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1981 Supreme(Ori) 120
Orissa High Court
R. N. MISRA, C.J. AND B. K. BEHERA, J.
Nandipalli Appalaraju - Appellant
Versus
G. Pannalal Sowcar - Respondents
A.H.Os. Nos.48 and 49 of 1975
Decided On : 2 November 1981
Y.S.N. Murty, for Appellants; B.R. Rao, B.L.N. Swamy and N.V. Ramdas, for Respondents.
The burden of proving that a transaction is benami lies on the person asserting it, and the source of consideration is the most important test for determining the true character of the transaction.
Headnote:
BENAMI TRANSACTION - DISTINCTION FROM SHAM TRANSACTION - BURDEN OF PROOF - SOURCE OF CONSIDERATION - SUBSEQUENT CONDUCT - MAINTAINABILITY OF SUIT UNDER O.21, R.63, C.P.C. - NECESSITY FOR RELIEF OF SETTING ASIDE AUCTION SALE - SUIT UNDER S.53 OF TRANSFER OF PROPERTY ACT - NECESSITY FOR FRAMING SUIT FOR BENEFIT OF ALL CREDITORS.
Fact of the Case:
The appellant challenged the affirming common judgment of a single Judge of the High Court in two First Appeals, which were directed against a common judgment in two Title Suits. The suits arose out of execution proceedings, where the appellant, an auction-purchaser in a certificate sale held under the Madras Revenue Recovery Act, claimed ownership of the disputed properties, while the plaintiffs, decree-holders in separate suits, sought to attach the properties for satisfaction of their decrees against the judgment-debtors.
Finding of the Court:
The High Court held that the burden of proving that a transaction is benami lies on the person asserting it, and that the source of consideration is the most important test for determining the true character of the transaction. The court found that the plaintiffs failed to establish that the auction-purchaser was not the real owner of the properties, as there was no evidence to support the plea that the judgment-debtors advanced the consideration money. The court also held that the subsequent conduct of the auction-purchaser, including obtaining the land recorded in his name in the Record-of-Rights and executing registered lease deeds, indicated that he had title to the property.
Issues: 1. Whether the transaction was benami, with the judgment-debtors being the real owners, or whether the auction-purchaser had absolute title to the properties. 2. Whether a suit under O.21, R.63, C.P.C. is maintainable without obtaining relief of setting aside the auction sale. 3. Whether a suit under S.53 of the Transfer of Property Act is maintainable if it is not framed for the benefit of all creditors.
Ratio Decidendi: 1. The court distinguished between a sham transaction and a benami transaction, emphasizing that in a benami transaction, there is an operative transfer resulting in the vesting of title in the transferee, while in a sham transaction, there is no such transfer. The court held that the burden of proving that a transaction is benami lies on the person asserting it, and that the source of consideration is the most important test for determining the true character of the transaction. 2. The court held that since the auction-purchaser had absolute title to the properties, the question of maintainability of a suit under O.21, R.63, C.P.C. without obtaining relief of setting aside the auction sale was unnecessary to examine. 3. The court held that since the auction-purchaser had title to the property, the question of maintainability of a suit under S.53 of the Transfer of Property Act for the benefit of all creditors was also unnecessary to examine.
Final Decision: The appeals were allowed, the judgment and decree of the trial court and the affirming judgment of the single Judge were set aside, the suits were dismissed, and the order of the executing court holding that the properties were not liable to attachment for satisfaction of the decree against the judgment-debtors was restored.
Judgement
R. N. MISRA, C. J. :- The appellant in both these appeals seeks to challenge the affirming common judgement of a learned single Judge of this Court in First Appeals Nos.65 and 66 of 1977. The said First Appeals were directed against a common judgement in Title Suits Nos.71 and 72 of 1964. First Appeal No.65 of 1967 arose out of Title Suit No.72 of 1964 while First Appeal No.66 of 1967 was out of Title Suit No.71 of 1964.
2. The short facts are the following :
One Pannalal Sowcar carried on business in the name and style of "Baughmal Pannalal Sowcar". He obtained a money decree against defendants 2 to 13 of Title Suit No.71 of 1964 and levied execution of the said decree in E.P.No.4 of 1958 in the court of the Subordinate Judge, Jeypore. In execution, he brought the disputed properties of Title Suit No.71 of 1964 under attachment by contending that these properties belonged to the judgement-debtors. One Lakshmanrao,
plaintiff in Title Suit No.72 of 1964, also obtained a money decree against defendants 1 to 8 of that suit and raised execution in E.P.No.1 of 1968 against the judgement-debtors. The decree-holder brought the disputed properties of Title Suit No.72 of 1964 under attachment. While these execution cases were pending and attachment of properties had been effected, Appalaraju, defendant No.1 in Title Suit No.71 of 1964 and defendant No.9 in Title Suit No.72 of 1964, preferred two claim petitions in the corresponding execution cases on the footing that the properties had been purchased by him in a sale held under the Madras Revenue Recovery Act for realisation of arrears of sales tax dues outstanding against the judgement-debtors who were defendants 2 to 13 in Title Suit No.71 of 1964, some of whom were also defendants 1 to 8 in Title Suit No.72 of 1964. The auction-purchaser maintained that the sale in his favour had been duly confirmed; the sale certificate had been issued and possession had been made over through court and he was in possession and enjoyment of the properties as absolute owner thereof; and, therefore, attachment of such properties which did not belong to the defendant-judgement-debtors for satisfying the decrees was not valid. The executing court allowed both the claims. Therefore, the two separate plaintiffs instituted these two Title Suits by impleading the claimant along with the other defendants for a declaration that the properties were liable to be proceeded against for satisfaction of the respective decrees.
3. The short facts relevant for appreciating the contentions advanced are these :-
The plaintiffs claimed that Appalaraju was the brother-in-law of Satyanarayana, the 3rd defendant in Title Suit No.71 of 1964, who was also the 2nd defendant in the connected suit. The auction-purchaser was not a resident of Koraput district. The property belonged to the family of the judgement-debtors and when for satisfying the demand of arrears of sales tax the certificate sale was held, Appalaraju was set up by the certificate-debtors to bid in the auction sale. The auction money was paid not by Appalaraju but was advanced by the certificate-debtors. This device was adopted to defeat the creditors of the certificate-debtors. The true owners of the property thus were the certificate-debtors who later became the judgement-debtors in the two suits. The right, title and interest in the properties thus continued to be with the family of the judgement-debtors and were liable to be attached. The claims should not have been allowed and the properties should have been found liable for attachment and to be proceeded against for satisfaction of the decrees. Appalaraju, the auction-purchaser, took the stand that the family of the certificate-debtors was heavily indebted and all their properties which formed the subject-matter of the two suits were under attachment in the earlier cases including the certificate case under the Madras Revenue Recovery Act. There were several bidders when in the certificate case t
