# UNION OF INDIA v. MOKSH BUILDERS AND FINANCERS LTD. AND ORS. ETC

- **Citation:** [1977] 1 S.C.R. 967
- **Court:** Supreme Court of India
- **Decided:** 1976-10-27
- **Bench:** M. H. Beg, P. N. Shinghal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-moksh-builders-and-financers-ltd-and-ors-etc-7012
- **Pages:** 12

## Headnote

Benami transaction-Proof of benami nature.
Evidence Act (I of 1872) ss.
17 and 33-Evidence nf admissionsAdmfa-.jbility.
The appellant (plaintiff) filed a suit on behalJi of and for the benefit of
itself and of other creditors against the respondents (3 defendants) and prayed
for a dc~aration that, (I) the sale deed of the house in t.lispute by the 2nd
defendant in favour of the !st defendant was void as against the plaintiff and
all other creditors of the 3rd defendant; and (2) that the house was and continued to be owned by the 3rd defendant. The house was sold in the name of
the 2nd defendant for Rs. 69,000. He is the son of the 3rd defendant who was
alleged to be the real purchaser.
As the 3rd defendant failed to pay the
arrears of income tax due from him the house was attached as his property .. The
2nd defendant raised an objection but the objection was rejected.
The 3rd
defend:mt filed an appeal against the assessment o~ income tax and while the
appeal was pending before the Appellate Assistant Commissioner, the 2nd and
3rd. defendants, and five other persons formed a limite~ company, namely, the
1st defendant.
The Appellate Assistant Commissioner allowed the 3rd defendant's appeal and ordered a fresh assessment of his income, and the Income
Tax Officer made a fresh assessment.
Soon after the 2nd defendant purported
to convey the house of the 1st defendant for Rs. 1,00,000 of which Rs. 90,000/-
were payable to the 2nd defendant in the shape of shares in the company. The
house was again attached fori recovery of the tax due from the 3rd defendant.
The l st defendant objected to that attachment. The objection was allowed and
the parties were referred to the Civil Comi for redress, and the suit was filed.
The trial court decreed the suit, but the High Court, in appeal, set aside the
judgment.
Allowing the appeal to this Court,
HELD : The evidence disclosed that the 3rd defendant was the owner of the
bonse, and bis son, the 2nd defendant, was merely a benamidar for him; and
that the !st defendant-Company was formed just to transfer the house to it in
an effort to save it from attachment and sale for realisation of the income tax
arrears of the 3rd defendant. [978 A·Cl
(a) In a case where it is asserted that an assignment in the name, of one
person is in reality for the benefit of another, it is necessary to find out the
source whence the consideration came, and to examine who actually was enjoying the benefits of the transfer. [907 F-G]
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Gangadara. Ayya,..and others v. Subramania Sastrigal and others
(A.LR.
G
1949 F.C. 88) referred to
Mernakshi Mills, Madurai v. The Commissioner of Income-tax,
Madras
[(1956) S.C.R. 691] followed.
(b) Although the onus of establishing that a transaction is benami is on the
plaintiff, where it is i:iot possible to obtain evidence which conclusively establishes
or rebuts ~be allegation,, . the case must be dealt ~itb on reasonable probabilities
and legal mferences ansmg from proved. or admitted facts.
While the burden
initially rests on the party who would fail if no evidence is led at all after the
evidence is recorded, it rests upon the party against whom judgment' would be
given if no further evidence ·were adduced by either side. Thus the burden of
proof is not ~tatic, and may shift during tb~ course of the tri;l.
Where
the
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968
SUPREME COURT REPORTS
[1977] 1 S.C.R.
entire evidence has been led by the contesting parties on the question in issue,
abstract considerations of onusl are out of place, and the truth or otherwise of
the case must always be adjudged on the evidence led by the parties. lt is
therefore necessary to weigh the evidence in this case and to decide whether,
even if it were assumed that there was nQ conclusive evidence to establish
or
rebut the benami allegation, what would, on a careful assessment· of the evi-
• dence, be a reasonable probability and a legal inference from relevant and admissible evidence. [973 A-DJ
Kalwa Devadattam and two Others v. The

## Text

J
967
UNION OF INDIA
v.
MOKSH BUILDERS AND FINANCERS LTD. AND ORS. ETC.
October 27, 1976
[M. H. BEG AND P. N. SHINGHAL, JJ.]
Benami transaction-Proof of benami nature.
Evidence Act (I of 1872) ss.
17 and 33-Evidence nf admissionsAdmfa-.jbility.
