Benami plea barred in pending proceedings; liability on dissolution followed settled accounts and interest was upheld.

The Benami Transactions (Prohibition) Act was treated as applicable to pending proceedings, so a benami plea could not be used to support or defeat the claim and the firm's accounts and balance-sheets controlled the dispute. On dissolution, liability followed the settled adjustment of accounts: the sums credited in the plaintiffs' names had been adjusted against Sham Sunder's share, so the claim could not be fastened on the other partner and Sham Sunder alone was liable. Future interest was also upheld under civil procedure principles, with 6% per annum awarded from the date of suit until realisation.

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Issues: (i) whether the defence that the amounts standing in the plaintiffs' names were benami and belonged to one partner could be raised; (ii) which partner was liable to satisfy the plaintiffs' claims on dissolution of the firm; (iii) whether interest could be granted on the decretal amount.

Issue (i): whether the defence that the amounts standing in the plaintiffs' names were benami and belonged to one partner could be raised.

Analysis: The Benami Transactions (Prohibition) Act was treated as applicable to pending proceedings, and once it came into force, a benami plea was no longer available either to support or defeat a claim. The entries in the firm's accounts and balance-sheets therefore governed the claim without entering into oral evidence on real ownership.

Conclusion: The benami defence was not available against the plaintiffs.

Issue (ii): which partner was liable to satisfy the plaintiffs' claims on dissolution of the firm.

Analysis: Although the dissolution deed apportioned liabilities between the partners, the appellate record showed that the amounts credited in the plaintiffs' names had been adjusted against Sham Sunder's share on settlement of accounts. Since the amount had effectively been taken out of the partnership funds and related to Sham Sunder's settled account, liability could not be fastened on the other partner.

Conclusion: Sham Sunder alone was liable to pay the plaintiffs' claims.

Issue (iii): whether interest could be granted on the decretal amount.

Analysis: Section 34 of the Code of Civil Procedure permits award of future interest at a reasonable rate, and the claim for interest was held to be supported by that provision.

Conclusion: Interest at 6% per annum was payable from the date of suit till realisation.

Final Conclusion: The plaintiffs succeeded in the appeals, and the decrees were modified so that their suits stood decreed with interest against Sham Sunder alone.

Ratio Decidendi: After the coming into force of the Benami Transactions (Prohibition) Act, a benami defence is unavailable in pending proceedings, and liability on dissolution must be fixed according to the settled adjustment of accounts between the partners.

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