2021 (11) TMI 520 - HC - Benami Property

Court Upholds Decision Allowing Suit to Proceed Under Order 7 Rule 11 CPC

The court upheld the trial court's decision to allow the suit to proceed, dismissing the petition seeking rejection of the plaint under Order 7, Rule 11 ... Benami transaction - sufficient cause of action for continuation of the suit at the instance of respondent Nos. 1 & 2. - HELD THAT:- Perusal of clause A(a)(ii)(ibid) clearly reveals that where a property is transferred to or held by a person and the consideration for such property has been provided or paid by another person and it is held by a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity then it is not covered within the ambit of benami transaction and as such, contention to that effect is liable to be rejected. For declaring the transfer of property as benami transaction, proper procedure has been prescribed under the Benami Act and mere assertion at the instance of petitioner would not abort the claim of respondent Nos. 1 & 2 at the threshold. The plea raised on behalf of the petitioner regarding compulsory registration of property, having value of more than ₹ 100/-, is also not helpful in view of the fact that both the properties were transferred in terms of section 17 of the Registration Act by way of Sale Deeds in name of the petitioner with an oral understanding that same shall be transferred in favor of respondent Nos. 1 & 2 on attaining the age of 20 years. Again, this is the plea of defence and as such, the same cannot be looked into while deciding the application under Order 7, Rule 11 CPC. It is one thing to say that there is no cause of action for the plaintiffs to file the suit and it is another thing to say that plaint does not disclose any cause of action. Plaint discloses sufficient cause of action for continuation of the suit at the instance of respondent Nos. 1 & 2. Issues Involved:1. Rejection of plaint under Order 7, Rule 11 CPC.2. Cause of action and its disclosure in the plaint.3. Benami transaction and its applicability.4. Compulsory registration of property under the Registration Act.Issue-wise Detailed Analysis:1. Rejection of plaint under Order 7, Rule 11 CPC:The petitioner filed an application under Order 7, Rule 11 of the Code of Civil Procedure, 1908 (CPC) for the rejection of the plaint, which was dismissed by the trial court. The petitioner sought to set aside this dismissal through the present petition under Article 227 of the Constitution. The relevant part of Order 7, Rule 11 CPC states that a plaint shall be rejected if it does not disclose a cause of action or if the suit is barred by any law. The court emphasized that the averments in the plaint must be read as a whole to determine if a cause of action is disclosed or if the suit is barred by law.2. Cause of action and its disclosure in the plaint:The trial court concluded that the plaint disclosed a cause of action, specifically referencing Paragraph 26 of the plaint. The court reiterated that the averments in the written statement and the defendant's contentions are irrelevant when considering an application under Order 7, Rule 11 CPC. The Supreme Court's definition of 'cause of action' was cited, emphasizing that it includes all material facts on which the plaintiff's right to relief is founded. The court found that the plaint, read in its entirety, disclosed sufficient cause of action for the suit to continue.3. Benami transaction and its applicability:The petitioner contended that the suit properties were benami transactions and thus barred by law. However, the court noted the exception under Section 2(9) A(ii) of the Prohibition of Benami Property Transactions Act, 1988, which excludes properties held in a fiduciary capacity from being considered benami transactions. The court found that the properties were allegedly held by the petitioner in trust for the benefit of the respondents, fitting within this exception. Therefore, the contention of the suit being barred as a benami transaction was rejected.4. Compulsory registration of property under the Registration Act:The petitioner argued that the respondents could not claim ownership based on an oral understanding due to the compulsory registration requirement for immovable properties valued over Rs. 100 under the Registration Act, 1908. The court dismissed this argument, noting that the properties were indeed transferred via registered Sale Deeds. The oral understanding regarding the future transfer of properties was considered a matter of defense, not affecting the disclosure of a cause of action in the plaint.Conclusion:The court concluded that the plaint disclosed a sufficient cause of action and was not barred by the Benami Act or the Registration Act. Consequently, the petition was dismissed, and the trial court's decision to allow the suit to proceed was upheld. The court clarified that its observations should not be construed as an opinion on the merits of the pending suit.