The appellant (plaintiff) filed a suit on behalJi of and for the benefit of
itself and of other creditors against the respondents (3 defendants) and prayed
for a dc~aration that, (I) the sale deed of the house in t.lispute by the 2nd
defendant in favour of the !st defendant was void as against the plaintiff and
all other creditors of the 3rd defendant; and (2) that the house was and continued to be owned by the 3rd defendant. The house was sold in the name of
the 2nd defendant for Rs. 69,000. He is the son of the 3rd defendant who was
alleged to be the real purchaser.
As the 3rd defendant failed to pay the
arrears of income tax due from him the house was attached as his property .. The
2nd defendant raised an objection but the objection was rejected.
The 3rd
defend:mt filed an appeal against the assessment o~ income tax and while the
appeal was pending before the Appellate Assistant Commissioner, the 2nd and
3rd. defendants, and five other persons formed a limite~ company, namely, the
1st defendant.
The Appellate Assistant Commissioner allowed the 3rd defendant's appeal and ordered a fresh assessment of his income, and the Income
Tax Officer made a fresh assessment.
Soon after the 2nd defendant purported
to convey the house of the 1st defendant for Rs. 1,00,000 of which Rs. 90,000/-
were payable to the 2nd defendant in the shape of shares in the company. The
house was again attached fori recovery of the tax due from the 3rd defendant.
The l st defendant objected to that attachment. The objection was allowed and
the parties were referred to the Civil Comi for redress, and the suit was filed.
The trial court decreed the suit, but the High Court, in appeal, set aside the
judgment.
Allowing the appeal to this Court,
HELD : The evidence disclosed that the 3rd defendant was the owner of the
bonse, and bis son, the 2nd defendant, was merely a benamidar for him; and
that the !st defendant-Company was formed just to transfer the house to it in
an effort to save it from attachment and sale for realisation of the income tax
arrears of the 3rd defendant. [978 A·Cl
(a) In a case where it is asserted that an assignment in the name, of one
person is in reality for the benefit of another, it is necessary to find out the
source whence the consideration came, and to examine who actually was enjoying the benefits of the transfer. [907 F-G]
A
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Gangadara. Ayya,..and others v. Subramania Sastrigal and others
(A.LR.
G
1949 F.C. 88) referred to
Mernakshi Mills, Madurai v. The Commissioner of Income-tax,
Madras
[(1956) S.C.R. 691] followed.
(b) Although the onus of establishing that a transaction is benami is on the
plaintiff, where it is i:iot possible to obtain evidence which conclusively establishes
or rebuts ~be allegation,, . the case must be dealt ~itb on reasonable probabilities
and legal mferences ansmg from proved. or admitted facts.
While the burden
initially rests on the party who would fail if no evidence is led at all after the
evidence is recorded, it rests upon the party against whom judgment' would be
given if no further evidence ·were adduced by either side. Thus the burden of
proof is not ~tatic, and may shift during tb~ course of the tri;l.
Where
the
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entire evidence has been led by the contesting parties on the question in issue,
abstract considerations of onusl are out of place, and the truth or otherwise of
the case must always be adjudged on the evidence led by the parties. lt is
therefore necessary to weigh the evidence in this case and to decide whether,
even if it were assumed that there was nQ conclusive evidence to establish
or
rebut the benami allegation, what would, on a careful assessment· of the evi-
• dence, be a reasonable probability and a legal inference from relevant and admissible evidence. [973 A-DJ
Kalwa Devadattam and two Others v. The Union of India and others [1964J
3 S.C.R. 191 followed.
In the present case, the 2nd defendant, at the time of the sale, was just 18
years old, and did not have any money o~ his own. His father the 3rd defendant vras alive. The High Court did not examine· the reliability of tfie 2nd
defendant's evidence regarding the source from which he received the sum of
Rs. 60,000 /- even though it was an important question and had been examined
by the trial court with reference td the entire evidence on record. Ttte rcarnnable preponderance of probability on the evidence is, that the 2nd defendant had
failed to establish the source of the consideration of Rs. 60,000 /- even though
it was an important fact within his• special knowledge. [973 E-H]
(d) The 2nd defendant had also failed to prove that he enjoyed the benefit
of the sale. [974-GJ
In order to find out whether the 3rd defendant was enjoying the benefit of
the transaction, the finding of the High Court was clearly against !he evidence
on record. The admissions contained in the records before the Income
Tax
Officer proved that the house was purchased by the 3rd defendant out of bis
own funds in the name of his son, the 2nd defendant, and that the 3rd defendant was enjoying the income· accruing from it as his own income. [97 5 E-FJ
(f) (i) The admissions by the 3rd defendant were substantive evidence
of
the facts admitted and such admissions, duly proved, were admissible evidence
irrespective of whether the party making them appeared in the witness box or
not, and whether: that party when appearing as a witness was confronted wi!h
those statements in case a statement contrary to those admissions was
made.
