CS(OS) No.119/2007 Page No.1 REPORTABLE * IN THE HIGH COURT OF DELHI AT NEW DELHI + CS(OS) NO. 119 OF 2007 % Date of Decision : 27th August, 2008. PADMAVATI MAHAJAN .... Plaintiff. Through Mr. Rakesh Tiku with Mr.Prakash Gautam, Advocates. VERSUS YOGENDER MAHAJAN & ANR. .... Defendants. Through Mr. S.C.Singhal, Advocate. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? YES 3. Whether the judgment should be reported in the Digest ? YES SANJIV KHANNA, J: 1. The plaintiff, Ms. Padmavati Mahajan, is the mother of Mr.Yogender Mahajan, defendant no.1 and mother-in-law of Ms.Sushma Mahajan, defendant no.2. She seeks decree of permanent injunction against the defendants from parting with possession or creating third party rights in respect of the property no.D-95, Anand Niketan, New Delhi (hereinafter referred to as the 'Property', for short). She also seeks mandatory injunction against the defendants to forthwith remove themselves and their belongings from the Property. CS(OS) No.119/2007 Page No.2 2. It is an admitted case of both the parties that by a perpetual Sub-Lease Deed dated 29th May, 1968, marked Exh.PW 1/1 the plaintiff was granted leasehold rights in the said Property. The said Sub-lease Deed is a registered document. It is also an admitted case of the parties that vide Conveyance Deed dated 12th November, 2001, marked PW1/2, the Property was converted into freehold in the name of the plaintiff as the owner. 3. Mr. Prabhudayal Mahajan, husband of the plaintiff and father of defendant no.1 expired in 1983 and the defendant no.1 is one of their five children. 4. The plaintiff claims that she wants to sell the Property and has entered into an Agreement to Sell with a third party. She has also made allegations about ill-treatment at the hands of defendant nos. 1 and 2. 5. The defendants in their common written statement have claimed that the Property was purchased out of funds provided by a Partnership Firm, M/s. Bhagmal Satyapal (hereinafter referred to as the Partnership Firm, for short) of which the defendant no.1 and his father, Mr. Pradbhudayal Mahajan were partners along with some other parties who held 56% shares. It is also stated that the building on the said Property was constructed out of the funds provided from accounts of the said Partnership Firm. The defendant no.1 also claims that he is entitled to and is owner of 72.1% share in the property on the basis that the funds were provided by the CS(OS) No.119/2007 Page No.3 Partnership Firm in which he held 29% share, while his father had 15% share. It is accordingly stated that the defendant no.1 is the owner of 66.5% of the Property in his own right as he had invested funds and he further acquired 5.6% share on the death of his father to make up for 72.1% share claimed by him. The defendant no.1 also claims that he is a tenant on the upper floor of the property, paying rent @ Rs.2000/- p.m. 6. On the basis of the pleadings of the parties, the following issues were framed on 15th May, 2007 :- “(1) Whether the property No.D-95, Anand Niketan, New Delhi was acquired out of the funds of the firm M/s.Bhagmal Satyapal? If so, its effect? OPD. (2) Whether the defendants have any right, title or interest in the aforesaid immovable property? OPD. (3) Whether defendant No.1 is tenant in respect of the first floor of the suit property? OPD. (4) Relief.” ISSUE NOS. 1 AND 2 7. Issue nos. 1 and 2 for the sake of convenience are being dealt with together. The Sub-lease Deed dated 29th May, 1968 and the Conveyance Deed dated 12th November, 2001 in favour of the plaintiff in respect of the Property being Exh,PW-1/1 and Exh. PW- CS(OS) No.119/2007 Page No.4 1/2 are admitted documents. In view of the Transfer of Property Act, 1882 the plaintiff and not the defendant no.1 is the owner of the Property. 8. Defendant no.1, however, claims that funds for purchase of leasehold rights and for construction of the building were provided by the Partnership Firm in which the defendant no.1 had 29% share at the relevant time i.e. when Sub-lease Deed was executed and the construction was made in early 1970. In other words, it is claimed that he is a benami owner of the Property as funds and consideration for purchase of the plot and for construction of the building were paid by the Partnership Firm in which he held 29% share. 9. The present Suit was filed on 17th January, 2007 after the Benami Transactions (Prohibition) Act, 1988 (hereinafter referred to as the Act, for short) had come into force. I may note here the definition of the expression “Benami Transaction” in Section 2(a) of the Act, which reads as under:- Section 2(a) : “”Benami transaction” means any transaction in which property is transferred to one person for a consideration paid or provided by another person;” 10. For plea of benami to succeed the person taking the said plea has to prove the factum of the money being given for the purpose of carrying out the transaction by a person other than the CS(OS) No.119/2007 Page No.5 purported owner of the property and secondly, the intention of the parties has to be such that the owner was only a façade for the real owner. Thus, the question arises whether funds for purchase of the Property and construction in 1968-70 had been paid by the defendant no.1 and whether the transaction in question was benami. 