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HIGH COURT OF ALLAHBAD
KIDWAI, RANDHIR SINGH, JJ.
Unnao Commercial Bank Ltd., Unnao
Versus
Kailash Nath
Second Appeal No.408 of 1945
Decided On : 27-01-1954
CHAMPTEROUS TRANSACTION - SALE DEED - VALIDITY - FAIRNESS - BURDEN OF PROOF - INTERPRETATION OF SALE DEED - THIRD PARTY CHALLENGE - SUBSEQUENT ADMISSION OF VALIDITY - PARTITION SUIT - SHARE ENTITLEMENT.
Fact of the Case:
Ram Prasad sold a half share in two houses to Ratan Chand to finance litigation against Smt. Janaka, who claimed ownership through a will executed by Baiju, Ram Prasad's uncle. The sale deed stipulated that Ratan Chand would bear the litigation costs and get half of the property. Ram Prasad later challenged the sale, claiming it was champertous and unfair. The Unnao Commercial Bank, as Ratan Chand's assignee, sued for partition of a half share in the houses.
Finding of the Court:
The court held that the transaction was a completed sale, not an agreement to sell, and that it was not champertous or unfair. The court found that Ratan Chand had performed his part of the contract by bearing the litigation costs, and that the sale deed was valid and effective in respect of half of the property.
Issues: 1. Whether the transaction between Ram Prasad and Ratan Chand was a completed sale or an agreement to sell. 2. Whether the transaction was champertous and, if so, whether it was binding on the parties. 3. Whether Ratan Chand had performed his part of the contract. 4. Whether a third party could challenge the transaction as champertous. 5. Whether Ram Prasad's subsequent admission of the sale deed's validity affected the case. 6. The respective share entitlements of the parties in the partition suit.
Ratio Decidendi: 1. A transaction may be a completed sale even if the consideration is unascertainable on the date of the sale. 2. A champertous transaction is not per se invalid, but the court may refuse to enforce it if it is unconscionable or unfair. 3. The burden of proving that a champertous transaction is fair lies on the person who seeks to rely on it. 4. A third party cannot challenge a transaction as champertous; only the vendor can do so. 5. A subsequent admission of the validity of a transaction by the vendor may affect the case. 6. In a partition suit, the plaintiff is entitled to a share of the property proportionate to his ownership interest.
Final Decision: The court allowed the appeal, set aside the decree of the lower appellate court, and restored the decree of the trial court, which had granted the plaintiff a half share in the houses.
BANDHIR SINGH, J.:- This appeal has been referred to a Bench by a learned Single Judge as it appeared to him that some points of importance on which, in his opinion, the law was not uniform, arose in the case and required consideration by a Bench.
2. The appeal arises out of a suit brought by the Unnao Commercial Bank, Ltd., for a partition of a half share in two houses situated in Muhalla Bashiratganj in the city of Lucknow. Baiju and Lachman Prasad, who were brothers, owned two houses and certain other property. Lachman Prasad died in 1930 leaving a son Ram Prasad who is defendant 1. Baiju died in November, 1934, without any issue. His widow Smt. Janaka, is, however, alive.
3. On the death of Baiju, Ram Prasad executed a sale deed in favour of Ratan Chand in respect of a half share in two houses and some moveable property which belonged to him and Baiju jointly. This sale deed was executed for obtaining money for filing a suit against Smt. Janaka and two others, Smt. Jasrath Dei and Mahadeo Prasad, in whose favour Baiju had executed a will which, according to Ram Prasad, was invalid. Ram Prasad was unable to finance the litigation and, in order to establish his claim to the property, he thought it fit to sell a half share of the property to Ratan Chand in order to raise funds for fighting out the suit. This sale deed in favour of Ratan Chand was executed on 14-12-1934. A suit was thereafter instituted jointly by Ram Prasad and Ratan Chand against Smt. Janaka, Smt. Jasrath Dei and Mahadeo Prasad. The suit was decreed on 17-4-1935, for a declaration that Ram Prasad was the owner of a half share in the property and for possession. An appeal was filed against this decree by Smt. Janaka and others, but this appeal was ultimately dismissed for default of prosecution. A review application against the dismissal of the appeal was also dismissed on the 3-5-1940.
4. On 2-2-1937, Ratan Chand, who was indebted to the Unnao Commercial Bank, sold away some property, including his half share in the two houses acquired from Ram Prasad. On 16-6-1937, Smt. Janaka, who was held to have a life interest in the other half of the two houses, executed a deed of relinquishment in favour of Ram Prasad. On 24-8-1940, a sale deed was executed by Ram Prasad in favour of Kailash Nath, defendant 3, in respect of a half share in the two houses. This was followed by a partition of the second house, and the southern part of this house fell to the share of Ram Prasad, who then sold his undivided interest in the first house and the share allotted to him in the second house to defendant 2 on 31-8-1940, and defendant 2 sold a half of the second house which she had acquired from Ram Prasad, to defendant 4 on 26-11-1942.
5. On the basis of the sale deed obtained by the Unnao Commercial Bank, the bank instituted a suit for a partition of a half share in the two houses. The suit was resisted by all the defendants on various grounds. It was alleged that the sale in favour of Ratan Chand was champertous and that Ratan Chand did not perform his part of the contract under the sale deed executed in his favour and as such no title to any part of the house passed to him. It was also contended that Ratan Chand at best had acquired only a one-fourth share in the house and the plaintiff was, therefore, not entitled to claim a half share. Defendant 4 pleaded that he was a bona fide transferee for value and that the transaction in favour of the plaintiff was not binding on him.
6. Various issues were framed by the learned Civil Judge who heard the case. He ultimately came to the conclusion that, although the sale-deed which was executed by Ram Prasad in favour of Ratan Chand had been made for financing the litigation, the transaction was fair and equitable and as such was binding upon Ram Prasad and his transferees. He also found that the transaction in favour of Ratan Chand was a completed sale and not an agreement to sell. The suit was, therefore, decreed by the trial Cour
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