Full Text
HIGH COURT OF DELHI
CS(OS) 535/2017 & I.As. 11360/2017, 9541/2018, 15577/2019, 13336/2022
DEEPT SARUP AGARWAL ..... Plaintiff
Through: Mr. Amit Khemka, Mr. Rishi Sehgal, Ms. Kiran Pandey, Mr. Midhun Aggarwal, Advocates (M:9811502010)
Through: Mr. Tanmay Mehta, Mr. A.
Martin, Ms. Radhika Chandrasekhar, Advocates for
D-1,4,5 Mr. Amit Sethi, Ms. Ekadhana Sethi, Advocates for D-2
(M:9811050339;email:sethi_am it_70@yahoo.com)
Mr. Lakshay Dhamija, Mr. Vipin Kumar, Advocates for D-3 (M:9873627270; email:lakshayadv1608@gmail.c om)
JUDGMENT
1. The present application under Order 12 Rule 6 of The Code of Civil Procedure, 1908 (in short „CPC‟) has been filed on behalf of defendant No. 1 for dismissal of the present suit, seeking a judgment on admission, in view of provisions of Sections 3 and 4 of The Prohibition of Benami Property Transactions Act, 1988 (Benami Act) read with Section 16 of The Specific Relief Act, 1963.
2. The present suit is for specific performance of Agreement to Sell dated 06.02.2017 and Supplementary Agreement dated 15.05.2017 in respect of a double storey built up property bearing NO. 5878, built on plot No. 19-B in Block UA, measuring 183.[3] sq. Yards situated in the layout plan of Northern City Extension, Scheme No. 1, Sabzi Mandi, presently known as Jawahar Nagar, Malka Ganj Road, Delhi – 110009 (suit property). By way of the aforesaid Agreement to Sell, predecessor-in-interest of defendants agreed for sale of the suit property to the plaintiff for sale consideration of Rs.10 crores. At the time of execution of the Agreement to Sell, plaintiff had paid an amount of Rs.[1] crore as part payment in respect of purchase of the suit property. The balance sale consideration of Rs.[9] crores was agreed to be paid at the time of execution and registration of Sale Deed in respect of the suit property, which was agreed to be done on or before 16.05.2017.
3. However, due to various intervening circumstances, sale deed in respect of the suit property was not executed by the predecessor-ininterest of the defendants herein. The predecessor-in-interest of the defendants, Sh. Prehlad Singh Chandhok expired in the last week of June, 2017. Since the defendants herein did not respond to the plaintiff for execution of the sale deed in his favour, the present suit was filed by the plaintiff.
4. The suit is premised on the readiness and willingness of the plaintiff for payment of the amounts towards purchase of the suit property in terms of the aforesaid Agreements.
5. During the pendency of the present suit, plaintiff claimed before this Court that he was ready and willing to pay the balance sale consideration of Rs.[9] crores. Thus, this Court passed order dated 09.10.2018 and directed the plaintiff to deposit the balance amount of Rs.[9] crores with the Registrar General of this Court within three weeks. Pursuant to the said order, Rs.[9] crores was deposited on behalf of plaintiff on 31.10.2018.
6. It is the case on behalf of defendants that the said amount of Rs.[9] crores was in fact deposited by M/s CSKG Agro (P) Ltd. („CSKG Agro‟) which is not a party in the present proceedings. The plaintiff neither pleaded nor filed any document to show any funding arrangement with the said entity. Thus, it is contended that the plaintiff has entered into some benami transactions with the aforesaid CSKG Agro for purchase of the property in question and it is that entity which has been the funding entity behind the scenes.
7. In view of the aforesaid, the present application for dismissal of the suit on admission on the basis of Benami Act has been filed.
