CIVIL APPEAL NO. 3367 OF 2019 (@ SLP(C)NO. 36694 OF 2017)

PAWAN KUMAR VS. BABULAL SINCE DECEASED THROUGH LRS AND ORS.

1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3367 OF 2019

(Arising out of Special Leave Petition (Civil) No.36694 of 2017)

PAWAN KUMAR …Appellant

VERSUS

BABULAL SINCE DECEASED THROUGH

LRS. AND ORS. …Respondents

J U D G M E N T

Uday Umesh Lalit, J.

1. Leave granted.

2. This appeal questions the final judgment and order dated 18.08.2017

passed by the High Court of Judicature for Rajasthan at Jaipur in SBRFA

No.511 of 2016.

3. The appellant filed a suit for declaration of title with respect to

premises in Kasba Fatehpur’s main market which were more particularly

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described in the plaint and prayed that he be declared owner of the premises

and that the sale deed dated 24.07.2006 executed by the first defendant in

favour of the second defendant be cancelled. The material averments in the

plaint were:

(a)A shop in said premises was held by the first defendant, namely,

father of the appellant on rent from the erstwhile owner;

(b)The first defendant having become old, it was the appellant who

had been looking after the entire business;

(c)The erstwhile owner had filed suit for possession which matter

came right upto this Court;

(d)There was a compromise between the erstwhile owner and the first

defendant under which the premises where the shop is situate, were

agreed to be sold in favour of first defendant;

(e)The first defendant was not having enough money and as such it

was the appellant who arranged all the money on his own after

borrowing from money lenders on interest;

(f)At the time of preparing the sale deed, the first defendant had

indicated that the premises be taken in his name;

(g)Even after purchase of the premises in the name of the first

defendant, the appellant was conducting the business in the said

shop;

(h)The first defendant had executed a document on a stamp paper on

14.03.2002 in the presence of witnesses which was verified by

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Notary Public acknowledging that the appellant had paid the entire

consideration towards purchase of the premises.

(i)The second defendant was also a tenant in the premises and after

the purchase as aforesaid he was making payment of rent to the

appellant.

(j)Taking undue advantage of the old age and fragile health of the

first defendant, the second defendant got written a document in his

favour with respect to first floor of the disputed shop from the first

defendant on 19.07.2002.

With the case as aforesaid, Civil Suit No.126 of 2006 was filed by the

appellant in the court of District Judge, Sikar.

4.The second defendant filed his written statement denying the case

pleaded by the appellant. Nine years later, the second defendant submitted

an application under Order VII Rule 11 of the Code of Civil Procedure (for

short ‘CPC’) praying for rejection of the plaint on the ground that the suit

was barred under Section 4 of the Benami Transaction (Prohibition) Act,

1988 (hereinafter referred to as ‘the Act’).

5.The trial court allowed said application under Order VII Rule 11, CPC

and by its order dated 23.09.2016 rejected the plaint. The relevant portion of

true translation of the decision of the trial court was as under:

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“11.In this way in the present case, the Plaintiff in

his Plaint has himself stated that he wants to purchase

the disputed property in the name of his father from his

own income or by the money which he had taken on

interest. In my humble opinion under Section-4 of the

Benami Transaction (Prohibition) Act, 1988 filing of

present Suit is prohibited. Hence, the judgment of the

Hon’ble Court produced on behalf of the

Applicant/Defendant are applicable on the present case.

The Plaint of the Plaintiff is prohibited under Order-7

Rule-11(3) C.P.C.”

6.The appellant, being aggrieved filed SBRFA No.511 of 2016 in the

High Court which appeal was dismissed by the High Court vide its judgment

and order dated 18.08.2017. It was observed by the High Court as under:

“From the averments made in the plaint it is clear that

plaintiff is seeking declaration in his name in respect of

suit property with a clear stipulation that he purchased

the said property from his own funds/sources in the

name of his father and his father was not real owner of

the suit property, the Act of 1988 provides that 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, shall lie by or on behalf of a person

claiming to be the real owner of such property. It is not

the case of the plaintiff that property in question was

held by the defendant No.1 – father, for joint

benefit/joint ownership. The suit was clearly hit by

section 4 of the Act of 1988 and the learned trial court

rightly allowed the application under Order 7 Rule 11

CPC.”

7.The decision rendered by the High Court is presently under appeal.

Mr. Abhishek Gupta, learned Advocate appearing for the appellant invited

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our attention to the documents on record including the writing dated

14.03.2002 executed by First Defendant and father of the Appellant. The

relevant portion of said document dated 14.3.2002 was as under:

“I, Babu Lal Son of late Shri Tara Chand Meharishi,

Caste – Brahmin, am the Resident of Near Laxminath

Press, Fatehpur, District-Sikar (Raj.)

In my name in Kasba Fatehpur near Saraswati Library

there is shop along with rooms made over its terrace.

Since this property (shop) was purchased by my elder

son Pawan Kumar by the money earned with his own

income, but in order to give respect to me he had got the

Registry of this shop in my name. Hence, over this

entire property only his right. In future neither mine nor

any of my other successors shall have any right in this

property.

