Delhi High Court
Sh Amar N Gugnani vs Naresh Kumar Gugnani Through ... on 30 July, 2015
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) No. 478/2004
% 30th July, 2015
SH. AMAR N. GUGNANI ..... Plaintiff
Through Mr. Raman Kapur, Sr. Advocate
along with Mr. Manish Kumar,
Mr.Amit Kumar, Mr. Piyush Kaushik
and Mr. Mohit Arora, Advocates
versus
NARESH KUMAR GUGNANI (THROUGH LEGAL HEIRS)
..... Defendant
Through Mr. Pravir K. Jain, Adv. for D-1
with Mrs. Sunita Gugnani
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not? Yes
VALMIKI J. MEHTA, J (ORAL)
1(i) The present suit is a suit for declaration, eviction, recovery of
damages, rendition of accounts and permanent and mandatory injunctions.
Plaintiff is Sh. Amar N. Gugnani and who was the son of late Sh. Jai Gopal
Gugnani. Defendant is the brother of the plaintiff and the other son of late
Sh. Jai Gopal Gugnani. Defendant has now expired and is now being
represented by his legal heirs.
CS(OS) No. 478/2004 Page 1 of 26
(ii) Disputes in the present suit concerns the property no.33, Uday
Park, New Delhi (suit premises). Plaintiff claims that he is the sole and
exclusive owner of the suit premises, although, the suit premises as per the
title document was in the name of the father, late Sh. Jai Gopal Gugnani.
2. In this suit on 11.08.2008 issues were framed and issue no.1
reads as under:-
"Whether the claim in the suit is barred by the provisions of Benami
Transactions Prohibition Act, 1988? OPD"
3. Issues, if they are legal issues, and result in bar of any law to
the filing of the suit, then such issues under Order XIV Rule 2 of the Code of
Civil Procedure, 1908 (CPC) can be treated as preliminary issues. Also,
under Order VII Rule 11 CPC if the plaint is shown to have been barred by
any such law, the suit plaint can be rejected at any stage. Order XII Rule 6
CPC also entitles a court to decree the suit finally at any stage.
4. In the present case evidence of the plaintiff commenced way
back i.e around six years back on 22.09.2009, when the plaintiff filed his
evidence by way of affidavit, thereafter now even after around six years and
around 25 dates of hearings, plaintiff/PW1 has not completed his evidence,
and not only that the evidence of the plaintiff has not been completed,
CS(OS) No. 478/2004 Page 2 of 26
plaintiff as PW1 has stepped into the witness box for his cross-examination
for three times and his cross-examination is still not complete. The cross-
examination of the plaintiff could not be completed as repeated orders
passed by this Court and the Joint Registrars of this Court show that for
around 20 dates the plaintiff has claimed his illness and illness of his wife
for not appearing in the witness box. This ground of illness is such which
existed from the year 2009 itself onwards. Plaintiff is residing in the USA.
5. This matter came up before this Court on 20.07.2015 as the
plaintiff had filed OAs challenging the Orders passed by the Joint Registrar
on 29.05.2015 by which two applications filed by the plaintiff were
dismissed. First application being for adding a witness to the list of
witnesses. The second application was for filing of additional documents.
These applications were filed after at least 20 dates when the plaintiff failed
to appear in the witness box for his cross-examination on the ground of
illness as stated above. On 20.07.2015, when the matter came up before this
Court, noticing that issue no.1 is a strictly legal issue, and hence the plaintiff
was put to notice with respect to arguments on this issue. This Order dated
20.07.2015 reads as under:-
CS(OS) No. 478/2004 Page 3 of 26
"O.A. Nos.265/2015 & 266/2015
List on 30th July, 2015. Counsel for the plaintiff is put to notice
that the issue no.1 which is framed in this case is a completely legal
issue and once the issue is a legal issue with respect to bar to the suit,
then, either under Order 7 Rule 11 of Code of Civil Procedure, 1908
(CPC) or Order 12 Rule 6 CPC the suit may no longer to be
continued. Plaintiff, of course, with respect to arguments of
maintainability of the suit will be heard on the next date of hearing
and when these OAs be also listed for hearing."
