Holding

The High Court correctly framed a substantial question of law and correctly held that the arrangement was a mortgage by conditional sale, so the appeal is dismissed.

Summary

The suit concerned a property originally belonging to Krishnan Nair, which was attached in execution. To raise funds, Nair executed a sale deed (Exhibit A‑5) in favour of Kesavan Channar, simultaneously executing an agreement (Exhibit A‑6) to sell the same property to his relative Kochu Kunja Nair after ten years, and later assigning those rights (Exhibit A‑7) to the predecessor of the appellant. The daughter of Nair sued for a declaration of ownership and possession. The trial court held A‑5 genuine but A‑6 and A‑7 benami, characterising the whole arrangement as a mortgage by conditional sale. The first appellate court reversed, treating all documents as genuine. The High Court again held the transaction to be a mortgage by conditional sale and passed a preliminary decree for redemption. The Supreme Court examined whether the High Court had framed a substantial question of law and whether its interpretation was correct. It held that the High Court did formulate a substantial question of law concerning the construction of the documents and that the transaction was indeed a mortgage by conditional sale, thus dismissing the appeal.

Issues considered

Whether the High Court correctly formulated a substantial question of law in construing the documents Ext A‑5, A‑6 and A‑7.
Whether the documents constitute a genuine sale or a benami transaction, i.e., whether the arrangement is a mortgage by conditional sale.

Legislation cited

Subjects

benami transactionmortgage by conditional saleconstruction of documentscivil appealproperty lawexecution proceedingsdeclaration of ownershippossession

Judgment

SANTAKUMARI AND ORS. A
v.
LAKSHMI AMMA JANAK! AMMA (D) BY LRS. AND ORS.

AUGUST 10, 2000

.. [V.N. KHARE AND S.N. VARIAVA, JJ.] B

Benami Transaction :

Execution proceedings against plaintiff-In order to deposit decretal
amount plaintiff sold suit property and simultaneously got a document executed
by purchaser to sell the praperty to one of his relations-Held, High Court has
c
rightly concluded that the transaction was a mortgage by conditional sale-
Even if the sale deed was executed, vendor had no intention to permanently
dispose of the property-The second transaction was a benami transaction and
heirs of plaintiff-vendor entitled to a decree of declaration as owner of the
property and for recovery of possession. D

Code of Civil Procedure, 1908 :

S.100-Second appeal-Substantial question of law-Construction of
documents upon which claim to property is based-Held, is a substantial
question of law. E

The suit property belonging to the father of the plaintiff-respondent,
namely, 'KN' was attached in execution proceedings. However, he was
allowed to get back the property provided he deposited the decretal amount
In order to raise funds, 'KN' executed a sale deed (Ext.A-5) in favour of F
one 'KC' and on the same day 'KC' executed another agreement (ExtA-6)
in favour of 'KKN', a relation of 'KN', stipulating that 'KC' would sell the
suit property to 'KKN' after 10 years but before expiry of 11 years. 'KKN'
further assigned his rights under Ext.A-6 to predecessor of the appellant
by a deed of assignment (Ext.A-7). Later, when the assignee got a sale deed
in respect of suit property executed in his favour as stipulated in Ext.A-6, G
the plaintiff-respondent filed a suit against the said assignee for declara-
tion that she was owner of the property, and for possession. The trial court
decreed the suit holding Ext.A-5 to be a genuine document and Ext.A-6
and Ext.A-7 as benami transactions entered into on behalf of 'KN' and
that predecessor of appellant was merely a trustee of 'KN'. It further held H
353
354 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.
A that the defendant had spent considerable amounts and it was necessary to
take accounts between the parties, and since there was no prayer to render
accounts, the suit could not be decreed. Both the parties filed appeals. The
appellate court held that once the trial court held Ext.A·S to be genuine, it
followed that Exts.A-6 and A· 7 were not genuine, and, therefore, predeces·
B sor of the appellant had a right to the suit property. The plaintiff filed a
second appeal. The High Court held that taken as a whole, the transactions
...
were in the nature of mortgage by conditional sale, and passed a prelimi-
nary decree for redemption and directed taking of accounts. Aggrieved,
the defendant filed the present appeal.

