Peeyush Aggarwal vs Sanjeev Bhavnani
2013 Latest Caselaw 2761 Del

             *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                           Date of decision: 4th July, 2013

+                              CS(OS) 1026/2010
       PEEYUSH AGGARWAL                                     ..... Plaintiff
                   Through:              Mr. Sachin Chopra with Mr.
                                         Sarvpreet S. Chawla & Mr. Anuj
                                         Tyagi, Advs.

                                     Versus
       SANJEEV BHAVNANI                                 .....Defendant
                   Through:              Mr. N. Kumar with Ms. Shelly
                                         Dutta, Advs.
                                         Mr. Kamal Bansal, Adv. for D-
                                         2&3.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J

1.

The plaintiff claims:

(i) that M/s Visesh Infotecnics Ltd. (VIL) is a public limited

company;

(ii) that the defendant was a Joint Managing Director of the said

company holding about 11,000 shares in his name;

(iii) that in the year 2004, the plaintiff purchased the majority shares

in the said company and took over the management thereof

from the erstwhile management and assumed the position of

chairman of the said company;

(iv) that the plaintiff, for the sake of continuity, allowed the

defendant to continue with the company and gave him the

position of Managing Director in the company making him the

senior most official of the company;

(v) that the plaintiff was also in management of another company

viz. MPS Technosoft Ltd. (MPS);

(vi) that the defendant by virtue of being the Managing Director in

VIL also started advising the plaintiff about the affairs of MPS

and suggested various expansion plans / new business ventures

for VIL as well as MPS;

(vii) that in April, 2004, the defendant represented to the plaintiff

that he was facing difficulties in convincing investors and

clients that he was stable in MPS and VIL as the investors and

clients wanted assurance that he was stably stationed with MPS

and VIL; the defendant thus suggested that some of the shares

of MPS be parked in his name and also represented that it was a

common market practice to keep part of shareholding with

senior officials of the company and that the same would make it

easier for him to convince the clients / investors and impress

them with his abilities and skills about his stability in MPS and

VIL and help in bringing new business to MPS and VIL;

(viii) that on such representations of the defendant, the plaintiff

agreed to park / keep-in-trust shares of MPS with the defendant

and on 27.04.2004 transferred part of his equity in MPS being

31,97,150 shares of MPS in the name of the defendant; it was

decided that the said shares would be parked with the defendant

in-trust / as custodian and that the defendant would return the

same to the plaintiff whenever the plaintiff will demand the

same or in the event of disassociation of the defendant from

MPS or VIL;

(ix) that of the aforesaid 31,97,150 shares so transferred to the

defendant, 9,97,150 shares were transferred from the holdings

of the plaintiff through Omkam Developers Pvt. Ltd. (Omkam)

and 22,00,000 shares were transferred from the holding of the

plaintiff through BGR Finvest Pvt. Ltd. (BGR);

(x) that the aforesaid transfer of shares was subsequently brought to

the notice of the Board of Directors of MPS as it was

mandatory to inform the Board of Directors of MPS as to why

no stamp duty was being paid on the transfer; as the shares

were only being parked with the defendant in-trust / as

custodian, no consideration was paid to the plaintiff;

(xi) that thereafter, on the suggestion of the defendant and after

complying with the formalities, in or about July, 2005 MPS was

merged with VIL and the defendant was issued 23,97,863

shares of VIL against the aforesaid 31,97,150 shares of MPS

which were in his name, though under the arrangement

aforesaid;

(xii) that on 07.11.2005, the defendant gave an interest free loan of

Rs.34,50,000/- to VIL;

(xiii) that VIL on 18.02.2006 issued dividend @10% and accordingly

dividend of Rs.23,97,863/- was issued with respect to the shares

aforesaid in the name of the defendant, in the name of the

defendant; however since the defendant had no right thereto, it

was decided that the defendant would deposit the same sum

amount of Rs.23,97,863/- with VIL (Para No.17);

(xiv) that the defendant thus became liable to pay Rs.23,97,863/- to

the plaintiff as the dividend had been issued on the shares that

were property of the plaintiff (Para No.18);