6. Before I turn to the arguments urged on behalf of the learned
senior counsel for the plaintiff, why the issue is only a legal issue requires to
be stated because only a legal issue can be decided as a preliminary issue
and not a factual issue on which evidence is required to be led. The issue is
legal because this Court is only looking at the plaint filed by the plaintiff and
on the basis of admissions and statements made by the plaintiff in the plaint,
it is seen that actually issue no.1 can be decided against the plaintiff by
holding that the suit is barred by the Benami Transactions (Prohibition) Act,
1988 (in short 'the Benami Act'). Let us therefore turn firstly to the relevant
averments in the plaint which have been made by the plaintiff and which
show that the suit is barred by the Benami Act. The relevant paras of the
plaint read as under:-
"1. The plaintiff and Defendant are brothers. The plaintiff is
presently residing in USA at the address given above. The Defendant
who is the Plaintiff's younger brother is presently residing in the
ground floor of the Plaintiff's house at 33, Uday Park, New Delhi as a
CS(OS) No. 478/2004 Page 4 of 26
licencee of the Plaintiff alongwith the Plaintiff's mother. Prior to
1962, the Plaintiff was living with his father Shri Jai Gopal Gujnani,
mother Smt. Raj Kumari and younger brother Amar Nath as well as
sisters in a rented house at 7/23 Darya Ganj, Old Delhi.
xxxxx
3. That in February/March 1969, the Plaintiff visited India and
gave substantial funds to his father Shri Jai Gopal Gugnani to keep it
by way of deposit in India for the benefit of the Plaintiff. Again in the
year September 1970, the Plaintiff came to India for marriage of his
sister brought funds from abroad and extended financial help in
solemnization of her marriage. Once again, the Plaintiff handed over
substantial funds to his father to keep in deposit in trust for and on
behalf of the Plaintiff and for his benefit.
xxxxx
5. That after marriage of the Plaintiff with Usha, the Plaintiff's
father suggested that as the Plaintiff's substantial funds are in deposit
with him and he is doing well for himself in USA, he should purchase
a plot of land to build a house thereon in New Delhi. He offered to do
the needful, if the Plaintiff makes additional funds available. The idea
was fascinating and consequently acting upon the said idea of his
father, the Plaintiff decided to purchase a plot for construction of a
residential house for himself. Plaintiff's father agreed to help the
Plaintiff in selecting and acquiring a plot and constructing a house
from the funds and money of the Plaintiff.
6. That the Plaintiff and his wife, Smt. Usha made special efforts
and purchased Plot No.33 located at Masjid Moth Extension now
known as Uday Park, New Delhi having an area of 425.25 sq. meters
for a consideration of Rs.1,07,000/- by the money made available by
the Plaintiff to his father, Shri Jai Gopal Gugnani with an
understanding and assurance that the plaintiff's father who stood in
fiduciary relationship would hold the property in his name trust for
the Plaintiff and the Plaintiff shall be real owner always.
7. That on 4th May, 1973 the Plaintiff came to India and handed
over further funds to his father for acquiring the plot that had already
been identified on perpetual lease. The said deposit was made so that
including the funds deposited from time to time, the Plaintiff's father
CS(OS) No. 478/2004 Page 5 of 26
had sufficient funds for the acquisition, registration of lease deed and
incidental expenses.
8. That in view of the said, understanding the Plaintiff's father in
his capacity as trustee obtained perpetual lease of the aforesaid plot
benami in his name to endure to the exclusive benefits of the
Plaintiff. All the funds in purchase of the plot were availed by the
Plaintiff's father from the money deposited with father and given to
him from time to time. The possession of the plot was obtained by the
Plaintiff's father for and on behalf of Plaintiff in his capacity as a
trustee on 9th May, 1973, a perpetual lease deed was executed by the
Delhi Development Authority, which was registered on 5 th July, 1974
at No.4300 in Additional Book No.1, Volume 3391, pages 24-29 on
21st August, 1974. The Plaintiff has been throughout and still
continues to be exclusive real owner in possession of the plot and the
name of his father Late Shri Jai Gopal Gugnani was benami.
9. That the Plaintiff entrusted the title deed of the land in question
to his father for safe custody in his capacity, as a benami and the real
ownership always vested in the Plaintiff." (emphasis added)
7. There are other similar averments made by the plaintiff in the
plaint but the aforesaid paras are representative of the essence of the plaint.
8. It is on the basis of these averments that the reliefs are claimed
in the suit by pleading essentially that the plaintiff is the exclusive owner of
the suit premises no.33, Uday Park, New Delhi and his father in whose name
the title deeds are is only a benamidar trustee. A reading of the aforesaid
paras of the plaint which have been reproduced above shows that no doubt
the plaintiff has used the expression of the property being purchased in the
name of the father of the parties because of a fiduciary relationship and that
CS(OS) No. 478/2004 Page 6 of 26
the father was a trustee, however, simultaneously a reading of the last lines
of paras 8 and 9 of the suit plaint shows that the plaintiff has admitted that
the ownership in the name of the father, late Sh. Jai Gopal Gugnani was
benami and since the father was only a benami owner, real ownership fell
with the plaintiff.
