THE HONOURABLE SMT. JUSTICE P.SREE SUDHA
APPEAL SUIT No.1448 of 1998 & Tr.A.S.No.1523 of 2001
JUDGMENT:
This appeal suit is filed by the plaintiffs in the suit in O.S.No.43 of 1992. One N.Durga Bhavani and N.Saraswathi filed suit in O.S.No.43 of 1992 against N.V.Rama Raju S/o. N.V.S.Raju aged 29 years for declaration and recovery of possession. The defendant in the suit i.e, M/s. Sri Venkateshwara Engineering Works represented by its proprietor N.V.Rama Raju filed suit for perpetual injunction in O.S.No.679 of 1991. As the parties and properties are one and the same, O.S.No.43 of 1992 is comprehensive suit both the matters were clubbed and the Common Judgment was passed on 10.04.1998.
2. A.S.No.1448 of 1998 filed and numbered here in High Court aggrieved by the order dated 10.04.1998 passed in O.S.No.43 of 1992 on the file of the I - Additional Senior Civil Judge, Ranga Reddy District.
3. While ordering Tr.C.M.P.No.214 of 1999 this Court directed the Registry to club A.S.No.78 of 1998 on the file of I - Additional District Judge, Ranga Reddy District be transferred to this High Court and to be heard along with A.S.No.1448 of 1998.
4. A.S.No.78 of 1998 is transferred to High Court and renumbered as Tr.A.S.No.1523 of 2001 and connected with A.S.No.1448 of 1998.
5. Tr.A.S.No.1523 of 2001 is filed by plaintiffs in the suit to set aside the decree and Judgment in O.S.No.679 of 1991 dated 10.04.1998.
6. The trial Court examined P.Ws.1 to 5 and marked Exs.A1 to A17(a) and also Ex.X1 and examined D.W.1 and marked Exs.B1 to B12. Considering the entire evidence on record the trial Court dismissed O.S.No.43 of 1992 and decreed O.S.No.679 of 1991. Aggrieved by the said order plaintiffs preferred an appeal. Appellants mainly contended that in the cross-examination of the defendant, he clearly admitted that plaintiffs in the suit never interfered with his possession, as such there is no cause of action and the suit filed by the defendant ought to have dismissed. The appellants also stated that Benami (Prohibition Transaction Act, 1988) is not 2 applicable to the facts of the present case as the factory established in the year 1984 and the said Act is not retrospective in effect. Though, the trial Court believed the version of the defendant that he invested entire amount for establishing the suit unit, failed to observe that the suit unit belongs to the plaintiffs. The trial Court erroneously believed the version of the defendant that he is the proprietor of the suit unit though he has no capacity or source of income to establish the unit. Though the defendant failed to produce the original books the trial Court erroneously gave finding that he is the proprietor of the suit unit, in fact he was only an employee. The trial Court erroneously held that husband of the plaintiff has withdrawn his guarantorship in respect of the suit unit, but he was still continuing as guarantor. Therefore, requested the Court to allow the appeal by setting aside the Judgment and decree dated 10.04.1998.
7. Heard arguments of both sides, perused the entire record. The case of the plaintiffs in O.S.No.43 of 1992 before the trial Court is that the husband of the first plaintiff is executive engineer in E.C.I.L with technical experience. The husband of the second plaintiff is the Technical Officer in Marine 3 Communication Engineering Works, Kushaiguda and both of them are brothers. The defendant is the son of the elder brother of the husbands of the plaintiffs. The defendant secured diploma in Mechanical Engineering and staying in his native place without any employment. As such, the husband of the first plaintiff brought him to the Hyderabad and got him employment as instructor in private I.T.I with a salary of Rs.500/- per month in December, 1982. The defendant requested the husbands of the plaintiffs to provide employment with higher salary. As such, they thought of starting a small scale unit utilizing his services. The husband of the second plaintiff sold his house and contributed Rs.40,000/- to the industry and the husband of the first plaintiff managed to pay the rest of the amount or payment of 50% of cost of the land for allotment in industrial area, Mallapur. The application was submitted in the name of Sri Venkateswara Engineering Works showing the defendant as proprietor and he also gave application for loan under Gramodaya scheme and Rs.25,000/- loan was sanctioned by the State Bank of India, Nacharam branch. Initially unit was started in the plaintiffs' house by purchasing raw material for Rs.25,000/- and the loan of the S.B.I is repaid by the husbands of the plaintiffs. They also paid 4 balance cost of the land to A.P.I.I.D.C. The defendant discontinued the job in Venkateswara Engineering Works and worked somewhere as employee and again joined as employee in Venkateswara Engineering Works from January, 1989 on salary of Rs.1500/- per month.
