P V. SANAKARA KURUPversusLEELAVATHY NAMBIAR

A                            i'.V. SANAKARA KURUP
                                            v.
                             LEELAVATHY NAMBIAR

                                  AUGUST 16, 1994

B                    (K. RAMASWAMY AND G.N. RAY, JJ.]

          Code of Civil Procedure 1908 /Benami Transactions (Prohibition) Act.
    1988/Trust Act. 1882 :

C           S.66( 1)!Ss.4, 7/S. 8&-Agent and Power of Attomey-Holder purchasing
    property in !tis name-Consideration for purchase and improvemem with
    principle's mon~Wltetlter property vests in Principal or agent-Held : Agel!t
    lteld tlte property in trust in !tis fiduciary capacity and property vests in Prin-
    cipal-Hence entitled to declaration and recovery ofpossession of the property.
D         Abuse of Judicial Process : Party acting fraudulently and abusing
    judicial process-£xemplary costs awarded.

           This Special Leave Petition challenged the High Court's judgment
    reversing the concurrent findings of the Courts below that the petitioner
E   was an agent and power of Attorney holder of the respondent-plaintiff and
    was looking after her thavazhy properties which was outstanding on a
    lease. The property was purchased by the petitioner in his name, in a court
    auction. But the consideration for the purchase as well as the improve-
    ments of the property were met with the funds of the respondent for whom
    the petitioner was acting as an agent and Power of Attorney.
F
          The questions which arose in this petition were, whether the title to
    the suit property vested in the petitioner of his principal-the respondent
    and whether the respondent was entitled to the declaration and recovery
    of possession sought in that behalf
G
          Dismissing the Special Leave Petition, this Court

           HELD : 1.1. Obviously, at the time of the sale, Section 66 of C.P.C.
    wa$ QD the statute which was deleted by the Benami Transactions (Prohibi-
    tio;;) Act, 1988. It is true that Sub-section (1) of Section 66 prohibits the
H   maintainability of a suit against any person claiming title under the
                                            660
                  P.V.SANKARAKURUPv. L.NAMBIAR                            661

purchase-certificate issued by the Court on the ground that the purchase A
was made on behalf of the plaintiff or on behalf of some one through whom
the. plaintiff claims and that the defendant also it enjoined not to plead
that the purchase was made on his behalf or on behalf of some one to whom
the defendant claims. The public policy behind Section 66(1), as it then
stood, was to prevent fraud on purchase and to prohibit benami purchase B
at execution sale enabling genuine participants in the bid to secure the best
price for the property sold in the court auction and highest bidder secures
clear title of it. It prohibits a suit by beneficial owner or one claiming
through him. Therefore, if a real owner purchase the property but the
name of a third person was fraudulently an without consent of the real
purchaser was inserted, the real purchaser is entitled to obtain a declara· C
tion to that effect. [663-B-E]

       1.2. In the instant case, it is clear that the real purchaser is the
respondent, the petitioner as an against and power-of-Attorney, had pur-
chased the property but ostensibly had his name entered in the sale certifi-     D
cate, fraudulently and "ithout the consent of the respondent. That apart,
under Section 88 of the Indian Trust Act, an agent or other person is bound
in a fiduciary character to protect the interests of the principal and the
former would hold the property for the benefit of the principal or the
person on whose behalf he acted as an agent. The question of benami,
therefore, does not arise, though Section 4 of the Benami Transactions E
(Prohibition) Act, prohibits such a plea. Section 7 thereof does not repeal
Section of Trust Act. When an agent was employed to purchase the property
on behalf of his principal and does so in his own name, then, upon con-
veyance or transfer of the property to the agent, he stands as a trustee for
the principle. [663-F-H, 664-A-B)
                                                                                 F
       1.3. The property in the hands of the agent is for the principal and
the agent stands in the fiduciary capacity for the beneficial interest he had
in the property as a trustee. The petitioner has acted as an agent as a cestui
que trust, is a trustee and he held the property in trust for the respondent
in his fiduciary capacity as an agent or trustee and he has a duty and           G
responsibility to make over the unauthorised profits or· benefits he derived
while acting as an agent or a trustee and property account for the same to
the principal. [664-C)

     1.4. Section 4 of the Benami Transactions (Prohibition) Act does not
stand in the way for the declaration of title and possession of the plaint       H
     662                   SUPREME COURT REPORTS [1994) SUPP. 2 S.C.R.

A schedule property. The courts below, therefore, wrong in dismissing the
     suit relying on Section 66 (1) of C.P.C. The High Court was perfectly right
     in reversing the decree of the appellate court and that of the trial court
     and decreeing the suit as prayed for. [664-E]

          2. Since the petitioner has fraudulently acted and abused)udicial
B    process, exemplary costs of Rs. 10,000 are awarded and it would go to the
     Supreme Court Legal Aid Committee. [664-F]

          CIVIL APPELLATE JURISDICTION : Special leave Petition No.
     12392 of 1994.

C          From the Judgment and Order dated 2.3.94 of the Kerala High Court
     in Second Appeal No. 564 of 1989.

