CIVIL APPEAL NO. 3367 OF 2019 (@ SLP(C)NO. 36694 OF 2017)
PAWAN KUMAR VS. BABULAL SINCE DECEASED THROUGH LRS AND ORS.
1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3367 OF 2019
(Arising out of Special Leave Petition (Civil) No.36694 of 2017)
PAWAN KUMAR …Appellant
VERSUS
BABULAL SINCE DECEASED THROUGH
LRS. AND ORS. …Respondents
J U D G M E N T
Uday Umesh Lalit, J.
1. Leave granted.
2. This appeal questions the final judgment and order dated 18.08.2017
passed by the High Court of Judicature for Rajasthan at Jaipur in SBRFA
No.511 of 2016.
3. The appellant filed a suit for declaration of title with respect to
premises in Kasba Fatehpur’s main market which were more particularly
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described in the plaint and prayed that he be declared owner of the premises
and that the sale deed dated 24.07.2006 executed by the first defendant in
favour of the second defendant be cancelled. The material averments in the
plaint were:
(a) A shop in said premises was held by the first defendant, namely,
father of the appellant on rent from the erstwhile owner;
(b)The first defendant having become old, it was the appellant who
had been looking after the entire business;
(c) The erstwhile owner had filed suit for possession which matter
came right upto this Court;
(d)There was a compromise between the erstwhile owner and the first
defendant under which the premises where the shop is situate, were
agreed to be sold in favour of first defendant;
(e) The first defendant was not having enough money and as such it
was the appellant who arranged all the money on his own after
borrowing from money lenders on interest;
(f) At the time of preparing the sale deed, the first defendant had
indicated that the premises be taken in his name;
(g)Even after purchase of the premises in the name of the first
defendant, the appellant was conducting the business in the said
shop;
(h)The first defendant had executed a document on a stamp paper on
14.03.2002 in the presence of witnesses which was verified by
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Notary Public acknowledging that the appellant had paid the entire
consideration towards purchase of the premises.
(i) The second defendant was also a tenant in the premises and after
the purchase as aforesaid he was making payment of rent to the
appellant.
(j) Taking undue advantage of the old age and fragile health of the
first defendant, the second defendant got written a document in his
favour with respect to first floor of the disputed shop from the first
defendant on 19.07.2002.
With the case as aforesaid, Civil Suit No.126 of 2006 was filed by the
appellant in the court of District Judge, Sikar.
4. The second defendant filed his written statement denying the case
pleaded by the appellant. Nine years later, the second defendant submitted
an application under Order VII Rule 11 of the Code of Civil Procedure (for
short ‘CPC’) praying for rejection of the plaint on the ground that the suit
was barred under Section 4 of the Benami Transaction (Prohibition) Act,
1988 (hereinafter referred to as ‘the Act’).
5. The trial court allowed said application under Order VII Rule 11, CPC
and by its order dated 23.09.2016 rejected the plaint. The relevant portion of
true translation of the decision of the trial court was as under:
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“11. In this way in the present case, the Plaintiff in
his Plaint has himself stated that he wants to purchase
the disputed property in the name of his father from his
own income or by the money which he had taken on
interest. In my humble opinion under Section-4 of the
Benami Transaction (Prohibition) Act, 1988 filing of
present Suit is prohibited. Hence, the judgment of the
Hon’ble Court produced on behalf of the
Applicant/Defendant are applicable on the present case.
The Plaint of the Plaintiff is prohibited under Order-7
Rule-11(3) C.P.C.”
6. The appellant, being aggrieved filed SBRFA No.511 of 2016 in the
High Court which appeal was dismissed by the High Court vide its judgment
and order dated 18.08.2017. It was observed by the High Court as under:
“From the averments made in the plaint it is clear that
plaintiff is seeking declaration in his name in respect of
suit property with a clear stipulation that he purchased
the said property from his own funds/sources in the
name of his father and his father was not real owner of
the suit property, the Act of 1988 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, shall lie by or on behalf of a person
claiming to be the real owner of such property. It is not
the case of the plaintiff that property in question was
held by the defendant No.1 – father, for joint
benefit/joint ownership. The suit was clearly hit by
section 4 of the Act of 1988 and the learned trial court
rightly allowed the application under Order 7 Rule 11
CPC.”