8. It is submitted on behalf of defendants that CSKG Agro is a legal entity different from plaintiff, so there was no occasion for CSKG Agro to deposit the balance sale consideration of Rs.[9] crores before this Court in a suit for specific performance that has been filed by the plaintiff. Therefore, it is apparent that the plaintiff is a benamidar of CSKG Agro in respect of Agreement to Sell dated 06.02.2017. Thus, it is contended that the plaintiff‟s dealings with CSKG Agro comes within the prohibition under the Benami Act. Section 3 and 4 of the Benami Act prohibit benami transactions and consequently, the plaintiff being a benamidar of CSKG Agro, could not have filed the present suit.
9. It is further submitted on behalf of defendants that a benami agreement being contrary to law, cannot be enforced under the provisions of the Specific Relief Act. It is contended that the plaintiff himself did not personally deposit the funds and a stranger, namely, CSKG Agro came forward and deposited Rs.[9] crores before this Court. Plaintiff himself has not filed any document showing his own financial capacity to pay the balance sale consideration. Since it is apparent that there is benami transaction between the plaintiff and CSKG Agro, the Agreement to Sell dated 06.02.2017 cannot be enforced. It is, thus, prayed that the present suit is liable to be dismissed.
10. In support of his submissions, learned counsel appearing for defendants has relied upon the following judgments: i) PPA Impex Pvt. Ltd. vs. Mangal Sain Mittal, MANU/ DE/3065/2009. ii) Grammy Communications Pvt. Ltd. Vs.
11. Opposing the submissions made on behalf of the defendants vehemently, learned counsel for the plaintiff has submitted that the present application is only an effort to drag and delay the present proceedings. The defendants are misinterpreting and misrepresenting the law as contained in the Benami Act and the definition of benami transaction. There is no benami transaction involved in the present case.
12. It is submitted that the plaintiff is doing business running into hundred of crores of rupees. During the financial year 2017-18 alone one of his companies namely Buddha Global Limited, did a business of Rs. 235.71 crores. The company enjoys credit facilities from two banks to the tune of Rs. 38 crores in different types of credit facilities. It is submitted that plaintiff holds 51% of shareholding in the said closely held public limited company Buddha Global Limited. Rest of the shares are also held by his close family friends.
13. It is further the case on behalf of plaintiff that the amount of Rs. 1 crore which was paid by the plaintiff as advance towards the property, was paid by the plaintiff from his own resources. Further, the plaintiff himself volunteered to deposit in the Court the balance sale consideration upon the query of this Court. As per direction of this Court, a sum of Rs. 9 crores was deposited by the plaintiff on 31.10.2018, which was taken as a loan from the company known as CSKG Agro. The very fact that the plaintiff was able to arrange such a big amount at a short notice, clearly shows the financial capacity/capability and credit worthiness of the plaintiff.
14. It is submitted that immediately after entering into the agreement to sell dated 06.02.2017, the plaintiff had also applied for a loan against property, which also was granted on the basis of his credit worthiness. The plaintiff was always ready and willing to perform his part of contract. It was only because of internal disputes in the family of late Sh. Prehlad Singh Chandhok, predecessor in interest of the defendants, that late Sh. Prehlad Singh Chandhok was not able to execute his part of the contract. The plaintiff had made complete arrangements for the money to be paid.
15. It is the case on behalf of the plaintiff that the fact that entire amount of Rs. 9 crores which was deposited with this Court by CSKG Agro and was later on returned to the same company, clearly shows that it was merely a loan. There is not an iota to suggest that CSKG Agro was in any way interested in the property or was the beneficiary of the said property. It is submitted that in order for a transaction to be benami transaction, it must satisfy the twin tests provided in Section 2(9) A of Benami Act. It is necessary that not only the complete source of fund to acquire a property should come from the beneficial owner, but it should also be demonstrated that the said provider of consideration is the ultimate beneficiary. It is submitted that there is nothing in law to debar any person from taking a loan or arranging the money legally from any source.
16. Learned counsel for the plaintiff has vehemently argued that plaintiff is not a benamidar of CSKG Agro. On the date of agreement to sell dated 06.02.2017, CSKG Agro was nowhere in picture.
