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Madras High Court
Sree Raja Datla Venkata … vs Goluguri Bapiraju on 21 April, 1910
Equivalent citations: (1911) ILR 34 Mad 143
Bench: A White, A Rahim


1. The respondent in this appeal, who was the plaintiff in the Court of First Instance, bought two villages for Rs. 19,100 at a Court sale held on the 27th April 1901 in the execution of a decree obtained by defendants Nos. 1 and 2 in Original Suit No. 29 of 1900 against defendants Nos. 5 to 8. Defendants Nos. 3 and 4 who also had a judgment against defendants Nos. 5 to 8, received a portion of the purchase money paid by the plaintiff in rateable distribution. The plaintiff sued, on the 29th January 1901, to have the sale cancelled and for a decree for Rs. 25,100, Rs. 19,100 there of being the amount paid by him and the balance Rs. 5,900 interest on that sum. The grounds on which the plaintiff bases his case for relief are that he was induced to bid at the sale by the false and fraudulent misrepresentations of defendants Nos. 1 and 2, inasmuch as they stated in the proclamation of sale that the defendants Nos. 5 to 8 possessed full interest in the villages which were liable to the payment of Rs. 204-8-0 only as Government assessment, and that there were no incumbrances on the same, suppressing the following material facts: that the villages were granted to the fifth defendant and the father of defendants Nos. 6 and 7 on service tenure, the defendants Nos. 5 to 8 had no right to alienate them; that it was a condition of such tenure that on the family alienating the villages, the alienee would be liable to pay assessment at the rate of 12 annas, per rupee on the annual income; and that the property was subject to a mortgage for Rs. 30,000 in favour of one Gunnam Peddayya. They also alleged that since the sale the Government had given notice to the plaintiff calling upon him to pay enhanced assessment and that, having regard to the real nature of the tenure, the villages would not be worth more than Rs. 3,000. The defence to the suit as disclosed in the written statement of defendants Nos. 1 and 2 was that one Basivi Reddi was the real purchaser and the plaintiff merely his benamidar; that the assessment of Rs. 204-8-0 mentioned in the plaint was correct; that the entire interest of defendants Nos. 5 to 8 in the subject of sale was sold, that the plaintiff and Basivi Reddi knew that the villages were Mokhasa and the Government had an interest in them; that the mortgage for Rs. 30,000 was a collusive transaction and without consideration concocted by the fifth defendant and his brother in order to defraud the first and second defendants, and that the fifth defoliant had given up the mortgage deed to them and that the defendants Nos. 1 and 2 had not been guilty of any fraud. The defendants further pleaded that the suit was barred by the law for limitation of suits.

2. The learned Subordinate Judge who tried the suit found upon the evidence that the real purchaser of the villages was Basivi Reddi and that the plaintiff was only his benamidar and the learned vakil who appeared for the respondent has not contested that finding, so far as it is one of fact, before us, But the Subordinate Judge held that the plaintiff was nevertheless entitled to maintain this suit, the suit was not barred, the sale was vitiated by fraud as alleged and that the defendants Nos. 5 to 8 had no saleable interest in the villages. He gave a decree to the plaintiff setting aside the sale and directing the defendants Nos. 1 and 2 and the defendants Nos. 3 and 4 to pay to the plaintiff Rs. 20,405 and Rs. 1,816-8-0, respectively, with the usual provision for costs and payment of further interest from date of plaint till date of payment.

3. The defendants Nos. 1 and 2 alone have appealed against this decree; ana Mr. Sundara Ayyar who appeared for them has contested the conclusion of the first Court on each one of the points mentioned above.