(xv) that the defendant however failed to do so and ultimately on

much persuasion vide cheque dated 17.05.2006 transferred a

small part of the dividend amount of Rs.5,50,000/- leaving a

balance of Rs.18,47,863/-;

(xvi) that the defendant thereafter suggested that the loan of

Rs.34,50,000/- given by him to VIL could be squared off

against the said dividend, with VIL paying the balance of

Rs.16,02,137/- to the defendant and which was agreed to by the

plaintiff;

(xvii) that all the transactions aforesaid were oral;

(xviii) that VIL accordingly vide cheque dated 28.03.2007 paid a sum

of Rs.16,50,000/- to the defendant in full and final settlement of

the loan given by the defendant; however on the asking of the

defendant, the said cheque was issued in the name of Mr. Anil

Chuttani from whom the defendant claimed to have arranged

the loan;

(xix) that several projects initiated by the defendant resulted in huge

and continuous loss to the plaintiff and the relationship between

the defendant and the plaintiff soured; VIL had to procure

further loans so that the projects initiated by the defendant did

not fail for want of funds; the defendant represented to the

plaintiff that he could arrange loan against the security of shares

of VIL from one Mr. Rajinder Singh Negi;

(xx) that accordingly 30,00,000 shares were transferred to Mr.

Rajinder Singh Negi or his companies and of which 10,00,000

shares were the shares out of the 23,97,863 lying in-trust with

defendant; as such between July, 2007 and November, 2007,

30,00,000 shares were transferred to Mr. Rajinder Singh Negi

or his companies including 10,00,000 shares in-trust in the

name of the defendant; this also indicates that the defendant had

no right over the said shares;

(xxi) that thereafter disputes and differences arose between the

plaintiff and the defendant and the defendant from January,

2009 became irregular in attending the office of VIL and on

02.01.2009 the plaintiff received an e-mail from the defendant

in which the defendant claimed that he had resigned from the

position of MD/CEO since 24.07.2008;

(xxii) that the plaintiff subsequently discovered that the defendant and

the said Sh. Rajinder Singh Negi were trying to take over VIL

and were manipulating the ownership of shares;

(xxiii) that the plaintiff also learnt of possible involvement of the

defendant in siphoning of GDR funds;

(xxiv) that the defendant in or about April, 2010 also served a notice

of winding up to VIL with respect to the loan of Rs.40,00,000/-

aforesaid;

(xxv) that in April, 2010 an Annual General Meeting (AGM) of VIL

was convened and notice thereof was also issued to the

defendant as he was registered as shareholder in the records;

and,

(xxvi) that the defendant at this stage wanted the plaintiff to remove

his name from the criminal complaints qua siphoning of GDR

funds and to which the plaintiff did not agree.

2. On the aforesaid pleas, the plaintiff has instituted the present suit:

(I) for declaration declaring that the plaintiff is the owner of

13,97,150 shares of VIL presently in the custody and name of

the defendant;

(II) for permanent injunction restraining the defendant from dealing

with the said shares; and,

(III) for mandatory injunction directing the defendant to transfer the

said 13,97,150 shares in favour of the plaintiff.

3. The defendant being on caveat appeared on 25.05.2010 when the suit

came up for hearing and accepted notice of the suit and gave a statement not

to transfer the shares till the next date of hearing. However vide order dated

26.08.2010, the defendant was ordered to be bound by the said statement till

further orders; the said order continues and an application of the defendant

under Order 39 Rule 4 of the CPC is pending.

4. The defendant inter alia filed IA No.8673/2010 under Order 7 Rule

11 CPC for rejection of the plaint inter alia on the ground that Omkam and

BGR which had transferred the shares in the name of the defendant had not

been impleaded as parties and the claim if any as made in the suit could be

of Omkam and BGR only and not of the plaintiff and secondly on the

ground that the suit claim was barred by limitation. It was pleaded that the

shares were transferred to the defendant on 27.04.2004 and the declaration

with respect thereto could be made within three years thereof only as

provided under Article 58 of the Schedule to the Limitation Act.