17. In support of his submissions, learned counsel for the plaintiff has relied upon the following judgments:-
(i) Jaydayal Poddar (deceased) through his L.Rs. and Anr. Vs.
(ii) Smt. P. Leelavathi (D) By Lrs. vs Vs. Shankarnarayana Rao
(D) By Lrs. Bearing Civil Appeal No. 1099 of 2008 dated 9 April, 2019
(iii) Union of India & Anr. Vs. Ganpati Dealcom Pvt. Ltd., 2022
18. I have heard the learned counsels for the parties.
19. Perusal of the record shows that agreement to sell was entered between the plaintiff and predecessor-in-interest of the defendants in respect of the suit property for a total sale consideration of Rs. 10 crores. The plaintiff paid an amount of Rs. 1 crore at the time of execution of agreement to sell dated 06.02.2017 and the balance payment of Rs. 9 crores was to be paid simultaneously along with registration of the sale deed. Due to various circumstances as detailed in the plaint, the predecessor-in-interest of the defendants did not execute the sale in favour of the plaintiff herein. After the demise of the predecessor-in-interest of the defendants, the plaintiff pursued the matter with the defendants, which bore no fruit leading to filing of the present suit.
20. There are categorical averments on behalf of the plaintiff in the plaint that the plaintiff has always been ready and willing to perform his part of the agreement to sell. Para 33 of the plaint reads as under:- “33.That the Plaintiff has always been ready and willing and is still ready and willing to perform his part of the agreement to sell dated 06.02.2017 & supplementary agreement dated 15.05.2017, but it is only because the predecessor in interest of the Defendants and the Defendants have not been able to resolve the interse personal disputes that the sale deed in respect of the suit property could not be executed, despite several requests of the Plaintiff made telephonically and personally.”
21. During the course of hearing of the present suit, a submission was made before this Court that the plaintiff was willing to deposit in the Court the balance of Rs. 9 crores within three weeks. Further, statement was also made on behalf of the defendants that they had no objection to complete the transaction with the plaintiff, in case plaintiff/his authorised representative deposits the said sum of Rs. 9 crores within three weeks. Thus, in the order dated 09.10.2018, this Court directed the plaintiff herein to deposit the balance sum of Rs. 9 crores within three weeks with the Registrar General of this Court, as undertaken on behalf of the plaintiff before the Court. It was further directed that on deposit of the said amount by the plaintiff, the defendants will take steps to have the property transferred in the name of the plaintiff/his representative.
22. Thus, in compliance of the aforesaid order dated 09.10.2018, Rs.[9] crores was deposited on 31.10.2018 in this Court by CSKG Agro, which as per plaintiff was deposited pursuant to loan taken by plaintiff from CSKG Agro. However, the defendants subsequently resiled from their statement as given on 09.10.2018 and failed to complete the transactions. Thus, this Court imposed cost of Rs. 8 lakhs on the defendants in order to compensate the plaintiff in arranging the balance sale consideration by way of order dated 29.11.2018. Subsequently, vide order dated 11.12.2018, this Court directed the Registry to refund the said amount of Rs.[9] crores to CSKG Agro, with the consent of the plaintiff.
23. The present application came to be filed on behalf of defendant no. 1 under Order 12 Rule 6 CPC for dismissal of the suit on the basis of Benami Act, after almost 1 year of the order dated 11.12.2018 for return of the money, as deposited on behalf of the plaintiff.
24. The power of a Court under Order 12 Rule 6 CPC is discretionary and cannot be claimed as a matter of right. Court will exercise its power under the said provision, only when there are specific, clear and categorical admission of facts and documents on record.