4. It will be convenient to deal first of all with the question of fraud which is covered by the issues 2 and 3 as framed at the trial. This matter is fully discussed in the judgment of the Court of First Instance, and in our opinion not only is the conclusion of the Subordinate Judge correct on this point but we agree generally with his reasoning. We shall satisfy ourselves with mentioning the salient considerations which have weighed with us on the present question. The defendants Nos. 1 and 2 had a judgment against the defendants Nos. 5 to 8 for about Rs. 19,100 and the latter had no property except the two villages. It was therefore in the interest of the appellants to obtain as high a price for the property as possible. The evidence of the first defendant himself shows that he knew all about the villages before the sale proclamation, Exhibit A was issued, he knew that the villages were service Mokhasa villages, that as an incident of such tenure the assessment was liable to enhancement on alienation being made by the defendants Nos. 5 to 8, and that the Government: would enhance the assessment by fixing it at three-fourths of the rental in 1882 or three-fourths of the ten years’ average rental, And yet, what is the description of the property as given in Exhibit A which was drawn up on information supplied by the first defendant himself? Under the heading “description of property, including name of village, extent, boundaries, etc.,” the names of the two villages are mentioned, the boundaries and their area is given as 1, 404 acres, and, in the third column, the revenue or rent assessed on the land is mentioned as Rs. 204-8-0, and under the heading “extent of interest of judgment-debtors as far as ascertained” the entry is “Has complete right”; in the column for incumbrances, it is stated “this property has to be sold completely”; and under the heading “any other facts material to be known relating to the property” the entry is “none.” Any one reading this document would conclude that the judgment-debtors had an absolute proprietary right in the villages subject only to the payment of Rs. 204-8-0 a year to the Government for revenue and that is how the plaintiff himself understood it. There is nothing in Exhibit A to suggest that the judgment-debtors held the villages under a service Mokhasa tenure, so that on sale the tenure itself would come to an end and the villages in the hands of the purchaser would be held on materially different and less advantageous terms than in the hands of the judgment-debtors. On the Government determining to exercise its full right of assessment, as it has actually done, the villages would hardly be worth more than 3 or 4 thousand rupees. We have no hesitation in holding that the description of the property as given in Exhibit A is false and misleading, and was deliberately so given with a view to obtain a much greater price for the property than what it could have fetched if the true nature of the judgment-debtor’s tenure was disclosed. And we agree with the finding of the Subordinate Judge that neither the plaintiff nor Basivi Reddi, the real purchasers knew of the true nature of the interest which the judgment-debtors possessed in these villages and that they were induced to buy the property by the statements contained in Exhibit A, The facts bearing on the question are fully discussed in the judgment of the lower Court (paragraphs 20, 21 and 22,) and bear out the conclusion reached by it.

5. As regards the non-mention of the mortgage in favour of Gunnam Peddayya, the first defendant says that it had been discharged at the date of the sale and that he had obtained a deed of release from Peddayya paying him Rs. 1,000. Upon the materials available in this case it is not possible to find definitely that the incumbrance does not subsist; the so-called release is not registered nor is there any admission by the mortgagees that they have no claim under the mortgage. In these circumstances there is at least a considerable risk of the purchaser of the property being involved in heavy litigation should the mortgagees choose to put forward a claim. At the same time the possibility of the appellant having believed in good faith that there was no valid or subsisting claim in respect of the mortgage, is not in our opinion excluded. The deed of mortgage is in their possession and Exhibit IV b was executed in 1899 on payment by them of Rs. 1,000 odd. And if the defendants Nos. 1 and 2 believed as the first defendant says he did that the mortgage in favour of Peddayya was a colourable transaction, they would not be expected to make any mention of it in the sale proclamation.

