Issue of 'fiduciary capacity' in Benami property dispute cannot be decided without evidence, suit was wrongly rejected under O 7 R 11 CPC: Delhi HC

The Delhi High Court on May 1, 2020 {NEERU DHIR AND ORS v. KAMAL KISHORE DHIR AND ORS} held in the present case, the stage of evidence had not even been arrived at. In fact, only pleadings in the suit were completed. Issues have also not been framed. It was held therefore, there was no occasion for the Court to determine as to whether the respondent No.1 stood in a ‘fiduciary capacity’ vis-a-vis his deceased brother, Shri Anil Kumar Dhir, predecessor-in-interest of the appellants/plaintiffs. The Court held that on perusing the averments made in the plaint, it cannot be said at this stage that the suit is barred by Benami Act.

The High Court observed that an instructive discussion on the scope of sub-section (3) of Section 4 of the Banami Act is found in Marcel Martins vs. M. Printer and Others (2012) 5 SCC 342, where the Supreme Court has elaborated the definition of the expression, ‘fiduciary capacity’ used in sub-section 3(b) of Section 4 of the Benami Act and concluded that for determining whether a relationship is based on a fiduciary capacity, the Court will have to take into consideration the factual context in which the question arises and only in that background, can any finding be returned. The High Court further held that any amendment to the Benami Transactions (Prohibition) Act, 1988 by virtue of Act 43 of 2016, that came into effect on 01.11.2016, cannot acquire retrospectivity.

In the present lis, the appellants/plaintiffs have questioned the judgment passed by the Single Judge of HC dismissing a suit, for partition and permanent injunction instituted by them against the respondents/defendants claiming that they are collectively entitled to 1/10th undivided share in the suit property, being barred by the Benami Transactions (Prohibition) Act, 1988.

The Division Bench of High Court held that if it goes strictly by the averments made in the plaint and the documents filed by the appellant/plaintiffs, it is of the opinion that the suit ought not to have been rejected outright under Order VII Rule 11 CPC on the ground that the pleas taken by the appellants/plaintiffs are barred under Section 4(3) of the unamended Benami Act. It was held that the matter would require a more comprehensive consideration after permitting the parties to lead evidence in the case. The Court held that Order VII Rule 11 CPC was not the appropriate stage for testing the veracity of the pleas taken in the plaint and return any finding on the merits of the said plea taken by the appellants/plaintiffs in the plaint or to extensively examine the underlying intent of the parties on a perusal of the documents filed by the appellants. It was held by the HC that on a bare reading of the averments made in the plaint read in conjunction with the documents placed on record, it is of the opinion that sufficient material facts have been disclosed requiring determination only after a proper trial. The Court held that at the stage of deciding an application moved by the respondents under Order VII Rule 11 CPC, there was no occasion for the Court to have taken pains to interpret and analyse the documents filed by the appellants/plaintiffs to hold in favour of the respondents.

In view of the aforesaid, the appeal was allowed by the Division Bench of the Delhi High Court. The impugned judgment of Single Judge was quashed and set aside. The suit was restored by the Division Bench of the High Court to its original position for being taken further from the stage at which the impugned judgment was passed by Single Judge.