They were taken into consideration against the 3rd defendant and not against
the 2nd defendant. [975 H, 976 A-BJ
Bharat Singh and another v. B/iagirath [1966J 1 S.C.R. 606, followed.
(ii) There is no requirement of the Evidence Act that unless the admissions
were adverse to his interest when made, they could not be read against the
person making them. [97 6 Fl
f
L
(iii) The contention that the evidence of the admissions is admissible only in
~.
terms of s. 33 of the Evidence Act was untenable because that section deals with
statements of persons whot cannot be called as witnesses and does not restrict
G
or override the provisions relating to admissions in the Evidence Act. (977 AC]
(g) The 2nd defendant, who had failed to obtain an order for the release
of the house from attachment when it was first attached, hastened to sell
the
ho11se when the assessment proceedings were pending beft>re
the Income-tax
Department.
The 1st defendant-Company was in fact dominated by the 3rd
defendant and his clooe relations, it did not even pay the sale pJice in cash, and
there was no evidence· to show that it was able to transact any substantial business.
Therefore, the sale of the house in favour of the 1st defendant was a
sham transaction and was effected only, to defeat and delay the creditors of the
3rd defendant. (978: A-BJ
CIVIL APPELLATE JURISDICTION
Civil Appeal Nos. 1739-1740 of
H
1968.
(From the Judgment and Decree dated 14-2-1967 of the Delhi
High Court in Regular First Appeal Nos. 5-D, and 54-D of 1958).
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UNION OF INDIA v. MOKSH BUILDERS (Shinghal, J.)
'\)69
V. S. Desai and Girish Chandra, for the Appellant.
Sachin Chaudhary, B. P. Maheshwar and Suresh Sethi, for the
Respondent No. 1 in (CA. 1739/68) and for Respondent No. 2 in
1739/68)/nd Respondent No. 1 in (CA. No. 1740/68).
A. K. Sen and D. Goburdhan, for Respondent No. 2 in (CA. No.
1740/68).
The Judgment of the Court was delivered by
SHI~GHAL, J.,-These two appeals by certificate have been consolidated by an order of thi's Court dated April 15, 1969. They are
directed &gainst a common judgment of the Delhi High Court dated
February 14, 1967, in Regular First Appeals Nos. 5-D and 54-D of
1958, by which the judgment and decree of the trial court dated
January 13, 1958 have been set aside with costs t;hroughout. As this
has resulted in the dismissal of the suit raised by the Union of India,
it has filed the present appeals.
The· facts giving rise to the appeais are quite simple, _Barjas Rai
Malhotra, defendan~ No. 3, is the father of Krishan Uil Malhotra,
pefendant No. 2.
The liability of defendant No. 3 to income-tax
and
super-tax for the
assessment year
1947-48, was fixed
Rs.
1,25,090/11/- in March, 1952. A demand was made for its payment,
but he neglected to meet it and a certificate was issued on October 8,
1952 to the Collector of Delhi for its recovery as arrears of land revenue.
The Collector was asked to attach house No. 15, Keeling
Road and house No. 9, Hailey Road in New Delhi, of defendant No. 3.
Both the houses were at:tached on October 13, 1952.
Meanwhile,
.defendant No. 3 appealed against the order of assessment. The Appel-
·late Assistant Commis'sioner allowed the appeal on May 12, 1953,
. set aside the assessment and directed a fresh assessment. The order
. of fresh asses'sment was made on November 30, 1953 and the incomefax demand was reduced to Rs. 1,05,769.13.
The assessments for
1944-45-and 1948"49 were completed on March 28 and 31, 1953,
. respectively, raising ;a tax demand for Rs. 1,94,738.15. A recovery
certificate was issued ~t_o the Collector for the same on May 4, 1953
and the house at No. J.~, Keeling Road wa's again attached on August
6, 1953.
.
•
We are not concerned with the house at No. 9, Hailey Road, for
the controversy before us relates to house No. 15, Keeling Road,
hereinafter referred to as the house. That house had been ostensibly
purchased by defendantj No. ~ in December, 1946 for Rs. 60,000/-.
He filed an application objecting to the attachment on the ground that
the house belonged to him, but the Collector dismissed the objection
holding that the house belonged to defendant No. 3. Defendant No. 2
, did not appeal against that order and did no~ question it by a suit.
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Thus far, the facts are not in dispute.