7. The decision rendered by the High Court is presently under appeal.
Mr. Abhishek Gupta, learned Advocate appearing for the appellant invited
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our attention to the documents on record including the writing dated
14.03.2002 executed by First Defendant and father of the Appellant. The
relevant portion of said document dated 14.3.2002 was as under:
“I, Babu Lal Son of late Shri Tara Chand Meharishi,
Caste – Brahmin, am the Resident of Near Laxminath
Press, Fatehpur, District-Sikar (Raj.)
In my name in Kasba Fatehpur near Saraswati Library
there is shop along with rooms made over its terrace.
Since this property (shop) was purchased by my elder
son Pawan Kumar by the money earned with his own
income, but in order to give respect to me he had got the
Registry of this shop in my name. Hence, over this
entire property only his right. In future neither mine nor
any of my other successors shall have any right in this
property.
I have written my this script in my full senses, with
healthy and sound mind, without under any coercion or
influence in the presence of two witnesses to my elder
son Pawan Kumar, so that it shall remain as proof and in
future during their mutual partition amongst brothers, in
connection with this shop any kind of dispute would not
arise.”
8. Mr. Abhishek Gupta, learned Advocate relied upon the decision of
this Court in Marcel Martins v. M. Printer and others1
and submitted that
the case pleaded of the Appellant was fully covered by Section 4 (3) of the
Act and that the courts below were not justified in rejecting the plaint under
Order VII Rule 11, CPC. Mr. R.K. Singh, learned Advocate appearing for
1
(2012) 5 SCC 342
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the respondent, on the other hand, contested the submission and relied upon
a decision of this Court in Om Prakash and another v. Jai Prakash2
.
9. Before we consider the rival submissions, we must note Section 4 of
the Act, as it stood before it was amended by Act 43 of 2016, was as under:
“4. Prohibition of the right to recover property held
benami.—
(1) 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.
(2) No defence based on any right in respect of any
property held 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.
(3) Nothing in this section shall apply,—
(a) where the person in whose name the property is held
is a coparcener in a Hindu undivided family and the
property is held for the benefit of the coparceners in the
family; or
(b) where the person in whose name the property is held
is a trustee or other person standing in a fiduciary
capacity, and the property is held for the benefit of
2
(1992) 1 SCC 710
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another person for whom he is a trustee or towards
whom he stands in such capacity.”
10. In Marcel Martins1
a suit was filed in the year 1990 praying for
declaration that the plaintiffs were co-owners of certain properties to the
extent of their contribution. After a full-fledged trial, the Suit was
dismissed by the Trial Court but the judgment was reversed by the High
Court. While considering the question whether the case of the plaintiffs
would come within the purview of Sub-Section (3) of Section 4 of the Act,
the matter was dealt with by this Court as under:-
“28. The critical question then is whether sub-section (3)
of Section 4 saves a transaction like the one with which
we are concerned.
29. Sub-section (3) to Section 4 extracted above is in two
distinct parts. The first part comprises clause (a) to
Section 4(3) which deals with acquisitions by and in the
name of a coparcener in a Hindu Undivided Family for
the benefit of such coparceners in the family. There is no
dispute that the said provision has no application in the
instant case nor was any reliance placed upon the same by
the learned counsel for the respondent-plaintiffs.
30. What was invoked by Mr Naveen R. Nath, learned
counsel appearing for the respondents was Section 4(3)(b)
of the Act which too is in two parts viz. one that deals
with the trustees and the beneficiaries thereof and the
other that deals with the persons standing in a fiduciary
capacity and those towards whom he stands in such
capacity. It was argued by Mr Nath that the circumstances
in which the purchase in question was made in the name
of the appellant assumes great importance while
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determining whether the appellant in whose name the
property was acquired stood in a fiduciary capacity
towards the respondent-plaintiffs.
31. The expression “fiduciary capacity” has not been
defined in the 1988 Act or any other statute for that
matter. And yet there is no gainsaying that the same is an
expression of known legal significance, the import
whereof may be briefly examined at this stage.
32. The term “fiduciary” has been explained by Corpus
Juris Secundum as under:
“A general definition of the word which is
sufficiently comprehensive to embrace all cases
cannot well be given. The term is derived from
the civil or Roman law. It connotes the idea of
trust or confidence, contemplates good faith,
rather than legal obligation, as the basis of the
transaction, refers to the integrity, the fidelity, of
the party trusted, rather than his credit or ability,
and has been held to apply to all persons who
occupy a position of peculiar confidence toward
others, and to include those informal relations
which exist whenever one party trusts and relies
on another, as well as technical fiduciary
relations.
