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PETITIONER: GANGABAI W/O RAMBILAS GILDA

       Vs.

RESPONDENT: CHHABUBAI W/O PUKHARAJJI GANDHI

DATE OF JUDGMENT06/11/1981

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. DESAI, D.A.

CITATION:  1982 AIR   20            1982 SCR  (1)1176  1982 SCC  (1)   4        1981 SCALE  (3)1753  CITATOR INFO :  RF         1991 SC 672  (20)

ACT:      Res judicata,  bar of-Question  of title in Small Cause Suit can  be regarded  as incidental only to the substantial issue in the suit and cannot operate as res judicata-Section 11 of the Code of Civil Procedure.      Evidence Act-Admissibility of oral evidence-Bar imposed by sub-section (1) of section 92 of the Act-Scope of.

HEADNOTE:      Being in  need of  money, respondent  entered  into  an agreement with  the appellant for a loan of Rs. 2,000 and it was decided that simultaneously she should execute a nominal document of  sale and  rent note, of her house situated near Sarafa Bazar  in Amravati.  These documents were executed on January 7,  1953. The respondent continued in the possession of the house property throughout and carried on repairs from time to  time. Since the appellant was attempting to enforce the document  as a sale deed by filing suits in the Court of Small Causes  for recovery  of rent  and the  said suits had resulted in  a decree,  the  respondent  filed  a  suit  for declaration that  she was  and continued  to be owner of the house property.  The documents  executed on January 7, 1953, it was  said, were  never intended  to  be  acted  upon.  In defence,  the   appellant  maintained  that  the  sale  deed represented a  genuine transaction,  and  ownership  of  the house property  had passed  to her.  It was  further pleaded that the  decrees  passed  by  the  Court  of  Small  Causes operated  as   res  judicata  barring  the  respondent  from pleading  that   the  sale   deed  was   merely  a   nominal transaction. Reliance  was also  placed on section 92 of the Indian Evidence Act.      Dismissing the appeal by special leave, the Court ^      HELD: 1:1.  When a  finding as  to title  to  immovable property is rendered by a Court of Small Causes res judicata cannot be  pleaded as  a bar  in a  subsequent regular civil suit for  the determination  or enforcement  of any right or interest in  immovable property.  In order to operate as res judicata the  finding must  be one  disposing  of  a  matter directly and  substantially in  issue in the former suit and

