Section 138 of NI Act: Can there be piecemeal settlement with one accused director/partner?

 

Section 138 of NI Act: Can there be piecemeal settlement with one accused director/partner?

The section 138 -147 of Negotiable Instruments Act 1881 (as amended and up to date) is a code in itself, in a sense, that myriads of issues are raised, while the process of trial begins and in the touchstone of law, the issues are deliberated and settled and judgments are passed. The discussion herein , however, shall be in narrow compass. What shall be the situation, if, in case of an accused  company, there are two directors representing the accused company and are arrayed as  a party, for their defining roles in issuing cheques and it is dishonoured for “insufficient funds”? Whether, the complaint can be settled in piecemeal manner with a Director/accused by receiving part of the cheque amount from one accused/director and whether, in such circumstances, the complaint against the other director could continue? In other words, if only part of the cheque amount could be paid by one of the director and the said director persuades the complainant, that he, having paid the dues towards his liability, the disputes could be compounded qua him and the complainant for remaining claim could pursue the complaint, against the other directors. Similarly, as a corollary, in case of an accused being a partnership firm, one of the partners pays part of the cheque amount, ostensibly part of his liability, while impressing upon the complainant to pursue the case against the other partner, allegedly, qua his share. Whether such a settlement, so to say, a piecemeal settlement u/s 138 of Negotiable Instruments Act, shall pass muster, and if it does, whether such complaints could be compounded against such partner/director and qua the alleged shares of other director/partner whether the proceedings could continue has been a moot point to deliberate herein.

Most recently, the Delhi High Court had dealt with such a situation in a matter reported as CRL.M.C. 2928/2021 & Crl.M.A. 18466/2021 SATISH KUMAR PAWA Vs STATE OF NCT OF DELHI

                   FACTS AS A PRELUDE TO THE PETITION

(i)       A petition was preferred by the accused partner under Section 482 of the Code of Criminal Procedure, 1973 against the Order dated 02.07.2019 of the learned ACMM, whereby Complaint under Section 138 of the Negotiable Instruments Act, 1988 filed by the Complainant in respect of dishonor of cheque of Rs.50 Lacs against the partners/Partnership Firm, was compounded qua one of the Partner, on receiving of Rs.25 Lacs from him, but continued against the second Partner/ Petitioner. The petitioner had challenged the order of partial compounding, on the premise that the liability of the two accused/ partners of the Partnership Firm (unregistered) was joint and several and thus, compounding in piecemeal manner, should not have been permitted. The petitioner had therefore, preferred the quashing of the Complaint against himself in terms of compounding of the offence. being the Partner of the Firm.

(ii)      To elucidate further, the complaint was  filed under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against Petitioner and Respondents No.3 & 4 i.e other partners. The ld  Metropolitan Magistrate took cognizance of the Complaint and issued summons to all the accused persons, namely, Petitioner, Respondent No.3/M/s Jagat Overseas and Respondent No.4/Mr. Sant Lal Aggarwal, on 19.11.2015, in response to which, Petitioner and Respondent No.4 appeared before the learned MM. The learned MM vide Order dated 07.03.2018 observed that “as unregistered partnership firm is only a compendious name under which the activity of the firm carried out and it is not a legal entity with respect to an unregistered partnership firm with respect to any act or omission attributable act the partners would be liable”.

(iii)      The notice under Section 251 Cr.P.C for the offence under Section 138 of the Negotiable Instruments Act, was framed against Satish Kumar Pawa and Sant Lal Aggarwal, the two Partners and not against the Firm, to which they pleaded not guilty. However, at the stage of Complainant’s evidence, the parties entered into settlement and eventually settlement was arrived at between the complainant and Respondent No.4/Sant Lal Agarwal. As per the settlement Rs 25,00,000/- was payable by the said accused and a sum of Rs.25,00,000/-, out of which Rs.20,00,000/- stood already paid and balance Rs.5,00,000/- was paid before the learned MM. The Complainant thus, compounded the offence under Section 138 N.I. Act qua Respondent No.4/Sant Lal Agarwal, who was acquitted of the offence. However, the Complaint was continued against the Petitioner Satish Kumar Pawa, the second Partner, even after compounding of the offence.

Aggrieved, the petitioner had filed Petition seeking quashing of the Complaint under Section 138 read with Section 141 Negotiable Instruments Act, 1881 asserting that in view of Orders dated 07.03.2018 and 02.07.2019, the Complaint does not survive on account of compounding on behalf of the Partnership Firm.

                             TERMS OF SETTLEMENT

It is of pertinence to refer to terms of settlement before going further. The relevant part of Settlement Agreement reads as under:

“1. It is agreed between the parties that respondent no.2/Santlal Agarwal being an equal partner of respondent no. 1 firm, shall pay a sum of Rs. 25,00,000(Rupees Twenty-Five Lakh only) which is half of the total dishonoured cheque amount, to the complainant, towards full and final settlement of all disputes/claims arising out of instant complaint case against him.

2. It is further agreed between the parties that respondent no.2/Santlal Agarwal shall pay the aforesaid settled amount to the complainant in five equal monthly instalments of Rs. 5,00,000/-(Rupees Five Lakh only) each, by way of demand draft, before the referral court on 21st day of every English calendar month. The instalments would commence from January, 2019 itself. In case of holiday, the payment shall be made on the next working day.

3. It is agreed between the parties that in case of default, the respondent no.2 shall pay a sum of Rs. 15,000/- on one default and in case of second default, the settlement shall be revoked.

4. It is agreed between the parties that after realization of the aforesaid settled amount, the complainant shall be left with no claim/dues/ criminal or civil liability whatsoever against the respondent no.2/Santlal Agarwal qua the instant complaint case and he shall withdraw his claim against respondent no.2 accordingly. The complainant shall not recover the civil liability and criminal liability from the respondent ·no.2 in the present case and he shall also not file any claim against respondent ·no.2 with regard to the instant matter.

5. Both the parties have agreed on each and every term. recorded in the settlement agreement, after carefully reading over and fully understanding and appreciating the contents, scope and effect thereof as also the consequences of the breach thereof.

6. The terms have been settled between the parties of their own free will, volition and consent and without there being any undue pressure, coercion, influence, misrepresentation or mistake (both of law and fact), · in any form, whatsoever, and the settlement agreement has correctly recorded the said agreed terms.

7. Both the parties undertake that they will abide by and be bound by the agreed terms/stipulations of the settlement agreement.”             

CONTENTIONS OF THE PETITIONER

(i) The Petitioner had been impleaded as an accused by virtue of Section 141 of the N.I. Act, making him vicariously liable for the offence committed by the Partnership Firm; unless it is determined that the offence has been committed by the Partnership Firm, he as Partner, cannot be held liable for the offence.

(ii) Consequent upon acquittal of Respondent No.4 vide Order dated 02.07.2019, the Complaint does not survive against the Petitioner,  and the Complaint cannot be proceeded with against the Officers, Director of the Companies and Partners of the Firm.

(iii)  Admittedly, the cheque in question had been signed by Respondent No.4 on behalf of Respondent No.3/M/s Jagat Overseas, the Partnership Firm. Further, to secure the payment of the cheque amount, Respondent No.4 had signed the Promissory Note in favour of the Complainant. Since the offence has already been compounded with Respondent No.2 and he has been acquitted, no trial can proceed against the Petitioner alone and he cannot be held liable under Section 138 of the Act.

(iv) No loan was advanced by the Complainant to the Partnership Firm; rather it was the amount paid in discharge of its liability towards supply of rice/paddy. The mala fide Act of Respondent No.4 cannot be held binding upon the Petitioner. No letter was ever sent by the Firm to the Complainant qua admission of its liability. Neither the Partnership Firm nor the Petitioner had received the alleged legal Notice dated 18.04.2015 sent by the Complainant.

(v) The Respondent No.4 has in mala fide manner acted against the interest of Partnership Firm. The alleged Loan transaction and the issuance of Promissory Note was done by Respondent No.4, without prior consent of the Petitioners, which is in contravention of the terms and conditions of Clause-10 of Deed of Partnership dated 01.01.1995. Therefore, the sole responsibility of the transaction was on Respondent No.4, against whom the offence has already been compounded and the Complaint does not survive against the Petitioner.

(vi) The Petitioner and Respondent No.4 are the Partners having equal share in the ratio of 50% each. However, he has never been engaged in the day-to-day affairs of the Partnership Firm. Furthermore, the Petitioner at the relevant time and even as on given dates, did not have access to the place of business. For these illegal and mala fide acts of Respondent No.4, the Petitioner has already preferred Arbitration proceedings, which have been stayed by the Supreme Court.

(vii) The reliance were placed in support of a judgment reported as  Dilip Hariramani Vs. Bank of Baroda, 2022 SCC OnLine SC 579.

 Hence, a prayer is made for quashing of the Complaint.

                             SUBMISSIONS OF THE COMPLAINANT

(i)       The Petitioner is admittedly one of the partners and the second partner Mr. Sant Lal Agarwal, have 50% share in Respondent No.3/Firm, which has not been disputed. He admits himself to be one of the Partnership Firm and is responsible for day-to-day affairs of the Firm; he may have separate action against Respondent No.4 in regard to his acting against the interest of the Firm, but the Complainant has no concern with it as he had dealt with the Firm through its Partner/ Respondent No.4.

(ii)      The assertion that since no separate Notice under S.251 NI Act has been framed on the Partnership Firm, he cannot be held vicariously liable for the acts of the Firm, is also not tenable under Law as being a Partner in the Firm, he has equal responsibility for the affairs of the Partnership Firm.

(iii)      On behalf of the Complainant that under Section 257 Cr.P.C., it is the discretion of the Complainant to withdraw the Complaint against one or the other accused persons. The Complainant has exercised his discretion under Section 257 Cr.P.C. and withdrawn the Complaint against one Partner on account of settlement with him.

(iv)      As per Section 25 of the Partnership Act, 1932 clearly enjoins that the liability of each partner is joint and several. Therefore, the Petitioner being a partner in the Partnership Firm, is severally liable for the amount due from the Firm.

