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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 106 OF 2010  

M/S FAIR COMMUNICATION AND  CONSULTANTS & ANR. ...APPELLANT(S)

VERSUS SURENDRA KERDILE     ...RESPONDENT(S)

J U D G M E N T

S. RAVINDRA BHAT, J.

1. This appeal by Special Leave challenges a decision of the Madhya Pradesh, High

Court, by which a suit for recovery of  80,000/- was decreed in appeal.  The impugned₹

judgment set aside the judgment and decree of the XIII Additional District Judge, Indore

(hereafter “trial court”).

2. The plaintiff (respondent in the present case, referred to hereafter as “Surendra”)

is  the maternal  uncle of  the defendant-second appellant  (hereafter  referred to by his

name as “Sanjay”).  Sanjay is also the sole proprietor of first appellant/defendant (M/s

Fair Communication & Consultants).  Surendra filed a suit for claiming recovery of ₹

1,08,000/- alleging that Sanjay and his proprietorship firm owed money lent.  Surendra

apparently was a resident of Nashik, but had completed his education at Indore.  He was

an Engineer employed at Nashik and owned some land and a flat (MIG Scheme No. 54,

Indore).  As Surendra wished to settle eventually in Nashik, he appointed Sanjay who

used to reside in Indore as Power of Attorney and executed a deed of General Power of

Attorney (GPA) in favour of Sanjay on 30.09.1989 for that purpose.  Sanjay entered into

an agreement to sell the property to one Niranjan Singh Nagra (“buyer”) on 30.11.1989

and received a sum of  50,000/- as earnest money.  Surendra alleged that Sanjay called₹

him to  Indore  on  29.01.1990  and  requested  that  the  agreement  to  sell  ought  to  be

executed in favour of the buyer directly and that at the time of executing the agreement,

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the buyer had paid  80,000/-.  This amount was returned by Sanjay.   Surendra also₹

alleged that the buyer requested for cancellation of the Power of Attorney which was

given to Sanjay.  Sanjay requested Surendra for an advance in the sum of  80,000/- for₹

the expansion of his business,  which he was carrying on under the style of the first

respondent proprietorship concern.  Sanjay assured the plaintiff that he would return the

amount shortly.  Accordingly,  80,000/- was given by the plaintiff (Surendra) to Sanjay.₹

3. Sanjay issued three post-dated cheques for the sum of  16,500/-,  3,500/- and₹ ₹

60,000/-  all dated 16.02.1990, drawn on the State Bank of India, Indore Branch.₹

Before the due date, Sanjay requested the plaintiff (Surendra) not to present the cheques

for collection for a few months; this request was complied with. The cheques, when

presented,  were  returned  by  the  banker  to  the  plaintiff  (Surendra).  In  these

circumstances, the suit for recovery of a sum of  80,000/- (together with interest @₹

12% till  the date of  the filing of  the suit  and for  future interest,  consequently,  was

instituted.   

4. Sanjay, in his written statement denied the suit allegations.  However, the written

statement did not dispute the execution of the GPA or that he had entered  - on behalf of

the plaintiff,  into the agreement  to  sell  with Niranjan Singh Nagra and obtained ₹

50,000/-  as  earnest  money.   The  written  statement  also  did  not  deny  that  Sanjay

requested Surendra for a loan of  80,000/- which was given to him.  However, in the₹

defense, Sanjay alleged that Surendra asked him to return the amount on the same day

i.e.  30.01.1990,  which  he  did.   The  written  statement  then  alleged  that  Sanjay

repeatedly asked for the return of the three cheques but being the maternal uncle, the

plaintiff insisted on keeping the three instruments, and prevailed upon him as the elder

relative.  It was also alleged in the written statement that Sanjay was assured that the

cheques would be returned on the next day; however they were never returned.

