possession of the house property throughout and carried on repairs from time to time
Since the appellant was attempting to enforce the document as a sale deed by filing suits in the Court of Small Causes for recovery of rent and the said suits had resulted in a decree the respondent filed a suit for declaration that she was and continued to be owner of the house property
The documents executed on January 7 1953 it was said were never intended to be acted upon
In defence the appellant maintained that the sale deed represented a genuine transaction and ownership of the house property had passed to her
It was further pleaded that the decrees passed by the Court of Small Causes operated as res judicata barring the respondent from pleading that the sale deed was merely a nominal transaction
Reliance was also placed on section 92 of the Indian Evidence Act
Dismissing the appeal by special leave the Court  HELD 11
When a finding as to title to immovable property is rendered by a Court of Small Causes res judicata cannot be pleaded as a bar in a subsequent regular civil suit for the determination or enforcement of any right or interest in immovable property
In order to operate as res judicata the finding must be one disposing of a matter directly and substantially in issue in the former suit and the issue should have been heard and finally decided by the court trying such suit
A matter which is collaterally or incidentally in issue for the purpose of deciding the matter which is directly in issue in the case cannot be made the basis of a plea of res judicata
A question of title in a Small Cause suit can be regarded as incidental only to the substantial issue in the suit and cannot operate as res judicata in a subsequent suit in which the question of title is directly raised
H81 G 1182A C 1177 12
Explanation VIII to section 11 of the Code of Civil Procedure operates only where an issue has been heard and finally decided in the earlier suit
1182 D E 13
In the instant case the finding rendered by the Court of Small Causes in the two suits filed by the appellant that the document executed by the respondent is a sale deed cannot operate as res judicata
1182 E Poholi Mullick vs Fukeer Chunder Patnaik 1874 22 Suth WR 349 Chet Ram and Others vs Ganga 1886 Allahabad Weekly Notes Anwar Ali vs Nur Ul Haq and Another  Khandu Valad Keru vs Tatia valad Vithoba 1871 8 Bombay HCRAC 2324 DB Mohd Yusuf and another vs Abul Wahid AIR 1948 All
296 and SAA Annamalai Chettiar vs Molaiyan and others AIR 1970 Mad 396 approved
Muhammad Abdul Ghafur Khan vs Gokul Prasad and others AIR 1914 All
527 Gulabchand Chhotalal Parikh vs State of Bombay  Madan Kishor and Another vs Mahabir Prasad and others AIR 1929 All 816 Ram Dayal Sonar vs Sukh Mangal Kalwar AIR 1937 All 676 Ganga Prasad vs Nandu Ram AIR 1916 Patna 75 Ganesh Das vs Feroze Din AIR 1934 Lahore 355 Puttangowda Mallangowda Patil vs Nikanth Kalo Deshpande XV Bombay Law Reporter 773 Asgarali Roshanalli and another vs Kayumalli Ibrahimji AIR 1956 Bombay 236 Lala Jageshwar Prasad vs Shyam Behari Lal AIR 1967 All 125 Shyam Behari Lal vs Lala Jogeshwar Prasad  Manzural Haq and another vs Hakim Mohsin Ali AIR 1970 All 604 Pateshwari Parshad Singh vs A section Gilani AIR 1959 Punjab 420 referred to and dissented from
The bar imposed by sub section 1 of section 92 applies only when a party seeks to rely upon the document embodying the terms of the transaction
In that event the law declares that the nature and intent of the transaction must be gathered from the terms of the document itself and no evidence of any oral agreement or statement can be admitted as between the parties to such document for the purpose of contradicting or modifying its terms
The sub section is not attracted when the case of a party is that the transaction recorded in the document was never intended to be acted upon at all between the parties and that the document is a sham
Such a question arises when the party asserts that there was a different transaction altogether and what is recorded in the document was intended to be of no consequence whatever
For that purpose oral evidence is admissible to show that the document executed was never intended to operate as an agreement but that some other agreement altogether not recorded in the document was entered into between the parties
1183 C F Tyagaraja Mudaliyar and another vs Vedathanni AIR 1936 Privy Council 70 followed