1. The plaintiff has preferred this appeal against the decree of the Subordinate Judge of Masulipatam dismissing his suit on a mortgage-deed executed by the 1st defendant. The plaintiff's case is that he lent Rs. 1,750 on the mortgage of property belonging to the 1st defendant, a Hindu widow, and that she did not pay anything towards the mortgage amount and that he is entitled to a decree against her. The 1st defendant's case is that the money lent on the mortgage belonged to Kottayya, her sister's husband, and that the plaintiff is only a benamidar and is not entitled to a decree against her. Kottayya applied to the Court to be made a party to the suit and the Subordinate Judge directed him to be added as the 2nd defendant to the action. Kottayya's case is that the plaintiff is a benamidar for him and that he paid Rs. 1,750 for the plaint mortgage and the plaintiff, therefore, is not entitled to a decree. The Subordinate Judge upheld the contention of the 2nd defendant and dismissed the suit. Hence this appeal.
2. The first contention of Mr. Krishnaswami Aiyar for the appellant is that the Lower Court had no power to make the 2nd defendant a party to a suit on a mortgage and to try the question whether the mortgagee is a benamidar for some one else. His argument is that, granting that the plaintiff is a benamidar, he is a trustee and the cestui que trust or the beneficial owner cannot intervene in a suit in which the trustee is seeking to enforce a legal remedy against a third person in respect of the trust property and that Order 1, Rule 10 of the Civil Procedure Code has no application to a case like the present. When a person acquires an interest in property with his funds in the name of another for his own benefit the latter is called a benamidar. A benamidar is not a trustee in the strict sense of the term. He has the ostensible title to the property standing in his name but the property does not vest in him but is vested in the real owner. He is only a name-lender or an alias for the real owner. The cardinal distinction between a trustee as known to English Law and a benamidar lies in the fact that a trustee is the legal owner of the property standing in his name and the cestui que trust is only a beneficial owner, whereas, in the case of a benami transaction, the real owner has got the legal title though the property is in the name of the benamidar. It is well settled that the real owner could enforce his remedy in respect of property standing in the name of a benamidar without reference to the latter. If a mortgage stands in the name of a benamidar, the person for whom the mortgage was obtained could sue on the mortgage, and the same rule applies to other transactions except those forbidden by law. The benamidar has some of the liabilities of a trustee but not all his rights. When the benamidar is in possession of the property standing in the name, he is in a sense the trustee for the real owner. It is well settled now that a benamidar can sue in his own name. He can give a discharge to an obligor, who, not knowing the real nature of the transaction, bo'na fide pays him the amount due from him. The benamidar incurs no obligation if he does not protect the property standing in his name. A trustee is liable for neglect in safeguarding the interests of the trust by not taking reasonable care with it such as a prudent man would bestow in his own affairs, but I am not aware of any case in which a mere benamidar was held liable for failure to sue for recovery of money due on a bond standing in his name. A benamidar has no interest at all in the property or transaction standing in his name. If a contract is entered into in his name, he is not the contracting party. Bipeen Beharee Chowdhry v. Ramchunder Roy and Ors. (1870) 14 W.R. 12, 15. In Petheperumal Chetti v. Muniandy Servai I.L.R. (1908) Cal. 551 : 1908 L.R. 35 IndAp 98 : 1908 18 M.L.J. 277 Lord Atkinson quotes with approval the following passage from Mayne's Hindu Law, 7th Edition, para. 446:
Where a transaction is once made out to be a mere benami, it is evident that the benamidar absolutely disappears from the title. His name is simply an alias for that of the person beneficially interested.
3. A benami transaction does not create the relation of trustee and cestui que trust. See Uma Sundari Dasi v. Dwarakanath Roy (1868) 2 Beng. L.R. 284, A person dealing with a benamidar bona fide without the knowledge of the real nature of the transaction would be protected on the principle of the law of estoppel. As the real owner held out to the world that the benamidar was the real owner, he could not complain if other people bona fide dealt with the owner of the ostensible title as the real owner. The principle is embodied in Section 41 of the Transfer of Property Act.
4. Mr. Krishnaswami Aiyar relied strongly upon Vaitheswara Aiyar v. Srinivasa Raghava Aiyangar I.L.R. (1919) Mad. 348 : 1919 36 M.L.J. 269 as supporting his contention that the benamidar is a trustee in the full sense of the term. What was decided in that case was that a benamidar could sue to enforce the mortgage standing in his name and that the real mortgagee need not be a party. There was a conflict of opinion as to the right of a benamidar to sue in his own name and a Full Bench of this Court following the decision in Chowdhry Gur Narayan v. Sheolal Singh I.L.R. (1918) Cal. 566 : 1918 36 M.L.J. 68 held that a benamidar could sue on a mortgage standing in his name. In Chowdhry Gur Narayan v. Sheolal Singh I.L.R. (1918) Cal. 566 : 1918 36 M.L.J. 68 it was held by the Privy Council that
an action could be maintained in the name of the benamidar in respect of the property though the beneficial owner is not a party to it.
5. Mr. Krishnaswami Aiyar's argument is that as the benamidar could sue in his own name, it is not open to the Court to make the real owner a party to the action. The cases in Vaitheswara Aiyar v. Srinivasa Raghava Aiyangw I.L.R. (1919) Mad. 348 : 1919 36 M.L.J. 269 and Gur Narayan v. Sheolal Singh do not support his contention. They only decided that a benamidar could bring a suit in his own name without making the real owner a party. But a Court could make the real owner a party if it thinks that his presence is necessary for the proper determination of the suit. In a case where the obligor pleads that he paid what was due from him to the real owner, the benamidar would be bound by such payment and if he brings a suit ignoring the payment, the defendant could ask the Court to make the real owner a party. Where a benamidar brings a suit the result of which is likely to prejudice the right of the real owner, the Court is not debarred from making the real owner a party. Order 1, Rule 10 gives a discretion to the Court to order
that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added.
6. In Gur Narayan v. Sheolal Singh , relied upon by the appellant, their Lordships observed:
It was open to him (meaning the real owner) to apply to be joined in the action, but, whether or not he is made a party, a proceeding by or against his representative is in its ultimate result fully binding on him.
7. It is to the interest of the real owner to protect his rights when he thinks that the action of the benamidar might prejudice him. As the benamidar is only an alias for the real owner, the real owner could always step in and say that he is the person who is entitled to the property or contract standing in the name of the benamidar. The Lower Court was justified in making the 2nd defendant a party in the circumstances of the case and we find against the appellant on this point.
8. The remaining portion of the judgment is omitted as it is not material for the purpose of this report. - REP.
9. The appeal fails and is dismissed with costs.