5. Vide order dated 19.01.2011, on the oral request of the counsel for the

plaintiff and in the light of the objection aforesaid of the defendant, Omkam

and BGR were found to be appropriate parties to the suit and impleaded as

defendants no.2 and 3 and an amended plaint filed.

6. Though with the aforesaid, the main ground on which the application

under Order 7 Rule 11 CPC had been filed disappeared but the same

remained pending and arguments thereon were addressed and heard on

19.02.2013. During the hearing, it prima facie appeared that the claim in

suit was hit by the Benami Transactions (Prohibition) Act, 1988. However

on the plea of the counsel for the plaintiff that the defendant had not sought

rejection of the plaint on this ground and he was as such not prepared to

address on the said aspect, opportunity in this regard was granted and after

hearing counsels on this aspect also orders were reserved.

7. Though for consideration of the aspect of maintainability of the suit

and / or under Order 7 Rule 11 of the CPC, there is no need to notice the

defence but for the sake of completeness, it is deemed proper to also record

in brief here the defence of the defendant. It is the plea of the defendant; (i)

that the present suit is a counter blast to the notice of winding up got issued

by him for recovery of the loan amount from VIL; (ii) that this is evident

from the fact that even though the defendant has been dis-associated from

VIL since 24.07.2008 but no demand with respect to the said shares was

made for about two years and has been made only after he issued the notice

of winding up; (iii) that whenever shares are held in-trust, the provisions of

the Companies Act require declaration to be filed by the trustee as well as

the beneficiary and the company is also required to disclose the said fact to

the office of the Registrar of Companies but nothing of this sort was done in

the present case; (iv) that the shares were transferred in the name of the

defendant against lawful consideration and not in trust; (v) that the aforesaid

shares of MPS were transferred to the defendant in consideration and

exchange of his transferring 8,19,652 shares of Infotecnics India Ltd. (IIL)

in favour of the plaintif; (vi) that the defendant was part and parcel of the

promoter group of VIL by virtue of merger of business and assets of IIL

under the control of the defendant, vide Memo of Understanding /

Agreement dated 25.06.2002; (vii) that VIL was originally incorporated in

the name of M/s Ultimate Software Pvt. Ltd. and its name was changed to

the present name of VIL consequent upon acquisition of business assets and

properties of the defendant‟s company IIL; (viii) that the transfer of shares

of MPS in the name of the defendant was in lieu of the transfer of business

of ILL to VIL and so as to ensure allotment of shares of VIL to the

defendant by merger of MPS with VIL; and, (ix) that both the payments of

Rs.34,50,000/- as well as Rs.5,50,000/- by defendant to VIL were towards

loan.

8. The plaintiff has filed a replication to the written statement aforesaid

but to which, for the present purpose, it is not necessary to advert to.

9. As far as the plea of the defendant seeking rejection of the plaint on

the ground of claim in suit being barred by limitation is concerned, the case

set up by the plaintiff in the plaint is of the cause of action having accrued to

him within three years prior to the institution of the suit on the defendant on

24.07.2008 resigning from VIL and the plaintiff terminating the services of

the defendant on 02.09.2009 and whereupon the defendant was under

obligation to return the shares. The counsel for the defendant has been

unable to demonstrate as to how the suit would be barred by time. Even

otherwise no merit is found in the aforesaid plea.

10. As far as the bar to the maintainability of the suit on the basis of

Benami Act is concerned, the counsel for the plaintiff has argued:

(i) that for a transaction to be benami, requires three parties i.e. a

transferor, an ostensible transferee and a real transferee from

whom the consideration flows to the transferor;

(ii) that the transaction of transfer of shares in the present case is

bilateral and not tripartite, with the transfer being from Omkam

and BGR to the defendant;

(iii) that for a transfer to be benami, there has to be a flow of

consideration which is also lacking in the present case.

