TaxTMI 
TaxTMI 
TaxTMI 
1990 (3) TMI 28
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....t on the basis of the plea of benami. Therefore, the suit of the plaintiff should be dismissed against defendants Nos. 2, 3 and 5. The replies in these IAs on behalf of the plaintiff are identical. It was denied that the present suit was directed against defendant No. 1 only. In fact, it is filed against all the defendants. The case is that defendant No. 1, in order to defraud the plaintiff company, did not apply the loan amount directly for purchasing immovable property in his name for which purpose the loan was asked for and sanctioned to him by the plaintiff company. It is then contended that defendant No. 1 after having obtained the loan diverted the same to defendants Nos. 2 to 5 and another. Defendant No. 2 is the son of defendant No. 1. Defendants Nos. 3 to 5, the three companies, have been floated by defendants Nos. 1 and 2 and are controlled by them. The majority of the shares of these companies are held by defendants Nos. 1 and 2, their family members, close relations and friends. It is further the case of the plaintiff that defendant No. 1 has resorted to the subterfuge of diverting the funds to other defendants to perpetuate a fraud. It is further stated in the reply th....
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....id properties and it is nobody's case that they have any other business activity. Prima facie, therefore, it would appear that these companies were formed by defendants Nos. 1 and 2, etc., for purchase of the properties in question and the allegation of diversion of funds made by the plaintiff cannot be brushed aside lightly at this stage. It is, of course, a different matter that the defendants may satisfy the court about the bona fide nature of the dealings and transactions in question at the trial. Hence, we consider it to be a fit case to grant and do grant ad interim relief to the plaintiff by restraining defendants Nos. 3 and 5 from in any manner alienating, transferring, disposing of or encumbering the properties in question, viz, 10, Panchsheel Marg, New Delhi, and flats Nos. 101 and 102 in 'New Delhi House' at 27, Barakhamba Road, New Delhi, till the disposal of the suit." The above observations, therefore, clearly point out that, in view of the allegations of diversion of funds made by the plaintiff against defendants Nos. 1 and 2 towards the companies, defendants Nos. 3 to 5, it was held that, at that stage, the allegations made by the plaintiff company could not be bru....
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....% per annum. In consideration of his having obtained the loan, defendant No. 1 executed a promissory note, Again, at the request of defendant No. 1, the plaintiff gave another loan of Rs. 10,00,000 to him on January 29, 1975. Defendant No. 1 had represented that he would utilise these loans for purchase of immovable property in Delhi. It was one of the terms that the loan would be secured by deposit of title deeds of the property as soon as it was purchased and registered in the name of defendant No. 1. Another condition was that the loan would be repaid in 12 monthly instalments commencing from April, 1975. No amount either towards principal or interest was paid. Instead, defendant No. 1 diverted the amount of both the loans to defendants Nos. 2 to 5. Defendant No. 2 is the son of defendant No. 1. Defendants Nos. 3 to 5 were alleged to be companies floated by defendants Nos. 1 and 2 and were controlled by them. The majority of the shares of these companies were held by defendants Nos. 1 and 2, their other family members and close friends. Thus, they were alleged to be the family concerns of defendants Nos. 1 and 2. Defendant No. 3 purchased the property bearing No. 10, Panchsheel ....
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....eholder and director of defendant No. 5. The allegations of diversion of funds by defendant No. 1 in its favour were also denied. As such, defendant No. 5 was not liable for any amount whatsoever to the plaintiff. On behalf of defendants Nos. 2, 3 and 5, it has been argued that the allegations made in the plaint amount to saying that defendants Nos. 2, 3 and 5 held the properties benami on behalf of defendant No. 1. Therefore, such allegations squarely fall within the definition of the term "Benami transaction" covered by the first Act and that now there was a complete bar under the Act to the right of any real owner to recover property held benami. This argument has been countered on behalf of the plaintiff by saying that the allegations as made in the plaint do not make out any case of the nature of a benami transaction. Rather the allegations indicated that the plaintiff company sought to make defendants Nos. 2 to 5 liable because defendant No. 1 fraudulently transferred the amount of loans raised by him from the plaintiff company in favour of defendants Nos. 2 to 5 with view to defraud the plaintiff company. The reliance on behalf of the defendants is upon section 4 of the fir....
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.... Hoe Lai Pat, AIR 1932 Rangoon 13. Learned counsel for the plaintiff has also cited the case of Mohammad Ali Mohammad Khan v. Mt. Bismillah Begam, AIR 1930 PC 255, in order to show that defrauded creditors are not affected by a sham transaction. On the other hand, on behalf of the defendants, Chidambaram Chettiar v. Srinivasa Sastrigal, AIR 1914 PC 137 has been cited to show that the provisions of section 53 of the second Act do not apply in the case of movable property. In the case of A h Foon, AIR 1932 Rangoon 13, the facts were that the plaintiff and defendant No. 1 were partners at one time and the partnership was dissolved in 1927. In 1930, the plaintiff obtained a decree for over Rs. 40,000 against defendant No. 1 and in execution of the decree attached certain timbers lying in the godown of defendant No. 1. Defendant No. 2 informed the bailiff that he and defendants Nos. 3 and 4 had jointly purchased all the timbers lying in the godown of defendant No. 1 prior to the date of the attachment. Objections to that effect were filed on behalf of defendants Nos. 2 to 4 which compelled the plaintiff to institute a suit for declaration that, at the time of attachment, the property i....
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....m Behari Khare [1989] 177 ITR 97 (SC), Velayudhan Ramakrishnan v. Rajeev [1988] 174 ITR 482 (Ker) and Urmila Bala Dasi v. Probodh Chandra Ghosh [1990] 184 ITR 604 (Cal) is concerned, there cannot be any dispute in that respect. In the case of Mithilesh Kumari [1989] 177 ITR 97 (SC), the respondent, Prem Behari Khare, had purchased property in the name of Mithilesh Kumari who had been living with him for a number of years and had also given birth to two children from his loins. Prem Behari Khare challenged the creation of any apprehended rights by Mithilesh Kumari in favour of others by filing a suit for declaration and permanent injunction. His suit was decreed up to the High Court. The contention raised on behalf of Prem Behari Khare in appeal by Mithilesh Kumari in the Supreme Court was that the first Act did not apply retrospectively to cover a past benami transaction. Repelling this contention, the Supreme Court held that the appellant being a benamidar, the provisions of the first Act shall very much be applicable if an appeal against the main judgment was pending at the time of coming into force of the Act. The relief available to a person could be moulded in the light of the....