SEVERAL MEMBERS OF FAMILY PROVIDING CONSIDERATION TO CONVERT LEASE PROPERTY INTO FREE-OLD BUT REGISTRATION OF PROPERTY HELD ON THE NAME OF ONE PERSON'S NAME-WHETHER CONSIDERED AS BENAMI PROPERTY?
BRIEF FACTS
Ms. SM was a tenant (Lessee) of a residential house owned by Municipal Corporation. in the year 1978 the Corporation decided to sell the said property and similar other properties to those, who are in occupation at the time of decision taken. Before sale could be affected in Ms. SM, she had passed away leaving behind her husband, their daughters (respondents) and the appellant, who happened to be their only son.
Since the Corporation desired that transfer of tenancy rights held by the deceased lady, Ms. SM should be made to only one out of her several legal representatives presumably to avoid procedural complications, the husband of the deceased -tenant and the daughters -respondents herein all consented to transfer of the tenancy rights in favor of the appellant.
The consideration to the Municipal Corporation of Rs. 48000 -odd was paid for purchase of the property by the three daughters -respondents and the son each contributing Rs. 5000/- towards the consideration and balance Rs. 28000 -odd was paid by the husband of the late Ms. SM (tenant).
QUESTION RAISED BEFORE COURTS
- Whether the appellant could take the plea of "BENAMI" transaction in any suit?
- Could the appellant be said to be standing in a fiduciary relationship and it could be said that the transaction is outside the scope of the term "BENAMI TRANSACTION"?
The facts of this case are identical to the case of [Marcel Martins Vs. M. Printer (2012) 21 Taxmann.com 7/207 Taxman 103(SC)] the Apex Court held that
The first and foremost of the circumstance relevant to the question at hand is the fact that the property in question was tenanted by Smt. Stella Martins-mother of the parties before us. It is common ground that at the time of her demise she had not left behind any Will nor is there any other material to suggest that she intended that the tenancy right held by her in the suit property should be transferred to the appellant to the exclusion of her husband, C.F. Martins or her daughters, respondents in this appeal, or both.
In the ordinary course, upon the demise of the tenant, the tenancy rights should have as a matter of course devolved upon her legal heirs that would include the husband of the deceased and her children (parties to this appeal). Even so, the reason why the property was transferred in the name of the appellant was the fact that the Corporation desired such transfer to be made in the name of one individual rather than several individuals who may have succeeded to the tenancy rights.
A specific averment to that effect was made by plaintiffs-respondents in para 7 of the plaint which was not disputed by the appellant in the written statement filed by him. It is, therefore, reasonable to assume that transfer of rights in favor of the appellant was not because the others had abandoned their rights but because the Corporation required the transfer to be in favor of individual presumably to avoid procedural complications in enforcing rights and duties qua in property at a later stage.
It is on that touchstone equally reasonable to assume that the other legal representatives of the deceased-tenant neither gave up their tenancy rights in the property nor did they give up the benefits that would flow to them as legal heirs of the deceased tenant consequent upon the decision of the Corporation to sell the property to the occupants.
That conclusion gets strengthened by the fact that the parties had made contributions towards the sale consideration paid for the acquisition of the suit property which they would not have done if the intention was to concede the property in favor of the appellant.
Superadded to the above is the fact that the parties were closely related to each other which too lends considerable support to the case of the plaintiffs that the defendant- appellant held the tenancy rights and the ostensible title to the suit property in a fiduciary capacity vis-à-vis his siblings who had by reason of their contribution and the contribution made by their father continued to evince interest in the property and its ownership.
Reposing confidence and faith in the appellant was in the facts and circumstances of the case not unusual or unnatural especially when possession over the suit property continued to be enjoyed by the plaintiffs who would in law and on a parity of reasoning be deemed to be holding the same for the benefit of the appellant as much as the appellant was holding the title to the property for the benefit of the plaintiffs.
DECISION
The cumulative effect of the above circumstances when seen in the light of the substantial amount paid by late Shri C.F. Martins, the father of the parties, thus puts the appellant in a fiduciary capacity vis-à-vis the said four persons. Such being the case the transaction is completely saved from the mischief of Section 4 of the Act by reason of the same falling under Sub-section 3(b) of Section 4. The suit filed by the respondents was not, therefore, barred by the Act as contended by the learned counsel for the appellant. The view taken by the High Court to that effect is affirmed though for slightly different reasons.
We may while parting say that we have not been impressed by the contentions urged on behalf of the appellant that the plea of a fiduciary relationship existing between the parties and saving the suit from the mischief of Section 4 of the Act, was not available to the respondents, as the same had not been raised before the Courts below. The question of whether the suit was hit by Section 4 of the Act was argued before the High Court and found against the appellant. The plea was not, therefore, new nor did it spring a surprise upon the appellant, especially when it was the appellant who was relying upon Section 4 of the Act and the respondents were simply defending the maintainability of their suit. That apart no question of fact beyond what has been found by the High Court was or is essential for answering the plea raised by the appellant nor is there any failure of justice to call for our interference at this stage.