The word ‘fiduciary’, as a noun, means one who
holds a thing in trust for another, a trustee, a
person holding the character of a trustee, or a
character analogous to that of a trustee with
respect to the trust and confidence involved in it
and the scrupulous good faith and condor which
it requires; a person having the duty, created by
his undertaking, to act primarily for another’s
benefit in matters connected with such
undertaking. Also more specifically, in a statute, a
guardian, trustee, executor, administrator,
receiver, conservator or any person acting in any
fiduciary capacity for any person, trust or estate.”
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33. Words and Phrases, Permanent Edn. (Vol. 16-A, p. 41)
defines “fiducial relation” as under:
“There is a technical distinction between a
‘fiducial relation’ which is more correctly
applicable to legal relationships between parties,
such as guardian and ward, administrator and
heirs, and other similar relationships, and
‘confidential relation’ which includes the legal
relationships, and also every other relationship
wherein confidence is rightly reposed and is
exercised.
Generally, the term ‘fiduciary’ applies to any
person who occupies a position of peculiar
confidence towards another. It refers to integrity
and fidelity. It contemplates fair dealing and
good faith, rather than legal obligation, as the
basis of the transaction. The term includes those
informal relations which exist whenever one
party trusts and relies upon another, as well as
technical fiduciary relations.”
34. Black’s Law Dictionary (7th Edn., p. 640) defines
“fiduciary relationship” thus:
“Fiduciary relationship.—A relationship in
which one person is under a duty to act for the
benefit of the other on matters within the scope
of the relationship. Fiduciary relationships—
such as trustee-beneficiary, guardian-ward,
agent-principal, and attorney-client—require the
highest duty of care. Fiduciary relationships
usually arise in one of four situations: (1) when
one person places trust in the faithful integrity of
another, who as a result gains superiority or
influence over the first, (2) when one person
assumes control and responsibility over another,
(3) when one person has a duty to act for or give
advice to another on matters falling within the
scope of the relationship, or (4) when there is a
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specific relationship that has traditionally been
recognised as involving fiduciary duties, as with
a lawyer and a client or a stockbroker and a
customer.”
35. Stroud’s Judicial Dictionary explains the expression
“fiduciary capacity” as under:
“Fiduciary capacity.—An administrator who
[had] received money under letters of
administration and who is ordered to pay it over
in a suit for the recall of the grant, holds it ‘in a
fiduciary capacity’ within the Debtors Act, 1869
so, of the debt due from an executor who is
indebted to his testator’s estate which he is able
to pay but will not, so of moneys in the hands of
a receiver, or agent, or manager, or moneys due
on an account from the London agent of a
country solicitor, or proceeds of sale in the
hands of an auctioneer, or moneys which in the
compromise of an action have been ordered to
be held on certain trusts or partnership moneys
received by a partner.”
36. Bouvier’s Law Dictionary defines “fiduciary capacity”
as under:
“What constitutes a fiduciary relationship is
often a subject of controversy. It has been held
to apply to all persons who occupy a position of
peculiar confidence towards others, such as a
trustee, executor, or administrator, director of a
corporation or society, medical or religious
adviser, husband and wife, an agent who
appropriates money put into his hands for a
specific purpose of investment, collector of city
taxes who retains money officially collected, one
who receives a note or other security for
collection. In the following cases debt has been
held to be not a fiduciary one: a factor who
retains the money of his principal, an agent
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under an agreement to account and pay over
monthly, one with whom a general deposit of
money is made.”
37. We may at this stage refer to a recent decision of this
Court in CBSE v. Aditya Bandopadhyay3
, wherein
Raveendran, J. speaking for the Court in that case
explained the terms “fiduciary” and “fiduciary
relationship” in the following words: (SCC pp. 524-25,
para 39)
“39. The term ‘fiduciary’ refers to a person
having a duty to act for the benefit of another,
showing good faith and candour, where such
other person reposes trust and special confidence
in the person owing or discharging the duty. The
term ‘fiduciary relationship’ is used to describe a
situation or transaction where one person
(beneficiary) places complete confidence in
another person (fiduciary) in regard to his
affairs, business or transaction(s). The term also
refers to a person who holds a thing in trust for
another (beneficiary). The fiduciary is expected
to act in confidence and for the benefit and
advantage of the beneficiary, and use good faith
and fairness in dealing with the beneficiary or
the things belonging to the beneficiary. If the
beneficiary has entrusted anything to the
fiduciary, to hold the thing in trust or to execute
certain acts in regard to or with reference to the
entrusted thing, the fiduciary has to act in
confidence and is expected not to disclose the
thing or information to any third party.”