C It was contended for the appellant that the High Court without
formulating any question of law decided the second appeal and erred in
holding that the transaction was a mortgage by conditional sale even
though there was no such pleading, nor was there any prayer to that effect.

Dismissing the appeal, the Court
D
HELD : 1. It cannot be said that the second appellate court, I.e., the
High Court, has not formulated the question of law. The High Court has
categorically stated that there Is a substantial question of law between the
parties inasmuch as the construction of documents under which the claim
to property Is made Is a substantial question of law. [358-G·H]
E
Kochukaskkada Aboobacker v. Attam Kasim, [1996] 7 SCC 389; Guran
Ditta v. T. Ram Ditta, AIR (1928) P.C. 172 and Neelu Narayani v. Lakshmanan,
[1999] 9 sec 237, relied on.

1.2. The suit was for a declaration that the plaintiff is owner of the
F property and for recovery of possession. The claim to ownership and
possession was on the basis of interpretation of the documents Exts.A-S, A·
6 and A-7. In effect the trial court, on the interpretation of the three
documents, said that the transaction was in the nature of mortgage by
conditional sale. The first appellate court erred in interfering merely on
G the ground that if Ext.A-S was found to be a genuine document, it neces·
sarlly followed that Exts. A-6 and A-7 were also genuine transactions and
not benami transactions. [358-D-F]

1.3. The facts leading to the execution of Exts.A-S to A· 7, and the
manner in which these documents are executed are all very relevant. The
H property had been sold in execution of a decree. At the relevant time the
SANTAKUMARI v. LAKSHMI A¥MAJANAKI AMMA [S.N. VARIAVA, J.] 355
Transfer of Property Act did not operate in the State of Travancore and only A
the general principles of that Act, based on justice, equity and good con·
science, were applicable. It is clear that even though the sale deed was ex·
ecuted, the vendor had no intention to permanently dispose of the property.
Simultaneously with the execution of Ext.A-5 the purchaser, i.e. 'KC' ex·
.. ecuted a second agreement to sell the property after 10 years. The two docu·
ments were executed immediately one after the other and were also registered
B

simultaneously. The proposed purchaser, in Ext.A-6, was a close relative of
the vendor and was already 72 years of age. This makes it clear that Ext.A·
6 was for and on behalf of 'KN', the father of the plaintiff. [359-B-G]

1.4. It cannot be said that the findings of the trial court and the second c
appellate court, i.e., the High Court that the documents Exts.A-5, A-6 and
A-7 are not what they purport to be and that they had been executed with
the intention that the property would be re-conveyed to plaintiff's father,
are perverse and/or illogical. Nor can it be said that such an interpretation
of these documents, could never have been arrived at. The High Court was D
confirming the findings of the trial court. Therefore it cannot be said that it
has reversed concurrent findings offact. The High Court by stating that the
transaction is a mortgage by conditional sale has merely put a form to the
said transaction. Taken as a whole, the transaction appears to be a mort·
gage by conditional sale. The High Court is not making out any new case
but is merely interpreting the documents and putting a form to the nature E
of the transactions. [360-B-C; D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1365 of 1990.

From the Judgment and Order dated 7.8.87 of the Kerala High Court in
F
S.A. No. 313 of 1981.

T.L.V. Iyer and Ms. Malini Poduval for the \'\ppellants.

Sanjay Sen and S. Sukumaran and Ramesh Bl!-bu for the Respondents.
G
The Judgment of the Court was delivered by

S. N. VARIAVA, J. This Appeal is against a Judgment dated 7th August,
1987 in Second Appeal No. 313 of 1981.

Briefly stated the facts are as follows: H
356 SUPREME COURT REPORTS [20001 SUPP. 2 S.C.R.