Therefore, it was submitted that the impugned order does not suffer from any infirmity and the present petition should be dismissed.

The core legal issue

(A)      whether in a case under Section 138 of N.I. Act, against the Partnership Firm, compounding by one partner would be in discharge of the entire liability of the Partnership Firm or it can be apportioned to the partners individually?

(B)      Whether a Partnership Firm is a legal entity, which can sue or be sued in its own name?

(C)      Whether compounding of Offence by one Partner would result in complete discharge of the Liability of the Partnership Firm against all the Partners?

In the light of the core issues, the factual matrix has to be recapitulated. The Complaint under Section 138 of N.I. Act was filed against the Respondent No. 3/M/s Jagat Overseas, the Partnership Firm in which the Petitioner/Satish Kumar Pawa and the Respondent No.4/Sant Lal Agarwal were the two partners, having their share in the ratio of 50:50. The averments in the Complaint were that the Partnership Firm/ Respondent No. 3/M/s Jagat Overseas, had issued Post-dated Cheque of Rs. 50,00,000/- under the signatures of Respondent No. 4/Sant Lal Agarwal, the partner, drawn on State Bank of India, which on presentation, was dishonored for “funds insufficient”.

The Cheque in question, that the liability incurred was by the Partnership Firm and the Cheque had also been issued for and on behalf of the Partnership Firm under the signatures of Respondent No.4 Sant Lal Agarwal, one of the partners.

The moot point was that whether a criminal case can be filed against an unregistered Partnership Firm. The  Section 69 of the Partnership Act provides for the effect of non-registration. Clause (2) of Section 69 states that no Suit to enforce a right arising from a Contract, shall be instituted in any Court by or on behalf of a Firm against any third party unless the Firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the Firm. Section 69 of the Partnership Act clearly stipulates the filing of Suits which are confined to proceedings under Code of Civil Procedure and not to criminal offences. The word “Suit‟ in common parlance means a process instituted in the Court for recovery or protection of right or enforcement of a claim or redressal of civil injuries. It does not encompass any criminal liability.

The Section 142 of N.I. Act deals with “cognizance of offence‟ and provides that the Complaint under Section 138 of NI Act in writing, can be made by the Payee or holder in due course. The Legislature in its wisdom, has used the word ‘Complaint’ and not ‘Suit’ in Section 142 of N.I. Act thereby indicating that the bar created for maintaining a Suit in Section 69 of the Partnership Act by or against an unregistered Firm, cannot be stretched and applied to maintain a criminal proceeding under Section 138 of N.I. Act.

                             LEGAL PRECEDENTS

The Supreme Court in B.S.I. Ltd. and Another vs. Gift Holdings Pvt. Ltd. and Another, 2000 SCC (Cri) 538, interpreted the word “Suit’ while deciding maintainability of a proceeding under Section 138 of NI Act in the context of ban imposed by the Sick Industrial Companies (Special Provisions) Act. It provides that no Suit for Recovery of Money or Enforcement of any security against the Industry, Company or Guarantee in respect of any loan or advance granted to the Industrial Company shall lie if in respect of the Industrial Company, an inquiry under Section 16 is pending or any scheme referred to under Section 17, is under preparation or consideration. The Court observed that the word “Suit‟ envisaged in Section 22(1) cannot be stretched to criminal prosecution as it is neither for recovery of money nor for enforcement of any security, etc. Section 138 of NI Act is a penal provision for commission of an offence which entails conviction and sentence on proof of the guilt in duly conducted criminal proceedings. Once the offence under Section 138 of NI Act is completed, the prosecution initiated is not for recovery of the amount covered by the Cheque, but for bringing the offender to penal liability.

The registration or non-registration of the Partnership Firm would have no bearing insofar as Section 141 of NI Act is concerned. The same has been held by the Karnataka High Court in the case of Gowri Containers vs. S C Shetty, ILR 2007 Kar 4586.

The Kerala High Court in Abdul Gafoor vs. Abdurahiman, 1999 (4) Crimes 98, held that Section 138 is not a Suit and the bar of Section 69(2) of the Partnership Act would not operate in such cases. It was further observed that the effect of non-registration of a Partnership Firm, is applicable only to the cases involving civil rights and has no application to criminal cases.

It was therefore held by the hon’ble Delhi High Court in SATISH KUMAR PAWA  (Supra)  on the basis of the aforesaid discussion that the Complaint under Section 138 of NI Act was not maintainable as the Partnership Firm was unregistered, is not tenable in law.

 

B. Whether a Partnership Firm is a legal entity, which can sue or be sued in its own name?

It is a matter of record that M/s Jagat Overseas was a Partnership Firm, in discharge of whose liabilities, the Cheque had been issued under the signatures of Respondent No. 4/Sant Lal Agarwal. It is not in dispute that the Complaint under S.138 NI Act was filed against the Respondent No. 3/M/s Jagat Overseas and the two Partners. The Section 141 of N.I. Act provides that where offences are committed by the Company, then every person at the time of offence committed was in charge of and was responsible to the Company for the conduct of its business as well as the Company shall be deemed to be guilty of the offence.

Explanation to Section 141 reads as under: -

“Explanation.— (a) “company” means any body corporate and includes a firm or other association of individuals; and (b) “director”, in relation to a firm, means a partner in the firm.”

Section 141 of N.I. Act read with Explanation, therefore, makes it abundantly clear that when an offence is committed by a Company or a Firm, every member who is responsible and in charge of the affairs of the Company/Firm is guilty of the offence committed under Section 138 of NI Act.

The situation, though , became somewhat piquant owing to the fact that the ld Metropolitan Magistrate, while framing a Notice under Section 251 of Cr.P.C., 1973 on 07.03.2018, observed that the Partnership Firm is not a separate entity but it is only a compendium of persons, and did not frame a Notice against the Partnership Firm, but only against Respondent No. 4/Sant Lal Agarwal and the Petitioner/Satish Kumar Pawa separately by describing them as the partner of the Respondent No. 3/M/s Jagat Overseas.

                                      LAW

Thus, the Notice under Section 251 N.I. Act was framed on 18.04.2018 only against the two partners and not the Partnership Firm, which has not been challenged by either Party. The Supreme Court in Aneeta Hada vs M/s Godfather Travels & Tours Pvt. Ltd., AIR 2012 SC 2795, after referring to judgments in Iridium India Telecom Ltd. v. Motorola Inc and Ors., 2004 (1) BOM CR 479 and Standard Chartered Bank and others v. Directorate of Enforcement and others, AIR 2006 SC 1301, has observed that :

“the Company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a Company commits an offence, then certain categories of persons in charge as well as the Company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain.”

According to the Supreme Court “for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative.”  The relevant paras of the judgment are reproduced as under: -

“the common proposition of law that has emerged for consideration is whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 (for brevity 'the Act') without the company being arraigned as an accused. Be it noted, these two appeals were initially heard by a two-Judge Bench and there was difference of opinion between the two learned Judges in the interpretation of Sections 138 and 141 of the Act and, therefore, the matter has been placed before us.

It is to be borne in mind that Section 141 of the Act is concerned with the offences by the company. It makes the other persons vicariously liable for commission of an offence on the part of the company. As has been stated by us earlier, the vicarious liability gets attracted when the condition precedent laid down in Section 141 of the Act stands satisfied. There can be no dispute that as the liability is penal in nature, a strict construction of the provision would be necessitous and, in a way, the warrant”. 

The supreme court while applying the doctrine of strict construction has held that “ we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section 8 make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. [59] In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. We say so on the basis of the ratio laid down in C.V. Parekh [(1970) 3 SCC 491] which is a three- Judge Bench decision. Thus, the view expressed in Sheoratan Agarwal [(1984) 4 SCC 352], does not correctly lay down the law and, accordingly, is hereby overruled. The decision in Anil Hada [(2000) 1 SCC 1] is overruled with the qualifier as stated in paragraph 37. The decision in Modi Distilleries [AIR 1988 Supreme Court 1128] has to be treated to be restricted to its own facts as has been explained by us hereinabove.”

The Supreme Court has reiterated in Anil Gupta vs Star India Pvt. Ltd., 2014 (10) SCC 373, Himanshu vs B. Shivamurthy & Anr., (2019) 3 SCC 797, and recently in Bijoy Kumar Moni vs Paresh Manna & Anr., 2024 INSC 1024.

What therefore emerged is that it is settled that in the absence of Company being arraigned as an accused, the Directors cannot be held liable for the offence committed by a company. Since the Notice under S.251 Cr.P.C. has not been framed against the Partnership Firm, this itself is a sufficient ground for discharge of the Petitioner.

 

C. Whether compounding of Offence by one Partner would result in complete discharge of the Liability of the Partnership Firm against all the Partners?

According to the petitioner, the Partnership Firm defines the group of persons who form a Partnership Firm and the liability of the partners is joint and several and thus, compounding done by one partner for the liability of the Partnership Firm, would result in compounding of the entire case and cannot be apportioned to the Partner who was not a party to the compromise, by leaving his liability to the extent of his share in the Partnership Firm.

In the present case, one partner, the Respondent No. 4/Sant Lal Agarwal has compromised the matter with the Complainant vide Mediated Settlement Agreement dated 17.01.2019, wherein the Respondent No. 4/Sant Lal Agarwal, being equal partner of Respondent No. 3/M/s Jagat Overseas, the Partnership Firm, agreed to pay a sum of Rs. 25,00,000/- which is half of the dishonored cheque amount, to the Complainant “towards full and final settlement of all disputes/claims arising out of instant complaint case against him”. The said Compromise has been accepted by the learned Metropolitan Magistrate vide Order dated 02.07.2019 and the case has been directed to be continued against the Petitioner/Satish Kumar Pawa.

The question arise as to whether such partial compounding by one partner for the liabilities of the Partnership Firm, would result in total discharge of all liabilities or it can be apportioned in the manner it was done by the Respondent No. 4/Sant Lal Agarwal and the Complainant?.