8. The Andhra Pradesh State Finance Corporation sanctioned loan of Rs.6,38,000/- and husbands of the plaintiffs invested Rs.3,75,000/- towards the promoters share. When defendant got marriage in the year 1990 at the instigation of his father - in - law, he started quarrelling with the husbands of the plaintiffs and filed cases against them. Plaintiff No.1 and her husband were living in the factory premises supervising the work of the factory. The husband of the first plaintiff stood as a guarantor for the loan obtained in the name of Sri Venkateswara Engineering Works, as such the bank issued notice to the defendant and the husband of the first plaintiff. The plaintiffs issued legal notice dated 25.11.1991 to the defendant. The defendant filed O.S.No.679 of 1991 for perpetual injunction, as such they filed suit for declaration and injunction.
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9. In the written statement filed by the defendant, he stated that he is an Engineering diploma holder and unemployed. He applied for allotment of plot at Mallapur and got plot No.72 from A.P. Industrial Infrastructure Corporation in April, 1984. He obtained a loan of Rs.25,000/- from S.B.I.Nacharam under Gramodaya Scheme for running refractory Fire Bricks Industry. He also applied loan from A.P. State Financial Corporation. The turnover of the defendant increased day by day and by the end of 1989 it was about Rs.5,00,000/- per year. The husbands of the plaintiffs are the paternal uncles and they helped in establishing the industry and securing loans. He borrowed Rs.5,000/- from the husband of the first plaintiff and Rs.17,000/- from the husband of the second plaintiff as hand loan and repaid the same by way of cheque and same was also acknowledged by them. The State Bank of India, Nacharam sanctioned a loan of Rs.1,75,000/- in April, 1989. The husband of the first plaintiff stood as a surety. He further stated that husbands of the plaintiffs used to visit the workshop and take away the amount available in the workshop and they also developed jealousy against him. In May and June 1991, they started claiming industry as their own and asked him to leave the industry, but the same was refused by the defendant. They 6 beat the defendant on 21.06.1991, he gave police complaint and also filed O.S.No.671 of 1991 against them in which he filed I.A.No.1535 of 1991 for temporary injunction. Later plaintiffs also filed the suit and plaintiff No.1 has withdrawn his guarantee and thus instigated the bank to file suit for recovery of amount in O.S.No.161 of 1992. The claim of the plaintiffs is hit by Sections 3 to 5 of the Benami Transactions (prohibition) Act 1988.
10. The trial Court observed that there is no dispute regarding the fact that plot No.72 admeasuring 3007 Sq. yards situated in Industrial Development area which was allotted in the name of defendant as proprietor and the loan was also sanctioned in his name under Gramodaya Scheme. Along with the husband of the first plaintiff, 4 other witnesses were examined on behalf of the plaintiffs including the father of the defendant/P.W.3 and Chartered Accountant/P.W.5. Considering the evidence on record the trial Court held that there may be some understanding between the parties but the plaintiffs are not entitled to any relief in the absence of any partnership or other document. Even if it is assumed that husbands of the plaintiffs purchased the suit and erected machinery, the 7 Benami Transactions (Prohibition) Act 1988 comes into play. According to Section 4(1) of the Benami Transaction (Prohibition) Act, 1988, the suit filed by the plaintiffs for declaration and recovery of possession is not maintainable on the ground that they are real owners, as such O.S.No.43 of 1992 is dismissed and injunction was granted as prayed for in O.S.No.679 of 1991.
