2023 (7) TMI 1136 - HC - Benami Property

Benami transaction - subject property as joint property - plaint does not disclose a cause of action and that it is also barred by law - HELD THAT - The plaintiffs do not dispute that the subject property was purchased by defendant No.2 from its erstwhile owners, Davinder Sahni and Pritpal Kaur Chandhok, vide registered Sale Deed dated 27.03.1992. The plaintiffs contend that funds of their partnership firm were used for purchasing the subject property, since they allege, defendant No.2 had no income of her own. Whatever may have been the legitimacy of routing funds in this way, even on a demurrer, the plaintiffs admit that ultimately monies were paid by defendant No.2 towards purchase of the subject property in her name. The subject property accordingly stands in the sole name of defendant No.2 and is her absolute property. There is no averment in the plaint that the sale deed placed any restriction saying that the subject property would not be held by defendant No. 2 as sole and absolute owner. In view of the clear mandate of the section 14 of the Hindu Succession Act therefore, as a matter of law, defendant No.2 holds the subject property as full owner and not as a limited owner, and no averment in the plaint detracts from this position. Besides, the plaintiffs' own best case, as admitted inter-alia in para 8 of the plaint, is that they routed money through third parties to buy the subject property in the name of defendant No.2. This is precisely the kind of mischief that section 4 of the Benami Transactions Act seeks to prevent, and therefore bars any claim made in respect of property so held by a third party benami for the person who funds the purchase. This in fact is the very purpose and intention of the legislature in enacting the Benami Transactions Act. Insofar as the plaintiffs' contention that defendant No.2 falls within the exception engrafted in section 2(9)(A)(ii) to the definition of benami transaction , a bare reading of the plaint would show that there is not even a whisper of an allegation that defendant No.2 was a partner of the partnership firm, the monies of which were allegedly routed for purchasing the subject property. There is also no allegation in the plaint that defendant No.2 was a partner of that firm. At the highest, the plaintiffs contend that defendant No.2 was in a fiduciary capacity vis- -vis them since she was the wife of defendant No.1, who (latter) is a partner of the firm. There is clearly no support for the proposition that a partner s wife becomes a partner, by operation of any law or otherwise. If any doubt was to remain on that count, a bare reading of section 5 of the Partnership Act answers it squarely. Merely because defendant No. 2 is the wife of a partner of the firm, she does not ipso-facto become a partner of the firm, inter-alia since as per section 5 of the Partnership Act, a relationship of partnership arises from contract and not from status of the parties. It is the plaintiffs own case that the alleged oral family settlement happened even before the settlement deed was signed in February 2013. Clearly therefore, the present suit is way beyond the limitation of 03 years stipulated in Article 59 of the Schedule of the Limitation Act, with no scope for any extension or exclusion of time or condonation of delay under any of the provisions of the Limitation Act. It may further be observed that, other than a bald plea, there is no averment in the plaint nor any separate substantive application seeking to address the point of limitation, or explaining how the cause of action is claimed to be continuing in nature. This court is persuaded to hold that the plaint does not disclose any cause of action that requires trial. Furthermore, this court is of the opinion that applying the position of law as cited above, the reliefs claimed in the plaint are also clearly barred by law.

Summary

Issues Involved:

1. Whether the plaint discloses a cause of action.
2. Whether the suit is barred by law, specifically under the Limitation Act, the Benami Transactions Act, and the Hindu Succession Act.

Summary:

1. Cause of Action:
Defendant No. 2 filed an application under Order VII Rule 11 of the CPC seeking rejection of the plaint on grounds that it does not disclose a cause of action and is barred by law. The plaintiffs sought a decree declaring the property as joint property, cancellation of the sale deed, partition, and permanent injunction against the defendants.

The court noted that the plaintiffs admitted the property was purchased in the name of Defendant No. 2 via a sale deed dated 27.03.1992, and thus, she is the sole and absolute owner. The plaintiffs alleged the property was purchased from partnership funds and held by Defendant No. 2 in a fiduciary capacity. However, the court found no specifics or support for these claims in the plaint or documents filed.

2. Barred by Law:
a. Limitation Act:
The court observed that the suit was filed more than 21 years after the sale deed and 5 years after the alleged family settlement, making it time-barred under Article 59 of the Limitation Act, which provides a limitation period of 3 years for seeking cancellation of a document.

b. Benami Transactions Act:
The court held that the plaintiffs' claim that the property was purchased using partnership funds but in the name of Defendant No. 2 falls under the mischief that Section 4 of the Benami Transactions Act seeks to prevent. The court found no allegations that Defendant No. 2 was a partner in the firm, nor that she held the property in a fiduciary capacity as defined under the Act.

c. Hindu Succession Act:
The court emphasized that under Section 14 of the Hindu Succession Act, Defendant No. 2 holds the property as a full owner and not as a limited owner. The court rejected the plaintiffs' contention that Defendant No. 2's ownership was limited by the family settlement, noting that she was not a party to the settlement.

Conclusion:
The court concluded that the plaint does not disclose a cause of action and the suit is barred by law. The application under Order VII Rule 11 CPC was allowed, and the plaint was rejected, resulting in the disposal of the suit and any pending applications.