9. On behalf of the plaintiff, the learned senior counsel, Mr.
Raman Kapur has argued that the suit is not barred by the Benami Act,
inasmuch as, the suit falls within the exception contained in Section 4(3)(b)
of the Benami Act because this provision allows exception to the benami
transactions once there is a fiduciary relationship or a relationship of a
trust/trustee. It is argued that the plaintiff's father was a trustee for purchase
of the property for and on behalf of the plaintiff, and hence a fiduciary
relationship was created, and resultantly the subject suit therefore is saved
by the provision of Section 4(3)(b) of the Benami Act. Strong reliance is
placed by the learned senior counsel for the plaintiff upon the judgment of
the Supreme Court in the case of Marcel Martins Vs. M. Printer and
Others (2012) 5 SCC 342.
CS(OS) No. 478/2004 Page 7 of 26
10. Section 4 of the Benami Act reads as under:-
"4. Prohibition of the right to recover property held
benami-- (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.
(3) Nothing in this section shall apply,--
(a) where the person in whose name the property is held is
a coparcener in a Hindu undivided family and the
property is held for the benefit of the coparceners in the
family; or
(b) where the person in whose name the property is held is
a trustee or other person standing in a fiduciary
capacity, and the property is held for the benefit of
another person for whom he is a trustee or towards
whom he stands in such capacity."
11. Before I turn to the arguments urged on behalf of the plaintiff
and the judgment of the Supreme Court in the case of Marcel Martins
(supra), I would at this stage refer to a judgment delivered by this Court in
the case of J M Kohli Vs. Madan Mohan Sahni & Anr in RFA
No.207/2012 decided on 07.05.2012. In this judgment this Court has had an
occasion to consider the intendment of the passing of the Benami Act as
reflected from Section 7 of the Benami Act. Section 7 of the Benami Act
CS(OS) No. 478/2004 Page 8 of 26
repealed the provisions of Sections 81, 82 and 94 of the Indian Trusts Act,
1882 (in short 'the Trusts Act') and which provisions of the Trusts Act gave
statutory recognition and protection to the benami transactions by calling
such transactions protected by a relationship of a trust. It bears note that
benami transactions were very much legal within this country before the
passing of the Benami Act and the relationship of a benamidar to the owner
was in the nature of a trust/fiduciary relationship because it was the Trusts
Act which contained the provisions of Sections 81, 82 and 94 giving
statutory recognition to the benami ownership of the properties being in the
nature of trust. In J M Kohli's case (supra), this Court has held that the
expression "fiduciary relationship" and a relationship of a trustee cannot be
so interpreted so as to in fact negate the Benami Act itself because all
benami transactions actually are in the nature of trust and create a fiduciary
relationship and if the expression "trustee" or "fiduciary relationship" is
interpreted liberally to even include within its fold a typical benami
transaction, then it would amount to holding that there is no Benami Act at
all. Putting in other words, since Section 7 of the Benami Act repealed
certain provisions, hence, the relationship of trust comprised in such
provisions necessarily would be excluded from the sweep of the expression
trust/fiduciary relationship found in Section 4(3)(b) of the Benami Act
CS(OS) No. 478/2004 Page 9 of 26
because what is excluded by Section 7 of the Benami Act cannot be got
included in Section 4(3)(b) of the Benami Act. Let me at this stage refer to
the relevant paras in the judgment in the case of J M Kohli (supra) and these
paras read as under:-
"6. The consequences of the Benami Transactions (Prohibition)
Act, 1988 were harsh as they brought to an end the ownership rights
of an actual owner against the benami owner. Before passing of the
Benami Act, a de jure owner could also file a suit against de facto
owner and thereby claim ownership of the property on the ground that
ostensible owner was only a benamidar. The legal provisions which
helped the plaintiff in such a suit prior to passing of the Benami Act
were inter-alia the provisions of Sections 81, 82 and 94 of the Indian
Trusts Act, 1882 and as per which provisions a benami owner was
actually a trustee for the real owner. Section 7 of the Benami Act
specifically repeals the aforesaid sections of the Indian Trusts Act,
1882 and also Section 66 of the CPC which had similar substance.
7. Section 4(3)(b) of the Benami Act, however, protected rights of
a real owner where the person in whose name the property is held is a
trustee or other person standing in the fiduciary capacity and the
property is held for the benefit of other person, for whom the person
in whose name the property is held is a trustee. Section 4(3)(b) of the
Benami Act reads as under:-
"4. Prohibition of the right to recover property held
benami.-
(3) Nothing in this section shall apply -
(b) where the person in whose name the
property is held is a trustee or other person
standing in a fiduciary capacity, and the
property is held for the benefit of another
person for whom he is a trustee or towards
whom he stands in such capacity."
8. In a way, therefore, there may be some ostensible conflict
between the provision of Section 4(3)(b) of the Benami Act and
CS(OS) No. 478/2004 Page 10 of 26
Section 7 of the same Act which repeals the provisions of the Indian
Trusts Act, 1882, however, one has to read and interpret Section
4(3)(b) in a manner which is in accord with the legislative intention to
bar claims against properties held as benami. The concept of trust was
always inbuilt once a transaction was a benami transaction as the
benamidar was the trustee for the real owner. But in spite of the
concept of trust being inbuilt in benami transactions, the Benami Act
provided that no rights could be asserted in a benami property by the
actual/de jure owner.