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It was alleged in the plaint that the house was purchased by defendant No. 3, "benami'', in the name of his son defendan~ No. 2,
out of his "own funds drawn from his bank account" and that the
"full beneficial ownership, right, title and interest in the s~} property
has always belonged and continues to tihis day to belong .o the 3rd
defendant." The plaintiff alleged further that during the pendency of
his appeal to the Appellate Assistant Commissioner against the assessment which had been made in March 1952 for 1947-48 and the
assessment proceedings for 1944-45 and 1948-49, defendant No, 3
"in collusion and conspiracy with the 2rtd defendant and certain other
persons, and with the view, intent and purpose of defeating and delaying his creditors including the plaintiff, had recourse to diver~ ways
and means" as detailed in the plaint. He was thus alleged that, in
February 1953, defendants Nos. 2 and 3 and five other perions purported to form a limited company known as Moksh Builders and
Financier's Ltd., hereinafter referred tP as the Company, which was
arrayed as defendant No. 1 in the suit, with an authorised capital of..
Rs. 5,00,000/- divided into 5000 shares of Rs. 100/- each.
There
were 7 subscribers to the Memorandum and the Articles of Association
of the Company and each of them took 10 shares.
Soon after the
Appellate Assistant Commis'sioner made his aforesaid order dated May
12, 1953 for fresh assessment of the income-tax liability of defendant
No. 3, a sale deed dated May 25, 1953 was brought into existence
whereby defendant No. 2 "purported to convey" the house to defendant No. 1 for Rs. 1,00,000/- of which Rs. 90,000/- were payable
in the shape of shares in the Company, Rs. 8,000/- payable to Sunrise
Investors Ltd. and Rs. 2000/- in cash.
The plaintiff pleaded that
"these transactions were all sham, colourable, and effected and entered
into with the active aid, instigation and advice ot the 3rd defendant and
to subserve and carry out the object of placing his proper!y, viz ... No. I
15, Keeling Road out of the reach of his creditors". It was further
urged a·s follows,-
"The consideration mentioned in the sale-deed of 25th
May, 1953 was illusory. In effect and substances the 2nd
defendant purported to sell a house to the 1st defendant in
which company in return was to become a holder of shares
of controlling interest, the shares being the alleged
price.
Except for tihe legal fiction of the 1st detendant Companybeing juristic person the 'sale was by the vendor to himself.
None of these devices and subterfuges could divest the 3rd
defendant of his
ownership of the propercy in question.
The 1st defendant company by its. promoters directors and
office bearers was fully aware of aU the facts of the case,
including the true state of the title to the property No. 15,
Keeling Road, the highly embarra:Sed financial circumstances
of the 3rd defendant the facts that he owed to the plaintiff
alone taxes to the amount of several lakhs of rupees etc. The
1st defendant is not a purcha&er in good faith for consideration of the said property or without notice of the title of the
3rd defendant. On the other hand the sale deed dated 25th
May,, 1953 to the 1st defendant was executed by t~ namelender the 2nd defendant at the instance of the true owner of
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UNION OF INDIA v. MOKSH BUILDERS (Shinghal, J.)
9 71
the 3rd defendant with intent to defeat or delay the latter's
A
creditors, and is voidable at the option of any of such creditors including the present plaintiff."
Defendant No. 1 objected to the attachment of the house for the
realisation of the arrears of income-tax of defendant No. 3.
The
Additional Collector allowed the objection by a summary inquiry, and
the Chief Commissioner dismissed the appeal on April 1, 1954. Both
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those officers, according to the plaintiff, proceeded on "prima facie
considerations" and left the parties to seek their redress in the civil
court.
With these specific averments the plaintiff raised its 'suit seeking
leave to sue on behalf and for the benefit of itself and the other creditors, if aeiy, of defendant No 3.
Itl prayed for a declaration that (i)
c
the sale deed dated May 25, 1953 was void as against the plaintiff
and all other creditors of defendant No. 3, and (ii) the house is and
continued to be owned by defendant No. 3.
In the alternative, the
plaintiff prayed for a declaration that the shares allotted to defendant
No. 2 belong~d to defendant No. 3. It also prayed for a declaration
that it was entitled to proceed against the "properties which may be
declared to be of 3rd defendant's" by attachmenv and sale to realise
D
the tax arrears due from him. A prayer was made for setting aside
the orders of the Additional Collector and the Chief Commissi0ner
on the objection pe~ition of defendant No. 2.
Defendant No. 3 did not appear to contest the suit in spite of personal service and the trial court made an order on April 15, 1955 to
prnceed against him ex-p.ar~. Separate written statements were filed
E
by the Company and defendant No. 2
The Company took the plea, inter alia, that it had been genuinely
and properly formed and that it was a bona fide purchaser for value
and the "transaction wa·s quire real and genuine". It denied that the
sale deed dated May 25, 1953, was executed at the instance of defendant No. 3, or that it was intended to defeat or delay his creditors.
It was pleaded that defendant No. 2 was the rightful owner of the
house which he had
rightfully purchased with
"his own
money
(Rupees 1 O,OOQ/- by cheque No: 32920 dated 14.11.1946 on the
New Bank of India Ltd., New Delhi drawn by his mother K. Rani
and Rs. 50,000/- paid in cash before Sub-Registrar)".