A In 1939 the suit property came to the share of one Krishnan Nair by
virtue of a partition in his family. As the family of Krishnan Nair had been
conducting several chit funds a number of debts had been incurred in that
business, several suits had been instituted and several decrees had been passed
against the said Krishnan Nair. Krishnan Nair, therefore, executed a Sale Deed
in 1940 selling the land to his brother-in-law, one Parameswaran Nair. One of
B
the decree holders got this property attached in execution of his decree.
Parameswaran Nair filed objection claiming to be owner of the property by
virtue of Sale Deed executed in his favour. The Executing Court held that the
Sale Deed was sham and bogus and that the same was a benami transaction.
The Executing Court held that the property continued to remain vested in
c Krishnan Nair. The property was thus sold in execution. Thereafter, Krishnan
Nair filed a Petition to set aside the sale. That Petition was dismissed. However,
Krishnan Nair was allowed to get back the property, provided he deposited the
decretal amount, interest and commission.

In order to raise money to so deposit Krishnan Nair then executed a Sale
D Deed in favour of one Kesa van Channar for Rs. 1,200. The Sale Deed provided
that Krishnan Nair was to receive a consideration of Rs. 1,200 and the pur-
chaser was to pay off the creditors. This Sale Deed was registered and Kesavan
Channar was put in possession of the land. On the same day and simultaneously
with the execution of this Sale Deed another Agreement was executed by
E Kesavan Channar in favour of Kochu Kunja Nair. That Agreement was also
registered simultaneously and immediately after the above mentioned Sale
Deed. This Agreement provided that Kesavan Channar would sell the suit
property to Kochu Kunja Nair for a sum of Rs. 1,400 after a period of 10 years,
but before 11 years were over. It must immediately be mentioned that the said
Kochu Kunja Nair was a relative of Krishnan Nair. For the sake of convenience
F
hereinafter the Sale Deed in favour of Kesavan Channar will be referred to as
Exhibit A-5 and the Agreement to Sell in favour of Kochu Kunja Nair will be
referred to as Exhibit A-6.

Before the period of 10 years had expired Kesavan Channar expired and
G there was a partition in his family. The suit property came to the share of his
daughter, one Lakshmikutty. On 14th February, 1952 Kochu Kunja Nair as-
signed his rights under Ext. A-6 to the predecessor of the present Appellant.
For the sake of convenience this Deed of Assignment will hereinafter be
referred to as Exhibit A-7.

H At the end of a period of 10 years Lakshmikutty did not sell the property
SANTAKUMARI v. LAKSHMI AMMA JANAK! AMMA [S.N. VARIAVA, J.] 357

as envisaged by the Agreement Ext. A-6. Therefore, the predecessor in title pf A
the Appellant filed Suit No. 198 of 1957 for specific performance of Ext. A-
6. It must be mentioned that Krishnan Nair was made a party defendant to that
Suit. He was Defendant No. 15. That Suit came to be decreed and the Appeal
filed by Lakshmikutty was dismissed. Second Appeal filed by Lakshmikutty
was also dismissed. Therefore, Lakshmikutty executed a Sale Deed in favour
B
of the predecessor of the Appellant on 9th July, 1964. The predecessor in title
took possession of the property through the Court on 18th July, 1967.