Attention is invited to Minutes of the Meeting of the Board of

Directors of MPS held on 27.04.2004 (MoM) according

consent to the transfer of shares by Omkam and BGR to the

defendant and also recording the transfer to be in-trust with the

shares being returnable on demand and the shares being so

registered in the name of the defendant without payment of

stamp duty on transfer as the same was without consideration

and the beneficial interest in the shares to remain in the plaintiff

only. The said MoM also records that the Omkam and BGR had

sold the said shares to the plaintiff under blank transfer;

(iv) Reference is made to:

(I) Section 88 of the Indian Trust Act, 1882;

(II) Ouseph Chacko Vs. Raman Nair Raghavan Nair AIR

1989 Kerala 317 laying down that where there is no

transfer of property as in a sham document and when

there is no consideration for transaction, the bar of

benami does not apply;

(III) Smt. Meeradevi @ Sheela Gajanan Jagtap Vs.

Chandramohan Dattajirao Jadhav AIR 1995 Bombay

47 laying down that nominal transaction is not covered

by Benami Act;

(IV) Sh. Mahinder Singh Vs. Mr. Pardaman Singh AIR

1992 Delhi 357 laying down that burden of proof lies on

a person who asserts benami and mere assertion that the

property was purchased benami is not sufficient to

dismiss the suit at a preliminary stage;

(V) Bhargavy P. Sumathykutty Vs. Janaki Sathyabhama

AIR 1995 Kerala 42 (FB) enunciating the difference

between benami transaction and a sham transaction; and,

(VI) Canbank Financial Services Ltd. Vs. Custodian (2004)

8 SCC 355 also laying down that in a transfer involving

benami transaction three parties are involved.

11. The counsel for the defendant has been unable to argue anything

except reiterating the defence in the written statement but which is on merits.

It is also contended that the second page of the MoM has been fabricated.

12. Though the defendant in the written statement has pleaded that a

declaration is required to be made with the Registrar of Companies of

transfer of shares in-trust but neither has the counsel for the defendant urged

so during the hearing nor am I able to find anything to that effect in the

Companies Act or in any of the Rules and Regulations made thereunder.

The plea appears to have been taken on the basis of Section 153B and 187C

of The Companies Act, 1956 but provisions whereof do not apply after the

commencement of Companies (Amendment) Act, 2000 and would thus

have no application to the transaction in question.

13. The MoM which forms the fulcrum of the case of the plaintiff, on

page one thereof records receipt of share transfer request from various

persons and which were placed before the Board for transfer of shares and

contains the resolution of the consent of the Board for such transfers; in the

list of transfers mentioned on the said page is included, the transfer of

9,97,150 shares by Omkam and 22,00,000 shares by BGR, both on

27.04.2004 in favour of the defendant. It may be recorded that the said list

includes transfer of other shares also by Omkam in favour of others and no

consideration for any of the transfers is indicated. However, the second

page of the MoM, which according to the defendant has been fabricated and

subsequently added to the first page is as under:

"TRANSFER OF SHARES IN TRUST

The Board was informed by Mr. Peeyush Aggarwal, Chairman of the company that he was transferring 3,197,150 equity shares and 93,970 equity shares of MPS Technosoft Limited to Mr. Sanjiv Bhavnani Managing Director of Visesh Infotecnics Limited and Mr. Karun Jain Executive Director of Visesh Infotecnics Limited respectively, in trust, to be kept in custody and returnable on demand. The aforesaid shares were sold / transferred to Mr. Peeyush Aggarwal by his following companies, M/s Omkam Developers Pvt. Limited and BGR Finvest Pvt. Ltd. under blank transfer and the same were being given by Mr. Peeyush Aggarwal to Mr. Bhavnani and Mr. jain as above mentioned to hold these shares in trust. Further Mr. Peeyush Aggarwal requested to register the aforesaid transfer without payment of stamp duty on share transfer as the said transfers

were without consideration and beneficial interest in the shares would remain with Mr. Aggarwal. After detail discussion and deliberation on the matter, following resolution was passed unanimously.

Resolved That the consent of the Board be and is hereby accorded to the following transfers without consideration by way of trust and returnable on demand basis.

        Date of        Number of      Folio of    Transferors    Folio of     Transferee's
        Transfer         Shares      Transferor      name       Transferee       Name
                      Transferred
      27-04-2004      3,197,150      246          Mr. Peeyush   308           Mr. Sanjiv
                                                  Aggarwal                    Bhavnani
      27-04-2004      93,970         246          Mr. Peeyush   307           Mr. Karun
                                                  Aggarwal                    Jain

Resolved Further That Company Secretary of the Company be and is hereby authorized to do all acts deeds and things as may be necessary and expedient to give effect to aforesaid resolution.