It is manifest that while the expression “fiduciary
capacity” may not be capable of a precise definition, it
implies a relationship that is analogous to the relationship
between a trustee and the beneficiaries of the trust. The
expression is in fact wider in its import for it extends to all
3
(2011) 8 SCC 497
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such situations as place the parties in positions that are
founded on confidence and trust on the one part and good
faith on the other.
38. In determining whether a relationship is based on trust
or confidence, relevant to determining whether they stand
in a fiduciary capacity, the court shall have to take into
consideration the factual context in which the question
arises for it is only in the factual backdrop that the
existence or otherwise of a fiduciary relationship can be
deduced in a given case. Having said that, let us turn to
the facts of the present case once more to determine
whether the appellant stood in a fiduciary capacity vis-àvis the respondent-plaintiffs.”
11. The factual aspects of the matter were, thereafter, considered and in
paras 42 and 43 it was observed:-
“42. … …That conclusion gets strengthened by the fact
that the parties had made contributions towards the sale
consideration paid for the acquisition of the suit property
which they would not have done if the intention was to
concede the property in favour of the appellant.
43. … … Reposing confidence and faith in the appellant
was in the facts and circumstances of the case not unusual
or unnatural especially when possession over the suit
property continued to be enjoyed by the plaintiffs who
would in law and on a parity of reasoning be deemed to be
holding the same for the benefit of the appellant as much
as the appellant was holding the title to the property for
the benefit of the plaintiffs.”
12. It was, thus, concluded that the transaction was completely saved
from the mischief of Section 4 of the Act by reason of the same falling under
Sub-Section (3)(b) and that the Suit was not barred under the Act. This
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judgment was rightly relied upon by Mr. Abhishek Gupta, learned Advocate.
On the other hand, the reliance placed by Mr. R.K. Singh on the decision in
Om Prakash2
, in our view, is completely misplaced. The issue there was
whether prohibition under Section 4 would apply in relation to actions
initiated before the coming into force of the Ordinance or not? In any event
of the matter, the issue whether the provisions of the Act are retrospective
has already been settled4
.
13. In the present case, the controversy has arisen in an application under
Order VII Rule 11 CPC. Whether the matter comes within the purview of
Section 4(3) of the Act is an aspect which must be gone into on the strength
of the evidence on record. Going by the averments in the Plaint, the
question whether the plea raised by the appellant is barred under Section 4
of the Act or not could not have been the subject matter of assessment at the
stage when application under Order VII Rule 11 CPC was taken up for
consideration. The matter required fuller and final consideration after the
evidence was led by the parties. It cannot be said that the plea of the
appellant as raised on the face of it, was barred under the Act. The approach
must be to proceed on a demurrer and see whether accepting the averments
4 R. Rajgopal Reddy through LRs. Vs. Padmini Chandrasekharaiah through LRs.
(1995) 2 SCC 630
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in the plaint the suit is barred by any law or not. We may quote the
following observations of this Court in Popat and Kotecha Property vs.
State Bank of India Staff Association5
:
“10. Clause (d) of Order 7 Rule 7 speaks of suit, as
appears from the statement in the plaint to be barred
by any law. Disputed questions cannot be decided at
the time of considering an application filed under
Order 7 Rule 11 CPC. Clause (d) of Rule 11 of Order
7 applies in those cases only where the statement
made by the plaintiff in the plaint, without any doubt
or dispute shows that the suit is barred by any law in
force.”
14. We, therefore, allow this appeal, set aside the view taken by the courts
below and dismiss the application preferred by the second defendant under
Order VII Rule 11 CPC. Since the Suit has been pending since 2006, we
direct the Trial Court to expedite the matter and dispose of the pending Suit
as early as possible and preferably within six months from today. Needless
to say that the merits of the matter will be gone into independently by the
Trial Court.
5
(2005) 7 SCC 510
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15. The appeal stands allowed in aforesaid terms. No costs.
………………………….J.
