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1916 Supreme(SC) 2
Privy Council
Ameer Ali, Wrenbury , Lords Parmoor , Justice Viscount Haldane, JJ.
Srimathi Nrityamoni Dassi and others -Appellant
Versus
Lakhan Chandra Sen -Resopndent
Privy Council Appeal No. 70 of 1911
Decided On : 31-01-1916
Johnson, Messrs Downer , T.L. Wilson and Co., Messrs, Spencer, W. Garth , C. Ross, De Gruyther
In benami transactions, the primary test for beneficial ownership is the source of consideration. Sham documents created to shelter property from creditors do not transfer title or trigger limitation periods, and limitation is suspended during bona fide litigation.
Headnote:(A) Benami Transactions - Determination of beneficial ownership - The real test to determine whether an assignment in the name of one person is in reality for the benefit of another is the source of the consideration - Where there is no evidence that the ostensible owner provided the consideration and the rents and issues were applied to family expenses, the property is held benami for the family.
(B) Limitation - Effect of illusory documents and pending litigation - A declaration of right which is wholly false and illusory, intended only to shelter property from creditors, does not alter title or start the period of limitation - Limitation remains in suspense while parties are bona fide litigating for their rights in a court of justice.
(C) Trust and Endowments - A deed of trust created by a person who is not the beneficial owner of the property is inoperative against the real owners.
Facts of the case:
Certain house properties originally belonged to a father who became insolvent. While some properties were sold by the Official Assignee, others remained in the father's possession and devolved upon his sons. To shelter these properties from creditors, the sons executed a deed of covenant acknowledging their mother as the real owner. The mother subsequently dedicated some of these properties to a religious trust. Later, the descendants of the sons filed suits to assert their shares, claiming the mother held the properties benami for the father and the joint family. The defendants argued the suit was barred by limitation and that the mother was the absolute owner.
Findings of Court:
The court found that the deed of covenant was illusory and a mere device to deceive creditors, and thus did not operate to transfer any rights. Regarding the properties transferred to the mother by a third party, there was no evidence that she paid the consideration; rather, the family maintained possession and the income was used for family expenses. The court also found that the period of limitation was suspended during the time the plaintiffs were bona fide litigating their rights in previous court proceedings.
Issues: Whether the suit was barred by the statute of limitation; whether the deed of covenant effectively transferred ownership to the mother; and whether the properties were held by the mother as an absolute owner or benami for the joint family.
Ratio Decidendi: The court ruled that the source of consideration is the decisive factor in benami transactions. Since the ostensible owner failed to prove she provided the funds and the property's income served the joint family, the properties were held benami. Additionally, a sham document created to defraud creditors cannot be used to establish a transfer of title or trigger the limitation period, and such period is stayed during active litigation.
Result: Appeal dismissed.
Legal Category Hierarchy
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property law
- benami transactions
- trusts and endowments
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practice and procedure
- limitation
- pleadings and parties
Facts :-
The two suits which have given rise to the present appeals were instituted, one in November 1904 in the High Court of Calcutta, in its ordinary original civil jurisdiction, the other in the Court of the Subordinate Judge of the district of 24-Pergunnahs in Bengal.
The parties to this protracted litigation, with the exception of the appellant Nrityamoni Dassi and the other female defendants, are the descendants of one Guru Charan Sen, a Hindu inhabitant of Calcutta, who died in the year 1872, leaving him surviving three sons named respectively Baney Madhub Sen, Money Madhub Sen and Chuni Lall Sen, and a widow, Surat Kumari Dassi. The appellant is the widow of Baney Madhub who died in 1897.
Guru Charan Sen appears to have been at one period of his life a very wealthy man, and was possessed of considerable house property in Calcutta, besides some lands in the village of Panihati in the district of Nuddea. Among the house property were eight houses situated in Banstollah Street and its vicinity. Besides these and several others he owned 102, Cotton Street, and 27, Burtollah Street.
Between 1855 and 1857 Guru Charan Sen became heavily involved in debt, one of his principal creditors being James Church, Junr., and Co., to whom he had apparently been a banian. Early in 1857 he appears to have executed in their favour a bond by which he hypothecated, among other property, "the eight houses," subject to certain prior encumbrances created in favour of one Shama Charan Mallick, in whom also he was heavily in debt; and in a suit brought immediately thereafter on the bond he confessed judgment. Thereupon, on the application of another creditor, Guru Charan Sen was adjudicated an insolvent and all his property vested in the Official Assignee. This was followed by a suit at the instance of Shama Charan Mullick in respect of his debt. The Official Assignee then brought his action to get the insolvent's properties into his hands. All three suits were referred to arbitration, and under the award made in those proceedings Shama Charan Mullick obtained priority. The Official Assignee, in accordance with the directions contained in the award, sold most of the houses belonging to the insolvent, inclusive of 102, Cotton Street, and 27 (now numbered 34), Burtollah Street. But for some unexplained reason the "eight houses" never came into the possession of the Official Assignee, and, although the award contained a direction to that effect, they were never brought to sale. These eight houses unquestionably belonged to Guru Charan Sen, subject to certain payments out of the rents and issues for the maintenance of two idols, and he appears to have retained possession of them until his death in November 1872, when his three sons succeeded to the same. No application, however, for the substitution in the Collector's Register of their names as owners in place of their father was made until 1877, when they were recorded as shebaits, the ordinary designation for a person holding property dedicated for, or charged with, the maintenance in any way of Hindu religious worship. But the income arising from the eight houses — save as to a small portion which was spent for keeping up the two family idols — was applied towards the general expenses of the joint family.
Chuni Lall, the third son, died in 1881, leaving a widow, named Kusum Kumari Dassi, and several sons, of whom Nemya Charan is the eldest. But his death made no difference in the mode of dealing with the income of the eight houses or in the general condition of the family, which was that of an ordinary Hindu joint family, of which Benoy Madhub, the eldest male member, was the karta.
The state of things continued until 1891, when the events took place which gave rise to the litigation of 1896 and also form the subject of the present dispute.
Mr. Ameer Ali :—
(After stating facts as above, the judgment proceeded.)
As already stated, 102, Cotton Street, and 27, Burtollah Street, also belonged to Guru Charan