           M.K. Sasidharan and R.Satbish for the Petitioner

           The following Order of the Court was delivered :
D
           The petition-defendant impugnes the judgment and decree dated
     March 2, 1994 of the Kerala High Court in Second Appeal No. 564 of 1989.
     The courts below concurrently found that the petitioner was an agent and
     Power-of-Attorney holder of the respondent· plaintiff and was looking
     after her thavazhy properties. The property in question lies in the midest
E    of thavazhy properties. It was outstanding on a lease. In execution a court
     auction fo.r recovery of the arrears of rent, the suit-property was purchased
     by the petitioner in his name. The expenses incurred for the litigation till
     obtaining the sale certificate were all. credited to the account of respon-
     dent-plaintiff. For laying coconut grove the expenses incurred were
     credited to the account of the respondent. Thus the consideration for the
F    purchase as well as the improvements of the property were met with the
     fonds of the respondent for whom the petitioner was acting as an agent
     and Power-of-Attorney. He, thereby, obviously had acted in a fiduciary
     capacity as agent of the respondent. The sale- certificate though ostensibly
     stands in his name but obviously he obtained it while acting as an agent
 G   and Power-of-Attorney of the respondent. The sale-certificate thus was
     obtained without her knowledge and consent playing fraud on her. The
     facts manifest that the petitioner had purchased the property for the
     benefit of the estate of the respondent.

           From these facts the substantial questions of law, therefore, are
 H    whether the title to the suit-property vests in the petitioner or his principle·
                       P.V. KUR UP v. L. NAMBIAR                       663

respondent, and whether she' is entitled to the declaration and recovery of A
possession sought in. that behalf. The High Court has rightly considered
these substantial questions of law. Obviously, at the' time of the sale, Section
66 of C.P.C. was on the Statute which was deleted by the Benami Trans-
actions (Prohibition) Act, 1988. It is true that Sub-section (1) of Section 66
prohibits the maintainability of a suit against any person claiming title B
under the purchase-certificate issued by the court on the ground that the
purchase was made on behalf of the plaintiff or on behalf of some one
through whom the plaintiff claims and that the defendant also is enjoined
not to plead that the purchase was made on his behalf or on behalf of some
one to whom the defendant claims. The public policy behind Section 66(1),
as it then stood, was to prevent fraud on purchase and to prohibit benami C
purchase. at execution sale enabling genuine participants in the bid to
secure the best price for the property sold in the court auction and highest
bidder secures clear title of it. It, therefore, prohibits a suit by beneficial
owner or one claiming through him. Sub-section (2) mitigates against the
rigour and embargo and creates an exception which provides that "nothing D
in this Section shall bar a suit to obtain a declaration that the name of any
purchaser certified as aforesaid was inserted in the certificate fraudulently
or without the consent of the real purchaser, or interfere with the right of
a third person to proceed against that property, though ostensibly sold to
the certified purchaser, on the ground that "it is liable to satisfy a claim of
such third person against the real owner." Therefore, if a real owner E
purchases the property but the name of a third person was fraudulently
and without consent of the real purchaser was inserted, the real purchaser
is entitled to obtain a declaration to that effect.

      In the light of the facts recorded earlier, it is clear that a real F
purchaser is the respondent, the petitioner as an agent and Power-of-At-
torney, had pur-chased the property but ostensibly had his name entered
in the sale certificate, fraudulently and without her consent. That apart
under Section 88 of the Indian Trust Act, an agent or other person bound
in a fiduciary character to protect the interests of the principal and the G
former would hold the property for the benefit of the former would hold
the property for the benefit of the principal of the person on whose behalf
he acted as an agent. The question of benami, therefore, does not arise,
though Section 4 of the Benami Transactions (Prohibition) Act, prohibits
such a plea. Sub- section (3) provides that "nothing in the said section
would apply where the person in whose name the property is held is a H
    664                   SUPREME COURT REPORTS [1994] SUPP. 2 S.C.R.

A trustee or other person standing in a fiduciary capacity and the property
    is held for the benefit of ;,,nother person for whom he is a trustee or towards
    whom he stands in such capacity." Section 7 does not repeal Section 88 of
    Trust Act. When an agent was employed to p1·rchase the property on
    behalf of this principal and does so in his own name, then, upon conveyance
    or transfer of the property to the agent, he stands as a trustee for the
B
    principal. The property in the hands of the agents is for the principal and
    the agent stands in the fiduciary capacity for the beneficial interest he had
    in the property as a trustee. The petitioner has acted as an agent as a cestui
    que trust, is a trustee and he held the property in trust for the respondent
    in his fiduciary capacity as an agent or trustee and he has a duty and
C   responsibility to make over the unauthorised prohibits or benefits he
    derived ~hile acting as an agent or a trustee and properly account for the
    same to the principal.

           Therefore, the High Court is clearly right in its holding that the
    petitioner is an agent and trustee acted in the fiduciary capacity on behalf
D   of the respondent-plaintiff as General Power-of-Attorney. He held the
    property in cestui que trust for and on behalf of the respondent though he
    fraudulently got inserted his name in the sale-certificate issued by the court
    without the respondent's knowledge and consent. Section 4 of the Benami
    Transactions (Prohibition) Act does not stand in the way for the declara-
E   tion of title and possession of the plaint schedule property. The courts
    below were, therefore, wrong in dismissing the suit relying on Section 66( 1)
    of C.P.C. The High Court was perfectly right in reversing the decree of the
    appellant court and that of the trial court and decreeing the suit as prayed
    for. The,petition is accordingly dismissed. Since the petitioner has
    fraudulently acted and abused judicial process, the special leave petition is
F   dismissed with exemplary costs of Rs. 10,000. The costs would go to the
    Supreme Court legal Aid Committee. (The order be communicated to the
    Supreme Court Legal Aid Committee for the recovery of the amount).

    G.N.                                                       Petition dismissed.