[Uday Umesh Lalit]
………………………….J.
[Indu Malhotra]
New Delhi;
April 02, 2019.
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Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3367 OF 2019
(Arising out of Special Leave Petition (Civil) No.36694 of 2017)
PAWAN KUMAR …Appellant
VERSUS
BABULAL SINCE DECEASED THROUGH
LRS. AND ORS. …Respondents
J U D G M E N T
Uday Umesh Lalit, J.
1. Leave granted.
2. This appeal questions the final judgment and order dated 18.08.2017
passed by the High Court of Judicature for Rajasthan at Jaipur in SBRFA
No.511 of 2016.
3. The appellant filed a suit for declaration of title with respect to
premises in Kasba Fatehpur’s main market which were more particularly
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described in the plaint and prayed that he be declared owner of the premises
and that the sale deed dated 24.07.2006 executed by the first defendant in
favour of the second defendant be cancelled. The material averments in the
plaint were:
(a) A shop in said premises was held by the first defendant, namely,
father of the appellant on rent from the erstwhile owner;
(b)The first defendant having become old, it was the appellant who
had been looking after the entire business;
(c) The erstwhile owner had filed suit for possession which matter
came right upto this Court;
(d)There was a compromise between the erstwhile owner and the first
defendant under which the premises where the shop is situate, were
agreed to be sold in favour of first defendant;
(e) The first defendant was not having enough money and as such it
was the appellant who arranged all the money on his own after
borrowing from money lenders on interest;
(f) At the time of preparing the sale deed, the first defendant had
indicated that the premises be taken in his name;
(g)Even after purchase of the premises in the name of the first
defendant, the appellant was conducting the business in the said
shop;
(h)The first defendant had executed a document on a stamp paper on
14.03.2002 in the presence of witnesses which was verified by
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Notary Public acknowledging that the appellant had paid the entire
consideration towards purchase of the premises.
(i) The second defendant was also a tenant in the premises and after
the purchase as aforesaid he was making payment of rent to the
appellant.
(j) Taking undue advantage of the old age and fragile health of the
first defendant, the second defendant got written a document in his
favour with respect to first floor of the disputed shop from the first
defendant on 19.07.2002.
With the case as aforesaid, Civil Suit No.126 of 2006 was filed by the
appellant in the court of District Judge, Sikar.
4. The second defendant filed his written statement denying the case
pleaded by the appellant. Nine years later, the second defendant submitted
an application under Order VII Rule 11 of the Code of Civil Procedure (for
short ‘CPC’) praying for rejection of the plaint on the ground that the suit
was barred under Section 4 of the Benami Transaction (Prohibition) Act,
1988 (hereinafter referred to as ‘the Act’).
5. The trial court allowed said application under Order VII Rule 11, CPC
and by its order dated 23.09.2016 rejected the plaint. The relevant portion of
true translation of the decision of the trial court was as under:
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“11. In this way in the present case, the Plaintiff in
his Plaint has himself stated that he wants to purchase
the disputed property in the name of his father from his
own income or by the money which he had taken on
interest. In my humble opinion under Section-4 of the
Benami Transaction (Prohibition) Act, 1988 filing of
present Suit is prohibited. Hence, the judgment of the
Hon’ble Court produced on behalf of the
Applicant/Defendant are applicable on the present case.
The Plaint of the Plaintiff is prohibited under Order-7
Rule-11(3) C.P.C.”
6. The appellant, being aggrieved filed SBRFA No.511 of 2016 in the
High Court which appeal was dismissed by the High Court vide its judgment
and order dated 18.08.2017. It was observed by the High Court as under:
“From the averments made in the plaint it is clear that
plaintiff is seeking declaration in his name in respect of
suit property with a clear stipulation that he purchased
the said property from his own funds/sources in the
name of his father and his father was not real owner of
the suit property, the Act of 1988 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, shall lie by or on behalf of a person
claiming to be the real owner of such property. It is not
the case of the plaintiff that property in question was
held by the defendant No.1 – father, for joint
benefit/joint ownership. The suit was clearly hit by
section 4 of the Act of 1988 and the learned trial court
rightly allowed the application under Order 7 Rule 11
CPC.”