11. The other question which arises for consideration is whether sub section 3 to Section 4 of the Act will apply and therefore the bar and prohibition in Section 4 would not apply. The plea of benami is not available to the defendant no.1 in view of the Act, unless conditions of subsection 3 to section 4 are satisfied. Relevant provisions of the Act read as under:- Sections 3 and 4 “3. Prohibition of benami transactions.- (1) No person shall enter into any benami transaction. (2) Nothing in sub-section (1) shall apply to - (a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter; (b) the securities held by a - (i) depository as a registered owner under sub-section (1) of section 10 of the Depositories Act, 1996; (ii) participant as an agent of a depository. Explanation : The expressions “depository” and “Participants” shall have the meanings respectively assigned to them in clauses (e) and (g) of sub-section (1) of section 2 of the Depositories Act, 1996. (3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to CS(OS) No.119/2007 Page No.6 three years or with fine or with both. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence under this section shall be non-cognizable and bailable.” 4. Prohibition of the right to recover property held benami. - (1) 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) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property. (3) 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.” 12. The relationship between the plaintiff and the defendant no.1 is not denied and it cannot be also denied that their relationship is fiduciary. In the case of R.Rajagopal Reddy versus Padmini Chandrasekharan reported in (1995) 2 SCC 630 and Nand Kishore Mehra versus Sushila Mehra reported in (1995) 4 SCC 572 the Supreme Court laid out certain basic guidelines with respect to the admissibility of the plea of Benami being raised in case of a CS(OS) No.119/2007 Page No.7 suit, claim or action. The said guidelines have been propounded later in the case of Rebti Devi v. Ram Dutt, reported in (1997) 11 SCC 714 and the relevant portion thereof reads as under:- “(7) Seventhly, if in a suit, claim or action, a plea or defence based on benami is raised even after 19-5-1988 and the purchase is in the name of a wife or unmarried daughter, such a plea of benami is permissible and R. Rajagopal Reddy case will not come in the way merely because the plea is raised after 19-5-1988. Such a plea if raised, will however have to be decided taking into account the statutory presumption laid down in Section 3(2). This is because the Act says that if the purchase is in the name of the wife or unmarried daughter, the prohibition in Section 3(1) will not apply. Section 3(2) is enacted as an exception to the provisions in the Act and does not depend for its interpretation on the question as to what extent Sections 4(1) and 4(2) are retrospective. (8) Eighthly, if the case falls within the exception in Section 4(3)(a) i.e. 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 where as stated in Section 4(3)(b) 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, then in both situations if such a plea or defence is raised in a suit filed after 19-5-1988, the same can be decided by the Court notwithstanding Section 4(1) or 4(2) and notwithstanding what is decided in R. Rajagopal Reddy case.” 13. The intention of the parties to enter into a benami transaction is to be established, for upon a gift, a mother becomes CS(OS) No.119/2007 Page No.8 the owner of that money/property in her own right. A gift made by a father, husband, son or a daughter for purchase of property will not make the father, husband, son or daughter a benami owner. After a gift is made and accepted, money or gift made is the property of the recipient. Donor ceases to have any claim or right on the money or the property gifted. Source of money or the fact that funds emanated from person A and property was purchased by person B is not by itself sufficient to establish benami ownership. Intention of the parties is a relevant consideration. Presumption as raised in Section 3(2) (a) of the Act in case of wife or daughter is to the contrary, but the said section will not apply as the transaction is before the enactment of the Act and the relationship between the parties is that of mother and son. Presumptions under sections 81 and 82 of the Indian Trusts Act, 1882 are no longer applicable as the said sections stand deleted. 14. Mere payment of consideration by a third person will not make the transaction in all cases benami. Reference may be made to Chittaluri Sitamma and Another versus Saphar Sitapatirao reported in AIR 1938 Madras 8, wherein it has been held as under: “…the mere suspicion that the purchases might not have wholly been made with the Lady’s money will certainly not suffice to establish that the purchases were benami, nor even the suspicion that moneys belonging to Jagannadha Rao whether in Smaller measure or larger measure, must have also contributed to these purchases. Even in cases where there is positive evidence that money had been contributed by CS(OS) No.119/2007 Page No.9 the husband and not by the wife, that circumstance is not conclusive in favour of the benami character of the transaction though it is an important character….” 