To delve the issue further, it is worthwhile to refer to  Section 25 of the Partnership Act which provides that every partner is liable, jointly with all the other partners and also severally, for all acts of the Firm done while he is a partner. It reads as under:

“25. Liability of a partner for acts of the firm: - Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.”

The Firm is not a legal entity; it is a collective or compendious name for all the partners. In other words, a Firm does not have any existence away from its partners, though by virtue of S.141 NI Act, it can be sued in its name. A Decree in favour of or against a Firm has the same effect as a Decree in favour of or against the partners. When the Firm incurs a liability, it can be assumed that all the partners were incurring that liability and so the partners remain liable jointly and severally for all the acts of the Firm. Therefore, the liability of the partners is joint and several.

In Ashutosh vs State of Rajasthan & Ors., AIR 2005 SC 3434, it had been observed by the Supreme Court that it is open to a creditor of the Firm to recover the debt from any one or more of the partners. Each partner shall be liable as if the debt of the Firm has been incurred on his personal liability.

Therefore, when there is a compromise by one partner, it has to be for and on behalf of the Partnership Firm and there cannot be any partial settlement with one partner, as has been done in the present case.

The Complainant has sought to justify partial compounding and the withdrawal of the Complaint qua Respondent No. 4 under Section 257 of the Cr.P.C. which empowers withdrawal of Complaint against one or more accused persons.

Sections 257 of Cr.P.C. reads as under:

“257. Withdrawal of complaint — If a complainant, at any time before a final order is passed in any case under this Chapter, satisfies the Magistrate that there are sufficient grounds for permitting him to withdraw his complaint against the accused, or if there be more than one accused, against all or any of them, the Magistrate may permit him to withdraw the same, and shall thereupon acquit the accused against whom the complaint is so withdrawn.”

The Delhi High Court in SATISH KUMAR PAWA (Supra) has held as under:

“59.No doubt, Section 257 empowers a Complainant to withdraw the case on sufficient grounds against ‘all or any of the accused persons’, but it has to be understood in the right perspective. As already discussed above, the liability was that of the Partnership Firm, against whom, in the first instance, the Notice under Section 251 of Cr.P.C. has not been framed. Furthermore, as already held above, the liability was that of the Partnership Firm for which both Respondent No. 4/Sant Lal Aggarwal and the Petitioner/Satish Kumar Pawa were jointly and severally liable for the liability incurred by the Firm. The Settlement with one partner could not have been apportioned in the manner it has been done in the present case”.

60. Consequently, when the Complaint is withdrawn under Section 257 by the Complainant as against Respondent No. 4/Sant Lal Aggarwal, the same is essentially withdrawn against the Partnership Firm, which is originally liable for the debt owed to the complainant.

61. In view of Section 25 of the Partnership Act, the Partners, accused persons herein, are jointly and severally liable for the acts of the Partnership Firm/M/s Jagat Overseas.

62.  In the present case, both the partners, namely, Petitioner/Satish Kumar Pawa and the Respondent No. 4/Sant Lal Agarwal, were jointly and severally responsible for the liability incurred by the Partnership Firm, meaning thereby that each is liable for the entire liability individually as well as jointly. The partners may have agreed to be entitled to the share profit & loss in a particular ratio, but their legal liability towards the third person is joint and several and there can be no apportionment.

In the Mediated Settlement Agreement dated 17.01.2019 itself, it has been noted that the Compromise is towards all the existing liabilities of the Partnership Firm which also acknowledges that the payment made by the Respondent No. 4/Sant Lal Agarwal in discharge of his liabilities of the Partnership Firm.

The liability of Sh. Sant Lal was not limited to his 50% as has been erroneously assumed, but is towards the entire liability. Once this compounding has been accepted by the Complainant, the necessary implication shall be that it is for and on behalf of the Partnership Firm.

Therefore, once the matter stands compromised for whatever the amount, the offence is compounded towards all the existing liabilities of the Partnership Firm; nothing survives in the Complaint which has to be necessarily disposed of as compromised against the second partner/Petitioner as well. Thus, Section 257 of Cr.P.C. do not come to the rescue of the Complainant/Respondent No. 2 in the case herein.

The Petition was thus allowed and the Complaint Case No. 10445/2016 under Section 138 of N.I. Act filed by the Respondent No. 2 was quashed/disposed of as compounded and the Petitioner/Satish Kumar Pawa was acquitted.

                                      ----

                             Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

 

LIFE OF Anticipatory bail: SHALL IT CONTINUE post charge sheet

 

LIFE OF Anticipatory bail: SHALL IT CONTINUE post charge sheet

In a criminal case, if a F.I.R is registered and if person is accused of having committed non bailable offence, the accused shall be entitled to seek anticipatory bail, provided, the accused is able to satisfy the courts of law i.e Sessions Court or the High Court, as the case may be, that, he is falsely implicated and that he may not be involved in the alleged offence or the innocence could be pleaded on variety of other aspects and if prima facie, the courts are satisfied, then, the accused may be admitted to anticipatory bail. Such bails, if and when granted could be conditional or even unconditional.  In case, the alleged offence relates to the imprisonment of Seven (7) years or less, then, in terms of Section 35(3) of Bhartiya Nyaya Suraksha Sanhita (BNSS) 2023 ,   a notice to the accused shall have to be issued and unless, there are reasons to be recorded in writing, the accused persons shall, generally, not be arrested by the Investigating Officer. In any case, with a view to secure itself, the accused in the concerned F.I.R shall have to approach the courts for anticipatory bail for any non bailable offence, that the accused may be alleged to have committed.

However, there are yet another interesting dimension in this regard i.e in case after the granting of anticipatory bail, if charge sheet is filed and some other additional and grave sections are added in the charge sheet, whether, the police may arrest the accused due to the reasons as aforesaid, or whether, the permission from the court shall have to be obtained. If so, whether, yet again, the accused shall have to seek fresh bail from the court, in view of change in circumstances i.e addition of new sections in the charge sheet. The discussion herein shall revolve around that.

Recently, the Supreme Court, in a matter, reported as 2026 INSC 145 and  captioned as Sumit Vs State of U.P & Anr  (Criminal Appeal No. 830/2026) CRIMINAL APPEAL NO. 830 OF 2026 (Arising out of SLP(Crl.)No.1536/2026) have comprehensively dealt with such issues.

BRIEF FACTS

(i)     To set out the facts of Sumit Vs State of UP (Supra),  in brief, the above appeal arises from the order passed by the High Court of Allahabad dated 07.01.2026 in Criminal Misc. Anticipatory Bail Application No.11038/2025, by which the anticipatory bail application preferred by the appellant came to be rejected.

(ii)    The First Information Report bearing No.560/2024 came to be registered with the Akbarpur Police Station, District Kanpur Dehat, State of Uttar Pradesh for the offence punishable under Section 80(2)/85 BNS and Sections 3 and 4 respectively of the Dowry Prohibition Act, 1961.

(iii)   The appellant before the Supreme Court was the brother-in-law (Devar) of the deceased. The deceased was married to the brother of the appellant, past 7 months and died, allegedly died under mysterious circumstances at her matrimonial home. Accordingly, the FIR came to be lodged by the mother of the deceased.

(iv)   The appellant before the Supreme Court was apprehending arrest and had earlier, preferred an application before the High Court seeking anticipatory bail being application no.3992/2025. The anticipatory bail was granted by the high court. The operative part of the order [passed by the high court was as under:

“The applicant will cooperate during the investigation and trial and will not misuse the freedom of bail. In case of violation of the above conditions, the Investigating Officer/Prosecutor shall issue notice to the applicant shall be at liberty to file an appropriate application for cancellation of the anticipatory ball granted”.

What is evident from above is that the anticipatory bail was granted by the High Court as prayed for but the same was limited only up to filing of the chargesheet. Once the chargesheet was filed, the protection earlier granted came to an end and in such circumstances, the appellant, once again prayed for anticipatory bail by way of a fresh application which came to be rejected by the High Court.

According to the Supreme Court, As regards the principles, regarding exercising discretion of granting anticipatory bail, either, the Court may grant anticipatory bail or may decline. However, once having exercised its discretion in favour of the accused upon consideration of the overall matter, there may be no good reason for the High Court to restrict it up to the stage of filing of the chargesheet.

It is also relevant in the context that in the earlier order passed by the High Court, the High Court was pleased to observe that having regard to the nature of the allegations, the role of the applicant and all the facts and circumstances of the case, the accused could be said to have made out a case for grant of anticipatory bail. If that was so, the High Court could have indicated, while, declining to grant anticipatory bail, as to what was so particular or what was so gross, that, the High Court thought fit not to grant anticipatory bail, subsequently after filing of charge sheet.

POSITION OF LAW

(i)     In Bharat Chaudhary and Anr. vs. State of Bihar and Anr. reported in (2003)8 SCC 77, the Supreme Court has held that there is no restriction in Section 438 Cr.P.C. to grant anticipatory bail even when charge sheet has been filed and cognizance is taken. The relevant part of the said decision reads as under:

“7. From the perusal of this part of Section 438 of CrPC, we find no restriction in regard to exercise of this power in a suitable case either by the Court of Session, High Court or this Court even when cognizance is taken or a charge-sheet is filed. The object of Section 438 is to prevent undue harassment of the accused persons by pre-trial arrest and detention. The fact, that a court has either taken cognizance of the complaint or the investigating agency has filed a charge-sheet, would not by itself, in our opinion, prevent the courts concerned from granting anticipatory bail in appropriate cases. The gravity of the offence is an important factor to be taken into consideration while granting such anticipatory bail so also the need for custodial interrogation, but these are only factors that must be borne in mind by the courts concerned while entertaining a petition for grant of anticipatory bail and the fact of taking cognizance or filing of a chargesheet cannot by itself be construed as a prohibition against the grant of anticipatory bail. In our opinion, the courts i.e. the Court of Session, High Court or this Court has the necessary power vested in them to grant anticipatory bail in non-bailable offences under Section 438 of CrPC even when cognizance is taken or a charge-sheet is filed provided the facts of the case require the court to do so.”...