7. The decision rendered by the High Court is presently under appeal.
Mr. Abhishek Gupta, learned Advocate appearing for the appellant invited
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our attention to the documents on record including the writing dated
14.03.2002 executed by First Defendant and father of the Appellant. The
relevant portion of said document dated 14.3.2002 was as under:
“I, Babu Lal Son of late Shri Tara Chand Meharishi,
Caste – Brahmin, am the Resident of Near Laxminath
Press, Fatehpur, District-Sikar (Raj.)
In my name in Kasba Fatehpur near Saraswati Library
there is shop along with rooms made over its terrace.
Since this property (shop) was purchased by my elder
son Pawan Kumar by the money earned with his own
income, but in order to give respect to me he had got the
Registry of this shop in my name. Hence, over this
entire property only his right. In future neither mine nor
any of my other successors shall have any right in this
property.
I have written my this script in my full senses, with
healthy and sound mind, without under any coercion or
influence in the presence of two witnesses to my elder
son Pawan Kumar, so that it shall remain as proof and in
future during their mutual partition amongst brothers, in
connection with this shop any kind of dispute would not
arise.”
8. Mr. Abhishek Gupta, learned Advocate relied upon the decision of
this Court in Marcel Martins v. M. Printer and others1
and submitted that
the case pleaded of the Appellant was fully covered by Section 4 (3) of the
Act and that the courts below were not justified in rejecting the plaint under
Order VII Rule 11, CPC. Mr. R.K. Singh, learned Advocate appearing for
1
(2012) 5 SCC 342
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the respondent, on the other hand, contested the submission and relied upon
a decision of this Court in Om Prakash and another v. Jai Prakash2
.
9. Before we consider the rival submissions, we must note Section 4 of
the Act, as it stood before it was amended by Act 43 of 2016, was as under:
“4. Prohibition of the right to recover property held
benami.—
(1) 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.
(2) No defence based on any right in respect of any
property held 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.
(3) Nothing in this section shall apply,—
(a) where the person in whose name the property is held
is a coparcener in a Hindu undivided family and the
property is held for the benefit of the coparceners in the
family; or
(b) where the person in whose name the property is held
is a trustee or other person standing in a fiduciary
capacity, and the property is held for the benefit of
2
(1992) 1 SCC 710
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another person for whom he is a trustee or towards
whom he stands in such capacity.”
10. In Marcel Martins1
a suit was filed in the year 1990 praying for
declaration that the plaintiffs were co-owners of certain properties to the
extent of their contribution. After a full-fledged trial, the Suit was
dismissed by the Trial Court but the judgment was reversed by the High
Court. While considering the question whether the case of the plaintiffs
would come within the purview of Sub-Section (3) of Section 4 of the Act,
the matter was dealt with by this Court as under:-
“28. The critical question then is whether sub-section (3)
of Section 4 saves a transaction like the one with which
we are concerned.
29. Sub-section (3) to Section 4 extracted above is in two
distinct parts. The first part comprises clause (a) to
Section 4(3) which deals with acquisitions by and in the
name of a coparcener in a Hindu Undivided Family for
the benefit of such coparceners in the family. There is no
dispute that the said provision has no application in the
instant case nor was any reliance placed upon the same by
the learned counsel for the respondent-plaintiffs.
30. What was invoked by Mr Naveen R. Nath, learned
counsel appearing for the respondents was Section 4(3)(b)
of the Act which too is in two parts viz. one that deals
with the trustees and the beneficiaries thereof and the
other that deals with the persons standing in a fiduciary
capacity and those towards whom he stands in such
capacity. It was argued by Mr Nath that the circumstances
in which the purchase in question was made in the name
of the appellant assumes great importance while
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determining whether the appellant in whose name the
property was acquired stood in a fiduciary capacity
towards the respondent-plaintiffs.
31. The expression “fiduciary capacity” has not been
defined in the 1988 Act or any other statute for that
matter. And yet there is no gainsaying that the same is an
expression of known legal significance, the import
whereof may be briefly examined at this stage.
32. The term “fiduciary” has been explained by Corpus
Juris Secundum as under:
“A general definition of the word which is
sufficiently comprehensive to embrace all cases
cannot well be given. The term is derived from
the civil or Roman law. It connotes the idea of
trust or confidence, contemplates good faith,
rather than legal obligation, as the basis of the
transaction, refers to the integrity, the fidelity, of
the party trusted, rather than his credit or ability,
and has been held to apply to all persons who
occupy a position of peculiar confidence toward
others, and to include those informal relations
which exist whenever one party trusts and relies
on another, as well as technical fiduciary
relations.