On 27th January, 1976 the daughter of Krishnan Nair filed Suit No. 128
of 1976 for declaration that she was the owner of the property and for recovery
of possession. This Suit was filed against the predecessor in title of the Appel- c
lant herein. The other heirs of Krishnan Nair were Defendants Nos. 2 to 6 in
that Suit. Those heirs did not actively participate in that Suit. Thus the real fight
was between the daughter of Krishnan Nair and the predecessor in title of the
Appellant. On 7th March, 1977 the Suit was decreed by the trial Court. The
trial Court held that the Sale Deed, Ext. A-5 was a genuine document and that
it was not a sham document. The trial Court held that Exts. A-6 and A-7 were D
benami documents, which had been entered into on behalf of Krishnan Nair.
The trial Court held that the predecessor of the Appellant was merely a trustee
of Krishnan Nair. The trial Court, however, found that the predecessor had
spent considerable amounts and that it was necessary to take accounts between
the parties. The trial Court held that as there was no prayer to render accounts E
the Suit could not be decreed until accounts were taken and the predecessor
of the Appellant was paid the amounts spent by him. Therefore, the trial Court
refused to give possession to the daughter of Krishnan Nair.

Both parties went in Appeal. The Appellate Court disposed of both the
Appeals by a common Judgment dated 19th April, 1980. The Appellate Court F
held that once the trial Court had concluded that Ext. A-5 was genuine it
automatically followed that Exts. A-6 and A-7 were also genuine. On this basis
the Appellate Court held that Exts. A-6 and A-7 were not benami transactions
and the predecessor of the Appellant had a right to the suit property. The
Appellate Court, therefore, dismissed the Suit. G
The daughter of Krishnan Nair filed a Second Appeal in which the
impugned Judgment dated 7th August, 1987 has been passed. By the impugned
Judgment the High Court has held that the nature of the transactions clearly
indicated that Krishnan Nair had no intention of selling of the property and that
in order to meet his debts a device had been formulated by which there was H
358 SUPREME COURT REPORTS [2000) SUPP. 2 S.C.R.
A a notional sale to Kesavan Channar with a condition that the property would
be sold back after a period of IO years. The High Court held that taken as a
whole the transactions were in the nature of mortgage by conditional sale. The
High Court, therefore, passed preliminary decree for redemption and directed
taking of accounts. It is this Judgment which has been assailed before us.

B It has been seriously contended by Mr. Iyer that the High Court without
formulating any question of law had disposed of the Second Appeal and arrived
at a conclusion that the transaction was mortgage by conditional sale even
though there was no pleading to this effect, no prayer to this effect and neither
the trial Court nor the first Appellate court had come to any such conclusion.
C It was submitted that the High Court had interfered with the concurrent findings
of fact by the two Courts below and that, therefore, the Judgment of the High
Court should be set aside and the Appeal be made absolute.

We have heard counsel for the parties. We have read the Judgments of
the Courts below and all relevant documents. It is to be seen that the suit was
D for a declaration that the daughter of Krishnan Nair is owner of the property
and for recovery of possession. The claim to ownership and possession was on
the basis of interpretation of the documents Exts. A-5, A-6 and A-7. On an
interpretation of the documents the trial Court has held that there was a sale
in favour of Kesavan Channar but the subsequent Agreements Exts. A-6 and
E A-7 were merely benarni transactions. In effect the trial Court was also saying,
on the interpretation of the three documents, that the transaction was in the
nature of mortgage by conditional sale. The first Appellate Court interfered
merely on the ground that if Ext. A-5 was found to be a genuine document it
necessarily followed that Exts. A-6 and A-7 were also genuine transactions and
not benami transactions. No reason appears to have been given by the first
F Appellate Court for coming to this conclusion. We fail to understand as to how
merely because Ext. A-5 was held to be genuine it necessarily followed that
Exts. A-6 and A-7 were not benarni transactions. In our view, the Judgment of
the first Appellate Court appears to be erroneous and has rightly been set aside
by the impugned Judgment.
-
G As is seen the question is of interpretation of the three documents. It is
not correct to say that the second Appellate Court has not formulated the
question of law. The second Appellate Court has categorically stated that there
is a substantial question of law between the parties inasmuch as the construc-
tion of the documents under which the claim to property is made is a substantial
H question of law. That construction of documents would be a substantial ques-
SANTAKUMARI v. LAKSHMI AMMA JANAK! AMMA [S.N. VARIAVA, J.] 359
tion of law is now a well settled proposition. This proposition has been settled A
as far back as the Judgment of the Privy Council in the case of Guran Ditta
v. T. Ram Ditta, reported in AIR (1928) P.C. 172. It has since been re-affirmed
by this Court in the case of Kochukaskkada Aboobacker v. Attam Kasim,
reported in [1996] 7 S.C.C. 389 and the case of Neelu Narayani v. Lakshmanan,
reported in [1999] 9 S.C.C. 237. Thus we see no substance in the contention
B
that no question of law had been formulated.