Putting it differently, once Sections 81, 82 and 94 of the India
Trusts Act, 1882 have been repealed, they cannot be brought in from
the back door, so to say, by giving the same content contained in the
repealed provisions of Sections 81, 82 and 94 of the Indian Trusts Act,
1882 to Section 4(3)(b) of the Benami Act. If we give such an
interpretation, the entire Benami Act will fall and it will be as if the
same has not been enacted. Therefore, Section 4(3)(b) which provides
that the property which is held as a trustee or in a fiduciary capacity
must be interpreted in the sense that the trustee or a person who is
holding the property in a fiduciary capacity has either committed a
fraud and got the property title in his name or is in furtherance of law
holding property in his name however in the capacity of a trustee or in
fiduciary capacity, although the real owner is somebody else.
Repealed Sections 81, 82 and 94 of the Indian Trusts Act, 1882 read
as under:-
"81. Where the owner of property transfers or
bequeaths it and it cannot be inferred consistently with
the attendant circumstances that the intend to dispose of
the beneficial interest therein, the transferee or legatee
must hold such property for the benefit of the owner or
his legal representative.
82. Where property is transferred to one person for a
consideration paid or provided by another person, and it
appears that such other person did not intend to pay or
provide such consideration for the benefit of the
transferee, the transferee must hold the property for the
benefit of the person paying or providing the
consideration.
CS(OS) No. 478/2004 Page 11 of 26
Nothing in this session shall be deemed to affect
the Code of Civil Procedure, section 317, or Act No. XI
of 1859 (to improve the law relating to sales of land for
arrears of revenue in the Lower Provinces under the
Bengal Presidency), section 36.
94. In any case not coming within the scope of any of
the proceeding sections, where there is no trust, but the
person having possession of property has not the whole
beneficial interest therein, he must hold the property for
the benefit of the persons having such interest, or the
residue thereof (as the case may be), to the extent
necessary to satisfy their just demands."
9. Two of the examples where the Supreme Court has held the
property to be held as a trustee in terms of Section 4(3)(b) of the
Benami Act are the judgments in the cases of C. Gangacharan V. C.
Narayanan, 2000 (1) SCC 459 and P.V. Sankara Kurup V.
Leelavathy Nambiar, 1994(6) SCC 68.
In the case of C. Gangacharan (supra), the Supreme Court has
held that the property was held as a trustee as per Section 4(3)(b) of
the Benami Act, and the person in whose name the property stood
cannot take up a plea of the bar of Benami Act, inasmuch as, actually
the owner had given moneys for the property to be purchased under
his name, however, the moneys were in fraud utilized to get the
property purchased in the name of defendants in that suit. In the case
of P.V. Sankara Kurup (supra) also the obvious fraud which was
perpetrated was that the property was to be purchased in the name of
the plaintiff by his attorney holder and which the defendants did not
do and instead got the property purchased directly in their name. In
the case of P.V. Sankara Kurup (supra), the Supreme Court was
dealing with Section 66 of CPC as it existed before its repeal by
Section 7 of the Benami Act and in the facts of the case as stated
above it was held that the purchaser had acted in fiduciary capacity as
an agent and consequently the bar of the Benami Act would not apply.
In the said judgment, the Supreme Court held that when the agent was
employed to purchase the property on behalf of his principal, however
does so in his own name, i.e. the agent's name then upon conveyance
or transfer of the property to the agent, he stands as a trustee for the
principal.
CS(OS) No. 478/2004 Page 12 of 26
10. Therefore, in certain cases where there is obvious breach of
trust in purchasing the property in the name of a person, whereas it
ought to have been purchased in the name of the principal or the real
owner, Supreme Court has, to that limited extent, held that such
actions are covered under Section 4(3)(b) of the Benami Act and such
transactions are not hit by the Benami Act."
12. It need not be again said, but at the cost of repetition it bears
note that the expression "trustee" or "fiduciary relationship" cannot be
interpreted in such a manner that the definition of "benami transaction"
provided under Section 2(a) of the Benami Act and prohibited by Sections
4(1) & 4(2) of the Benami Act is totally washed away, inasmuch as, it is the
benami transactions which are sought to be completely barred by the
provisions of the Benami Act.