I have written my this script in my full senses, with

healthy and sound mind, without under any coercion or

influence in the presence of two witnesses to my elder

son Pawan Kumar, so that it shall remain as proof and in

future during their mutual partition amongst brothers, in

connection with this shop any kind of dispute would not

arise.”

8.Mr. Abhishek Gupta, learned Advocate relied upon the decision of

this Court in Marcel Martins v. M. Printer and others

1

and submitted that

the case pleaded of the Appellant was fully covered by Section 4 (3) of the

Act and that the courts below were not justified in rejecting the plaint under

Order VII Rule 11, CPC. Mr. R.K. Singh, learned Advocate appearing for

1

(2012) 5 SCC 342

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the respondent, on the other hand, contested the submission and relied upon

a decision of this Court in Om Prakash and another v. Jai Prakash

2

.

9.Before we consider the rival submissions, we must note Section 4 of

the Act, as it stood before it was amended by Act 43 of 2016, was 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

2

(1992) 1 SCC 710

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another person for whom he is a trustee or towards

whom he stands in such capacity.”

10.In Marcel Martins

1

a suit was filed in the year 1990 praying for

declaration that the plaintiffs were co-owners of certain properties to the

extent of their contribution. After a full-fledged trial, the Suit was

dismissed by the Trial Court but the judgment was reversed by the High

Court. While considering the question whether the case of the plaintiffs

would come within the purview of Sub-Section (3) of Section 4 of the Act,

the matter was dealt with by this Court as under:-

“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

the 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 the trustees and the beneficiaries thereof and the

other that deals with the 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

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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.”

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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, as 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 relationships

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 has a duty to act for or give

advice to another on matters falling within the

scope of the relationship, or (4) when there is a

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specific relationship that has traditionally been

recognised as involving fiduciary duties, as with

a lawyer and a client 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 the 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

on 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 or 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 to be not a fiduciary one: a factor who

retains the money of his principal, an agent

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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. Aditya Bandopadhyay

3

, wherein

Raveendran, J. speaking for the Court in that case

explained the terms “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

3

(2011) 8 SCC 497

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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 vis-à-

vis the respondent-plaintiffs.”

11.The factual aspects of the matter were, thereafter, considered and in

paras 42 and 43 it was observed:-

“42. … …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. … … 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.”

12.It was, thus, concluded that the transaction was completely saved

from the mischief of Section 4 of the Act by reason of the same falling under

Sub-Section (3)(b) and that the Suit was not barred under the Act. This

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judgment was rightly relied upon by Mr. Abhishek Gupta, learned Advocate.

On the other hand, the reliance placed by Mr. R.K. Singh on the decision in

Om Prakash

2

, in our view, is completely misplaced. The issue there was

whether prohibition under Section 4 would apply in relation to actions

initiated before the coming into force of the Ordinance or not? In any event

of the matter, the issue whether the provisions of the Act are retrospective

has already been settled

4

.

13.In the present case, the controversy has arisen in an application under

Order VII Rule 11 CPC. Whether the matter comes within the purview of

Section 4(3) of the Act is an aspect which must be gone into on the strength

of the evidence on record. Going by the averments in the Plaint, the

question whether the plea raised by the appellant is barred under Section 4

of the Act or not could not have been the subject matter of assessment at the

stage when application under Order VII Rule 11 CPC was taken up for

consideration. The matter required fuller and final consideration after the

evidence was led by the parties. It cannot be said that the plea of the

appellant as raised on the face of it, was barred under the Act. The approach

must be to proceed on a demurrer and see whether accepting the averments

4

R. Rajgopal Reddy through LRs. Vs. Padmini Chandrasekharaiah through LRs.

(1995) 2 SCC 630

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in the plaint the suit is barred by any law or not. We may quote the

following observations of this Court in Popat and Kotecha Property vs.

State Bank of India Staff Association

5

:

“10. Clause (d) of Order 7 Rule 7 speaks of suit, as

appears from the statement in the plaint to be barred

by any law. Disputed questions cannot be decided at

the time of considering an application filed under

Order 7 Rule 11 CPC. Clause (d) of Rule 11 of Order

7 applies in those cases only where the statement

made by the plaintiff in the plaint, without any doubt

or dispute shows that the suit is barred by any law in

force.”

14.We, therefore, allow this appeal, set aside the view taken by the courts

below and dismiss the application preferred by the second defendant under

Order VII Rule 11 CPC. Since the Suit has been pending since 2006, we

direct the Trial Court to expedite the matter and dispose of the pending Suit

as early as possible and preferably within six months from today. Needless

to say that the merits of the matter will be gone into independently by the

Trial Court.

5

(2005) 7 SCC 510

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15.The appeal stands allowed in aforesaid terms. No costs.

………………………….J.

[Uday Umesh Lalit]

………………………….J.

[Indu Malhotra]

New Delhi;

April 02, 2019.