VOTE OF THANKS

There being no other business to transact, the meeting concluded with vote of thanks to the Chair.

       Place: New Delhi
       Date: 19.05.2004                                               Chairman"

14. I find, that Section 153 of the Companies Act prohibits entering of

any notice of any trust, express, implied or constructive on the Register of

Members of a company required to be maintained under Section 150. What

the said Section means is that a company shall not record in its Register of

Members anything to show that as between the member whose name is

entered in the Register and any other person, there is any kind of relationship

as trustee and beneficiary and the Register is not to show and the company is

not to take notice of any such relationship. The object of this Section is to

relieve the company from any obligation to take notice of equitable interest

in its shares, that is to say, to take notice of rights of third parties in respect

of shares registered in the names of any members and to preclude any person

claiming a equitable interest in shares from treating the company as a trustee

in respect thereof. The effect of Section 153 is that a beneficiary who is not

entered as a holder of shares, has no connection with or rights in the

company in which any shares are held in-trust by him (Reference 17th

Edition 2010 of Ramaiya's Guide to the Companies Act).

15. Unfortunately neither counsel during the hearing adverted to the

aforesaid aspect.

16. I have wondered, whether not the MoM aforesaid, are not in the teeth

of Section 153 supra.

17. Section 153 bars notice of trust being entered on the Register of

Members of the company. The question which arises is whether inspite of

the said bar, the company can take notice of such trust in the resolution of its

Board of Directors preceding the entry in the Register of Members. I have

further wondered whether not taking notice of such trust in the resolution of

Board of Directors preceding entry in the Register of Members is in the teeth

of Section 153 and if the answer is in the affirmative, whether any

cognizance thereof can be taken by the Court. I must confess that my

research shows a Division Bench of Kerala High Court in Damien Subsidies

& Kuries Ltd. Vs. Jose Pulicken [2007] 137 CompCas 288 to have held to

the contrary. It was held that a company can take note of or recognize the

trust which has been brought to its notice otherwise than by entry in the

Register. The dicta laid down by Lord Coleridge, C.J. and Lord Esher M. R.

in In re Perkins [1889] 24 QBD 613 (CA) and in Fender Vs. Lushington

[1877] 6 Ch D 70 to the contrary laying down that companies have nothing

whatsoever to do with the relations between trustees and their cestuis que

trust in respect of the shares of the company were not followed and rather

the earlier dicta in S. Parameswari Vs. Kamadhenu Metal Rolling Mills P.

Ltd AIR 1971 Mad 293 laying down that a company can take notice of or

recognize any trust brought to its notice otherwise than by entry in the

Register was followed. However, what cannot be lost sight of is that both the

said judgments of Madras and Kerala High Courts are of the time when

Section 153B and 187C supra were applicable. The said provisions,

prescribing for the making of declarations by the person holding the

beneficial interest in the shares and the person in whose name the shares are

recorded but who is not having beneficial interest therein, diluted the spirit

of Section 153. Even though the principle underlying Section 153 was that

no notice of any trust shall be entered on the Register of Members, Section

153B and 187C permitted the company to take notice of the trust and

187C(4) further provided that notwithstanding provisions of Section 153,

any declaration made under Section 187C will have to be noted in the

Register of Members. It would thus be seen that Section 153B and 187C, till

they existed on the Statute Book, more or less made the provisions of

Section 153 redundant and the Company Law Board in Bharat Petroleum

Corporation Ltd. Vs. Stock Holding Corporation of India Ltd. [1995] 82

CompCas 539 went to the extent of observing that Section 153 deserved to

be removed from the statute book.

18. However, the legislature instead of removing Section 153 from the

statute book has made Section 153B and 187C not applicable with effect

from 13.12.2000 as aforesaid. The legislative intent clearly is in favor of

prohibiting the company from taking notice of any trust.

