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Issues Involved:
1. Whether the house was purchased by defendant No. 3 'benami' in the name of defendant No. 2. 2. Whether the sale of the house to the Company was a sham transaction intended to defeat and delay the creditors of defendant No. 3. Detailed Analysis: 1. Benami Purchase Issue: The main point in controversy was whether the house was purchased by defendant No. 3 'benami' in the name of defendant No. 2. The plaintiff alleged that the house was purchased by defendant No. 3, "benami", in the name of his son, defendant No. 2, using his own funds. The trial court found that the house was purchased "benami" in the name of defendant No. 2, by defendant No. 3 with his own money. The High Court, however, set aside this finding, stating that there was no evidence either of the plaintiff or the defendants on which a finding as to the "benami" nature of the transaction could be based. The Supreme Court examined the evidence and found that defendant No. 2 failed to establish the source of the consideration of Rs. 60,000 for the purchase of the house. Defendant No. 2 claimed that he got Rs. 10,000 from his mother and Rs. 50,000 from his grandfather, but he could not provide satisfactory evidence to support this claim. The Supreme Court noted that defendant No. 2 was only 18 years old at the time of the purchase and did not have any money of his own. Moreover, defendant No. 3 had admitted in his statement dated August 12, 1950, that he purchased the house for Rs. 60,000 in the name of his son using his own funds. This statement was corroborated by the personal account of defendant No. 3, which showed that he spent Rs. 60,000 on "property" in that assessment year. The Supreme Court held that the purchase of the house was "benami" and that its ostensible owner, defendant No. 2, was not the real owner but was a "benamidar" for defendant No. 3. 2. Sham Transaction Issue: The other important question was whether the sale of the house to the Company (defendant No. 1) was a sham transaction intended to defeat and delay the creditors of defendant No. 3. The trial court found that the sale of the house to the Company was a sham transaction and was effected to defeat or delay the creditors of defendant No. 3. The Supreme Court noted that defendant No. 3 was assessed to income-tax for a sum of Rs. 1,25,090/11/- for the assessment year 1947-48 in March 1952. Defendant No. 3 failed to pay that amount on demand, and a recovery certificate was issued on October 8, 1952. The house was attached on October 13, 1952. Defendant No. 2 raised an objection and prayed for the release of the house, but the Collector rejected the objection on March 3, 1953. No appeal or other remedy was sought against that order. The Company was incorporated in February 1953, and the assessment of income tax for the years 1944-45 and 1948-49 was completed in March 1953, raising the tax demand to Rs. 1,94,735.15. A recovery certificate was issued on May 4, 1953, and the house was again attached on August 6, 1953. In these circumstances, defendant No. 2 hastened to sell the house to the Company on May 25, 1953. The Supreme Court found that the Company was dominated by defendant No. 2 and his close relations and did not even pay the sale price in cash. The shares of the other relations were insignificant, and the Company could not lead evidence to show that it was able to transact any substantial business. The Supreme Court held that the Company was formed just to transfer the house to it in an effort to save it from attachment and sale for the realization of the income-tax arrears of defendant No. 3. Conclusion: In conclusion, the Supreme Court allowed the appeals, set aside the impugned judgment and decree of the High Court, and restored the decree of the trial court with costs throughout. The Supreme Court held that the house was purchased "benami" by defendant No. 3 in the name of defendant No. 2, and the sale of the house to the Company was a sham transaction intended to defeat and delay the creditors of defendant No. 3.
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