The Company also pleaded that the transaction of 'sale in its favour was without
notice of any body .else's claim and was binding.
Defendant No. 2 filed a short written statement stating that he was
the owner of the house having purchased it with "his own money".
He p\eaded that he had paid Rs. 10,000/- by cheque on New Bank
of India Ltd., New Delhi, and Rs. 50,000/- were paid before the SubRegistrar.
He pleaded further that he had no knowledge of the
Collector's order and tha~ his order, if any, was ex-parte. As regards
the Company, defendant No. 2 pleaded that it was a real and genuine
Company and that out of his shares worth Rs. 90,000/- he had sold
shares worth Rs. 74,000/-.
12 -1338SCT '76
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A
The trial court found tha~ the house was purchased "benami" in
r
the name of defendant No. 2, by defendant No. 3 with his own money
and that the sale of the house to the Company by defendant No. 2,
was
"sham and was
effected
~n order to defeat or to delay the
creditor of defendant No. 3 and that defendant No. 1 had no real
existence." The trial court therefore granted a decree declaring that
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the sale deed dated May 25, 1953 was void as against the plaintiff
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and all other creditors, if any, of defendant No. 3 and that the House"
is and continues to be owhed by the 3rd defendant and that the plaintiff is entitled to proceed against the said properties by way of attachment and sale to realise the tax arrears due from him."
The trial
(
court set aside the orders dated October 9, 1953 of the A<iditional
Collector on the objection petition of defendant No. 2 and of the
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Chief Commissioner dated _April 1, 1954.
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As the High Court has set aside the judgment and decree of the
\
trial court, the present appeals have been filed by the plaintiff a.s aforeI
I
said.
We shall refer to the findings of the High Court a~ and when
necessary.
The main point in controversy was whether the house wa·s purD
chased by defendant No. 3 'benami' in the name of defendant No. 2 ?
This was the subject matter of issue No. 1 in the trial court.
We have made a reference to the plaintiff's plea that the purchase
was "benami" and payment was made out of the funds of defendant
No. 3, which were drawn by him from his own ::iccount.
As
has
~
been mentioned, defendant No. 3 did not care to appear and contest
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the suit even though he was served and knew the nature o,f the plaintiff's claim and the basis thereof.
Defendant No. 2 appeared
at
the trial and pleaded that be purchased the property "with his own
money".
The source of the money was within his spedal knowledge, but it will be recalled that he contended himself by pleading
fhat Rs. 10,000/- were paid by him by a cheque and Rs. 50,000/-
,-
were paid before the Sub-Registrar.
We have made a reference to
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the plea of the Company in this respect.
~
It is no body's cas~ that the sale of the house to defendant No.
2 was fictitious and that the title of the transferor was not intended '
to pass.
What we have to examine is whether the title, on sale of
the house in December 1946, was transferred to defendant No. 3.
who was the real purchaser, and no~ to defendant No. 2, who was
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only the ostensible transferee and was no more• than a "benamidar".
It has been held in Gangadara Ayyar and others v. Subramania Sa5trigal and others(') that "in a case where it is asserted that an assigt1.-
~
ment in the name ofi one person is in reality for the benefit of anoJ
ther, the real test is the source whence the consideration came."
It
is also necessary to examine in such cases who actually has enjoyed
the benefits of the transfer.
; Both these tests were applied by this
H
Court in Meenakshi Mills, Madurai v. The Commissione1· of IncomeTax Madras.(')
It is therefore necessary, in the present case,
to
rl) A. T.R. 1949 F.C. 88.
(2) [1956] S.C.R. 691.
f
UNION OF INDIA v. MOKSH BUILDERS (Shfnghal, J.)
9 7 3
find out thei source of the con~deration for the transfer, as also to
find out -who has been in enjoyment of t_he benefits of the transaction.
It is equally well settled that, although the onus of establishing that
a transaction is 'benami' is on the plaintiff, 'where it is not possible
to obtain evidence which conclusively establishes or rebuts the allegation, the case must be dealt with on reasonable probabilities and legal
inferences arising from proved or admitted facts."
The burden of proof is, however not static, and may shift during
the course of the evidence.
Thus while the burden initially rests
on the party who would fail if no evidence is led at all after the
evideftce is recorded, ~t rests upon the party against whom judgment
would be given ilJ n0: further evidence were adduced by either side
i.e. on Jhtj evidence on record.
As has been held by this Court in
Kalwa Devadattam and others v. The Union of India and others(')
that where evidence has been led by the contesting parties on the
question in issue, abstract considerations of onus and out of place,
and the truth or otherwis~ of the case must. always be adjudged on
the evidence led by the parties. This will be so if the court finds
that there is no difficulty in arriving at a definite conclusion.