25. Commenting on the nature of the power of a Court under Order
12 Rule 6 CPC, Supreme Court in the case of SM Asif Vs Virender Kumar Bajaj[1], has held as follows:- “8. The words in Order 12 Rule 6 CPC “may” and “make such order …” show that the power under Order 12 Rule 6 CPC is discretionary and cannot be claimed as a matter of right. Judgment on admission is not a matter of right and rather is a matter of discretion of the court. Where the defendants have raised objections which go to the root of the case, it would not be appropriate to exercise the discretion under Order 12 Rule 6 CPC. The said rule is an enabling provision which confers discretion on the court in delivering a quick judgment on admission and to the extent of the claim admitted by one of the parties of his opponent's claim”
26. Considering the aforesaid position of law, it is to be seen whether in the present case judgment can be given by invoking the power under Order 12 Rule 6 CPC.
27. The primary basis of filing the present application by defendants is the contention on their behalf that the facts on record show that plaintiff had made some hidden arrangement with CSKG Agro in order to show willingness and readiness to deposit balance sale consideration in this Court. Thus, it has been contended that the Benami Act clarifies such kind of arrangement as benami transaction. Since, the plaintiff has clearly admitted the benami transaction in its reply, therefore, the present proceedings are barred under the Benami Act and present suit is liable to be dismissed. The plaintiff‟s plea of his arrangement with CSKG Agro being one of loan, is a sham and moonshine plea.
28. It is well settled law that the onus and burden to prove that a transaction is benami, is upon the person who alleges so. Supreme Court in the case of Jaydayal Poddar (deceased) through his LRs & Anr. Vs Mst Bibi Hazra and ors[2].,has held as follows:
29. In the present case, the defendants have failed to discharge the onus/burden to prove that the deposit of Rs. 9 crores by CSKG Agro in this Court, was in any manner in the nature of a benami transaction. The plaintiff has categorically submitted that the said amount was taken as loan by the plaintiff and that the said amount had been deposited by CSKG Agro on behalf of the plaintiff. The plaintiff has also submitted as regards his credit worthiness for arranging the said amount within a short period for the purposes of depositing the balance amount of consideration before this Court in order to show his capability and willingness to complete the sale pursuant to agreement to sell for the suit property.
30. For a transaction to be considered as benami, the twin tests as provided in Section 2(9) (A) of Benami Act must be satisfied. Thus, not only the consideration for the property must be provided or paid by another person, but the property must be held for the immediate and future benefit, direct or indirect, of the person who has provided the consideration, in order to consider a transaction as a benami transaction. Section 2(9)(A) of Benami Act reads as under:- “(9) “benami transaction” means,— (A) a transaction or an arrangement— (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration…..”
31. There is nothing that has been brought on record to show that the ingredients that what constitutes benami transaction within the meaning of Benami Act, have been made out in the present case. The whole case of the defendants for contending that the plaintiff has entered into some benami transaction with a third party, is premised on the deposit of Rs. 9 crores by CSKG Agro. The defendants have not been in any manner able to establish that the property was to be purchased by the plaintiff for the immediate or future benefit, direct or indirect, of the CSKG Agro. This is especially so when it is the clear case on behalf of the plaintiff that only a loan was taken by the plaintiff for the purposes of the deposit of balance consideration before this Court.
32. Supreme Court in the case of Mangathai Ammal (Died) Through Legal Representatives and Others Vs Rajeswari and Others[3], held that payment of part sale consideration cannot be the sole criteria to hold the sale/transaction as benami. It has been held that intention of the person who contributed the purchase money is determinative of the nature of transaction. Thus, it has been held as follows: “7.2. In Bhim Singh [Bhim Singh v. Kan Singh, (1980) 3 SCC 72] this Court in para 18 observed and held as under: (SCC p. 84) “18. The principle governing the determination of the question whether a transfer is a benami transaction or not may be summed up thus: (1) the burden of showing that a transfer is a benami transaction lies on the person who asserts that it is such a transaction; (2) it is proved that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary; (3) the true character of the transaction is governed by the intention of the person who has contributed the purchase money; and (4) the question as to what his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct, etc.”.........