5. After framing issues and recording evidence, the trial court dismissed this suit.

The trial court was of the opinion that the evidence clearly showed that a sum of ₹

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80,000/- had been deposited by Surendra in his bank account and that this circumstance,

supported Sanjay’s plea that the amount was returned immediately.  The trial court was

also  of  the  opinion,  that  the  discrepancy  in  the  amount  received  towards  the  sale

consideration, casts doubt regarding the veracity of the plaintiff’s claim.  Aggrieved by

the dismissal of the suit, Surendra appealed to the High Court.  During the course of

appeal, two applications seeking to amend the pleading and relief clause in the plaint

were sought.  

6. The High Court after an overall reading of the evidence framed three points for

consideration, while dealing first with the applications, and then the merits: they were

firstly, the consideration of the sale of the suit property – if it was for  2,30,000/- and₹

not   1,30,000/- ;  secondly, whether such fact had to be pleaded by the plaintiff in the₹

suit and lastly, whether in the absence of such pleading, it was necessary to allow the

application for amendment.  The High Court after analyzing the nature of evidence led,

concluded that since Sanjay had admitted the signature on the agreement to sell, as well

as  the plaintiff’s  GPA, even though the document  was a photocopy,  it  could not  be

ignored.

7. The impugned judgment  also  reasoned  that  there  was  no dispute  that  another

agreement to sell was executed on 30.01.1990 by the plaintiff (Surendra) in favour of

Niranjan Singh Nagra, where the sale consideration was showed to be  1,30,000/-.  The₹

sale  was  also  undisputedly  completed  on  31.01.1990.  It  was  held  that  in  these

circumstances, the plaintiff had  1,80,000/- as on 30.01.1990, which clearly showed₹

that the real consideration for the transaction was  2,30,000/-, though the document₹

subsequently  executed  showed  a  lesser  value  as   1,30,000/-.  The  court  noted  that₹

Surendra had not relied upon these circumstances to seek  relief on the basis of the

contract (for sale).  The High Court then reasoned that these documents were needed

only to consider their impact vis-a-vis the defendants’ claim for return of  80,000/-.₹

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8. The High Court in its impugned judgment upheld the plaintiff’s contention that he

possessed sufficient amount to advance   80,000/- to Sanjay.  He also had sufficient₹

funds to deposit amounts in the bank account, for which statement of account, Ex. D/1

was  on  the  record.   Given  that  the  real  consideration  for  the  transaction  was  ₹

2,30,000/-, the fact that some amount was deposited in the bank account, did not in any

way detract from the suit claim.  The court, therefore, held that the deposit  by itself

could not be relied on, that the amount was paid to Sanjay who issued three cheques.

The High Court then concluded and held as follows:-

“15. Since  it  is  not  disputed  by  the  respondents  that  the  loan amount of Rs 80,000/- was given by the appellant on 30/01/90 and the  dispute  is  only  whether  the  amount  was  returned  by  the respondent  no.  2  to  the  appellant  on  that  very  day  on  not,  the important  documents  are  Ex.  P/1  to  P/3,  the  cheques  and  the receipt of Rs 60,000/- Ex. P/9, which was issued by the respondent no. 2 in favour of appellant. When the amount was given back by the respondent no. 2 to the appellant on that very day then it  is surprising why the receipt Ex. P/9 and the cheques Ex. P/1 to P/3 were not taken back by the respondent no. 2 from the appellant and why the receipt of refund of the amount was not taken. Apart from this there is nothing on record to show that why the cheque of Rs. 30,000/- Ex. P/8 was given by the respondent no. 2 to the appellant. These all documents goes to show beyond doubt that the appellant who is maternal-uncle  of  the respondent  no.  1 lent  a sum of  Rs 80,000 to the Respondent no. 2, in lieu of which the cheques EX. P/1  to  P/3  were  not  taken  back  by  the  respondent  no.  2   as proprietor of respondent no. 1 and the amount was returned by the respondents to the appellant.

16. In  view  of  this  appeal  stands  allowed.  The  judgment  and decree dated 22/07/95 passed by learned XIIIth Additional District Judge, Indore in Civil Suit No. 98-B/93 is set aside. Respondents are directed to pay Rs 80,000/- alongwith interest @ 6% p.a w.e.f. 16/02/90  with  a  period  of  two  months,  failing  which  the respondents  shall  be  liable  to  pay  the  interest  on  the  aforesaid amount @ 12% per annum. Respondents shall also be liable for the costs through out.”

