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1965 Supreme(Mad) 319
Madras High Court
VEERASWAMI
Rangasami Goundar - Appellant
Versus
K.R.Easwaramurthi Goundan - Respondent
Decided On : 09/23/1965
S. Mohan and V. Shanmugham, for Appellant; R. Desikan. P. S. Balakrishna Iyer, P. S. Ramachandran and A. C. Masai Goundar, for Respondent.
S. 66, C. P. Code bars any claim based on a court auction purchase being benami, and this ban applies to claims for partition of a share in the property purchased.
Headnote:
PARTITION SUIT - COURT AUCTION PURCHASE - BENAMI TRANSACTION - S. 66, C. P. CODE - PARTNERSHIP - SINGLE VENTURE - VALIDITY OF AGREEMENTS - SPECIFIC PERFORMANCE.
Fact of the Case:
Plaintiff filed a suit for partition of a half share in two items of immovable properties purchased by the first defendant in a court auction. The plaintiff claimed that he and the first defendant had entered into two oral agreements, one in January 1941 and the other in March 1941, to form a partnership for the purpose of purchasing the properties in court auction. The first agreement provided for equal contribution towards the purchase and equal shares in the properties when purchased. The second agreement provided that the first defendant and his firm would be in charge of the litigation, and the plaintiff would bear half the litigation expenses and half the value of encumbrances cleared. The courts below found that the agreements were true, valid, and binding on the firm, and granted a decree for partition as prayed for by the plaintiff.
Finding of the Court:
The court held that the plaintiff's claim for partition was barred by S. 66, C. P. Code, which prohibits any claim based on a court auction purchase being benami. The court found that the agreements between the plaintiff and the first defendant did not constitute a partnership within the meaning of the Partnership Act, as they were not for the purpose of carrying on a business. The court also held that the plaintiff's alternative prayer for specific performance of the agreement subsequent to the auction purchase was not barred by S. 66, C. P. Code, and remitted the suit to the trial court for disposal on that prayer.
Issues: 1. Whether the agreements between the plaintiff and the first defendant constituted a partnership within the meaning of the Partnership Act? 2. Whether the plaintiff's claim for partition was barred by S. 66, C. P. Code? 3. Whether the plaintiff's alternative prayer for specific performance of the agreement subsequent to the auction purchase was barred by S. 66, C. P. Code?
Ratio Decidendi: 1. A partnership is defined under Section 4 of the Partnership Act as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. 2. S. 66, C. P. Code prohibits any claim based on a court auction purchase being benami. The whole policy behind the section is to avoid secret purchases or manipulated deals, smacking of fraud or which will be prejudicial to a decree-holder by the judgment debtor attempting to get at the property through a benami purchase for him. 3. The plaintiff's alternative prayer for specific performance of the agreement subsequent to the auction purchase was not barred by S. 66, C. P. Code, as it was not based solely on the court auction purchase.
Final Decision: The court allowed the second appeals, set aside the judgments and decrees of both the courts below, and remitted the suit to the trial court for disposal on the alternative prayer for specific performance of the agreement subsequent to the auction purchase.
The basis of the plaintiff's claim was two agreements, both oral, the first entered into in about January 1941 and
the other in about March of the same year, with the first defendant. The plaintiff claimed that the first agreement brought into existence a partnership for the single purpose of purchasing the properties in court auction with the stipulation that the plaintiff and the firm were to equally contribute towards the purchase and have equal shares in them when purchased. It was also understood, according to the plaintiff, that the first defendant or persons duly authorised by him were to bid and purchase in court auction as the agent of the partnership.
The court auction purchase was on 8th January 1941, on a bid by the first defendant. The sale was confirmed on 17th February 1941, in his favour. As it was apprehended apparently that there might be difficulty in getting possession and there would be litigation in that connection, the second agreement between the plaintiff and the first defendant representing his firm, it was claimed, provided that the first defendant and his firm were to be in charge of the litigation, either pending or expected, that the plaintiff was to bear half the litigation expenses and half of the value of encumbrances cleared, which might be found to be existing on the properties and that "the plaintiff and the firm are to divide the properties after all the litigations were over and a proper sale deed was to be executed in the plaintiff's favour thereafter".
The plaintiff in the main prayed for partition by metes and bounds and separate possession of his share out of the suit items, and in the alternative for directing the defendants to execute a sale in favour of the plaintiff in respect of his share and for division and separate possession thereof to him. The suit was resisted by the third defendant, who was also one of the partners of the decree-holder firm. He denied the oral agreements, their validity and the liability of the firm in respect of them.
The Courts below have found that the agreements pleaded by the plaintiff were true, that he had contributed his share due thereunder and that actually the amounts paid by him were duly credited in the account books of the firm of the third defendant. They have also found that the agreements were valid and binding on the firm and constituted the plaintiff and the firm into a firm of partnership for a single venture of purchasing the two items of properties in court auction. It appears, though no defence was raised in the written statement based on S. 66, C. P. Code, it was permitted to be argued with the result that both the courts have found that it does not bar the plaintiff from getting his relief of partition. This is on the view that the purchase was by one of the partners of the firm for the benefit of it, the firm brought into existence by the two oral agreements. They accordingly concurred in granting a decree for partition as prayed for by the plaintiff. The 21st defendant purchased the entire suit properties from the third defendant. Both of them being aggrieved, they have come up to this court in second appeals.
2. The substantial contention for the appellants is based on Sec. 66, C. P. Code. Mr. Mohan, for one of the appellants, urges that the plaintiff's prayer for partition presupposes that he has title vested in him to the two items to the extent of his share and that this means that his claim for partition, was or should be taken to be, necessarily based on the court auction purchase as regards his half share made by the first defendant benami for him. It seems to me