Section 4 in THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988
Prohibition of the right to recover property held benami. -
(1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.
(2) No defense based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.
(3) Nothing in this section shall apply, -
(a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or
(b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity.
The term "Fiduciary" has been explained by Corpus Juris Secundum as under
"A general definition of the word which is sufficiently comprehensive to embrace all cases cannot well be given. The term is derived from civil, or Roman Law. It connotes the idea of trust or confidence, contemplates good faith, rather than legal obligation, as the basis of the transaction, refers to the integrity, the fidelity, of the party, trusted, rather than his credit or ability, and has been held to apply to all persons who occupy a position of peculiar confidence toward others, and to include those informal relations which exist whenever one party trusts and relies on another, as well as technical fiduciary relations.
The word 'fiduciary', as a noun, means one who holds a thing in trust for another, a trustee, a person holding the character of a trustee, or a character analogous to that of a trustee with respect to the trust and confidence involved in it and the scrupulous good faith and candor which it requires; a person having the duty, created by his undertaking, to act primarily for another's benefit in matters connected with such undertaking. Also more specifically, in a statute, a guardian, trustee, executor, administrator, receiver, conservator or any person acting in any fiduciary capacity for any person, trust or estate."
Words and Phrases, Permanent Edition (Vol. 16-A p. 41) defines "Fiducial Relation" as under
"There is a technical distinction between a 'fiducial relation' which is more correctly applicable to legal relationships between parties, such as guardian and ward, administrator and heirs, and other similar relationships, and 'confidential relation' which includes the legal relationships, and also every other relationship wherein confidence is rightly reposed and is exercised.
Generally, the term 'fiduciary' applies to any person who occupies a position of peculiar confidence towards another. It refers to integrity and fidelity. It contemplates fair dealing and good faith, rather than legal obligation, as the basis of the transaction. The term includes those informal relations which exist whenever one party trusts and relies upon another, as well as technical fiduciary relations."
Black's Law Dictionary (7th Edn. Page 640) defines "fiduciary relationship" thus
"Fiduciary relationship- A relationship in which one person is under a duty to act for the benefit of the other on matters within the scope of the relationship. Fiduciary relationships- such as trustee-beneficiary, guardian-ward, agent-principal, and attorney-client - require the highest duty of care. Fiduciary relationship usually arises in one of four situations: (1) when one person places trust in the faithful integrity of another, who as a result gains superiority or influence over the first, (2) when one person assumes control and responsibility for another, (3) when one person ha a duty to act for give advice to another on matters falling within the scope of the relationship, or (4) when there is a specific relationship that has traditionally been recognized as involving fiduciary duties, as with a lawyer and a client or a stockbroker and a customer."
Stroud's Judicial Dictionary explains the expression "fiduciary capacity" as under
"Fiduciary Capacity - An administrator who had received money under letters of administration and who is ordered to pay it over in a suit for the recall of the grant, holds it "in a fiduciary capacity" within Debtors Act 1869 so, of the debt due from an executor who is indebted to his testator's estate which he is able to pay but will not, so of money in the hands of a receiver, or agent, or Manager, or money due to an account from the London agent of a country solicitor, or proceeds of sale in the hands of an auctioneer, or money which in the compromise of an action have been ordered to be held on certain trusts or partnership amounts of money received by a partner."
Bouvier's Law Dictionary defines "fiduciary capacity" as under
"What constitutes a fiduciary relationship is often a subject of controversy. It has been held to apply to all persons who occupy a position of peculiar confidence towards others, such as a trustee, executor, or administrator, director of a corporation of society. Medical or religious adviser, husband and wife, an agent who appropriates money put into his hands for a specific purpose of investment, collector of city taxes who retains money officially collected, one who receives a note or other security for collection. In the following cases debt has been held not a fiduciary one; a factor who retains the money of his principal, an agent under an agreement to account and pay over monthly, one with whom a general deposit of money is made."
DECISION OF APEX COURT
The transfer of rights in favor of the appellants was not because the others (respondents) has abandoned their rights but because the Corporation required the transfer to be in favor of one individual presumably to avoid procedural complications. That conclusion gets strengthened by the fact that the parties have made contributions towards the sale consideration paid for the acquisition of the suit property which they would not have done if the intention was to concede the property in favor of the appellant.
In the above factual context and also in view of the fact that the parties were closely related to each other too, the Court found merit in the respondent's case that the appellant held the tenancy rights and the ostensible title to the suit property in a fiduciary capacity vis-à-vis is siblings. Therefore, in view of this, the transaction would fall outside the scope of the term "BENAMI TRANSACTION".
CONCLUSION
From above it is clear that where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity is not considered that person holds the property is a "BENAMI PROPERTY". In the above case, the father has paid the major amount of sale consideration for the purchase of property and hold the property for the benefit of others i.e. for daughters and the son of the deceased tenant.
DISCLAIMER: The case law produced above is only for the information and knowledge of readers. In case of necessity do consult with a professional for more understanding and clarification on the subject matter.
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