6. Upon these facts the first question for decision is, whether the plaintiff who is benamidar of Basivi Reddi is entitled to maintain this suit on the ground that the sale was vitiated by the fraud of the appellants, the decree-holders. The plaintiff actually bid at the auction and the property was knocked down to him; it was he who paid the purchase money and the sale certificate was issued to him. But Basivi Raddi was present at the time of the sale and it was under his directions that the plaintiff made the bids and Basivi Raddi supplied the purchase money, the arrangement being that he and not the plaintiff was to be the owner of the property. So far as Basivi Reddi and the plaintiff are concerned, it was never intended that the title of the property should vest in the latter and in that sense the plaintiff is undoubtedly a benamidar. Those being the facts, Mr. Sundara Ayyar contends that for the purposes of this suit we must treat the plaintiff as a mere alias of Basivi Reddi, and that Basivi Reddi alone is entitled to seek any relief with respect to the sale. It may be mentioned here that Basivi Raddi was examined as a witness in this case and he disclaims all title to the property. The fact however is, as proved by the evidence, that he was the real purchaser, and a false statement made by him in the witness box cannot affect the question as to whether the plaintiff can maintain the action [See Hari Gobind Adhikari v. Ashoy Kumar Mozumdar (1889) I.L.R. 16 Calc. 364]. The learned vakil for the appellants relies strongly on the decision of the Privy Council in Petherpermal Chetty v. Muniandy Servai (1908) I.L.R. 35 Calc. 551, where their Lordships cite with approval a passage from Mr. Mayne’s book on Hindu Law on the effect of benami transactions entered into with a view to defraud a third person. The passage cited lays down that once a transaction is made out to be a mere benami, the benamidar absolutely disappears from the title, he being simply an alias for the person beneficially interested. The actual questions for decision before the Judicial Committee were firstly, whether a person who had executed a benami deed of sale for the purpose-of defeating the claim of an equitable mortgagee could recover the-property from the benamidar when it is found that the purpose of the fraud was not effected; secondly, whether it was necessary to have the benami deed set aside as a preliminary to the plaintiff obtaining possession of the property. They answered the first question in the affirmative and the second question in the negative. The only proposition bearing upon the point under discussion that can be deduced from that case is that a person in whose favour the owner of a property has executed a benami deed of sale acquires no title to the property so as to resist a suit “for possession by the owner. The other Privy Council ruling cited by Mr. Sundara Ayyar, Annada Pershad Panja v. Prasanna Moyi Dasi (1907) I.L.R. 34 Calc. 711 at p. 717, has no closer bearing on the present question. In that case all that was decided was that the real owner of a property which was sold under a decree, the result of a fraudulent arrangement between the benamidar and a third person, could recover the property from the latter, and that to such a case Section 95 of the Limitation Act did not apply. The other cases cited in support of the appellant’s contention, for instance, Kutha Perumal Rajali v. The Secretary of State for India (1907) I.L.R. 30 Mad. 245, Hari Gobind Adhikariv. Akhoy Kumar Mozumdar (1889) I.L.R. 16 Calc.. 364, Subbarayar v. Asirvatha Upadesayyar (1897) I.L.R. 20 Mad. 495 and Mohendra Nath Mookerjee v. Kali Proshad Johuri (1903) I.L.R. 30 Cale. 265, lay down that a benamidar cannot sue to recover possession of the property standing in his name inasmuch as he has no title to the property. The proposition therefore which may be taken to be established is that a benami transaction does not vest any title to an immoveable property, the subject of such a transaction, in the benamidar, and therefore such a person cannot maintain a suit which is based on title, such as a suit in ejectment. But none of the cases, relied on by the appellant are authority for the contention that where a person who is really acting for another, but does not disclose the fact, enters into a contract for the purchase of land and the land is conveyed to him in pursuance of the contract, he cannot sue for any relief in respect of the contract. Some of the rulings just mentioned recognize the distinction between a suit to recover possession of land and one based on contract in connection with a benami transaction. It is difficult to see how the analogy of the law relating to benami transactions such as enunciated in Petherpermal Chetty v. Muniandy Servai (1908) I.L.R. 35 Calc. 551 can be applied to suits either based on or seeking to avoid a contract of sale, for, in cases of the latter class, the person actually entering into the contract acts, as a matter of fact, as agent of an undisclosed principal, and it cannot be contended that such a person acquires no rights and incurs no liability under the contract (see Sections 231 and 232 of the Contract Act). It may be that though such a person is really an agent in the matter of the contract, he can be properly called a mere benami-dar so far as the title to the property conveyed in his name is concerned, for neither the legal nor the beneficial estate in the property is intended to vest in him, A benamidar properly so called is not a trustee, for he is not the owner of the legal estate, although he holds the property for the benefit of the real owner; nor can a trustee in whom the legal estate is vested properly be called a benamidar. Similarly, it would be a misnomer to call an agent who has entered into a contract but without disclosing the fact that he is an agent, benamidar of his principal in the sense of Petherpermal Chetty v. Muniandy Servai (1908) I.L.R. 35 Calc. 551 This is the substance of what is laid down in Kutha Perumal Rajali v. The Secretary of State for India (1907) I.L.R. 30 Mad. 245, though the learned Judges at one place in their judgment would seem to suggest that in some cases the benamidar may be a trustee or agent of an undisclosed principal.