It is
therefore necessary to weigh the evidence in this case and to decide
whether, even if it were. assumed that there was no conclusive evidence to establish or rebut the "benami'.' allegation, what would, on
a careful assessment of the evidence, be a reasonable probability and
a legal inference from relevant and admissible evidence.
The sale in question was admittedly made in December
1946.
Defendant No. 2 had admitted in his statement date May 2§>, 1957
that he was born in 1928. ' He was therefore 18 years old at that
time.
His fathe~ (defendant No. 3) was also alive at that time,
and it is not his case that he (defendant No. 2) had any money of his
own, for he has stated that he got Rs. 10,000/- from his mother and
Rs. 50,000/- from
his grandfather to constitute the sum of Rs.
60,000/- for which he purchased the house.
It is however a significant fact that the defendant No. 2 did not disclose any such source
of the money in his written statement dated April 15, 1955.
It took
him two years to come out with such a case. He was given an
{)pportunity, during the course of his cross-examination, to explain
the omissio_n regarding the disclosure of the source of the sum
of
Rs. 50,000/- in his written statement, but he contented himself by
~aying that he collld not give "any reason as to why he (I) omitted
to mention in the written statement about receipt of Rs. 50,000/-
from his (my) grandfather''.
Similarly he failed to explain whv
he did not mention in his written statement that the cheque for Rs.
10,000/- was drawn by his mother.
It is true that there is a mention in document Ex. Dl that out of the sum of Rs. 60,000/- "a
sum of Rs. 10,000/- has already been paid to the vendor by the vendee by cheque No. 32920 dated November 14, 1946,
on the New
Bank of India Ltd., New Delhi," but it is again significant that while
the documen~ states that the payment of Rs. 10,000/- was !TJade by
(1) (1964] 3 S.C.R. 191.
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SUPREME COURT REPORTS
[19771 1 s.c.a..
the vendee (defendan~ No. 2) by the aforesaid cheque, he has stated
in. the trial court that the cheque for Rs. 10,000/- was issued by his
moiher in favour of the vendor.
He was not able to explain the
discrep~ncy and merely stated that his written statement (which did
not disclose the source and the nami;4 of the person who drew the
cheque for Rs. 10,000/-) was correct.
If it had been a fact that
defendant No. 2 really obtained a cheque for Rs. 10,000/- from his,
mother, in the vendor's name, and if it was not really a chequei <lraw}1
by his father, there was nothing; to prevent him from
establishing_
that :k1ct with reference to the counter-foil of his
mother's cheque
book or her account with the bank.
The dden<lant has also not
stated whether he repajd the money to his mother and, if so,•wl1en,
or whether it was a gift to him and, if so, why, when she hadj another
son also.
As it is, it cannot be said that defendant No. 2 Jrns been
able to establish that it was he who paid the· sum of Rs. 10,000/-
to the vendor.
According to the written statement of defondant No .. 2, the baclancc of Rs. 50,000/- was paid before the Sub-Registrar.
He has
stated that about 7 or 8 days before his death, his grandfather Solm<ll
J\1:::1 (who died in October 1946) paid him Rs .. 50,000/- after taking_
out t'he money which was "lying underneath his pillow."
He could.
not however stand the test of cross-examination, for he could not
~tatc where the money was kept by his grandfather and whether he
at all had a bank account.
The High Court did not care to examine
the reliability of the defendant's evidence regarding the source from
which he received Rs. 60,000/- even though it was an
important
question and had been examined by the trial court with reference to
all the other evidence on the record including the statement of Amar
Nath Shanna D.W.3.
We find that there is no reason for us to1 disagree with the trial court's view in the matter, based on the parot evidence on the record. In arriving at this
conel'usfon, we
have not
relied ori that part of the trial court's judgment where it has made
a reference to the admission of defendant No. 3, for we shall deal
with them, separately.
The reasonable preponderance
of
probability therefore is that defendant No. 2 has failed: to establish the
source of the consideration of Rs. 60,000}- even though it was an
important fact v.•ithin his special knowledge.
He could not therefore be said to be the real owner of the house.
It is also an important fact that defendant ~o. 2 has failed
to
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prove that he enjoyed the benefit of the sale.
He claimed that
he had shown the rent of the house in his income-tax returns,
but
he did1 not ·produce an~ rent .note.
Even the tenant who was S'itid
to be living in th~ house on the date of the sale, has not been examined.
While the trial court has examined this aspect of the controversy, the High Court has missed it altogether.
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The High Court went by the vi'ew that statement Ex. P. 1 of defendant No. 3, the income-tax return of defendant No. 3 showing the
house as his property, his statement of accountj and the assessment
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order for the year 1948-49 showing the same, were not admissible
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UNlON OF INDIA v.. MOKSH BUILDERS (Shinghal, J.)