(ii)    The Delhi High Court in a matter reported as 2004 SCC OnLine Del 53, dealt with somewhat similar question, as to, whether Section 170 Cr.P.C prevents the Trial Court from taking a charge-sheet on record, unless the accused is taken into custody. The Delhi High Court observed as under:

“15. Word “custody” appearing in this section does not contemplate either police or judicial custody. It merely connotes the presentation of accused by the investigating officer before the Court at the time of filing of the charge-sheet whereafter the role of the Court starts. Had it not been so the investigating officer would not have been vested with powers to release a person on bail in a bailable offence after finding that there was sufficient evidence to put the accused on trial and it would have been obligatory upon him to produce such an accused in custody before the Magistrate for being released on bail by the Court”.

16. In case the police/investigating officer thinks it unnecessary to present the accused in custody for the reason that the accused would neither abscond nor would disobey the summons as he has been cooperating in investigation and investigation can be completed without arresting him, the IO is not obliged to produce such an accused in custody”.

(iii)   The above view was reiterated in Ravindra Saxena vs. State of Rajasthan, reported in (2010) 1 SCC 684. In the said case the High Court had rejected the application seeking anticipatory bail on the ground that the chargesheet had been filed, such approach was held to be erroneous. The Court observed that a Constitution Bench in Shri Gurbaksh Singh Sibbia and Others vs. State of Punjab, reported in (1980) 2 SCC 565, clearly held that the anticipatory bail can be granted at any time so long as the applicant has not been arrested:

“7. We are of the considered opinion that the approach adopted by the High Court is wholly erroneous. The application for anticipatory bail has been rejected without considering the case of the appellant solely on the ground that the challan has now been presented”.

8. We may notice here that the provision with regard to the grant of anticipatory bail was introduced on the recommendations of the Law Commission of India in its Forty-first Report dated 24-9- 1969. The recommendations were considered by this Court in a Constitution Bench decision in Gurbaksh Singh Sibbia v. State of Punjab [(1980) 2 SCC 565 : 1980 SCC (Cri) 465].

Upon consideration of the entire issue, the Supreme Court laid down certain salutary principles to be followed in exercise of the power under Section 438 CrPC by the Sessions Court and the High Court. It is clearly held that the anticipatory bail can be granted at any time so long as the applicant has not been arrested. When the application is made to the High Court or the Court of Session it must apply its own mind on the question and decide when the case is made out for granting such relief.”

(iv)    In Sushila Aggarwal & Ors. vs. State (NCT of Delhi) & Anr reported in (2020) 5 SCC 1, the following questions were referred to the larger Bench of five judges:

i.      Whether the protection granted to a person under Section 438 CrPC should be limited to a fixed period so as to enable the person to surrender before the trial court and seek regular bail?

ii.     Whether the life of an anticipatory bail should end at the time and stage when the accused is summoned by the court?

The Constitution Bench answered the reference as under:

Regarding Question 1,

The Supreme Court held that the protection granted to a person under Section 438 CrPC should not invariably be limited to a fixed period; it should enure in favour of the accused without any restriction on time. Normal conditions under Section 437(3) read with Section 438(2) should be imposed; if there are specific facts or features in regard to any offence, it is open for the court to impose any appropriate condition (including fixed nature of relief, or its being tied to an event), etc.

Regarding Question 2

It is held that the life or duration of an anticipatory bail order does not end normally at the time and stage when the accused is summoned by the court, or when charges are framed, but can continue till the end of the trial. Again, if there are any special or peculiar features necessitating the court to limit the tenure of anticipatory bail, it is open for it to do so.”

The Supreme Court in Sumit Vs State of U.P & Anr (Supra) has also referred to the following observations made by the Constitution Bench in paras 77.3 and 77.4 respectively of Sushila Aggarwal (supra) are also relevant which reads as under:

“77.3. In these circumstances, the mere fact that an accused is given relief under Section 438 at one stage, per se does not mean that upon the filing of a chargesheet, he is necessarily to surrender or/and apply for regular bail. The analogy to “deemed bail” under Section 167(2) with anticipatory bail leads this Court to conclude that the mere subsequent event of the filing of a charge-sheet cannot compel the accused to surrender and seek regular bail. As a matter of fact, interestingly, if indeed, if a charge-sheet is filed where the accused is on anticipatory bail, the normal implication would be that there was no occasion for the investigating agency or the police to require his custody, because there would have been nothing in his behaviour requiring such a step. In other words, an accused, who is granted anticipatory bail would continue to be at liberty when the chargesheet is filed, the natural implication is that there is no occasion for a direction by the court that he be arrested and further that he had cooperated with the investigation.

77.4. At the same time, however, at any time during the investigation were any occasion to arise calling for intervention of the court for infraction of any of the conditions imposed under Section 437(3) read with Section 438(2) or the violation of any other condition imposed in the given facts of a case, recourse can always be had under Section 439(2).”

According to the Supreme Court there should not be a misconception that in every nonbailable and cognizable offence the police is required to invariably arrest a person, even if it is not essential for the purpose of investigation. Rather, the law is otherwise. In normal and ordinary course, the police should always avoid arresting a person and sending him to jail, if it is possible for the police to complete the investigation without his arrest and if every kind of cooperation is provided by the accused to the investigating officer in completing the investigation. It is only in cases of utmost necessity, where the investigation cannot be completed without arresting the person, for instance, a person may be required for recovery of incriminating articles or weapon of offence or for eliciting some information or clue as to his accomplices or any circumstantial evidence, that his arrest may be necessary. Such an arrest may also be necessary if the investigating officer concerned or officer in charge of the police station thinks that presence of the accused will be difficult to procure because of grave and serious nature of crime as the possibility of his absconding or disobeying the process or fleeing from justice cannot be ruled out.

(v) The aforesaid decision of the Delhi High Court received endorsement of the supreme Court in Siddharth vs. State of Uttar Pradesh & Anr., reported in (2022) 1 SCC 676, wherein it was observed as under:

“9. We are in agreement with the aforesaid view of the High Courts and would like to give our imprimatur to the said judicial view. It has rightly been observed on consideration of Section 170 CrPC that it does not impose an obligation on the officer-in-charge to arrest each and every accused at the time of filing of the charge-sheet. We have, in fact, come across cases where the accused has cooperated with the investigation throughout and yet on the charge-sheet being filed nonbailable warrants have been issued for his production premised on the requirement that there is an obligation to arrest the accused and produce him before the court. We are of the view that if the investigating officer does not believe that the accused will abscond or disobey summons he/she is not required to be produced in custody. The word “custody” appearing in Section 170 CrPC does not contemplate either police or judicial custody but it merely connotes the presentation of the accused by the investigating officer before the court while filing the chargesheet”.

The Supreme Court has consistently held, that personal liberty is an important aspect of the constitutional mandate. The occasion to arrest an accused during investigation arises when custodial investigation becomes necessary or it is a heinous crime or where there is a possibility of influencing the witnesses or accused may abscond. Merely, because an arrest can be made because it is lawful does not mandate that arrest must be made. A distinction must be made between the existence of the power to arrest and the justification for exercise of it [Joginder Kumar v. State of U.P., (1994) 4 SCC 260 : 1994 SCC (Cri) 1172] . If arrest is made routine, it can cause incalculable harm to the reputation and self-esteem of a person. If the investigating officer has no reason to believe that the accused will abscond or disobey summons and has, in fact, throughout cooperated with the investigation we fail to appreciate why there should be a compulsion on the officer to arrest the accused.

In Sumit Vs State of UP (Supra) in para 12 it is held as under:

“When the appellant has joined the investigation, investigation has completed and he has been roped in after seven years of registration of the FIR we can think of no reason why at this stage he must be arrested before the chargesheet is taken on record. We may note that the learned counsel for the appellant has already stated before us that on summons being issued the appellant will put the appearance before the trial court.”

(vi) The Supreme Court in Satender Kumar Antil vs. CBI reported in (2022) 10 SCC 51 said in clear terms that the mandate laid down in Siddharth (supra) should be strictly complied with.

In Md. Asfak Alam vs. State of Jharkhand and Another reported in 2023 SCC OnLine SC 892 under a similar situation where the appellant therein had been granted interim protection nby the High Court under Section 438 CrPC and the charge-sheet was filed before the application seeking pre-arrest bail was finally heard, the High Court rejected the pending anticipatory bail and directed the appellant to surrender before the competent authority and seek regular bail. In this backdrop, it was observed as under:

“14. ……What appears from the record is that the appellant cooperated with the investigation both before 8-8-2022, when no protection was granted to him and after 8-8-2022, when he enjoyed protection till the filing of the charge-sheet and the cognizance thereof on 1-10-2022. Thus, once the charge-sheet was filed and there was no impediment, at least on the part of the accused, the court having regard to the nature of the offences, the allegations and the maximum sentence of the offences they were likely to carry, ought to have granted the bail as a matter of course. However, the court did not do so but mechanically rejected and, virtually, to rub salt in the wound directed the appellant to surrender and seek regular bail before the trial court. Therefore, in the opinion of this Court, the High Court fell into error in adopting such a casual approach. The impugned order of rejecting the bail and directing the appellant, to surrender and later seek bail, therefore, cannot stand, and is hereby set aside…...”

The position of law is therefore, well settled:

(i) once anticipatory bail is granted, it ordinarily continues without fixed expiry. The filing of a charge-sheet, taking of cognizance, or issuance of summons does not terminate protection unless special reasons are recorded. The Constitution Bench in the case of Sushila Aggarwal (supra) held that duration is a matter of judicial discretion and cannot be confined by arbitrary timelines. In the case of Siddharam Satlingappa Mhetre vs. State of Maharashtra, reported in (2011)1 SCC 694, this Court similarly cautioned that anticipatory bail should not hinge on procedural milestones.