15. On the question of benami ownership, it will be appropriate to refer to the decision of the Supreme Court in the case of Binapani Paul versus Pratima Ghosh and others reported in (2007) 6 SCC 100. In the said case there was a dispute with respect of the ownership of a property bought in the name of the wife, while the money was paid by the husband. Dispute arose between children of the said lady after the death of the lady. The son had opposed mutation in daughters’ names on the ground that their father was the benami owner. The trial court rejected the said contention, but the High Court upheld the objection of the son. However the Supreme Court in appeal held the view of the trial court as the correct one. It was observed that the deceased lady had been treated as the owner of the property during the lifetime of her husband and that she had even paid a part of the consideration for the said property. Supreme Court also noted that there could be various reasons for a person to buy a property in the name of someone else and in all cases such transactions would not be in the nature of a Benami transaction. The Court further noticed that for a particular transaction to be called benami, credence has to be given to the surrounding circumstances and the intention of the parties at the time of the transaction. The Supreme Court in the case of CS(OS) No.119/2007 Page No.10 Thakur Bhim Singh versus Thakur kan Singh reported in (1980) 3 SCC 72 dealt with this question of the intention behind a transaction and held that the intention could be gauged on the basis of: a) surrounding circumstances, (b) relationship of the parties, (c) motives governing their action in bringing about the transaction, and (d) their subsequent conduct. 16. In the case of Jaydayal Poddar versus Bibi Hazra, reported in (1974) 1 SCC 3 the Supreme Court held as under: “ Though the question, whether a particular sale is benami or not, is largely one of fact, and for determining this question, no absolute formulae or acid test, uniformly applicable in all situations, can be laid down; yet in weighing the probabilities and for gathering the relevant indicia, the Courts are usually guided by these circumstances: (1) the source from which the purchase money came; (2) the nature and possession of the property, after the purchase; (3) motive, if any, for giving the transaction a benami colour; (4) the position of the parties and the relationship, it 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 the property after the sale.” 17. Burden to prove and establish benami owner's rights protected by Section 4 (3), is on the person who makes the said assertion. The onus, therefore, is on the defendant no.1 who asserts ownership rights to prove benami ownership by leading reliable CS(OS) No.119/2007 Page No.11 evidence. This could have been shown by establishing (i) transfer of purchase money or payment of purchase consideration had taken from the account of the defendant no.1, and; (ii) the said transaction was made with the intention to treat the property purchased as a benami property of the defendant No. 1 with reference to conduct of parties, surrounding circumstances and motive for their action. 18. On the question of payment of consideration, the defendant no.1 has examined himself as DW-1 and Mr.Sher Singh Jain as DW-2. Evidence by way of affidavit of one Mr.Shiv Nath Sharma was filed by the defendant no.1 but he was not produced for cross examination and therefore his evidence cannot be relied upon by the defendant no.1. It is an admitted case of the parties that the defendant no.1 was born on 23rd November, 1944 and in 1968, he was about 24 years old. It is an admitted case of the parties that the father of the defendant no.1-late Mr.Pradbudayal Mahajan was originally a partner in the Partnership Firm and the defendant no.1 joined the Partnership Firm in 1964. It is the case of the defendant no1 that he joined the business in 1964. (I may note here that, in his affidavit Mr. Shiv Nath Sharma, has stated that the defendant no.1 had joined the partnership firm in 1966). Majority shares in the said Partnership Firm to the extent of 56% were held by outsiders who were also providing finance and raw material for carrying on CS(OS) No.119/2007 Page No.12 business of the firm. In his affidavit in chief, the defendant no.1 has stated as under :- “ …The property in question was acquired and built out of the funds provided by M/s.Bhagmal Satyapal, Katra Choban at Chandni Chowk, Delhi of whom the Deponent was the partner…” 19. No document has been placed on record by the defendant no.1 to establish flow of funds from the Partnership Firm and how and in what manner the payments made were treated in the books of the firm. The firm which had even outsiders as partners is not claimed to be the benami owner. The claim is made by Defendant No. 1. 