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the issue  should have been heard and finally decided by the court trying  such suit.  A matter  which is collaterally or incidentally in issue for the purpose of deciding the matter which is  directly in  issue in  the case cannot be made the basis of  a plea  of res  judicata. A question of title in a Small Cause  suit can  be regarded as incidental only to the substantial issue  in the  suit and  cannot operate  as  res judicata in a subsequent suit in which the question of title is directly raised. [H81 G-1182A-C] 1177      1:2. Explanation  VIII to  section 11  of the  Code  of Civil Procedure  operates only where an issue has been heard and finally decided in the earlier suit.      [1182 D-E]      1:3. In  the instant  case, the finding rendered by the Court of  Small  Causes  in  the  two  suits  filed  by  the appellant that  the document executed by the respondent is a sale deed cannot operate as res judicata. [1182 E]      Poholi Mullick  v. Fukeer  Chunder Patnaik,  (1874)  22 Suth W.R.  349; Chet Ram and Others v. Ganga, 1886 Allahabad Weekly Notes;  Anwar Ali v. Nur-Ul-Haq and Another, (1907) 4 Allahabad Law  Journal 517; Khandu Valad Keru v. Tatia valad Vithoba, (1871) 8 Bombay H.C.R.A.C. 23(24) (DB); Mohd. Yusuf and another  v. Abul  Wahid, A.I.R. 1948 All. 296 and S.A.A. Annamalai Chettiar  v. Molaiyan and others, A.I.R. 1970 Mad. 396, approved.      Muhammad Abdul  Ghafur Khan v. Gokul Prasad and others, A.I.R. 1914  All. 527;  Gulabchand Chhotalal Parikh v. State of Bombay,  [1965] 2 S.C.R. 574; Madan Kishor and Another v. Mahabir Prasad  and others,  A.I.R. 1929 All. 816; Ram Dayal Sonar v.  Sukh Mangal  Kalwar, A.I.R.  1937 All.  676; Ganga Prasad v.  Nandu Ram,  A.I.R. 1916  Patna 75;  Ganesh Das v. Feroze Din,  A.I.R. 1934 Lahore 355, Puttangowda Mallangowda Patil v. Nikanth Kalo Deshpande, XV Bombay Law Reporter 773; Asgarali Roshanalli  and  another  v.  Kayumalli  Ibrahimji, A.I.R. 1956  Bombay 236:  Lala  Jageshwar  Prasad  v.  Shyam Behari Lal,  A.I.R. 1967  All. 125; Shyam Behari Lal v. Lala Jogeshwar Prasad,  [1970] 3  S.C.C. 591;  Manzural  Haq  and another  v.   Hakim  Mohsin   Ali,  A.I.R.  1970  All.  604; Pateshwari Parshad Singh v. A. S. Gilani, A.I.R. 1959 Punjab 420, referred to and dissented from.      2. The  bar imposed  by sub-section  (1) of  section 92 applies only  when a  party seeks  to rely upon the document embodying the  terms of  the transaction. In that event, the law declares  that the  nature and intent of the transaction must be  gathered from  the terms of the document itself and no evidence  of any  oral  agreement  or  statement  can  be admitted as  between the  parties to  such document  for the purpose of  contradicting or  modifying its  terms. The sub- section is  not attracted  when the  case of a party is that the transaction  recorded in the document was never intended to be  acted upon  at all  between the  parties and that the document is  a sham.  Such a  question arises when the party asserts that  there was  a different  transaction altogether and what  is recorded  in the document was intended to be of no consequence  whatever. For  that purpose oral evidence is admissible to  show that  the document  executed  was  never intended to  operate as  an agreement  but that  some  other agreement altogether,  not recorded  in  the  document,  was entered into between the parties. [1183 C-F]      Tyagaraja Mudaliyar  and another  v. Vedathanni, A.I.R. 1936 Privy Council 70, followed.

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JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1537 of 1970.      Appeal by  special leave  from the  judgment and  order dated the  10/30th June,  1969 of  the  Bombay  High  Court, Nagpur Bench, Nagpur in Appeal No. 90 of 1962. 1178      U. R. Lalit and A. G. Ratnaparkhi, for the Appellant.      S. S. Khanduja for the Respondent.      The Judgment of the Court was delivered by      PATHAK, J: This appeal by special leave arises out of a declaratory suit in respect of title to a house property.      The respondent  filed a suit in the Court of the Second Joint Civil Judge, Amrawati alleging that the house situated near Saraf  Bazar in  Amrawati had  been purchased by her in 1950 for  Rs. 4,000  and thereafter  improvements  had  been affected by her to the property. Being in need of money, she entered into  an agreement  with the appellant for a loan of Rs. 2,000  and it was decided that simultaneously she should execute a  nominal document  of sale  and a rent note. These documents were executed on January 7, 1953. She alleged that the documents were never intended to be acted upon, and that the rent  paid by her represented in fact interest at 18% on the loan.  She continued in possession of the house property throughout and,  it is said, carried on repairs from time to time. It  was stated  that the  appellant was  attempting to enforce the  document as  a sale deed by filing suits in the Court of Small Causes for recovery of rent. As two suits had resulted in decrees, she considered it necessary to file the present suit  for a  declaration that she was, and continued to  be,  owner  of  the  house  property.  In  defence,  the appellant  maintained  that  the  sale  deed  represented  a genuine, transaction,  and ownership  of the  house property had passed to the appellant. It was pleaded that the decrees passed by the Court of Small Causes operated as res judicata barring the  respondent from pleading that the sale deed was merely a nominal transaction. Reliance was also placed on s. 92 of the Indian Evidence Act.      The trial  court held  that the  sale  deed  was  never intended  to  be  acted  upon  and  decreed  the  suit.  The appellant appealed  to the District Court, Amravati, but the learned District  Judge did  not accept the case that a sale had taken  place. He  held, however,  that  the  transaction between the  parties constituted a mortgage. He modified the trial court  decree to  conform to  that finding.  The  High Court of  Bombay, in  second appeal,  did not agree with the finding of  the lower  appellate court  that the transaction was a  mortgage and affirmed the findings of the trial court that the  sale deed  and rent note were sham documents, that the decrees of the 1179 Court of  Small Causes  did not  operate as res judicata and that s.  92 of  the Indian  Evidence Act did not prevent the respondent  from   establishing  the   true  nature  of  the transaction. Accordingly,  the  High  Court  set  aside  the decree of the lower appellate court and resorted that of the trial court.      When this  appeal was heard by us, it appeared that the parties may  settle the dispute by negotiated compromise. It seems,  however,  that  no  compromise  has  been  possible. Accordingly, we  proceed to  dispose of  the appeal  on  its merits.      Two points  have been  raised before  us. The appellant urges that  the Small  Causes Court  decrees, in view of the general principles  of res  judicata, precluded the trial of