13. In the judgment in J M Kohli's case (supra) certain cases
where there is a relationship of trust and fiduciary relationship, and which
cases are exempted from operation of the Benami Act and they fall under the
exception of Section 4(3)(b) of the Benami Act are given in para 9 by
reference to the judgments of the Supreme Court in the cases of
C.Gangacharan Vs. C. Narayanan 2000 (1) SCC 459 and P.V. Sankara
Kurup Vs. Leelavathy Nambiar 1994 (6) SCC 68. These Supreme Court
judgments held as to when a relationship of trustee would be covered under
Section 4(3)(b) of the Benami Act for the same not to be a benami
CS(OS) No. 478/2004 Page 13 of 26
transaction which is barred as per Section 2(a) read with Sections 4(1) and
4(2) of the Benami Act. Para 9 of the judgment in J M Kohli's case (supra)
gives the facts of these two Supreme Court judgments and hence the factual
reasons why those cases fell in the exception of Section 4(3)(b) of the
Benami Act.
14. Let me at this stage refer to the judgment of the Supreme Court
in the case of Marcel Martins (supra) and which judgment has been very
strenuously relied upon by the learned senior counsel for the plaintiff to
argue that the judgment passed by this Court in J M Kohli's case (supra)
will not hold the field but it is the ratio in the case of Marcel Martins
(supra) which will hold the field. Let us therefore examine the facts in the
case of Marcel Martins (supra), again keeping in mind, that it depends upon
the facts of each case as to whether the relationship is in the nature of a
fiduciary relationship which is exempted by Section 4(3)(b) of the Benami
Act and only which is in the nature of exception to the Benami Act. Surely
Section 4(3)(b) of the Benami Act, and which is an exception, cannot have
an effect of in fact repealing the entire Benami Act.
15. The facts in the judgment in the case of Marcel Martins
(supra) are that the suit property was in the tenancy of one Smt. Stella
CS(OS) No. 478/2004 Page 14 of 26
Martins. The landlord of the property was the Corporation and the
Corporation took a decision to sell the tenanted properties to the occupants
of the same. Smt. Stella Martins therefore was to be given the ownership
rights in the property subject to her paying a certain amount/consideration to
the Corporation. Before the property could be transferred to Smt. Stella
Martins, Smt. Stella Martins died and therefore the right to own the property
by payment of consideration devolved upon all the legal heirs of Smt. Stella
Martins i.e her husband Sh C.F. Martins and the other children. In the facts
of the case, when all the legal heirs of Smt. Stella Martins went to the
Corporation for getting the property transferred in their joint names,
Corporation as per its policy desired that property will not be transferred in
the name of all the legal heirs of Smt. Stella Martins but will only be
transferred in the name of one person. Consequently though the amount of
sale consideration of the property was paid to the Corporation essentially by
the husband of Smt. Stella Martins and the father of all the other parties,
namely, Sh. C.F. Martins, but the title documents of the property by the
Corporation were executed in the name of only one child of Smt. Stella
Martins, namely Sh. Marcel Martins. Sh. Marcel Martins therefore claimed
that he was the sole owner of the property and the other legal heirs who filed
the suit as plaintiffs were barred from claiming the rights in the suit property
CS(OS) No. 478/2004 Page 15 of 26
as the transaction in question as per Sh. Marcel Martins, the plaintiff, was a
benami transaction, and hence rights in the property claimed by other legal
heirs were barred by the Benami Act. In such facts, the Supreme Court by
referring to the meaning of "fiduciary relationship" as per various
dictionaries held that the transactions were not barred by the Benami Act viz
the transaction was not a benami transaction but was a breach of trust which
was a transaction of fiduciary relationship of the trust therefore covered
under the exception under Section 4(3)(b) of the Benami Act. The Supreme
Court therefore essentially held that unlike a benami transaction falling
under Section 2(a) and Sections 4(1) and 4(2) of the Benami Act, which is a
voluntary transaction deliberately entered into as a benami transaction, in the
facts of the case before it the transaction became 'benami' involuntarily
because of the requirement of the policy of a statutory body viz the
Corporation. But for the requirement of the Corporation to transfer the
property only in one name, the title deed would have been in the names of
all the legal heirs and in such circumstances Sh. Marcel Martins was a
trustee having fiduciary capacity falling in the exception of Section 4(3)(b)
of the Benami Act. The relevant paragraphs of the judgment of the Supreme
Court in the case of Marcel Martins (supra) are paras 27 to 46 and which
paras read as under:-
CS(OS) No. 478/2004 Page 16 of 26
"27. It is common ground that although the sale deed by which the
property was transferred in the name of the appellant had been
executed before the enactment of above legislation yet the suit out of
which this appeal arises had been filed after the year 1988. The
prohibition contained in Section 4 would, therefore, apply to such a
suit, subject to the satisfaction of other conditions stipulated therein.
In other words unless the conditions contained in Section 4(1) and (2)
are held to be inapplicable by reason of anything contained in Sub-
section (3) thereof the suit filed by plaintiffs-respondents herein
would fall within the mischief of Section 4.