11. The case of the plaintiffs is that defendant is the son of elder brother of the plaintiffs husbands, they brought him from their native village and started a unit in his name and he gave an application for allotment of plot and also for securing loan, but in fact he was only working as employee in the unit initially for a salary of Rs.500/- per month and later for a salary of Rs.1500/- per month. Though, Advocate Commissioner was appointed to seize the account books available in the residence of the defendant and also in the factory premises, no books were seized from the factory premises, but the books from the house of the defendant are only seized and to that effect he also filed a report under Ex.X1. P.W.3 is the father of the defendant. He stated that husbands of the plaintiffs are his real brothers. The defendant is his son and he completed diploma. P.W.1 brought 8 him to Hyderabad and started Sri Venkateswara Engineering Works in the name of his son in the year 1982. But, the defendant after his marriage in the year 1990 at the instigation of his father - in - law rebelled against the husbands of the plaintiffs and claiming the Venkateswara Engineering Works as his exclusive property. He further stated that he is not capable of investing and the defendant had no resources. P.W.1 invested all the necessary amounts for the Venkateswara Engineering Works. He also requested P.W.2 and Venkataramaraju to settle the dispute between the plaintiffs and the defendant as his son started picking up quarrel with the husbands of the plaintiffs after his marriage. He further stated that the plaintiffs filed suit only after filing of the suit by his son and thus his evidence is in support of the plaintiffs but not in favour of defendant. Though, he stated in the cross - examination that he was not in talking terms with his son, it cannot be stated that he deposed falsely against his son in the Court. The evidence of P.W.3 is trustworthy and he clearly stated that he has no source of income for investing amount, only P.W.1 invested in the name of his son.
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12. P.W.2 is the mediator. He also stated that husbands of the plaintiffs invested the amount. He requested auditor to give account books and papers to the defendant and accordingly auditor handed over all the account books necessary to the defendant. When he made efforts for mediation of both parties, defendant did not turn up. In the cross-examination he stated that he was working in the National Institute of Rural Development. The defendant started engineering works in the year 1984 in Hyderbad. On enquiry he came to know that both parties are jointly doing business. He also seen the account books in which the investment of the husbands of the plaintiffs are found. He further stated that father - in - law of the defendant is his classmate during 1956 - 58.
13. P.W.1 stated that initially they started the unit in the premises of their house situated at K.P.H.B. Colony, Moulali. The amount was entirely contributed by him and the husband of the plaintiff No.2. Initially defendant worked in Electro mechanical engineer at Kushaiguda with a salary of Rs.500/- per month and worked till 1986. Later he left the job and joined in Indian duplicate company with salary of Rs.800/- and worked till 1988. He further stated that the defendant has no 10 source of income and brother of the defendant was also working in the factory as an employee. When the State Bank of India, Nacharam Branch sanctioned working capital to the company P.W.1 stood as guarantor and created equitable mortgage by depositing his title deeds.
14. The Chartered Accountant who is examined as P.W.5 stated that the estimated total investment required for the factory is Rs.14,00,000/-. He stated that Income Tax return was filed in the name of the proprietor. The company incurred loss of Rs.3,00,000/-. He also stated that he is not aware of the personal investment made by the parties. He further stated that P.W.1 is maintaining katcha account book and there is no regular account book.
15. D.W.1 during his cross-examination admitted that the allotment of plot was cancelled in the year 1987 for not paying the amount and it was restored when P.W.1 paid Rs.52,000/-. He clearly admitted that plaintiffs never interfered with the possession/business and he gave complaint against P.W.1 in the year 1991. He further admitted that the land was allotted in the year 1991 and it was registered in his name in the year 11 1995. He further stated that he did not know whether A.P.G.S.C put the stamp on the account books. The service certificate of D.W.1 dated 10.01.1992, in which it was stated that he was Fitter Instructor from 01.10.1982 to 15.03.1984 with the salary of Rs.575/- per month and in another service certificate dated 27.12.1991 which shows he worked as superviser from 01.02.1985 to 30.04.1986 with the salary of Rs.500/- per month was filed before this Court. P.W.1 also filed several promissory notes executed by him.