19. The prohibition contained in Section 153, if limited merely to entry on

the Register of Members would cease to be any prohibition at all. If it were

to be held that the prohibition is limited to taking cognizance of the trust

only in the Register of Members and does not extend to taking cognizance

on / in records other than the Register of Members, also statutorily required

to be maintained by the company, would allow the company to take

cognizance of such trusts in the resolution of Board of Directors on the basis

of which entries are made in the Register of Members and would make a

laughing stock of such prohibition. The same cannot be permitted. What is

prohibited to be done cannot be permitted to be done indirectly. As

aforesaid, the purpose of Section 153 is to relieve the company from any

obligation to take notice of equitable interest in its shares and to prevent

persons claiming such interest from approaching the company asserting the

same. The interpretation, as taken by the Madras and Kerala High Courts if

followed inspite of Section 153B and 187C being made inapplicable would

defeat the said objective of Section 153, and cannot be taken.

20. I am therefore of the view that even if the part of the MoM where

notice is sought to be taken of the plaintiff retaining the beneficial interest in

the shares while recording transfer thereof in the name of a defendant was

sanctioned, were to be ultimately proved to be a part of the MoM, the said

part is in the teeth of Section 153 and the Court cannot take cognizance of

things which the law prohibits from being done. The said part of the

MoM/resolution of the Board of Directors is thus but to be ignored.

21. Once the aforesaid part of the MoM/resolution dated 27.04.2004 is

ignored, there is no other document of trust.

22. That nevertheless brings me to the aspect of Benami.

23. The transaction as borne out from the pleadings of the plaintiff and the

MoM/resolution dated 27.04.2004 recording "the aforesaid shares were sold

/ transferred to Mr. Peeyush Aggarwal by his following companies, M/s

Omkam Developers Pvt. Ltd. and BGR Finvest Pvt. Ltd. under blank

transfer and the same were being given by Mr. Peeyush Aggarwal to Mr.

Bhavnani..... to hold the shares in trust" is of transfer of the shares of / by

Omkam and BGR in favour of the defendant for consideration paid by

plaintiff to Omkam & BGR. There are thus clearly three parties to the

transaction i.e. Omkam and BGR as transferors, plaintiff as real purchaser

from Omkam and BGR and defendant as the ostensible or Benami purchaser

in whose favour transfer is effected. In the light thereof the contention of the

counsel for the plaintiff of there being no Benami transaction possible

without three parties does not survive.

24. Even otherwise I am of the opinion that the reference in Section 2(a)

of the Benami Act to „consideration paid or provided‟ is not necessarily to

consideration in money and can be consideration of any nature. It is the plea

of the plaintiff that the consideration for transfer of the said shares held in

the names of Omkam and BGR to the defendant was the new business

ventures and clients to be brought by the defendant to VIL of which the

plaintiff was holding the majority stake and thus a beneficiary. The same in

my view would satisfy the requirement of „consideration‟.

25. Even otherwise I am unable to see as to how the case built by the

plaintiff does not fall in the trap of benami. The case in nutshell of the

plaintiff is of the shares (which are property within the meaning of Section

2(c) of the Benami Act) though in the name of the defendant, being owned

by the plaintiff and the present suit has been filed by the plaintiff to enforce

rights in the said shares held benami by the defendant and which is clearly

within the bar of Section 4 of the Benami Act.

26. The plaintiff even otherwise has been unable to plead a case of „trust‟.

The defendant did not stand in the position of a trustee with the plaintiff and

merely because the word „trust‟ is used does not allow a transaction to be

taken out of Benami Act. Section 4(3)(b) of the Benami Act while carving

out an exception in this regard, is applicable only where the person in whose

name the property is held is a trustee or stands in a fiduciary capacity qua the

beneficiary. Admittedly there is no writing between the parties. The MoM

aforesaid also are not signed by the defendant. If there was any iota of truth

in the claim of the plaintiff, nothing prevented the plaintiff who was

admittedly then the Chairman of VIL to obtain from the defendant who was

the Managing Director and in the position of an employee, a writing of the

trust. No case of trust is thus made out.