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9. It is argued by Mr. Santosh Kumar, learned counsel for the appellant that the high

court committed an error in appreciation of the evidence and that the plaintiff had come

forward with an entirely new case, in the cross-examination which was not backed by

the pleadings.  He further submitted that the impugned judgment was in error because it

placed  reliance  on  inadmissible  documents  and  rendered  findings  exclusively  based

upon their appreciation.  It was highlighted, that the impugned judgment was conjectural

inasmuch  as  the  court  connected  the  receipt  issued  by  Sanjay  with  the  agreement,

showing the sale consideration to be  2,30,000/-.  It was emphasized that the original₹

agreement was never produced or made part of the record.  

10. Mr. Santosh Kumar next submitted that being a prohibited transaction, the story

put forward by the plaintiff that the real value of the sale of  2,30,000/- as against the₹

declared value of  1,30,000/- could not be countenanced by the court as it was contrary₹

to the public policy. He also relied on the Benami Transactions (Prohibition) Act, 1988

(hereafter “the Benami Act”) to submit that any plea based on benami transactions could

not be canvassed in courts. It was argued that as on 30.01.1990 or soon thereafter, the

plaintiff  did  not  have  any  amount  in  his  bank  account.  Counsel  lastly  argued  that

consistent position of the defendant, Sanjay was that the three cheques were issued to

the plaintiff at the latter’s insistence and that despite repeated requests, they were not

returned. This was clearly stated in the written statement and was consistently reiterated

during the course of the oral deposition.  The high court, it was urged, fell into error in

completely overlooking this aspect.

11. It is submitted on behalf of the plaintiff/respondent that the basis for dismissal of

the  suit  by  the  trial  court  was  that  the  amount  in  question  was  part  of  the  sale

consideration of a sum of  1,30,000/- for the plot belonging to the respondent which₹

has been sold and from which  50,000/- had been received earlier, and the remaining ₹ ₹

80,000/- was received on the day when the loan had been given to the appellants. The

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trial court observed that the sum of  80,000/- was received by the plaintiff and was₹

deposited in the bank account on the next day, i.e. 31.1.1990. It is further argued that

when this question was put to the plaintiff, it was explained that the entire transaction

was for a consideration of  2,30,000/- and not  1,30,000/- and therefore, the amount₹ ₹

deposited  in  the  bank  account  had  nothing  to  do  with  the  loan  advanced  to  the

appellants.

12. It is argued that the first agreement dated 03.7.1989 was executed for a sum of ₹

2,30,000/-  by  the  first  appellant  himself  on  behalf  of  the  plaintiff,  and  in  fact  that

agreement was put to the first appellant/defendant in cross-examination where he stated

that:  

“…..it is corrected that my signature appears below at page no. 3 of stamp papers purchased on 3rd July. Witness himself stated that no any such agreement had been executed. Stamp paper only had  been  purchased  in  the  name  of  fair  communication.  My signature appears for A to A on the page no. two and three annexed with  the  stamp  paper  dated  3rd July  1989’ (Copy  of  the  said agreement  dated  3.7.1989  is  Annexed  herewith  and  marked  as Annexure R-2)

13. It is urged that the first appellant admitted his signature on the said document in

his  cross-examination;  thus,  clearly,  the  fact  was  established.  The  original  of  the

document was with the buyer of the property and this fact was admitted by the appellant

in his statement;  therefore, its  photocopy was produced. The document was relevant

only to show that the plaintiff had the funds to advance to  Sanjay and when extension of

the loan to the appellant was admitted, the document is of no consequence.