28. The critical question then is whether sub-section (3) of Section
4 saves a transaction like the one with which we are concerned.
29. Sub-section (3) to Section 4 extracted above is in two distinct
parts. The first part comprises clause (a) to Section 4(3) which deals
with acquisitions by and in the name of a coparcener in a Hindu
Undivided Family for the benefit of such coparceners in the family.
There is no dispute that the said provision has no application in the
instant case nor was any reliance placed upon the same by learned
counsel for the respondent-plaintiffs.
30. What was invoked by Mr. Naveen R. Nath, learned counsel
appearing for the respondents was Section 4(3)(b) of the Act which
too is in two parts viz. one that deals with trustees and the
beneficiaries thereof and the other that deals with persons standing in
a fiduciary capacity and those towards whom he stands in such
capacity. It was argued by Mr. Nath that the circumstances in which
the purchase in question was made in the name of the appellant
assumes great importance while determining whether the appellant in
whose name the property was acquired stood in a fiduciary capacity
towards the respondent-plaintiffs.
31. The expression "fiduciary capacity" has not been defined in the
1988 Act or any other statute for that matter. and yet there is no
gainsaying that the same is an expression of known legal significance,
the import whereof may be briefly examined at this stage.
32. The term "fiduciary" has been explained by Corpus Juris
Secundum as under:
"A general definition of the word which is
sufficiently comprehensive to embrace all cases cannot
well be given. The term is derived from the civil, or
Roman law. It connotes the idea of trust or confidence,
contemplates good faith, rather than legal obligation, as
the basis of the transaction, refers to the integrity, the
fidelity, of the party trusted, rather than his credit or
ability, and has been held to apply to all persons who
occupy a position of peculiar confidence toward others,
and to include those informal relations which exist
whenever one party trusts and relies on another, as well
as technical fiduciary relations.
The word 'fiduciary', as a noun, means one who
holds a thing in trust for another, a trustee, a person
holding the character of a trustee, or a character
analogous to that of a trustee with respect to the trust
and confidence involved in it and the scrupulous good
faith and condor which it requires; a person having the
duty, created by his undertaking, to act primarily for
another's benefit in matters connected with such
undertaking. Also more specifically, in a statute, a
guardian, trustee, executor, administrator, receiver,
conservator or any person acting in any fiduciary
capacity for any person, trust or estate."
33. Words and Phrases, Permanent Edn. (Vol. 16-A, p. 41)
defines "fiducial relation" as under:
"There is a technical distinction between a 'fiducial
relation' which is more correctly applicable to legal
relationships between parties, such as guardian and
ward, administrator and heirs, and other similar
relationships, and 'confidential relation' which includes
the legal relationships, and also every other relationship
wherein confidence is rightly reposed and is exercised.
Generally, the term 'fiduciary' applies to any person
who occupies a position of peculiar confidence towards
another. It refers to integrity and fidelity. It contemplates
fair dealing and good faith, rather than legal obligation,
as the basis of the transaction. The term includes those
informal relations which exist whenever one party trusts
and relies upon another, a well as technical fiduciary
relations."
34. Black's Law Dictionary (7th Edn. p. 640) defines "fiduciary
relationship" thus:
"Fiduciary relationship--A relationship in which one
person is under a duty to act for the benefit of the other on
matters within the scope of the relationship. Fiduciary
relationships-such as trustee-beneficiary, guardian-ward, agent-
principal, and attorney-client - require the highest duty of care.
Fiduciary relationship usually arise in one of four situations: (1)
when one person places trust in the faithful integrity of another,
who as a result gains superiority or influence over the first, (2)
when one person assumes control and responsibility over
another, (3) when one person ha a duty to act for give advice to
another on matters falling within the scope of the relationship,
or (4) when there is a specific relationship that has traditionally
been recognised as involving fiduciary duties, as with a lawyer
and a clinet or a stockbroker and a customer."
35. Stroud's Judicial Dictionary explains the expression
"fiduciary capacity" as under:
"Fiduciary Capacity - An administrator who had
received money under letters of administration and who is
ordered to pay it over in a suit for the recall of the grant, holds
it "in a fiduciary capacity" within Debtors Act, 1869 so, of the
debt due from an executor who is indebted to his testator's
estate which he is able to pay but will not, so of moneys in the
hands of a receiver, or agent, or Manager, or moneys due to an
account from the London agent of a country solicitor, or
proceeds of sale in the hands of an auctioneer, or moneys which
in the compromise of an action have been ordered to be held on
certain trusts or partnership moneys received by a partner."