The risk management can be taken care of by way of imposing conditions of cooperation, attendance, and non-tampering, not by imposing time limits. Where circumstances change, modification or cancellation may be sought under the BNSS, 2023, but expiry clauses inserted at inception are unsustainable.

In Sumit Vs State of UP (Supra) it is held as under:

27. In such circumstances referred to above, the impugned order passed by the High Court is set aside.

28. We order that in the event of arrest of the appellant in connection with the offence enumerated above, he shall be released on anticipatory bail subject to the terms and conditions that the Investigating Officer deem fit to impose.

29. Once the appellant is released by the Investigating Officer, he shall thereafter appear before the Trial Court and furnish fresh bail bond.

The Supreme Court has thus concluded in the following terms::

30. Before we close this matter, we would like to clarify something important. Take a case, wherein an accused has been released on bail, pending the investigation, and later upon completion of the investigation, chargesheet is filed with addition of new cognizable and non-bailable offences, then what would be the position?

It is held in para 31 of Sumit Vs State of UP (Supra) as under: 

31. The aforesaid question was looked into and answered by this Court in Pradeep Ram vs. State of Jharkhand and another reported in 2019 Crl. L.J. 3801, wherein this Court after discussing various decisions, more particularly, the decision in Prahlad Singh Bhati vs. NCT Delhi and another reported in (2001) 4 SCC 280 held that with the addition of a new cognizable and non bailable offence, more particularly of a serious nature, the accused becomes disentitled to the liberty earlier granted to him in relation to the offences for which the FIR came to be registered.

32. In such circumstances, the correct approach of the Court concerned should be to apply its mind afresh as to whether the accused is entitled for grant of bail in the changed circumstances.

33. In Prahlad Singh Bhati (supra), the FIR initially was registered under Sections 306 and 498A of the IPC respectively. But, subsequently, the chargesheet showed that the accused had committed offence under Sections 302 of the IPC. This Court took the view that with the change of the nature of the offence, the accused could be said to have become disentitled to the liberty granted to him in relation to the offence for which the FIR was registered, more particularly, if the offence is altered for an aggravated crime.

The Supreme Court in para no. 34 had recorded the conclusion:

34. In such circumstances referred to above, we arrive at following conclusions in respect of a circumstance whereafter the grant of bail to an accused, further cognizable and nonbailable offences are added:-

(i) The accused can surrender and apply for bail for newly added cognizable and non-bailable offences. In the event of refusal of bail, the accused can certainly be arrested.

(ii) The investigating agency can seek order from the court under Sections 437(5) or 439(2) of Cr.P.C. respectively for arrest of the accused and his custody.

(iii) The Court, in exercise of its power under Sections 437(5) or 439(2) of Cr.P.C. respectively, can direct for taking into custody the accused who has already been granted bail after cancellation of his bail. The Court in exercise of its power under Section 437(5) as well as Section 439(2) respectively can direct the person who has already been granted bail to be arrested and commit him to custody on addition of graver and non-cognizable offences which may not be necessary always with order of cancelling of earlier bail.

(iv) In a case where an accused has already been granted bail, the investigating authority on addition of an offence or offences may not proceed to arrest the accused, but for arresting the accused on such addition of offence or offences it needs to obtain an order to arrest the accused from the Court which had granted the bail.

From the aforesaid discussion, the vista of anticipatory bail as regards its continuity, post charge sheet and circumstances of that has been duly explained including in the very recent judgment of Supreme Court in Sumit Vs State of UP (Supra). The aforesaid judgment has recorded various judgments in its historical perspective including that of the constitution bench judgment of Supreme Court in Sushila Aggarwal (Supra).  

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                                                Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com

Family Settlement, license, permissive possession & OWNERSIP: LAW DISCUSSED

 

Family Settlement, license, permissive possession & OWNERSIP: LAW DISCUSSED

The division bench of Delhi High Court has reiterated and reaffirmed the fact that a registered document and its effect cannot be undermined on the strength of a family settlement, howsoever, persuasive it may be. In a matter captioned as Sandeep Sethi & Anr Vs Rajinder Kumar Sethi deceased through LRs RFA (OS) 05/2017, the Delhi high court has held as much. It is held to be well settled that in the absence of material pleadings in the written statement, a plea of either an oral family settlement or of the case, falling within the exception to Section 4 of the Benami Act, is not legally tenable. Mere incantation of the words “trustee” or “fiduciary” cannot, by itself, attract the statutory exception. In absence of the cogent evidence, such a plea shall be untenable.

In the above case, in a good measure, it is also deliberated that, if the defendant, was a licensee, and he must be deemed to be always a licensee. It is not open to him, during the subsistence of the license or in the suit for recovery of possession of the property instituted after the revocation of the license to set up a title to the property in himself or anyone else. The licensee‟s obligation is to surrender possession upon termination of the license and, if so advised, to pursue any independent remedy for declaration of title through appropriate proceedings. In Sandeep Sethi (Supra), despite termination of the license though notice issued and institution of the suit, the defendants failed to surrender possession of the Suit property. The Plaintiff, therefore, became entitled, as a matter of law, to recover possession.

The ld single judge of Delhi High Court vide a  common judgement dated 28.11.2016 in CS(OS) 2134/2006 & CC No. 990/2017, in Sandeep Sethi (Supra) was pleased to decree the suit filed by the plaintiff against the Defendants in the said suit, directing the Defendants to handover the possession of the entire first floor and two rooms along with one bathroom on the second floor of the Property bearing No. A-8, Vishal Enclave, New Delhi( In short “suit property”). The counter claim filed by the defendant was dismissed.

In intra court appeal, the hon’ble division bench had also adjudicated the appeal vide a common judgment, since the parties to the disputes were common and the appeals emanated out of an identical factual matrix, involving overlapping parties and common questions of law.

FACTUAL MATRIX

(i)     The Plaintiff claimed to be the registered owner of the Suit Property, which was originally leased from the Municipal Corporation of Delhi [In short “MCD‟] pursuant to a perpetual lease dated 11.05.1971.

(ii)    The Plaintiff thereafter had  constructed a three-storey building on the said plot from his own funds and resources. The aforesaid property was subsequently converted into free-hold in favour of the Plaintiff vide a conveyance deed dated 05.01.2011.

(iii)   The Plaintiff bore all the expenses relating to the conversion, and on that basis, asserts exclusive ownership over the Suit Property as his self-acquired property.

(iv)   The Defendant, elder brother of the Plaintiff, was allowed to use and occupy the first floor, and two rooms along with one bathroom on the second floor of the Suit Property, purely out of natural love and affection. No consideration was ever charged from the Defendant for such use or occupation.

(v)    The oral licence granted in favour of the Defendant was revoked in September 2006. Upon revocation, the Defendant sought “15 days‟ time to shift, remove his belongings, and hand over the physical possession of the premises.

(vi)   However,  the Defendant failed to vacate the Suit Property. A legal notice dated 26.10.2006, was, thus, issued to the Defendant. The defendant, despite due service of the aforesaid notice, neither replied thereto nor complied with its terms. Hence, in terms of the notice, the licence to occupy the Suit Property stood revoked, and the defendant was granted Seven (7) days to vacate the premises, and handover vacant and peaceful possession to the Plaintiff.

(vii)  As the defendant did not comply with the same, therefore,  the suit was instituted, before Delhi High Court seeking the following reliefs:

(a)  A decree of possession be passed in favour of the Plaintiff and against the Defendant in respect of the entire first floor and two rooms and one bathroom on the Second Floor, as shown within red lines in the site plan attached with the plaint, of the property bearing No. A-8, Vishal Enclave, New Delhi.

(b)  A further decree of Rs. 2000/- on account of damages and mesne profits be also passed in favour of the Plaintiff and against the Defendant, for the period of 04.11.2006 till the date of filing of the Suit.

(c) A further decree @Rs. 1,000/- per day on such rate at which the court may arrive at after holding enquiry under Order XX Rule 12 of the CPC be also passed in favour of the Plaintiff and against the Defendant as damages and mesne profits pendente lite and future till handing over of its physical and vacant possession of the property in question. The Plaintiff undertakes to pay deficient court fee at the time of decree.

(d)  Cost of the suit may also be awarded in favour of the Plaintiff against the Defendant.

(e)  Any other or further order which this Hon’ble Court may deem fit and proper in the facts and circumstances of the case may also be passed in favour of the Plaintiff and against the Defendant.”

                       

 

Defendant’s version

The written statement was filed by the defendant while,  raising a counter- claim on the following grounds:

(i) While the execution of the lease deed dated 11.5.1971 is not in dispute, the defendant denies exclusive owner of the plaintiff in Suit Property.

(ii) It was claimed that the ground floor of the Suit property was constructed out of the joint funds of the Plaintiff and the Defendant, whereas the first and the second floors were constructed solely by the Defendant using his own resources, pursuant to a family arrangement under which those floors were to belong exclusively to him.

(iii) The defendant had also disputed the Plaintiff‟s assertion that the entire expenditure for conversion of the property from leasehold to freehold was borne exclusively by the Plaintiff.

(iv) The suit is not maintainable, not  valued properly, it is barred by limitation, and is also barred by the law of adverse possession.

                                        COUNTR CLAIM

In the counter claim, it was averred by the defendant, that upon the demise of the father of the parties, both the sons i.e. the Plaintiff and the Original Defendant, inherited his estate and business, a substantial portion of which was joint in nature.

It is also contended that the Plaintiff, Defendant, and their father jointly participated in the auction, and upon being declared successful, the property was purchased in the name of the Plaintiff, at the instance of their father, in order to circumvent the terms and conditions of the auction, which prohibited participation by a person already owning property in Delhi.

The initial amount of Rs.10,300/-, as well as the subsequent instalments, are stated to have been paid out of joint funds. It was also claimed that the Plaintiff had mortgaged the Suit Property to obtain a loan, and thereafter in November 1976, applied for sanction of building plans for construction of the ground floor. Upon approval, a dwelling unit was built using joint funds, and that was reflected in the occupancy certificate dated 16.05.1981.