Let us then see whether the interpretation placed by the trial Court and
the High Court on Exts A-5, A-6 and A-7 is correct. The facts leading to the
execution of these documents, the manner in which these documents are ex-
ecuted are all very relevant. As stated above, the property had been sold in c
execution of a decree. Krishnan Nair was, however, given an opportunity to
get back the property provided he deposited the decretal amount, interest and
the commission. Krishnan Nair being heavily debted did not have the money.
It is clear that he, therefore, devised a method of executing a Sale Deed in
favour of Kesavan Channar, i.e. Ext. A-5 with a condition that the property be
resold after 10 years. It is to be remembered that at that time the Transfer of D
Property Act did not operate in the State of Travancore and only the general
principles of that Act, based on justice, equity and good conscience, were
applicable. It is clear that even though the Sale Deed was executed Krishnan
Nair had no intention to permanently dispose of the property. It is clear from
the fact that simultaneously with the execution of Ext. A-5 the purchaser, i.e. E
Kesavan Channar, executed a second Agreement Ext. A-6. Unless there was
no intention to re-convey there would be no question of a purchaser simulta-
neously executing the Agreement to Sell the property after 10 years. The two
documents were executed immediately one after the other and were also reg-
istered simultaneously one after the other. There would not be two such docu-
ments executed simultaneously unless the intention was that the property was
F
to be reconveyed to the vendor i.e. Krishnan Nair. It is significant that the
proposed purchaser, in Ext. A-6, was a close relative of Krishnan Nair. It is also
relevant that Kochu Kunja Nair at the time of execution of Ext. A-6 was already
72 years of age. This makes it clear that Ext. A-6 was for and on behalf of
Krishnan Nair. This Deed of assignment in favour of the predecessor in title G
of the Appellant, i.e. Ext. A-7, by Kochu Kunja Nair shows that Ext. A-6 had
been executed at the instance of the predecessor of the Appellant. This further
indicates that the predecessor of the Appellant was aware of the fact that the
property was being sold to Kesavan Channar under Ext. A-5 with a condition
that the same would be sold back after a period of 10 years to Kochu Kunja
H
360 SUPREME COURT REPORTS (2000] SUPP. 2 S.C.R.
A Nair who was acting on behalf of Krishnan Nair. The predecessor of the
AppeUant was aware that the property had been taken on behalf of Krishnan
Nair and he himself took the property on behalf of Krishnan Nair probably due
to the old age of Kochu Kunja Nair. In our view, it cannot be said that the
findings of the trial Court and the second Appellate Court that the documents
Exts. A-5, A-6 and A-7 are not what they purport to be and that they had been
B
executed with the intention that the property would be re-conveyed to Krishnan
Nair is perverse and/or illogical. In our view it cannot be said that such an
interpretation, of these documents, could never have been arrived at. The
second Appellate Court was confirming the findings of the trial Court. There-
fore it cannot be said that the second Appellate Court has reversed concurrent
C findings of fact. The second Appellate Court by stating that this is a mortgage
. by conditional sale has merely put a form to the transaction. Taken as a whole
the transaction appears to be a mortgage by conditional sale. The second
Appellate Court is not making out any new case but is merely interpreting the
documents and putting a form to the nature of the transactions.
D We, therefore, find no reason to interfere. The Appeal stands dismissed.
There will be no order as to costs.

R.P. Appeal dismissed ...