36. Bouvier's Law Dictionary defines "fiduciary capacity" as under:
"What constitutes a fiduciary relationship is often a
subject of controversy. It has been held to apply to all persons
who occupy a position of peculiar confidence towards others,
such as a trustee, executor, or administrator, director of a
corporation of society. Medical or religious adviser, husband
and wife, an agent who appropriates money put into his hands
for a specific purpose of investment, collector of city taxes who
retains money officially collected, one who receives a note or
other security for collection. In the following cases debt has
been held not a fiduciary one; a factor who retains the money of
his principal, an agent under an agreement to account and pay
over monthly, one with whom a general deposit of money is
made."
37. We may at this stage refer to a recent decision of this Court in
CBSE v. Adiya Bandopadhyay:2 (2011) 8 SCC 497 wherein
Ravindeeran, J. speaking for the Court in that case explained the
term 'fiduciary' and 'fiduciary relationship' in the following words:
(SCC pp.524-25, para 39)
"39. The term 'fiduciary' refers to a person having a duty
to act for the benefit of another, showing good faith and
candour, where such other person reposes trust and special
confidence in the person owing or discharging the duty. The
term "fiduciary relationship" is used to describe a situation or
transaction where one person (beneficiary) places complete
confidence in another person (fiduciary) in regard to his affairs,
business or transaction(s). The term also refers to a person who
holds a thing in trust for another (beneficiary). The fiduciary is
expected to act in confidence and for the benefit and advantage
of the beneficiary, and use good faith and fairness in dealing
with the beneficiary or the things belonging to the beneficiary.
If the beneficiary has entrusted anything to the fiduciary, to
hold the thing in trust or to execute certain acts in regard to or
with reference to the entrusted thing, the fiduciary has to act in
confidence and is expected not to disclose the thing or
information to any third party."
It is manifest that while the expression "fiduciary
capacity" may not be capable of a precise definition, it implies
a relationship that is analogous to the relationship between a
trustee and the beneficiaries of the trust. The expression is in
fact wider in its import for it extends to all such situations as
place the parties in positions that are founded on confidence
and trust on the one part and good faith on the other.
38. 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 or otherwise of a fiduciary relationship
can be deduced in a given case. Having said that, let us turn to the
facts of the present case once more to determine whether the
Appellant stood in a fiduciary capacity capacity vis-à-vis the
respondent-plaintiffs.
39. The first and foremost of the circumstance relevant to the
question at hand is the fact that the property in question was
tenanted by Smt Stella Martins, the mother of the parties before us.
40. It is common ground that at the time of her demise she had
not left behind any will nor is there any other material to suggest
that she intended that the tenancy right held by her in the suit
property should be transferred to the Appellant to the exclusion of
her husband, C.F Martins or her daughters, respondents in this
appeal, or both.
41. In the ordinary course, upon the demise of the tenant, the
tenancy rights should have as a matter of course devolved upon her
legal heirs that would include the husband of the deceased and her
children (parties to this appeal). Even so, the reason why the
property was transferred in the name of the appellant was the fact
that the Corporation desired such transfer to be made in the name of
one individual rather than several individuals who may have
succeeded to the tenancy rights. A specific averment to that effect
was made by plaintiffs-respondents in para 7 of the plaint which was
not disputed by the appellant in the written statement filed by him. It
is, therefore, reasonable to assume that transfer of rights in favour of
the appellant was not because the others had abandoned their rights
but because the Corporation required the transfer to be in favour of
individual presumably to avoid procedural complications in
enforcing rights and duties qua in property at a later stage.
42. It is on that touchstone equally reasonable to assume that the
other legal representatives of the deceased-tenant neither gave up
their tenancy rights in the property nor did they give up the benefits
that would flow to them as legal heirs of the deceased tenant
consequent upon the decision of the Corporation to sell the property
to the occupants. That conclusion gets strengthened by the fact that
the parties had made contributions towards the sale consideration
paid for the acquisition of the suit property which they would not
have done if the intention was to concede the property in favour of
the appellant.
43. Superadded to the above is the fact that the parties were
closely related to each other which too lends considerable support to
the case of the plaintiffs that the defendant-appellant held the
tenancy rights and the ostensible title to the suit property in a
fiduciary capacity vis-à-vis his siblings who had by reason of their
contribution and the contribution made by their father continued to
evince interest in the property and its ownership. Reposing
confidence and faith in the appellant was in the facts and
circumstances of the case not unusual or unnatural especially when
possession over the suit property continued to be enjoyed by the
plaintiffs who would in law and on a parity of reasoning be deemed
to be holding the same for the benefit of the appellant as much as the
appellant was holding the title to the property for the benefit of the
plaintiffs.
44. The cumulative effect of the above circumstances when seen in
the light of the substantial amount paid by late Shri C.F Martins, the
father of the parties, thus puts the Appellant in a fiduciary capacity
vis-à-vis the said four persons. Such being the case the transaction is
completely saved from the mischief of Section 4 of the Act by
reason of the same falling under sub-section 3(b) of Section 4. The
suit filed by the respondents was not, therefore, barred by the Act as
contended by the learned counsel for the appellant. The view taken
by the High Court to that effect is affirmed though for slightly
different reasons.
