Plaintiff's suit not dismissed at threshold where benami claim raises disputed questions of fact, says Supreme Court

A Bench of Justice Pankaj Mithal and Justice Ahsanuddin Amanullah heard special leave petitions filed by a contesting defendant and a subsequent purchaser challenging the rejection of applications under Order VII Rule 11 CPC which sought dismissal of a partition and related suit on the ground that the properties were benami and barred by the Benami Transactions (Prohibition) Act, 1988 (as amended).

The Court held that the plaint could not be rejected at the threshold under Order VII Rule 11 merely because a defendant alleged a benami transaction, since whether a property was "benami" or fell within statutory exceptions raised disputed questions of fact to be resolved on evidence. The Bench observed that Section 4 of the Act provides that, "No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property," but stressed that the applicability of that bar could not be determined from the averments in the plaint alone. The Court, in its reasoning, observed: "for rejecting a plaint, the test is whether from the statement made in the plaint it appears without doubt or dispute that the suit is barred by any statutory provision. Where a plea is taken that the suit is saved by the exception to the benami transaction, it becomes the disputed question of fact which has to be adjudicated on the basis of the evidence. Therefore, the plaint cannot be rejected at the stage of consideration of application under Order VII Rule 11 CPC." The special leave petitions were dismissed and the parties were left to contest the suit on merits.

Background The dispute arose from a family partition suit instituted by a mother and one son against the elder son and his family for partition, possession, declaration, injunction and accounting in respect of several properties alleged to be joint family assets purchased from income of a joint tailoring business. Some properties stood in the exclusive name of the elder son’s wife and were later sold to subsequent purchasers. The subsequent purchasers (defendant Nos.5 & 6) filed an application under Order VII Rule 11 CPC contending that the suit was barred by Section 4 read with Section 14 of the Benami Act. The trial court rejected that application after detailed consideration of the plaint averments, holding that the question whether the properties were joint family assets or benami would depend on evidence. The High Court dismissed the revision. The elder son’s wife (defendant No.2) had not moved the threshold application below and the Court noted she had acquiesced to the trial court’s jurisdiction and was not an aggrieved party entitled to challenge the impugned orders.

The Supreme Court reiterated that the definition of "benami property" and the exceptions in Sections 2(8) and 2(9) were material to the determination and that a property would be treated as barring suit only if it was benami and did not fall within the statutory exceptions. Relying on this Court’s decision in Pawan Kumar v. Babu Lal, the Bench held that where the plaint averred that properties were joint family assets purchased from family funds, the plaint did not "ex facie" disclose a statutory bar. The Court further recorded that Section 14 (regarding property possessed by a female Hindu) did not itself bar a suit. The final result was that the special leave petitions were dismissed, the plaint stood not rejected, and the parties were permitted to lead evidence and have issues, including those on benami character, adjudicated at trial. No interim directions were necessary; the defendants retained the right to seek framing of issues and to raise statutory defences on evidence.

Case Details: Case No.: Special Leave Petition (C) No. 4673 of 2023 (lead); Special Leave Petition (C) No. 4674 of 2023 Case Title: Smt. Shaifali Gupta v. Smt. Vidya Devi Gupta & Ors. Appearances: For the Petitioner(s): Shri Navin Pahwa, Senior Counsel For the Respondent(s): Shri Kavin Gulati, Senior Counsel