7. But it is argued that the present suit does not seek relief in respect of any contract because the sate was in invitum and the officer conducting the said sale cannot be said to have entered into any contract with the plaintiff. But we do not see why the acceptance of the plaintiff’s bid by the officer should not have the effect of a contract with such officer simply because the rights and liabilities arising under it are regulated in many respects by the special provisions of the Civil Procedure Code. The present suit seeking to avoid the contract by which the plaintiff became purchaser of the property on the ground of fraud committed by the appellants in connection with such sale is brought under the general law and there is nothing in that law, as we have tried to show, which disentitles him to maintain such as an action. And if we have regard to the provisions of the Civil Procedure Code, they certainly seem to suggest that the person who bids for the property is the proper person in circumstances like the present to maintain the action. The plaintiff, as the person declared to be-the purchaser, has to pay the amount of deposit (Section 306) within a certain time (Section 307), and in default of payment by him he loses all claims to the property and to the money deposited (Section 308). If the sale is set aside under Section 310A, the purchase money or compensation would be payable to the plaintiff, he can apply to have the sale set aside on the ground that the judgment-debtor has no saleable interest in the property (Section 313); and if the sale is set aside, the plaintiff would receive back the purchase money (Section 315). and when the sale became absolute, the certificate of sale would be issued to him (Section 316) and no suit could be maintained against the plaintiff, who is the certified purchaser, on the ground that the purchase was made on behalf of any other person (Section 317). It would; be impossible to hold in face of these sections that the plaintiff as certified purchaser did not acquire any rights under his-certificate [See Ravji v. Mahadevi (1898) I.L.R. 22 Bom. 672 and Khushal Panachand v. Bhimabai (1888) I.L.R. 12 Bom. 594,] while the policy underlying them certainly points to-the certified purchaser being the proper person to seek relief in a case of this nature. In our opinion therefore there is no force in the objection that this action is not maintainable by the-plaintiff.

8. The next question is, whether the suit is barred; and that depends upon a determination whether Article 12 applies to the case, as contended for by the appellant, or article 95, as held by the Subordinate Judge, or 120, if neither of the other two articles applies. We feel no hesitation in holding that the suit is governed by article 95, and we entirely agree with what is said on the point in Sham Lal Mandal v. Nilmani Das (1906) 6 C.L.J. 385 where the question is fully discussed. If, as we think, article 95 is applicable, the suit is clearly within the prescribed limit of time.

9. There is one other question raised in the case and we wish to state as briefly as possible the view we take of it, though,. having regard to the conclusions which we have come to on the points raised by the appellant, it is not necessary to determine this question. Did the judgment-debtors have a saleable interest in the two villages? The learned Subordinate Judge has answered the question in the negative. The point is not free from difficulty, but on the whole it seems to us that it is going too far to say that the judgment-debtors had no saleable interest in the villages because the conditions under which the purchaser would hold the property would be materially different from those under which the judgment-debtors themselves held it.

10. However, as in our opinion the plaintiff is entitled to relief on the ground the sale is not binding on him by reason of the fraudulent misrepresentations contained in exhibit A and the suit is brought within time, the appeal fails and must be dismissed with costs.

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