14. What can be gleaned from the above narrative and submissions is that the plaintiff

wished to dispose of his property at Indore, where the second defendant, nephew resided

and  carried  on  business.  Since  the  parties  were  related,  the  plaintiff  relied  on  the

defendant and constituted him as his attorney. An agreement to sell was entered into for

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the sale of the said property (a flat) on 03.07.1989: this fact is not disputed; equally, it is

undisputed  that  the  consideration  for  the  flat  in  terms  of  this  agreement  was  ₹

2,30,000/-. This was admitted by Sanjay, the defendant in his deposition. It is also not

disputed that the original agreement with the purchaser (who ultimately finalized the

transaction),  is   dated  i.e.  03.07.1989.  A  second  agreement  was  entered  into  on

30.11.1989. However, this showed a lesser consideration of  1,30,000/-. It is also not₹

disputed  that  Sanjay,  the  second  appellant  received   50,000/-  from the  buyer  and₹

handed over that amount to Surendra. Furthermore, on 29.01.1990, Surendra went to

Indore  at  Sanjay’s  behest  to  conclude  the  transaction  directly  with  the  purchaser,

Niranjan Singh Nagra. He also received the amount agreed. Also, there is no dispute that

Sanjay wanted  80,000/- and was given it, by his uncle, the plaintiff, Surendra, for the₹

purpose  of  expansion  of  his  business.  This  is  where  the  version  of  the  two parties

diverges: Sanjay alleged that the amount was returned the next day and that Surendra did

not return the post dated cheques issued by him; Surendra alleges that Sanjay in fact

never returned the amount. The trial court was persuaded by arguments on behalf of

Sanjay and the circumstance that the sum of  80,000/- was deposited in Surendra’s₹

account on the same day. The High Court, however, took note of the plaintiff’s stand,

with  respect  to  the real  consideration,  which was  2,30,000/-  as  against  what  was₹

shown in the document,  to say that the amount deposited in Surendra’s account had

nothing to do with the money lent to Sanjay.  

15.   The defendant/appellants  arguments are two-fold:  one,  that  the document  on

which  the  High  Court  returned  its  findings  was  a  photocopy  and  was  therefore,

inadmissible; and two, that the question whether the sale consideration was  2,30,000/-₹

or  1,30,000/- could not have been gone into, since that argument was based on a₹

prohibited transaction, outlawed by the Benami Act.

16. As far as the first question goes, this court notices that the plaintiff had put the

matter, during the course of cross examination, to the appellant/defendant. The latter,

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unsurprisingly,  admitted the document,  despite the fact that it  was a photocopy.  The

plaintiff had argued that the original of that document was with the purchaser: this was

not denied. Once these were admitted, the plaintiff could not be faulted for seeking a

consequential amendment, that was purely formal, to back his argument that there was

sufficient money, after lending  80,000/- to the defendant, which was deposited in his₹

account. The appellant’s  argument,  in  the  opinion of  this  court,  is  insubstantial:  the

impugned judgment cannot be faulted on this aspect.

17. Now as to the second argument by the appellant, which is that the plaintiff’s plea

that the real consideration for the sale was  2,30,000/-  entails returning findings that₹

would uphold a plea based on a benami transaction, this court is of the opinion that the

argument is unmerited. Benami is defined by the Act as a transaction where

(a) where a property is transferred to, or is held by, a person, and the consideration for

such property has been provided, or paid by, another person; and  

(b) the property is held for the immediate or future benefit, direct or indirect, of the

person who has provided the consideration.

Benami  transactions are forbidden by reason of Section 3; no action lies, nor can any

defense in a suit be taken, based on any benami transaction: in terms of Section 4 of the

Act.  

18. In the opinion of this court, the argument that the plaintiff’s plea regarding the real

consideration  being  barred,  has  no  merit.  The  plaintiff  did  not  claim return  of  any

amount from the buyer; the suit is  not based on any plea involving examination of a

benami transaction. Besides, the plaintiff is not asserting any claim as benami owner, nor

urging  a  defense  that  any  property  or  the  amount  claimed  by  him   is  a  benami

transaction. Therefore, the defendant appellant’s argument is clearly insubstantial.

19. The relevant provisions of law, i.e. Sections 3 and 4 of the Benami Act, read as

follows:

“Prohibition of benami transactions.

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3. (1) No person shall enter into any benami transaction.

(2)Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.