45. We may while parting say that we have not been impressed by
the contentions urged on behalf of the Appellant that the plea of a
fiduciary relationship existing between the parties and saving the
suit from the mischief of Section 4 of the Act, was not available to
the respondents, as the same had not been raised before the Courts
below. The question whether the suit was hit by Section 4 of the Act
was argued before the High Court and found against the appellant.
The plea was not, therefore, new nor did it spring a surprise upon the
appellant, especially when it was the appellant who was relying
upon Section 4 of the Act and the Respondents were simply
defending the maintainability of their suit. That apart no question of
fact beyond what has been found by the High Court was or is
essential for answering the plea raised by the appellant nor is there
any failure of justice to call for our interference at this stage.
46. In the result, this appeal fails and is hereby dismissed but in the
circumstances without any orders as to costs."
16. With all humility I may note that in the judgment in the case of
Marcel Martins (supra), none of the parties drew attention of the Supreme
Court to the extremely important provision of Section 7 of the Benami Act
that the fiduciary relationships which were protected earlier by virtue of
Sections 81, 82 and 94 of the Trusts Act, such fiduciary transactions by
virtue of repeal of these provisions would stand excluded from Section
4(3)(b) of the Benami Act i.e those transactions which were transactions of
trust and fiduciary in nature, once they were in the nature falling under
Sections 81, 82 and 94 of the Trusts Act, then on these Sections being
repealed, hence trust/fiduciary relationships covered under such Sections
were those transactions which were benami transactions which stood
prohibited by the promulgation of the Benami Act. As held in J M Kohli's
case (supra), surely intendment of Section 4(3)(b) of the Benami Act is not
to bring through the back door, relationships of trust/fiduciary character
falling in the provisions of Sections 81, 82 and 94 of the Trusts Act which
were specifically repealed by Section 7 of the Benami Act. Putting it in
other words, once transactions were in the nature of trust, and such
transactions in the nature of trust were encompassed within the meaning of
trust as comprised in Sections 81, 82 and 94 of the Trusts Act, though such
transactions were transactions in trust and fiduciary in nature, such
transactions were held to be illegal after passing of the Benami Act by repeal
of these provisions of the Trusts Act. Obviously, it cannot be otherwise held
that the transactions which fall within the meaning of Sections 81, 82 and 94
of the Trusts Act, though these Sections stand repealed, yet the transactions
falling in these Sections will have protection of Section 4(3)(b) of the
Benami Act. A reading of the judgment in the case of Marcel Martins
(supra) shows that on the facts of the said case it was held that there was a
fiduciary relationship and a relationship in the nature of trust, inasmuch as,
actually all the parties were to be the owners but for the fact that the
Corporation had desired, and which is in fact in the nature of compulsion by
the Corporation and as per its policy, the property by the Corporation was
not transferred in the name of all the legal heirs of Smt. Stella Martins but
only in the name of one legal heir. Such transactions compassed in the case
of Marcel Martins (supra), and which were brought about on the direction
of a third party, is different from a voluntary transaction where a person
voluntarily gives money for property to be purchased in the name of another
person and in which case such a transaction where A pays money for the
property to be purchased in the name of B, this by itself will necessarily be a
benami transaction under Section 2(a) of the Benami Act which states that
any transaction in which property is transferred to one person for a
consideration paid or provided by another person, such a transaction is a
benami transaction, and such benami transactions are subject matter of
prohibition of Sections 4(1) and 4(2) of the Benami Act.
17. In my humble opinion therefore the judgment in the case of
Marcel Martins (supra) is distinguishable in view of the existence of the
provision of Section 7 of the Benami Act repealing Sections 81, 82 and 94 of
the Trusts Act.
18. In view of the above, since the plaintiff in the plaint himself
states that the property was purchased as a benami property in the name of
the father, late Sh. Jai Gopal Gugnani, merely and although the plaintiff has
used the expressions fiduciary relationship and trustee, yet these expressions
of fiduciary relationship and trustee are not those expressions which will
cause the transaction to fall under the exception of Section 4(3)(b) of the
Benami Act, but these expressions are those expressions which fall under
Sections 81, 82, and 94 of the Trusts Act and which have been repealed by
Section 7 of the Benami Act.
19. In view of the above, I hold that the suit is barred by the
provision of Section 4(1) of the Benami Transactions (Prohibition) Act,
1988.
20. The suit is accordingly dismissed. Parties are left to bear their
own costs. All pending applications will stand disposed of accordingly. Next
date of 24.8.2015 stands cancelled.
JULY 30, 2015 VALMIKI J. MEHTA, J
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