Both the families had shifted to the newly constructed ground floor on 04.11.1979. It is also claimed by the defendant that prior thereto, the parties were residing together in another property bearing No. B-1, Radhey Puri, Delhi, which admittedly belongs to the defendant, and whose ownership and possession are not in dispute.

It was further averred that under the family arrangement, the Plaintiff was to assist the defendant in securing sanction of building plans, and in the installation of water and electricity meters in the name of defendant. It was agreed between the parties that the first and second floors of the Suit Property would be constructed by the Defendant from his own funds, and that, in the event of sale of the Suit Property, the sale proceeds would be divided equally between the two brothers.

The Defendants claimed to have utilised the funds received from the sale of his Vivek Vihar Property, as well as the drawings from his business, towards the construction of the first and second floors, for which sanction was allegedly granted on 24.03.1988.

The Defendants pleads that the records of the MCD reflected his name and that of his son, were got noted as owners and occupants of the first and second floors of the Suit Property, since, they alone, interacted with municipal authorities. The reliance is placed on a notice dated 13.10.1989, which is stated to confirm their use and occupation of the said portions. In mid- 2003, at the request of the Plaintiff, the Plaintiff‟s son was permitted to use a part of the second floor, for the purpose of storage.

The Defendants while providing a detailed narrative of the family‟s movements, stated that after partition, the family initially stayed at Jammu with their maternal uncle, thereafter, moved to Karnal and subsequently settled in Delhi. During this period, several premises were taken on rent, following which, the parties shifted to Radhey Puri and throughout, the parties are said to have lived jointly as a family.

                                        ISSUES FRAMED

The following issues were framed on 04.07.2007 in the suit-

“1. Whether the plaintiff is entitled to a decree of possession in respect of A-8, Vishal Enclave, New Delhi, as claimed?OPP

2. Whether the plaintiff is entitled to damages/mesne profits of Rs.2000/-from the defendant till the period of filing of the suit and @ Rs.l000/- per day for the period after filing of the suit from the defendant as claimed or damages/mesne profits at any other rate? OPP

3. Whether the suit is barred by limitation? OPD

4. Whether the suit has not been properly valued and liable to be dismissed for want of court fee? OPD''

 The following issues were framed in the counter claim:

"1. Whether the defendant is entitled to decree of declaration that he was the owner of 1^st and 2^nd floor and proposed owner of land underneath A-8, Vishal Enclave, New Delhi?

2. Whether the defendant is entitled to mandatory injunction as claimed in the counter claim for removal of obstructions of plaintiff and his agents and servants etc in use and occupation of 1^st and 2^nd Floor of the property by the defendant?

3. Whether there was any family settlement as claimed by the defendant dated 25.10.1970 and 4.11.1979? OPD.

 4. Whether the counter claims have not been properly valued and are liable to be dismissed for want of proper court-fee?

5. Whether the counter claims of the defendant are barred under Benami Transaction Act? OPD

6. Relief"

                        EVIDENCE

The Plaintiff placed reliance on the partnership deed to demonstrate that the original parties were partners in a firm, thereby seeking to negate the existence of any Joint Hindu Family [hereinafter referred to as :JHF‟].  During cross-examination, DW1 admitted that, on the date of auction, no registered property stood in the name of Sh. Trilok Chand Sethi. The Defendant also placed on record, a letter issued by MCD concerning unauthorised construction further acknowledged that the Vivek Vihar property had been sold by his father, who thereafter purchased a flat in Mumbai. DW1 also admitted that he was unable to produce any document to show that his father had ever paid house tax in respect of the Suit Property or borne any charges for converting the property from leasehold to freehold. The only document produced by DW1 in support of construction, was an invoice for 200 bags of cement, issued in his own name. The DW1 deposed that the Suit Property was purchased in an auction, conducted in the year 1970. According to him, the original parties, their father, and an old friend of the Plaintiff, went for the MCD auction. The father was allegedly made aware of the terms and conditions of bidding, including the stipulation that a bidder should not own any other property in Delhi. A copy of these terms and conditions has been exhibited. DW1 further stated that the property bearing No. D-253 Vivek Vihar, which was in the name of the original Defendant, was sold after the parties shifted to the Suit Property on 04.11.1979. A copy of the passbook, duly exhibited and was relied upon, to show, that funds from their joint account were used to pay household expenses relating to the Suit Property. A copy of the ration card of the Plaintiff was also exhibited. DW1 further deposed that, pursuant to an alleged agreement of 1970, and subsequent family arrangements of 1974, and 04.11.1979, the first and second floors of the Suit Property were always intended to belong to the original Defendant.

                                Decision by the single judge

Upon consideration of the pleadings and evidence on record, the Suit was decreed in favour of the Plaintiff on the following grounds:

(A)    That the Plaintiff successfully proved his ownership of the Suit Property, by virtue of the perpetual lease deed dated 11.05.1971 and conveyance deed dated 05.01.2001.The plaintiff had also established that the sanctioned building plans, occupancy certificate, house tax records, electricity and water meters stood in his name. The Defendants failed to adduce any evidence to substantiate the existence or implementation of any family settlement. Furthermore, the Defendant did not place on record any documentary proof, to show that any expenditure was incurred by the original Defendant towards the construction of the ground, 1^st or 2^nd floors. Although reliance was placed on a bank passbook, the same did not establish payment of electricity or water charges, as claimed. Consequently, the Plaintiff was held to be the absolute owner of the Suit Property, and entitled to its possession.

(B).   That accordingly, the issue no.1 in the suit and issue nos. 1 and 3 in the counter-claim were decided in the Plaintiff‟s favour. The ld single judge had also observed that there was no cross-examination or rebuttal by the Defendant with respect to the rate of damages/mesne profits claimed by the Plaintiff. Considering the relationship between the parties, damages/mesne profits @ Rs.30,000/- per month, were granted in favour of the Plaintiff and against the Defendant.

(C).   That on  the point of limitation, the Defendants failed to establish adverse possession over the Suit Property. No evidence or anything was produced to show that the suit was barred by limitation. Since, the license of the Defendant was revoked by a legal notice dated 25.10.2006, and the suit was filed on 06.11.2006, the Suit was held to be well within the period of limitation.

(D)    That, the onus pertaining to the issue no 4 in the suit was on the Defendant, however, the Defendant failed to discharge it. The suit had been valued by the Plaintiff in accordance with the market value of the Suit Property. The issue is, therefore, decided in favour of the Plaintiff and against the Defendant.

(E)    That with regard to the issue no.2 in the counter-claim, the Defendant relied on photographs of the gym, allegedly run by Sh. Ajay Sethi, son of the Plaintiff, at the Suit Property, to establish the obstructions in the Defendant‟s use and occupation of the premises. However, in view of the Plaintiff having established his ownership and the Defendant having failed to prove any right, title, or interest in the Suit property, the said contention was rejected.

(F)    That pertaining to valuation of the Court Fee, in respect of the counter-claim, the ld Single Judge held that the Counter Claims had been properly valued in terms of para 25 of the plaint. Consequently, this issue was decided in favour of the Defendant and against the Plaintiff.

(G)    Lastly, with regard to the issue no.5 in the counter-claim, in view of the bar contained under Section 4(2) of the Prohibition of Benami Property Transactions Act, 1988 [“the Benami Act‟], this issue was decided in favour of the Plaintiff and  against the Defendant.

                        APPEAL BEFORE DIVISION BENCH

In light of these findings, the ld single judge of Delhi high court was pleased to decree the suit, in favour of the Plaintiff, and the Counter Claim stood dismissed accordingly.

CONTENTION OF THE PARTIES IN APPEAL

The defendant had impugned the judgment and decree in appeal by challenging the said judgment and decree with the following pleas.

 

        (i) The Plaintiff could be said to be holding the Suit Property in a fiduciary capacity, only, as a member of the Hindu Joint Family, and that the Suit Property was initially purchased, and subsequently, developed by construction of various floors, out of common and joint family funds.

        (ii) The ld single judge erred in failing to return any findings on a crucial argument raised on behalf of the Defendants, viz the averments of the Defendants in the counter-claim, having not been specifically denied or challenged by the Plaintiff, stood admitted, yet were completely ignored in the Impugned Judgement. In this regard, the Appellants specifically rely upon the averments pertaining to utilisation of joint funds, payments allegedly made for acquisition of the Suit Property by Late Sh. T.C. Sethi, from joint funds, expenditure incurred towards construction of the dwelling unit from joint funds, the alleged common business agreement of 1970, and the family arrangement dated 04.11.1979.

        (iv) It is settled law that the burden of proof to establish the quantum and justification of mesne profits, lies upon the party claiming the same. The Impugned Judgement, it is urged, has awarded mesne profits without any evidence on record, and solely on the ground of suggestion being made by the counsel of the Plaintiff.

        (v) The ld Single Judge erred in awarding interest on an alleged amount termed as mesne profits. It is pointed out that the suit remained pending for several years, partly due to delays occasioned during mediation proceedings, and also because the Impugned Judgement remained reserved for a considerable period, for which the Defendants cannot be faulted.

        (vi)  The Defendants contend that it was an admitted fact that the land standing in the name of the father of the erstwhile parties stood acquired shortly prior to the date of auction by MCD. This fact assumes significance, in light of the terms of the auction, which stipulated that ownership of any other property would render the bid liable to rejection. It is for this reason, inter alia, that the bid was recorded in the name of the younger son, i.e., the Plaintiff. According to the Defendants, this crucial aspect has been completely overlooked by the ld Single Judge.

        (vii) The ld single judge have erred in ignoring the fact that everything including houses/residencies/ businesses, income & expenditure etc. were joint and derived from a common source of funds namely, joint family business. This fact, it is contended, was not denied in the pleadings and stood admitted in evidence.