(3) Whoever enters into any benami transaction on and after the date of  commencement of  the Benami Transactions (Prohibition) Amendment Act, 2016, shall, notwithstanding anything contained in sub-section (2),  be punishable in accordance with the provisions contained in Chapter VII.]

(4) [***]

Prohibition of the right to recover property held benami.

4. (1) No suit, claim or action to enforce any right in respect of any property  held  benami  against  the  person  in  whose  name  the property  is  held  or  against  any  other  person  shall  lie  by  or  on behalf of a person claiming to be the real owner of such property.

(2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held  or  against  any  other  person,  shall  be  allowed  in  any  suit, claim or action by or on behalf of a person claiming to be the real owner of such property…”

20. In Valliammal (D.) by L.Rs v Subramaniam & Ors. (2004) 7 SCC 233, this Court

held that the onus of establishing that a transaction is benami is upon one who asserts it:

“13. This Court in a number of judgments has held that it is well established that burden of proving that a particular sale is benami lies on the person who alleges the transaction to be a benami. The essence  of  a  benami transaction is  the intention of  the party  or parties concerned and often, such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of the serious onus that rests on him, nor justify the acceptance of mere conjectures or surmises, as a substitute for proof. Refer to Jaydayal Poddar v. Bibi Hazra, Krishnanand Agnihotri v. State of M. P., Thakur Bhim Singh v. Thakur Kan Singh, Pratap Singh v. Sarojini  Devi  and  Heirs  of  Vrajlal  J.  Ganatra  v.  Heirs  of Parshottam S. Shah. It has been held in the judgments referred to above that the question whether a particular sale is a benami or

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not,  is  largely  one  of  fact,  and for  determining the  question  no absolute  formulas  or  acid  test,  uniformly  applicable  in  all situations  can  be  laid.  After  saying  so,  this  Court  spelt  out  the following  six  circumstances  which  can  be  taken  as  a  guide  to determine the nature of the transaction :

(1) the source from which the purchase money came ;

(2) the nature and possession of the property, after the purchase ;

(3) motive, if any, for giving the transaction a benami colour ;

(4) the position of the parties and the relationship, if any, between the claimant and the alleged benamidar ;

(5) the custody of the title deeds after the sale ; and

(6) the conduct of the parties concerned in dealing with the property after the sale. (Jaydayal Poddar v. Bibi Hazra1, SCC p 7, para 6).

14. The above indicia are not exhaustive and their efficacy varies according to the facts of each case. Nevertheless, the source from where the purchase money came and the motive why the property was  purchased  benami  are  by  far  the  most  important  tests  for determining whether the sale standing in the name of one person, is in reality for the benefit of another. We would examine the present transaction on the touchstone of the above two indicia.

*** *** *** 18. It is well-settled that intention of the parties is the essence of the benami transaction and the money must have been provided by the party invoking the doctrine of benami. The evidence shows clearly that  the  original  Plaintiff  did  not  have  any  justification  for purchasing the property in the name of Ramayee Ammal. The reason given by him is not at all acceptable. The source of money is not at all  traceable  to  the  Plaintiff.  No  person  named in  the  plaint  or anyone else was examined as a witness. The failure of the Plaintiff to examine the relevant witnesses completely demolishes his case.”

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These observations were reiterated in  Binapani Paul vs. Pratima Ghosh & Ors.

2007 (6) SCC 100.

21. In the present case, the appellants did not prove that the transaction (to which they

were not parties) was benami; on the contrary, the appellant’s argument was merely that

the transaction could not be said to be for a consideration in excess of  1,30,000/-: ₹ in

the context of a defense in a suit for money decree. The defendant/appellants never said

that the plaintiff or someone other than the purchaser was the real owner; nor was the

interest in the property, the subject matter of the recovery suit. Therefore, in the opinion

of this court, the conclusions and the findings in the impugned judgment are justified.  

22. For the foregoing reasons, this court is of opinion that there is no merit in the

appeal; it is accordingly dismissed, without order on costs.

.…....................…….....................J.                                                  [INDIRA BANERJEE]     

………….......................................J.                                                        [S. RAVINDRA BHAT]

New Delhi, January 20, 2020.