8.1. The first reason which is given by the learned trial court while holding the suit properties as benami transactions is that part sale consideration was paid by Narayanasamy Mudaliar at the time of the purchase of the property vide sale deed, Ext. B-3. As held by this Court in a catena of decisions referred to hereinabove, the payment of part sale consideration cannot be the sole criterion to hold the sale/transaction as benami. While considering a particular transaction as benami, the intention of the person who contributed the purchase money is determinative of the nature of transaction. The intention of the person, who contributed the purchase money, has to be decided on the basis of the surrounding circumstances; the relationship of the parties; the motives governing their action in bringing about the transaction and their subsequent conduct, etc… …”
33. Considering the aforesaid law as laid down by Supreme Court, the mere fact that balance consideration for the sale was deposited by a third party, cannot in any manner establish that the present case is that of benami transaction. The plaintiff has categorically submitted that the said money was deposited by the third party as the plaintiff had taken loan for the purposes of depositing the balance consideration in this Court. The plaintiff has further brought forth his financial creditworthiness. Thus, the fact of deposit of balance consideration by a third party does not in any manner prove that the transaction in question was in the nature of a benami transaction.
34. It is of importance to mention that the Benami Act was amended in the year 2016 and the definition of what constitutes a benami transaction underwent a significant change. The definition of Benami transaction before the amendment of 2016 as contained in Section 2 (a) read as under: “Section 2. Definitions:- In this Act unless the context otherwise requires:- (a) „Benami transaction‟ means any transaction in which property is transferred to one person for a consideration paid or provided by another person”.
35. However, after the amendment in 2016, the definition of benami transaction underwent a change. As noted earlier, after the amendment, for a transaction to be a benami transaction, not only the consideration of a property must be provided or paid by another person, but also the property must be held for the immediate and future benefit, direct or indirect, of the person who has provided the consideration. The plaintiff has justified the deposit by third party as in furtherance to loan having been taken by plaintiff for deposit of the balance consideration at a short notice. The defendants have not been able to discharge the onus upon them that the said transaction in any way constituted a benami transaction. The twin test as provided in Section 2(9)(A) of the Benami Act have not been satisfied.
36. Reliance by the defendants only on sub Clause (a) of Section 2(9)(A) of Benami Act is totally misplaced. The clauses of the section, have to be read in conjunction with each other in order to assess as to whether the transaction is benami or not. If sub Clause (a) of Section 2(9)(A) of the Benami Act was to be read separately and independently in order to hold a transaction as benami transaction, then the whole purpose of the amendment of 2016 would be defeated. The amendment of 2016 specifically inserted the provision with respect to the requirement of the property being held for the immediate or future benefit of the person who has provided the consideration, in addition to the requirement of the consideration for the property having been provided or paid by another person.
37. It is noteworthy that Section 2 of the unamended Benami Act which only contained the provision regarding the consideration of the property having been provided or paid by other person in order to bring a transaction within the scope of benami transaction, has been held to be overly broad and disproportionately harsh by Supreme Court. Thus, in the case of Union of India & Another Vs. Ganpati Dealcom Pvt. Ltd.4, Supreme Court held as follows:
38. As noted above, Supreme Court has held time and again that some financial assistance cannot be the sole determinative factor/circumstance to hold the transaction as benami in nature. Thus, in the case of P. Leelavathi (D) by LRs Vs. V. Shankarnarayana Rao
(D) by LRs[5], Supreme Court held as follows:
39. In view of the aforesaid discussion, it is held that the defendants have not been able to establish that the factum of deposit of balance consideration before this Court by a third party was in the nature of benami transaction. There is no “admission” on the part of the plaintiff in order to enable this Court to exercise its discretion in passing a judgment under Order XII Rule 6 CPC. All the facts as alleged by the defendants will have to be established by way of trial, and no finding, as averred, can be given at this stage by this Court.
40. In view thereof, the present application is dismissed.
41. List before the Roster Bench on 09.02.2023.
JUDGE JANUARY 23, 2023/PB/c/au