        (vii) The Defendants further contend that the provisions of the Benami Act, and the settled law thereunder, have been ignored by the ld Single judge. The Plaintiff could only be said to be holding the Suit Property in a fiduciary capacity, as part of the Hindu Family, and that the Suit Property was purchased and developed out of common funds.

        (viii) The ld Single judge , inequitably noted the sale of the Vivek Vihar property by the Defendant, and the purchase of an alternative property at Dhanu Road, Maharashtra, while completely ignoring the comparative monetary values involved in these transactions.

        (ix)  The Defendants assert that joint bank account of the business was used for making payment for all property tax, electricity, water, repayments of loan, and construction related payments. This, according to them, was consistent with the understanding that the Suit Property was joint, and that steps would subsequently be taken to record joint ownership in official records, pursuant to the family arrangement.

        (x) It is further pertinent to note that that even the Plaintiff has utterly failed to show any source of his funds for the construction, which he claims to have undertaken from his own resources. It is submitted that the Plaintiff had no known source of income at the relevant time, whereas, the Defendants had demonstrated availability of funds through sale of properties, constitute facts which were allegedly ignored by the ld single judge.

        (xi) wrongful reliance was placed by the ld single judge upon the judgement in Hemaji AIR 2012 SC 1987, as the facts of that case were entirely distinguishable, and the law laid down, therein, was not applicable to the present matter.

        (xii)  The ld single judge failed to apply the law laid down by the Apex Court in, Marcel Martins v. M. Printers AIR 2009 SC 103. The circumstances, in which the Suit Property was purchased in the name of the Plaintiff, assumes great importance while determining whether the Plaintiff held the property in a fiduciary capacity vis-à-vis the Defendants. On this basis as well, the Defendants assert that the Suit property was acquired and developed from common funds.

(xiii)  It is wrong to have accepted the Plaintiff‟s contention that the jewellery belonging to his wife was sold to finance construction of the Suit Property. This claim, according to the Defendants, stood completely demolished, during the Defendant‟s cross-examination on 25.10.2010, wherein he admitted that no documentary proof such as income tax returns or bank statements was available, to establish the availability of funds or the existence of such jewellery.

(xiv) The Defendants relied upon evidence led by the Defendant No.2 while contending that the only gold in the household was either bought or inherited by the father of the erstwhile parties, and a portion thereof was sold to repay a loan taken by the father of the parties from one Mr. K.C. Kapoor, at the time of auction bidding.

(xv)   In fact, both the Plaintiff and his son admitted that during matrimonial disputes between son and the daughter-in-law, the daughter-in-law had taken away her entire jewellery/stridhan, as well as the jewellery belonging to the wife of the Plaintiff, sometime during 2007-2008. This fact, supported by police records, clearly demonstrates that no jewellery was available for sale to finance construction, and that any jewellery purchased thereafter, could only have been acquired after completion of construction from funds, allegedly provided by the Defendants.

        (xvi) The Defendants further contend that the ld single judge failed to consider the mandate of the statutory provisions, especially Section 2(15) read with Section 35 of the Code of Civil Procedure, 1908, regarding filing of suit for partition and possession of an immovable property.

        According to the Defendants, these averments go to the very root of the matter and establish the counter-claim in their favour.

                                PLEA OF THE PLAINTIFF/RESPONDENT

Per contra, the learned counsel for the Respondent/Plaintiff has made the following submissions:

1.     It is averred that the Plaintiff has duly proved his ownership of the Suit Property by placing on record and exhibiting the perpetual lease deed, Conveyance deed  Occupancy Certificate, house tax receipts, assessment orders and various notices. In contrast, the Defendants failed to produce any document/record or prove the existence of any family settlement qua the Suit Property or otherwise.

2.     The Plaintiff contends that the Defendants failed to prove that the first and second floors of the Suit Property were constructed by his own funds or that the conversion from leasehold into freehold was not funded solely by the Plaintiff.

3.     The reliance placed by the Defendants on the Partnership Deed dated 06.04.1964 is misconceived, as the said Partnership Deed itself records that- “AND whereas the party No.1 Sh. Rajendra Kumar Sethi was carrying on the business under the sole proprietorship and with effect from 01.04.1964 the party no.2, i.e., Sushil Kumar Sethi has been taken as a partner by Shri Rajendra Kumar in the firm under the name and style of M/s Tara Rubber Industries”.

4.     This makes it amply clear that the Plaintiff had an independent source of income and did not require partnership funds to purchase the Suit Property. It has also been referred in the written statement, that the Plaintiff was also involved in the sale and purchase of properties, that further justify the generation of independent funds by the Plaintiff.

5.     The Plaintiff has also contended that the Appellant also called for the voluminous records through RTI from the MCD  and a perusal of the same showed that the bid amount was paid by and in the name of Plaintiff. Moreover, the Plaintiff has also been given a no Objection Certificate for mortgaging the Suit Property to Delhi Administration for loan etc.

6.     As regards the existence of the family arrangement dated 25.10.1970 and 04.11.1979, neither did the Appellant produce any supporting document nor were the 20 witnesses produced were able to prove any sort of family settlement.

7.     Furthermore, Sh. Trilok Chand Sethi in his lifetime executed a Will and property bearing no. D-253, Vivek Vihar, Delhi was bequeathed to the original Defendant. Further, in line with the said Will, a release Deed dated 20.05.1978  was executed by the Plaintiff in favour of the Defendant, since at that point of time a Will could not be given any effect, without grant of probate, and hence a relinquishment/ release deed ought to have been executed. This itself negates the existence of any family settlement.

8.     It is also contended that the Defendant owns multiple properties such as B-1 and 2, Radhey Puri from where it is deriving rent, a plot of land at Vivek Vihar, a flat at Dhanu Road, Mumbai and Appellantis a member of Varun Co-op. House Building Society, whereas the Plaintiff has in his name only one property i.e. the Suit property, thereby rendering the plea of family settlement improbable.

9.     Even prior to the setting up of M/s Tara Rubber Industries vide Partnership Deed dated 01.04.1964, the Plaintiff was having his sole proprietorship and even after that he was engaged in the business of buying and selling of properties thereby generating sufficient income and revenue to purchase the Suit Property in auction, through his own funds. The Defendants merely contended without any substantiation, that, he, along with his father had invested his monies for the said purchase. No corresponding proof could be furnished through any account statements, passbooks or record.

10.   The judgement of Marcel Martins (supra), was further relied by this Hon‟ble Court in Promila Gulati v Anil Gulati, 2015 (149) DRJ 195  Ramesh Advani v Hiro Advani & Anr CS(OS) 1828/2012, has held that for a party to successfully fall under the exception of Section 4 of the Benami Act, a specific pleading coupled with evidence proving the same ought to be present. It is imperative that a pleading of relationship of trust in a fiduciary capacity is taken and further the Court shall have to take into consideration the factual context in which the question arises for it is only in factual backdrop that the existence or otherwise of a fiduciary relationship can be deduced in a given case.

11.   Lastly, it is contended that the Defendants have never initiated any proceedings i.e., suit for implementation of an oral family settlement or any other claim raised by the Defendants in the written statement/counter-claim in spite of lapse of over three decades, clearly indicating that the defence raised is an afterthought, lacking bona fides, and intended merely to cloud the real issues in the matter.

 FINDINGS AND ANALYSIS

        (IN APPEAL)

The hon’ble Division bench on the basis of the arguments advanced and based on record have returned the findings as under:

(1) The primary contention of the Defendants that the Plaintiff is not the exclusive owner of the Suit Property is wholly untenable. The Plaintiff has conclusively proved his title, by placing on record the documents like Perpetual Lease Deed dated 11.05.1971, Conveyance Deed dated 05.01.2001 converting the property from leasehold into freehold, Occupancy Certificate, No Objection Certification, house tax records, assessment orders and statutory notices issued exclusively in his name. These documents constitute unimpeachable evidence of ownership. In contrast, the Defendants have not produced a single title document, conveyance, sanction letter, or statutory record evidencing any ownership rights in their favour, over any portion of the Suit Property.

(2) The Defendants assertion that the Suit Property was purchased from joint family or joint business funds, is equally devoid of merit. Significantly, the Defendant after having taken a stand in his written statement, that property was not purchased in name of their father, T.C. Sethi, because he was already owner of some other property in Delhi, admitted during cross-examination that no registered property stood in the name of the father of the parties on the date of auction. No bank statements, account books, vouchers, or payment receipts evidencing contribution by the Defendants or their father towards the auction price were produced. Even the passbook relied upon by the Defendant does not reflect any payment towards the auction consideration or construction costs. Mere oral assertions of “joint funds”, unsupported by contemporaneous documentary records, cannot displace registered title documents.

(3) What is of significance is that the Defendants themselves placed reliance on the Partnership Deed dated 06.04.1964. Ironically, the said document completely undermines their own averment, as it categorically records that the Plaintiff was carrying on business as a sole proprietor prior to the constitution of the partnership and that the Defendant was inducted subsequently as a partner. This clearly establishes that the Plaintiff had an independent source of income even prior to the partnership and negates the existence of any JHF or any joint family nucleus. Joint Hindu Family and Joint Hindu Family property are distinct and separate. The mere existence of a JHF does not necessarily lead to existence of a JHF property. Once the existence of a JHF is not established, the presumption of a Joint Hindu Family Property does not arise.

(4) It is well settled that even if there is an existence of Joint Hindu Family (JHF), it does not ipso facto render all the properties as joint family properties. Instead, the claimant must establish that the property in question was acquired with the aid of the joint family funds, particularly, by demonstrating the existence of a sufficient nucleus capable of supporting such acquisitions. It reinforces the importance of substantiating claims, regarding the nature of property within joint Hindu families. It is clear that without concrete evidence of a joint family nucleus, any presumption of a property as joint family-owned is legally impermissible.

