Benami Act and Partition Suit: Court Clarifies Maintainability

Factual Background and Procedural History

This matter involved two consolidated Special Leave Petitions arising out of a family dispute over partition and ownership of multiple immovable properties. The plaintiffs—Vidya Devi Gupta (mother) and her younger son, Sudeep Gupta—filed a suit in 2018 seeking partition, possession, injunction, and declaration concerning properties allegedly purchased from joint family funds or derived from joint family business income.

The defendants included the elder son Sandeep Gupta, his wife Shaifali Gupta, and their children. The suit also named two third parties, Deepak Lalchandani and Surya Prakash Mishra, as subsequent purchasers of certain suit properties.

An application was filed under Order VII Rule 11 CPC by defendants 5 and 6 (the purchasers) seeking rejection of the plaint on the ground that the suit was barred by the Benami Transactions (Prohibition) Act, 1988 (“Benami Act”).

Both the trial court and the High Court rejected the application. The matter reached the Supreme Court through these SLPs.

Identification of Legal Issues

1. Whether a suit for partition and declaration of Hindu Joint Family Property is barred under Section 4 of the Benami Act.
2. Whether a plaint can be rejected under Order VII Rule 11(d) CPC for being barred by law based solely on plaint averments.
3. Whether subsequent purchasers have locus standi to raise a Benami Act defence.
4. Whether Section 14 of the Hindu Succession Act bars such a suit when a property is held in the name of a female Hindu.

Arguments of the Parties

Petitioners (Defendants):

• Asserted that certain properties listed in the plaint were purchased exclusively in the name of defendant No.2 (Shaifali Gupta).
• Argued that these properties were benami and hence the suit was barred by Section 4 of the Benami Act.
• Contended that since the titles were not in the plaintiffs’ names, no claim for joint ownership or partition could be entertained.
• Raised a secondary argument under Section 14 of the Hindu Succession Act, asserting full ownership by female holders.

Respondents (Plaintiffs):

• Asserted that the Benami Act was not applicable, as all properties were purchased from the nucleus of the joint family, even if titled in individual names.
• Referred to Section 2(9)(A), Exception (ii) of the Benami Act, which allows such transactions where the property is held in a fiduciary or joint family context.
• Emphasized that Order VII Rule 11 CPC only permits rejection when a plaint is barred on the face of it, not when facts are disputed.
• Noted that neither the elder son nor his wife (defendants 1 & 2) had filed the application; only subsequent purchasers had moved the court.

Court’s Analysis and Reasoning

a) On Maintainability Under Benami Act

The Court clarified that Section 4 of the Benami Act bars suits only when the transaction is clearly benami. However, if a property is held in the name of a family member but purchased from joint family income, and such purchase falls under exceptions in Section 2(9), it is not a benami transaction.

“Whether the property is benami and not covered by the exception is a disputed question of fact and cannot be decided without evidence.”

b) Applicability of Order VII Rule 11 CPC

The Court reaffirmed the principle from Popat and Kotecha Property v. SBI Staff Association (2005) and Pawan Kumar v. Babu Lal (2019), holding:

• Only the plaint allegations are relevant to determine rejection under Rule 11(d).
• If the plaint does not ex facie show a legal bar, the application must fail.
• Mixed questions of fact and law, such as joint family status or source of funds, require trial.

c) Locus Standi of Subsequent Purchasers

The Court held that defendants 5 and 6, being third-party purchasers, had no personal knowledge of how the property was acquired. Thus, they lacked standing to assert that the properties were benami.

d) On Section 14 of the Hindu Succession Act

The Court declined to consider the bar under Section 14 since:

• The point was not pleaded or argued before the trial or High Court.
• Section 14 grants absolute ownership to female Hindus, but does not bar suits relating to such property.

Final Conclusion and Holding

The Supreme Court dismissed both SLPs, holding:

• The suit, based on allegations of joint family ownership, is not barred by the Benami Act.
• Whether the properties are joint or individual can only be decided after trial.
• Order VII Rule 11 CPC was rightly rejected by both lower courts.
• The defendants may raise their objections at trial via appropriate issues and evidence.

FAQs:

1. Can a partition suit be dismissed at the initial stage under the Benami Act?

No. If the plaint claims joint family ownership, it cannot be dismissed at the outset. Whether a property is benami is a factual issue requiring evidence.

2. What is Section 4 of the Benami Transactions Act?

Section 4 prohibits suits claiming rights in benami property. However, it applies only when the transaction does not fall under statutory exceptions like family or fiduciary ownership.

3. Can a property in a family member’s name still be joint family property?

Yes. If the property was purchased using joint family funds or business income, it may still be considered joint family property even if titled in one person’s name.

4. Who can raise objections under Order VII Rule 11 CPC?

Only a party directly affected and with knowledge of the property’s nature can do so. Subsequent purchasers generally lack standing to argue on benami grounds.

5. Does Section 14 of the Hindu Succession Act bar partition suits?

No. Section 14 grants full ownership to Hindu women but does not bar partition suits if others claim the property as joint family property.

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