16. The counsel for the appellants relied upon the Judgment passed by the Hon'ble Supreme Court in the case of Probodh Chandra Ghosh Vs. Urmila Dassi and another,1 in which it was held that Section 4 of the Benami Transaction Act was not expressively made retrospective by the legislature. The transaction in other words may be of the past but the suit, claim or action would not lie subsequent to the coming into force of the Act. The counsel for the appellants contended that the unit was established in the year 1984 prior to the coming into effect of the Benami Act on 19.05.1988 and thus the said Act has no retrospective effect, the provisions of the Act are not 1 2000(6) SCC 526 12 applicable to them. The counsel for the appellants also relied upon the Judgment passed by the High Court of Andhra Pradesh and Telangana at Hyderbad in the case of Brughumalla Seethamahalakshmi Vs. Brughumalla Raghunayaka Gupta and another,2 in which it was held as follows:
"10. There used to be a controversy as to whether Section 4 of Benami Act has retrospective effect in the sense whether the Act applies to benami transactions entered into prior to the Act. This controversy was resolved by Apex Court in R. Rajagopal Reddy Vs. P.chandrasekharan. The scope and ambit of Section 4 and its retrospectivity are dealt with in the said decision. The said decision was followed in a subsequent judgment in Samittri Devi Vs. Sampuran Singh.
11. As per the above precedential jurisprudence, it is clear that Section 4 is prospective in operation i.e. no suit or written statement contending that the transaction relating to property is benami is maintainable after the advent of benami Act. However, this section has limited sphere retrospectivity. Though the original transaction took place prior to the advent of the Act, still, a suit or written statement contending that the said transaction was benami cannot be taken after the Act came into force. To this extent only, Section 4(1) & (2) of the Act were held retrospective. It would mean, if a benami transaction and institution of the suit or filing of written statement, both were taken place prior to the advent of the Act, Section 4 of the Act would have no application."2
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17. As per the analysis of the evidence on record, this Court finds that the husbands of the plaintiffs brought defendant to the Hyderabad and got established Sri Venkateshwara Engineering Works in the name of the defendant and he was shown as proprietor, plot was allotted in his name and loan was also obtained in his name, but the loan was repaid by the husbands of the plaintiffs and they supervised the work by staying in the factory premises. The defendant worked only as an employee in the factory with the salary of Rs.1500/- per month. After his marriage in the year 1990 at the instance of his father - in - law, as he was shown as proprietor of the suit unit, he claimed ownership, but it was admitted by him that P.W.1 gave guarantee. When he addressed letter to the bank withdrawing his guarantee, bank filed suit for recovery against him. But, it was stated by the appellants that still they are continuing the guarantee. The main contention of the appellants is that the trial Court failed to declare that the unit belongs to them. The defendant admittedly stated in his cross-examination that the plaintiffs never interfered with his possession, as such suit filed by him for temporary injunction is not maintainable, but the trial Court granted decree in his favour and it is liable to be set aside. Regarding the declaration of the unit in the name 14 of the plaintiffs, though the evidence on record including the evidence of D.W.3 clearly establishes that unit was established by the husbands of the plaintiffs in the year 1984, the suit was filed in the year 1992 after the commencement of the Benami Transaction (Prohibition) Act, 1988. As such, the suit filed by the plaintiffs for declaration is hit by the provisions of the Benami Transaction (Prohibition) Act, 1988 and thus they are not entitled for declaration in view of Section 4 of the Benami Transaction (Prohibition) Act, 1988 the said Section was alone made as retrospective, but in the citation relied upon by the appellants it was held that unless the property was purchased, suit was filed and written statement was filed prior to the enactment it cannot be said that provisions of Benami Transaction Act are not applicable to the same. In this case, the property was purchased in the year 1984 prior to the Benami Transaction Act, but the suit was filed only after the enactment of the Benami Transaction (Prohibition) Act, 1988, in the year 1992 as such it was rightly held by the trial Court that plaintiffs are not entitled for the relief of declaration as it is hit by the Benami Transaction (Prohibition) Act, 1988. 15
In the result, A.S.No.1448 of 1998 merits no consideration and is dismissed by confirming the order of the trial Court in O.S.No.43 of 1992 and Tr.A.S.No.1523 of 2001 is allowed by setting aside the order of granting injunction in O.S.No.679 of 1991 dated 10.04.1998.
Miscellaneous petitions pending, if any, shall stand closed.
_________________________ JUSTICE P.SREE SUDHA DATED: 01.12.2022 tri 16 THE HONOURABLE SMT. JUSTICE P.SREE SUDHA APPEAL SUIT No.1448 of 1998 & Tr.A.S.No.1523 of 2001 DATED: 01.12.2022 TRI 17