27. The defendant as Managing Director of VIL cannot be said to have

been standing in a fiduciary capacity to the plaintiff who was the Chairman

of the said company and could at best be said to be standing in a fiduciary

capacity to the company i.e. VIL. Similarly, I am unable to see as to how the

defendant can be said to be a trustee of the plaintiff. I may notice that the

bar / prohibition of the Benami Act is being avoided in all cases where the

claim or the defence is clearly hit by the said legislation merely by paying

lip service and pleading the opposite party to be the trustee or standing in a

fiduciary capacity. Putting such claim or defences merely with the said plea

to trial tantamounts to permitting the so called „Benami owner‟ to be

harassed by litigation at the instance of the person claiming to be the „real

owner‟; litigation cannot be permitted to be used as a tool of oppression,

often forcing the „Benami owner‟ though having a valid defence of the

Benami Act, for the reason of the property coming under cloud owing to the

mere pendency of litigation and he being thus deprived from beneficial use

thereof, to settle with the „real owner‟.

28. It cannot be lost sight of that Section 81, 82 and 94 of the Indian

Trusts Act, 1882 which have been repealed by the Benami Act expressly

provided for the person in whose name the property is transferred for

consideration provided by another, to be holding the said property for the

benefit of the said another. Thus, the mere factum of payment of

consideration does not create a trust as was the case earlier.

29. Earlier also in Anil Bhasin Vs. Vijay Kumar Bhasin 102 (2003) DLT

932, the bar of the Benami Act was sought to be defeated by pleading the

son to be standing in a fiduciary capacity and as a trustee of the mother.

However, it was held; i) that the repeal of Sections 81 and 82 of the Trusts

Act by the Benami Act itself establishes that the intention of the legislature

was not to allow the concept of trustee or fiduciary capacity of the pre-1988

period to continue to remain as an available defence as otherwise the repeal

of Sections 81 and 82 would have no meaning and permit avoidance of the

prohibition contained in the Benami Act and render the provisions thereof

irrelevant; ii) it is only the purchase of property in the name of wife or

unmarried daughter which is exempted from the prohibition and even

purchase in the name of son or married daughter has not been given that

status; iii) once the legislature has expressly conferred exemption in the

name of the wife or unmarried daughter, it is to be deemed that such

restricted exclusion cannot be extended or made applicable to others; iv) that

in view of the repealed Sections 81and 82, there cannot be the same concept

of trusteeship or fiduciary capacity as was the position prior to 1988; and v)

that after the repeal of Sections 81 and 82, it is only those instances of

fiduciary capacity, such as property of a partnership firm held in the name of

one of the partners or property which Mr. X wanted Mr. Y to buy in the

name of Mr. X but in violation of that instruction, Mr. Y buying the property

in his own name can Y be said to be standing in a fiduciary capacity and as a

trustee of X, that the exemption under Section 4(3)(b) of the Benami Act

would apply.

30. I find the aforesaid view to have been followed in D.N. Kalia Vs. R.N.

Kalia 178 (2011) DLT 294 where also, the defence of the plaintiff being

only the Benami owner and holding the property in trust for the defendant

and other family members, was held to be not tenable in view of the Benami

Act and the exception contained in Section 4(3)(b) held to be not available.

31. I yet further find another Single Judge in Pushpa Kanwar Vs. Urmil

Wadhawan MANU/DE/2993/2009 to have also followed the dicta aforesaid

in Anil Bhasin and held that upon repeal by the Benami Act of Sections 81

and 82 of the Trusts Act, the concept of trusteeship or relationship of

fiduciary capacity as understood in trust law or that of the transferee being

deemed to be holding for the benefit of the person buying or providing the

consideration as was the position prior to the Benami Act, does not exist. It

was further held that the term fiduciary is not restricted to technical or

express trusts but includes even such offices or relations as those of an

attorney at law, a guardian, executor, broker, a director of a Corporation, and

a public officer. Finding no such office or relationship in the facts of that

case, mere plea of the Benami holding the property in a fiduciary capacity

was held to be insufficient to escape the bar of the Benami Act.