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the question  whether the  sale transaction  was  a  genuine transaction. The  other  point  concerns  the  operation  of section 92 of the Evidence Act.      The  successive  suits  were  filed  by  the  appellant against the  respondent in  the Court  of Small  Causes  for recovery of  arrears of  rent. In  each suit  the  appellant contended that  she  was  owner  of  the  property  and  the respondent was  her tenant.  The tenancy  was alleged on the basis of  the document  dated January  7, 1953  which on its terms purported  to be  a sale  deed by  the  respondent  in favour of  the appellant. The respondent resisted the suits. The court decreed the suits on the finding that the document was a  sale deed,  and therefore  the respondent was not the owner of  the property but merely a tenant of the appellant. The  question  is  whether  this  finding  operates  as  res judicata in  the instant  suit. The  High Court repelled the plea of res judicata on the ground that s. 11 of the Code of Civil Procedure  governed the  case, and  that as a Court of Small  Causes   is  not  competent  to  try  a  suit  for  a declaration of  title to immovable property, the court which passed the  decrees relied  on  by  the  appellant  was  not competent  to   try  the   present  suit  and  therefore  an imperative condition of s. 11 was not satisfied.      It is  contended before  us on  behalf of the appellant that  the   High  Court  erred  in  applying  the  statutory provisions of  s. 11  of the  Code, and  should have invoked instead the  general principles of res judicata. On that, it is submitted, all that was necessary to find was whether the Court of  Small Causes  was competent to try the two earlier suits and  decide the  issues arising  therein. We have been referred to  Gulabchand Chhotalal  Parikh v, State of Bombay where 1180 this Court  has taken  the view that the provisions of s. 11 of the  Code are  not exhaustive  with respect to an earlier decision operating  as res judicata between the same parties on the  same matter  in controversy  in a subsequent regular suit, and  that on  the general  principles of res judicata, any previous  decision on  a matter  in controversy, decided after full  contest or  after affording  fair opportunity to the parties  to prove  their case  by a  Court competent  to decide it,  will operate  as res  judicata in  a  subsequent regular suit.  It is  not necessary,  it was said, "that the Court deciding  the matter  formerly be  competent to decide the subsequent  suit or  that the  former proceeding and the subsequent  suit   have  the   same  subject   matter".  The observations were  made in  considering the question whether decisions on  matters in controversy in writ petitions under Article 32  or Article 226 of the Constitution could operate as res  judicata in  subsequent regular  suits on  the  same matters in controversy between the same parties.      A number  of other  cases have  been cited on behalf of the appellant  in support  of the  plea of  res judicata. We have considered  them and we do not think that they help the appellant. In Muhammad Abdul Ghafur Khan v. Gokul Prasad and others the  Allahabad High Court limited itself to observing that a  Court of  Small Causes  possessed  a  discretion  on whether to  return the  plaint under s. 23, Provincial Small Cause Courts  Act on  a  finding  that  the  relief  claimed depended on  proof of  title. The  same High  Court in Madan Kishor and  Another v.  Mahabir  Prasad  and  others  merely observed that it was for the Court of Small Causes to decide under s. 23 of the Provincial Small Cause Courts Act whether a question  of title was involved in the suit and on finding so it was open to it to return the plaint. That was also the