(5) The Defendants‟ case hinges substantially on alleged oral family settlements dated 25.10.1970 and 04.11.1979. However, no written memorandum, contemporaneous document, or corroborative evidence was produced to prove the existence of an oral family settlement. None of the witnesses examined were able to establish either the precise terms, the manner of implementation, or even the very existence of such alleged family settlements. Additionally, the Defendants have failed to produce any documents to prove that they ever asserted themselves as co-owner in the Suit Property, unlike the Plaintiff. Significantly, no suit or proceedings were ever instituted for enforcement of the purported settlements, for more than three decades, which conduct is wholly inconsistent with the existence of any concluded or acted-upon family arrangement.

(6) It is a settled principle of law, that, although, a family settlement may be oral, its existence must be proved by cogent, reliable and convincing evidence, demonstrating not only consensus ad idem, but, also acceptance and implementation by the parties. The Defendants, however, have failed on all counts. Moreover, the long and uninterrupted conduct of the parties, coupled with the absence of any mutation, change in possession, or assertion of rights in consonance with the alleged settlement, clearly negates the plea raised. An unsubstantiated oral family settlement cannot be permitted to defeat or override duly executed and subsisting title documents. Accordingly, the plea of family settlement remains a mere bald assertion, unsupported by evidence, and having remained unsubstantiated, was rightly rejected by the ld single judge.  

(7) The assertion that the ground floor was constructed from joint funds, whereas the first and second floors were allegedly constructed exclusively by the Defendants, is wholly unsupported by cogent and credible evidence. Apart from a solitary receipt pertaining to purchase of 200 bags of cement, the Defendants failed to produce any material substantiating the alleged expenditure, such as construction bills, contractor agreements, labour payments records, sanctioned building plans in the Defendant‟s name, or bank statements evidencing withdrawals for construction purposes.

(8)    It is trite law that the burden of proving financial contribution towards construction squarely lies upon the party asserting such a claim. Mere assertions, uncorroborated by documentary evidence, do not discharge this burden. Conversely, the sanctioned building plans, electricity and water connections, as well as the municipal records, stand exclusively in the name of the Plaintiff, thereby clearly indicating both ownership and control over the property. Further, it is well settled that mere occupation, supervision of construction, or participation in management does not, in law, confer any proprietary or ownership rights in immovable property. In the absence of proof of title or demonstrable financial contribution leading to the creation of an enforceable interest, the Defendants‟ claim is legally untenable. The ld single judge, therefore, rightly rejected the said plea, holding that possession or supervision, without more, cannot be elevated to a claim of ownership.

(9)    As regards the plea that the Plaintiff did not exclusively bear the expenses of conversion, the Defendants led no evidence to show any contribution on their part. On the contrary, DW-1 categorically admitted in cross-examination that no proof of payment towards conversion charges was available or could be produced by the Defendants, thereby amounting to failure to substantiate their stand. The conveyance deed stands solely in the name of the Plaintiff, and in law, once the conveyance deed stands duly executed and registered solely in the name of the Plaintiff, a strong presumption of legality, title and exclusive financial contribution, arises in favour of the Plaintiff. Mere denial or speculative assertions are insufficient to discharge such onus, particularly, in the absence of documentary evidence. Thus, the Defendants plea remains unsupported and legally untenable.

(10) The reliance placed by the Defendants on Marcel Martins (supra) is misplaced and clearly distinguishable. The decision therein was rendered in the peculiar factual matrix of that case, resting upon inferences drawn from admitted conduct and surrounding circumstances, none of which are present in the instant case. The ratio of the said judgement, therefore, cannot be mechanically transplanted to the present facts, which are dissimilar and devoid of any foundational evidence warranting such interference. On the contrary, the judgements in Promila Gulati (Supra) and Ramesh Advani (supra), unequivocally mandate strict and specific pleadings, coupled with cogent proof, particularly where exceptions to statutory prohibitions are invoked. These authorities underscore that vague assertions or omnibus pleas are insufficient to displace statutory presumptions or to bring a case within the narrow exceptions carved out by law. In the present case, there is a conspicuous absence of any specific pleading or evidence establishing the existence of a fiduciary relationship, circumstances giving rise to trust or confidence, and the legal obligation on the Plaintiff to hold the property for the benefit of the Defendants.

(11) It is well settled that in the absence of material pleadings in the written statement, a plea of either an oral family settlement or of the case falling within the exception to Section 4 of the Benami Act is not legally tenable. Mere incantation of the words “trustee” or “fiduciary” cannot, by itself, attract the statutory exception. Notably, despite examining as many as twenty witnesses, the Defendants failed to elicit any credible evidence to substantiate the alleged family settlement, which forms the very bedrock of their defence. The entire defence, therefore, rests on conjecture and unsubstantiated assertions.

(12) It is apparent that the said defence taken by the Defendants is barred by Section 4 of the Benami Act. The operative part of the law reads as under: “4. Prohibition of the right to recover property held benami- (1)… (2) No defence based on any right in respect of any property held as 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.”

It was therefore concluded by the division bench that in the present case, the Plaintiff cannot, by any stretch of imagination, be said to have been standing in a fiduciary capacity vis-a-vis the Defendant, nor can the Plaintiff be construed as a trustee. Even assuming such a plea is raised, the same is required to be established through specific and unambiguous pleadings and proof, both of which are conspicuously absent. However, the bar/prohibition under the Benami Act, cannot be circumvented merely by paying lip service to the concept of fiduciary capacity, as such an approach would defeat the very object and legislative intent of the statute. Permitting such defences, on the basis of bald and unsubstantiated pleas would amount to allowing statutory prohibitions to be rendered illusory, thereby subjecting the ostensible owner to prolonged and vexatious litigation at the instance of a person claiming to be the so-called “real owner”. Such an outcome would not only undermine the sanctity of registered title but would also run counter to the express mandate of section 4 of the Benami Act.

Permissive possession is distinct from adverse possession

The very basis of the claim of adverse possession shall be hostile possession to the knowledge of true owner. In Sandeep Sethi (Supra), the defendants have themselves admitted permissive occupation of the Suit Property. Such permissive possession, being referrals to a license, can never mature into adverse possession, unless there is clear, cogent and unequivocal evidence of hostile possession brought to the knowledge of the true owner. It is also bore out of record that the licence, stood revoked by notice dated 26.10.2006, and the suit for recovery of possession was instituted on 06.11.2006, well within the prescribed period of limitation. In the absence of any foundational proof, the plea of adverse possession is legally untenable and therefore the division bench has held that the said plea has rightly been rejected by the ld single judge.

So far as reliance by the defendants upon various documents, including a copy of the pass-book reflecting a joint saving bank account held by the plaintiff and the defendant, and thereby the claim of the defendant that the common funds were utilised for payment of all the expenses relating to the Suit Property at the most indicates that the account was jointly held, but it does not in any manner show, nor does it establish, that the funds from the said account were utilised either for the purchase of the Suit property or for the construction carried out thereon. The plea of joint funding for construction is therefore held to be far- fetched.

Interestingly, the terms and conditions of auction, filed along with amended written statement, categorically stipulates that, under no circumstances, would a change in the name of the intending purchaser be permitted. That being so, the said document does not aid the case of defendant in any manner. This condition clearly negates the defendant‟s plea and reinforces the Plaintiff‟s case. The relinquishment deed executed by the Plaintiff  further fortifies the Plaintiff‟s stand, as the same is executed only to give effect to a Will, under which another property stood bequeathed in favour of the original defendant. This circumstance, clearly demonstrates that there was no pre-existing family settlement, as alleged by the defendants. The remaining documents relied upon by the defendants, such as the ration card of the plaintiff, the death certificates of the father and mother of the parties and other allied documents, are not in dispute, and does not directly relate to the claim of the plaintiff, hence,  do not warrant any further consideration. The court therefore held that the remaining documents exhibited by the defendants, as well as the examination of as many as twenty witnesses, bear no relevance to the core controversy involved in the present dispute and do not carry any persuasive or probative value, hence, rejected.

So far as the challenge raised by the defendants to the award of mesne profits is concerned, it is devoid of merit. It is so, because, once, the defendants were held to be unauthorised occupants post revocation of licence, the liability to pay mesne profits followed as a necessary corollary and legal consequence. The judicial discretion in determining the quantum of mesne profits, was accordingly exercised while considering the location of the property, the nature of occupation, and the relationship between the parties. It was also held by the division bench that the rate so awarded cannot be characterised as arbitrary, perverse or excessive. Conversely, the Plaintiff‟s appeal seeking enhancement of mesne profits was also rightly rejected in the absence of evidence to justify a higher rate.

There is likewise no infirmity in the findings of the ld Single Judge with respect to the valuation of the suit, the payment of court-fees, and the valuation of counter-claim. These findings are supported by the pleadings and the evidence on record and call for no interference.

The defence set up by the Defendants is founded on conjectures, afterthoughts, and unsubstantiated allegations, whereas in sharp contrast, the Plaintiff has established his case through registered title documents, statutory and municipal records, and consistent oral and documentary evidence and that cannot be ignored.

CONCLUSION

In light of the foregoing discussion, the hon’ble Division bench has held that no illegality, perversity or incorrect view arrived at by the ld single judge and that no incorrect approach was adopted by the ld Single Judge in the Impugned Judgement, so as to justify appellate interference. It was further observed that the defendants have failed to establish any right, title or interest therein. The counter-claims were rightly dismissed, and the decree of possession and mesne profits warrants no interference. The findings of the ld single judge are based on a proper appreciation of evidence and a correct application of law.

Appeals, therefore, were dismissed.

What is a take away therefore, from the aforesaid judgment is that the law as regards family settlement based on full dress trial have thoroughly been analysed , while placing reliance on several documents and examining hordes of witnesses and it has been conclusively held that all such aspects shall have of no consequence, in the backdrop of undisputed registered documents of title existing in favour of the plaintiff. Conjectural setting up of a plea of joint fundings for construction, shall fall apart, in the face of the clear title. Once, the title of the plaintiff remains unimpeached, as a corollary thereto, the consequential relief such as mesne profit shall inevitably follow and accordingly it was also upheld by the division bench.

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                                Anil K Khaware

Founder & Senior Associate

Societylawandjustice.com