975
in evidence ag~inst defendant No. 2 and that them was. no evidence
either of the plaintiff or the def.endants on which a findmg as t~ ~he
·"benami" nature of the transact10n could be based. That decision
is obviously based on a misappreciation of . the law relating
to
"benami" transac~ions for, as has been stated, 1t was. necessary
to
:find out whether i;t was defendant No. 3 who had enioyed the be11efit of the transaction.
Moreover, the findiug of the High Court is
.against the evidence on the record, and must be set aside. We have
therefore n0 hesitation in holding that the purchase of the house was
"'benami" and that its ostensible owner defendant No. 2 was not the ·
:real owner but was a "benamidar."
The ancillary question is as to who was the real owner of the house
for whoTn
defendant No. 2
was
the
"benamider"?
We have
not taken the admissions of defendant No. 3 into consideration so
far, but they have a drrect bearingj on the question now before us.
He recorded a statement Ex. P. 1 dated August 12, 1950 before Puran
Chand P.W. 1, Income-tax Officer, which has been proved by the
witness.
It has been stated there as follows,-
·"1 purchased 15 Keeling
Roti.d
on
12.12.46
for
Rs.
60,000/- in the name of my son (Major Krishan,
Lal).
This money was paid out of my bank accounts and I have
·shown the details and payments from my bank pass books."
Then ther.e is document Ex. P. 6 which is a copy of the personal
account of defendant No .. 3.
It was filed in connection with the
adurn of his income-tax for 1947-48.
An attempt was made
to
argue that the document had not been proved or marked as an exhibit.
We have seen the original document and we have no deubt
that the whole of it was tendered in evidence and was marked as
Ex. P. 6. The ide'ntity of the document has been established bv the
statement of Puran Chand P.W. l that the scribbling on it was inade
by him.
The document has therefore been proved beyond doubt.
It shows that it was. defendant No. 3 who spent Rs. 60,000/- on "property" in that assessm~nt year.
Both exhibits P. 1 and P. 6 go to
prove tha~ the house was purchased by defendant No. 3 out of his
-0wn funds in the name of his son defendant No. 2 who, it will be
Jiecalled, was a9mittedly only 18 years old at that time and did not
have any money ctfl his own.
Moreover defendant No. 3 showed
the income accruing from the house as his own income in his return
for the years 1947-48 and 1948-49.
Counsel for the respondents
have urged for the exclusion of these admissions.
The main attack
was that they were admissions of
a co-defendant
and were
not
-admissible against defendant No. 2.
As has been stated, we
have
not taken them into consideration as evidence against that defendant.
There is however no force in the other argument that they are uot
admissible in evidence 3cgain'st defendant No. 3 as he was not confronted with them in the trial court and they were not adverse to the
interest of their maker at the time when they were made. It has
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SUPREME COURT REPORTS
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been held by this Court in Bharat Singh and another v. B~girath(')
that an admission is substantive ,evidence of the fact admitted, and
that admissions duly proved are "admissible evidence irrespective of
whether the party making them appeared in the witness box or not
and whether ,that party when appearing as witness was confronted
with those statements in case it made a statement contrary to those
admissions." In talcing !his view this Court has noticed the decision
in Ajodhya Prasad Bhargava v. Bhawani
Shanker
Bhargava and
,another(') also.
The; point has been com1idered and answered as
follows in Wigmorej on Evidence, Volume IV, 1048 (at page 3) ,-
"The theory of the Hearsay rule is that an extra judicl!tl
assertion is excluded unless there has been sufficient opportunity to test the grounds of assertion and the credit of the _witness, by cross-examination by the party against whom it is
offered (post, 1362); e.g. iLJones had said out of ·court.
"The party-opponent Smith borrowed this fifty
dollars",
Smith is entitled to an opportunity to cross-examine Jones
upon that assertion. But if it is Smith himself who said out
of court, I borrowed this fifty dollars, certainly Smith cannot
complain of lack of opportunity to cross-examine himself before his assertion is admitted against him. Such a request
would be absurd. Hence the objec_tion of the Hearsay rule
falls away, because the very basis of the rule is lacking, viz.,
the need and prudence of affording an opportunity of crossexamination."
Moreover, the defendant No.3 had full opportunity, to appear and
defend himself, bu~ he did! not do so and. the case proceeded against
him ex-parte.
The- plaintiff even tried to exaitjine him as his own
witness, but his appearance could not be secured in spite of the
prayer for the issue of summonses and a warrant.
There is therefore
no force in the argument to the contrary.
So also, there is no force in the argument that the aforesaid
admissions or statements of defendant No. 3 could not be read against
him as they were not adverse to his ;interest when made.