20. Defendant no.1 in his cross-examination has admitted that the Partnership Firm used to file Income Tax Returns but the Property was never shown as an asset of the said Firm. He has also admitted that there is no document in existence from which it can be said that the Property was purchased in the name of the Partnership Firm. The defendant no.1 in his cross examination has stated as under :- “….. I do not have any documents in my possession to show that the funds for purchase of the plot came from the said firm. I had earlier maintained bahi khatas (account books) which showed the payment of such amount from the firm but the said accounts being old are not available now. The money flowed from the firm to the plaintiff who in turn paid for the plot. Vol: The plaintiff was not a partner of the firm. It was given as loan from the firm to the plaintiff. CS(OS) No.119/2007 Page No.13 The construction of the plot was made in 1970. The construction was completed in 8 to 9 months. The construction consisted of four bed rooms with drawing and dining on the ground floor and with a room constructed on the first floor to the extent of 27.5 per cent of the coverage of the ground floor. An amount of Rs. one lakh was spent on construction. Amount on construction was spent by the plaintiff through the funds advanced from the firm. This money was also reflected in the account books which are not available now. The income tax returns of the firm also reflected the same. The amount was shown as a loan to the plaintiff. The amount outstanding against the plaintiff was adjusted in the accounts of the firm by debiting the personal accounts of the partners being myself and my father. Question : If the amount of dues from the firm to the plaintiff were adjusted on transfer of credit from your account and your father’s account to the partnership firm, is the amount now outstanding to you from the plaintiff? Answer : it is correct that in the accounts amount would be due from my mother to myself on the aforesaid account. There are no outstandings now being shown as it has become nil. The amount was written off. In the income tax record, the payments both for the plot and construction was shown as emanating from the firm. In the income tax returns, the property has not been mentioned and only outstandings from the plaintiff to the firm were mentioned. In the returns the property was never shown as a property of the firm. In 1970s the plaintiff, being my mother, my father and I shifted to the house in question from Chandni Chowk. I shifted to the house in the capacity of the son of my parents. Vol : I was also a partner of the firm.” (Emphasis supplied) CS(OS) No.119/2007 Page No.14 21. In the aforesaid statement of the defendant no.1 has stated that the amount paid was treated as a loan by the Partnership Firm to the plaintiff. The said statement was made not once but twice in the aforesaid cross examination and has been underlined. It is also stated by the defendant no.1 that subsequently the amount was written off, though at that time the outstanding amount was adjusted by debiting personal accounts of the partners i.e. the defendant no.1 and his father. If it is a case of loan, claim for benami ownership, will certainly fail. If it is the case where the loan was written off subsequent to the purchase of property, the claim for benami ownership will again fail, unless it is proved that when loan was given it was with the intention to write it off and defendant-1 was the benami owner. If it is a case where capital accounts of the partners were adjusted, claim for benami ownership will depend upon the percentage of adjustment made in the capital accounts of the two partners coupled with the intention of the parties i.e. the plaintiff, the defendant no.1 as well as the father of the defendant no.1 to treat and regard the said Property as a benami Property owned by the defendant no.1 and his father {refer Binapani Paul versus Pratima Ghosh (Supra)}. This intention should have existed at the time when the Property was purchased and not at a subsequent point of time when the adjustment was made, for if the Property at the time of purchase was treated and regarded as CS(OS) No.119/2007 Page No.15 the Property of the plaintiff, it would not become benami property on a later date upon adjustment of the loan given by the Partnership Firm to the plaintiff being adjusted in the books of the Partnership Firm from the capital accounts of the defendant no.1 and his father. A gift once made by an individual cannot be unilaterally undone and will not become benami as alleged by a subsequent action by which Capital Accounts were adjusted. 22. The defendant no.1, on whom the onus lies, has not produced any document or material to support his contention with regard to the payment of consideration as well as establish intention of the parties to record and treat the Property as a benami property. Except for oral statement of the defendant no.1, there is no document, evidence or proof. I may note here that DW-2, Mr.Sher Singh Jain in his affidavit has stated to the best of his knowledge that late Mr.Prabhudayal Mahajan was a partner of the said Partnership Firm along with the defendant no.1 and the entire money was spent, to his knowledge, out of the Partnership Firm. Evidence of Mr. Sher Singh, DW-2 is rather vague. Though in his cross examination he has stated that his deposition is based on best of his knowledge, he has admitted that he did not see any papers of