The word ‘fiduciary’, as a noun, means one who
holds a thing in trust for another, a trustee, a
person holding the character of a trustee, or a
character analogous to that of a trustee with
respect to the trust and confidence involved in it
and the scrupulous good faith and condor which
it requires; a person having the duty, created by
his undertaking, to act primarily for another’s
benefit in matters connected with such
undertaking. Also more specifically, in a statute, a
guardian, trustee, executor, administrator,
receiver, conservator or any person acting in any
fiduciary capacity for any person, trust or estate.”
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33. Words and Phrases, Permanent Edn. (Vol. 16-A, p. 41)
defines “fiducial relation” as under:
“There is a technical distinction between a
‘fiducial relation’ which is more correctly
applicable to legal relationships between parties,
such as guardian and ward, administrator and
heirs, and other similar relationships, and
‘confidential relation’ which includes the legal
relationships, and also every other relationship
wherein confidence is rightly reposed and is
exercised.
Generally, the term ‘fiduciary’ applies to any
person who occupies a position of peculiar
confidence towards another. It refers to integrity
and fidelity. It contemplates fair dealing and
good faith, rather than legal obligation, as the
basis of the transaction. The term includes those
informal relations which exist whenever one
party trusts and relies upon another, as well as
technical fiduciary relations.”
34. Black’s Law Dictionary (7th Edn., p. 640) defines
“fiduciary relationship” thus:
“Fiduciary relationship.—A relationship in
which one person is under a duty to act for the
benefit of the other on matters within the scope
of the relationship. Fiduciary relationships—
such as trustee-beneficiary, guardian-ward,
agent-principal, and attorney-client—require the
highest duty of care. Fiduciary relationships
usually arise in one of four situations: (1) when
one person places trust in the faithful integrity of
another, who as a result gains superiority or
influence over the first, (2) when one person
assumes control and responsibility over another,
(3) when one person has a duty to act for or give
advice to another on matters falling within the
scope of the relationship, or (4) when there is a
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specific relationship that has traditionally been
recognised as involving fiduciary duties, as with
a lawyer and a client or a stockbroker and a
customer.”
35. Stroud’s Judicial Dictionary explains the expression
“fiduciary capacity” as under:
“Fiduciary capacity.—An administrator who
[had] received money under letters of
administration and who is ordered to pay it over
in a suit for the recall of the grant, holds it ‘in a
fiduciary capacity’ within the Debtors Act, 1869
so, of the debt due from an executor who is
indebted to his testator’s estate which he is able
to pay but will not, so of moneys in the hands of
a receiver, or agent, or manager, or moneys due
on an account from the London agent of a
country solicitor, or proceeds of sale in the
hands of an auctioneer, or moneys which in the
compromise of an action have been ordered to
be held on certain trusts or partnership moneys
received by a partner.”
36. Bouvier’s Law Dictionary defines “fiduciary capacity”
as under:
“What constitutes a fiduciary relationship is
often a subject of controversy. It has been held
to apply to all persons who occupy a position of
peculiar confidence towards others, such as a
trustee, executor, or administrator, director of a
corporation or society, medical or religious
adviser, husband and wife, an agent who
appropriates money put into his hands for a
specific purpose of investment, collector of city
taxes who retains money officially collected, one
who receives a note or other security for
collection. In the following cases debt has been
held to be not a fiduciary one: a factor who
retains the money of his principal, an agent
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under an agreement to account and pay over
monthly, one with whom a general deposit of
money is made.”
37. We may at this stage refer to a recent decision of this
Court in CBSE v. Aditya Bandopadhyay3
, wherein
Raveendran, J. speaking for the Court in that case
explained the terms “fiduciary” and “fiduciary
relationship” in the following words: (SCC pp. 524-25,
para 39)
“39. The term ‘fiduciary’ refers to a person
having a duty to act for the benefit of another,
showing good faith and candour, where such
other person reposes trust and special confidence
in the person owing or discharging the duty. The
term ‘fiduciary relationship’ is used to describe a
situation or transaction where one person
(beneficiary) places complete confidence in
another person (fiduciary) in regard to his
affairs, business or transaction(s). The term also
refers to a person who holds a thing in trust for
another (beneficiary). The fiduciary is expected
to act in confidence and for the benefit and
advantage of the beneficiary, and use good faith
and fairness in dealing with the beneficiary or
the things belonging to the beneficiary. If the
beneficiary has entrusted anything to the
fiduciary, to hold the thing in trust or to execute
certain acts in regard to or with reference to the
entrusted thing, the fiduciary has to act in
confidence and is expected not to disclose the
thing or information to any third party.”