There is
no such requirement of the Evidence Act and the argument is untenable as it unreasonably restricts the opportunity to prove the true state
of affairs on the party's own showing and to demolish his subsequent
claim as self-contradictory.
This point has also been dealt with
in Wigmore on E\(idence, 1048 (at page 4) in tijis way,-
"It follows tbdt the subject of an admission is not limited
to f~cts '.lgrtinst the party opponent's interest at the time of
makmg 1t.
No .do_ubt the weight of credit to be given to
such state~e~ts is mcreased .when the fact ~tated_ is against
the pers?n s mterest at the time; bl),i that circumstance has
no beanng upon their admissibility.
On principle it is
plain that. the probative
reason why a
party-opp~nent's
utterance is sought to be used against him is ordinarily the
reason noted above, in! par. (1) b, viz.
that it exhibits
(1) [1966] l S,C.R. 606.
(2) A.LR. 1957 All. J.
UNION OF INDIA v. MOKSH BUILDERS (Shinghal, J.)
977
an inconsistency with his present claim, ~hus
tending to
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throw doubt upon it, whether he was at the time speaking
apparently in his own favour or against his own interest."
The contrary view; has been characterised by Wigmore as "a fallacy,
in the fullest sense."
Another argument which has been advanced against the admissibility of the aforesaid admissions of defendant No. 3 is that they
could be evidence only in terms of section 33 of the Evidence Act.
That argument is also quite untenable because section 33 deals with
stateJients of persons who cannot be called as witnesses, and does
not restrict or override the provisioL~, relating to admissions in
the
Evidenee
Act.
The High Court also committed a similar error of
law in its impugned judgment. The aforesaid admissions of defen·
dant No. 3 are therefore satisfactory evidence to prove that he him·
self was the owner of the house and his son, defendant No. 2 was
merely a "benamidar" for him.
It would thus appear that the finding of the trial court on issue
No. 1 which dealt with the question whether the house was purchased
by defendant
No. 3 "benami" in the name of defendant No. 2,
was correct and should be restored as the High Court's finding
to
the contrary has been vitiated by the substantial errors of law mentioned above.
The other important question is whether the sale of the house in
favour of the Company (defendant No. 1) was a sham transaction
and was effected to defeat and delay tl_ie creditors of defendant
No. 3.
This was the subject matter of issue No. 2 and the trial
court's finding in affirmative has not even been examined
by the
High Court.
We find that the admitted facts of the case are by themselves
sufficient to show that the findin~ of the trial court is justified and
does not call for any interference.
Defendant No. 3 was assessed
to income-tax for a sum of Rs. 1,25,090/11/- for assessment year
1947-48 in March 1952. Defendant No. 3 failed to pay that amount
on demand and a recovery certificate was issued on October 8, 1952.
The house was therefore attached on October 13, 1952.
Defendant
No. 2 raised an objection, and prayed for the release of the house.
The Collector rejected the objection on March 3, 1953. No appeal,
or other remedy was sought against that order.
The Appellate Assistant Commissioner however allowed the appeal of defendant No. 3
against the assessment of income-tax and ordered a fresh attachment
by his order dated May 12, 1953. In the meantime, the Company
was incorporated in February, 1953.
The assessment of
incometax for the years 1944-45 and 1948-49 was completed
in March
1953 raising the tax demand to Rs. 1,94,735.15, and a recovery
certificate was issued on May 4, 1953.
It was in these circumstances
that defendant No. 2, who had failed to obtain an order for
the
release of the house as aforesaid, hastened to sell it to the Company
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on May 25, 1953. As has been stated, a fresh recovery ce.rtificate
was issued to the Collector on May 4, 1953 and the house was again
attached on August 6, 1953.
These facts speak for them~elves and
are quite sufficient to justify the trial court's finding that sale of the
house to the Company was a sham transaction and arose out of the
anxiety to save the house some how from sale for realisation of the
income-tax. The Compa.ny was in fact dominated by defendant No. 2
and his close relations and did not even pay the. sale price in cash.
It is also significant that the shares of the other relations were insignificant.
Moreover the Company could not lead evidence to show
that it was able to transact any substantial business whatsoever. We
have therefore no reason to disaJ>· ce with the trial court's finding that
the Company was formed just to transfer the house to it in an effort
to save it from attachment and sale for realisation of the in~me-tax
arrears of defendant No. 3.
The finding of the trial court on the
issue is quite correct and the High Court committed a serious error
of law in not examining this aspect of the matter at all even though
it had a great bearing on the controversy.
In the result, we are constrained to allow the appeals.
The impugned judgment and decree of the High Court dated February 14,
1967 are set aside and the decree of the trial court is restored with
costs throughout one hearing fee.
V.P.S.
Appeals allowed.