32. As far as reliance by the counsel for the plaintiff on Canbank supra is

concerned, the Court found that case to be concerned by Section 88 of the

Trusts Act and held the list of persons viz. trustee, executor, partner, agent,

director of a company, legal advisor to be not exhaustive and held the shares

in that case to have been acquired as an agent; the facts of that case also

found the „benami owner‟ to be not claiming any right, title or interest

therein. The said judgment cannot be said to be inconsistent with the view

taken by this Court in Anil Bhasin supra and followed in D.N. Kalia and

Pushpa Kanwar supra.

33. Though the counsel for the plaintiff has not referred but mention may

also be made of Babita Pal Vs. Jagdish Bansal 196 (2013) DLT 792 (DB)

where a plea for summary dismissal of the suit for the reason of the claim

therein being barred by the Benami Act was rejected for the reason that the

real import of the transaction and the relationship between the parties could

be determined only after trial. However, that case fell in the category as

discussed in Anil Bhasin supra of Y purchasing property in his own name

contrary to the instruction of X who had provided the sale consideration to

purchase the properties in the name of X. Thus, the said dicta of the Division

Bench also does not come in the way of holding the claim in the present case

to be barred by the Benami Act.

34. Similarly, the facts of the recent judgment of the Supreme Court in

Marcel Martins Vs. M. Printer (2012) 5 SCC 342 were entirely different.

There in the facts, the relationship of trust was found to exist. Such is not the

case here. Moreover, the Supreme Court in the said judgment held that in

determining whether a relationship is based on trust or confidence relevant

to determining whether they stand in a fiduciary capacity, the court shall

have to take into consideration the factual context in which the question

arises for it is only in the factual backdrop that the existence of a fiduciary

relationship can be deduced in a given case.

35. In the present case, the pleas of the plaintiff fall in the genre of

„fantastic‟. The prevalent market practice is of giving stock options to the

employees and not of „parking‟ the stocks with the employees.

36. Some other obvious inconsistencies going to the root of the matter are

also found in the case of the plaintiff. Though the plaintiff has approached

this Court with himself being the beneficial owner of the shares, with the

shares in the name of Omkam and BGR being transferred in the name of the

defendant for consideration paid by the plaintiff and on which plea it should

be the plaintiff who should have been entitled to the dividend with respect to

the said shares, but the plea of the plaintiff in para 17 of the plaint is of the

defendant having agreed to deposit the said dividend with VIL and in

pursuance to the said agreement having deposited Rs.5,50,000/- out of the

dividend received of Rs.23,97,863/- with VIL. Even if the plaintiff were to

be a majority shareholder of VIL, VIL remains a distinct legal entity from its

shareholders and the question of the monies owed to the shareholders being

paid to the company without any satisfactory explanation therefor, and

which has not been given, does not arise. Similar is the plea of the plaintiff

of the loan admittedly repayable by VIL to the defendant being squared off

against the balance dividend which as per the case built by the plaintiff

should have been repayable by the defendant to the plaintiff. The squaring

off is sought to be done with VIL paying Rs.16,50,000/- to the defendant as

against Rs.16,02,137/- which was due. The same is also contrary to all

canons of accounting practices particularly corporate accounting which is

subject matter of internal and external audits. What follows from such

inconsistencies is that the present suit is an abuse of the process of the Court

to ward off the claim of the defendant for recovery of the balance loan

amount admittedly advanced by the defendant to VIL.

37. The Supreme Court in T. Arvindandom Vs. T.V. Satyapal AIR 1977

SC 2421, Liverpool & London S.P. & I Association Ltd. Vs. M.V. Sea

Success I (2004) 9 SCC 512 and ITC Ltd. Vs. Debts Recovery Appellate

Tribunal (1998) 2 SCC 70 has held that litigation should not be allowed to

be used as a tool of oppression and the Courts should exercise jurisdiction to

dismiss a case which has no chance of success and to abort it at the earliest

so that the resources of the Courts can be used for deserving cases. The

present is one such case.

38. I therefore dismiss the present suit as not disclosing a cause of action

and / or being thoroughly vexatious and frivolous and in abuse of the process

of this Court. Costs of Rs.20,000/- are also imposed on the plaintiff payable

to the defendant.

Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J JULY 04, 2013 „gsr‟