It is manifest that while the expression “fiduciary
capacity” may not be capable of a precise definition, it
implies a relationship that is analogous to the relationship
between a trustee and the beneficiaries of the trust. The
expression is in fact wider in its import for it extends to all
3
(2011) 8 SCC 497
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such situations as place the parties in positions that are
founded on confidence and trust on the one part and good
faith on the other.
38. In determining whether a relationship is based on trust
or confidence, relevant to determining whether they stand
in a fiduciary capacity, the court shall have to take into
consideration the factual context in which the question
arises for it is only in the factual backdrop that the
existence or otherwise of a fiduciary relationship can be
deduced in a given case. Having said that, let us turn to
the facts of the present case once more to determine
whether the appellant stood in a fiduciary capacity vis-àvis the respondent-plaintiffs.”
11. The factual aspects of the matter were, thereafter, considered and in
paras 42 and 43 it was observed:-
“42. … …That conclusion gets strengthened by the fact
that the parties had made contributions towards the sale
consideration paid for the acquisition of the suit property
which they would not have done if the intention was to
concede the property in favour of the appellant.
43. … … Reposing confidence and faith in the appellant
was in the facts and circumstances of the case not unusual
or unnatural especially when possession over the suit
property continued to be enjoyed by the plaintiffs who
would in law and on a parity of reasoning be deemed to be
holding the same for the benefit of the appellant as much
as the appellant was holding the title to the property for
the benefit of the plaintiffs.”
12. It was, thus, concluded that the transaction was completely saved
from the mischief of Section 4 of the Act by reason of the same falling under
Sub-Section (3)(b) and that the Suit was not barred under the Act. This
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judgment was rightly relied upon by Mr. Abhishek Gupta, learned Advocate.
On the other hand, the reliance placed by Mr. R.K. Singh on the decision in
Om Prakash2
, in our view, is completely misplaced. The issue there was
whether prohibition under Section 4 would apply in relation to actions
initiated before the coming into force of the Ordinance or not? In any event
of the matter, the issue whether the provisions of the Act are retrospective
has already been settled4
.
13. In the present case, the controversy has arisen in an application under
Order VII Rule 11 CPC. Whether the matter comes within the purview of
Section 4(3) of the Act is an aspect which must be gone into on the strength
of the evidence on record. Going by the averments in the Plaint, the
question whether the plea raised by the appellant is barred under Section 4
of the Act or not could not have been the subject matter of assessment at the
stage when application under Order VII Rule 11 CPC was taken up for
consideration. The matter required fuller and final consideration after the
evidence was led by the parties. It cannot be said that the plea of the
appellant as raised on the face of it, was barred under the Act. The approach
must be to proceed on a demurrer and see whether accepting the averments
4 R. Rajgopal Reddy through LRs. Vs. Padmini Chandrasekharaiah through LRs.
(1995) 2 SCC 630
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in the plaint the suit is barred by any law or not. We may quote the
following observations of this Court in Popat and Kotecha Property vs.
State Bank of India Staff Association5
:
“10. Clause (d) of Order 7 Rule 7 speaks of suit, as
appears from the statement in the plaint to be barred
by any law. Disputed questions cannot be decided at
the time of considering an application filed under
Order 7 Rule 11 CPC. Clause (d) of Rule 11 of Order
7 applies in those cases only where the statement
made by the plaintiff in the plaint, without any doubt
or dispute shows that the suit is barred by any law in
force.”
14. We, therefore, allow this appeal, set aside the view taken by the courts
below and dismiss the application preferred by the second defendant under
Order VII Rule 11 CPC. Since the Suit has been pending since 2006, we
direct the Trial Court to expedite the matter and dispose of the pending Suit
as early as possible and preferably within six months from today. Needless
to say that the merits of the matter will be gone into independently by the
Trial Court.
5
(2005) 7 SCC 510
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15. The appeal stands allowed in aforesaid terms. No costs.
………………………….J.
[Uday Umesh Lalit]
………………………….J.
[Indu Malhotra]
New Delhi;
April 02, 2019.