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view expressed  by it  in Ram  Dayal Sonar  v.  Sukh  Mangat Kalwat. So also in Ganga Prasad v. Nandu Ram, the Patna High Court said that the Court of Small Causes had power under s. 23 to  return the  plaint where  it was  of opinion that the question of title raised was so intricate that it should not be decided  summarily. To  the  same  effect  was  the  view expressed by  the Lahore  High Court in Ganesh Das v. Feroze Din. 1181 In Puttangowda  Mallangowda Patil v. Nikanth Kalo Deshpande, the Bombay  High Court declared that a Court of Small Causes could render  a finding on an issue as to title to immovable property but  only in  a suit  which did  not ask  for  that relief and  merely for  payment  of  a  sum  of  money.  Our attention was  drawn to  Asgarali Roshanalli  and another v. Kayumalli Ibrahimji, but we find nothing there of assistance to the appellant. Reliance was placed on the decision of the Allahabad High  Court in Lala Jageshwar v. Shyam Behari Lal. There a  learned Single  Judge took the view that as a Court of Small  Causes is  a Court  of exclusive  jurisdiction the restrictive conditions  imposed by s 11 of the Code of Civil Procedure requiring "two-fold competency" of the Court whose decision is to operate as res judicata cannot be invoked. It was sufficient,  he observed,  that the  decision  had  been rendered by a court of competent jurisdiction and it was not necessary that that court should also be competent to decide the subsequent  suit. The  judgment was brought in appeal to this Court  but while  disposing of the appeal, Shyam Behari Lal v.  Lala Jageshwar Prasad, this Court declined to decide whether a Court of Small Causes could be regarded as a Court of exclusive  jurisdiction. We  find, however, that the view taken by the High Court in Lala Jageshwar Prasad (supra) was expressly overruled  by a  Full Bench  of the  High Court in Manzurul Haq and another v. Hakim Mohsin Ali and it was laid down that  a Court  of Small  Causes could be described as a court of  "preferential jurisdiction"  but not  as court  of "exclusive jurisdiction". It was also held by the Full Bench that a  decision rendered  by a  Court of  Small Causes in a suit for  arrears of  rent would not operate as res judicata in a  subsequent suit  filed in  the Court of the Munsif for recovery of  arrears of  rent for a different period and for ejectment. That  the principle  of res judicata could not be availed of where a decision given by a Court of Small Causes was relied  on in  a subsequent  regular civil  suit was the view also  taken by  the  Punjab  High  Court  in  Pateshwar Parshad Singh v. A. S. Gilani.      It seems  to us  that when  a finding  as to  title  to immovable property  is rendered  by a  Court of Small Causes res judicata cannot 1182 be pleaded  as a  bar in a subsequent regular civil suit for the determination or enforcement of any right or interest in immovable property.  In order to operate as res judicata the finding must  be one  disposing of  a  matter  directly  and substantially in  issue in  the former  suit and  the  issue should have  been heard  and finally  decided by  the  court trying  such   suit.  A  matter  which  is  collaterally  or incidentally in  issue for  the  purposes  of  deciding  the matter which is directly in issue in the case cannot be made the basis  of a  plea of res judicata. It has long been held that a  question of  title in  a Small  Cause  suit  can  be regarded as  incidental only to the substantial issue in the suit and cannot operate as res judicata in a subsequent suit in which  the question  of title  is directly raised. Poholi Mullick v.  Fukeer Chunder  Patnaik, Chet  Ram and others v.

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Ganga, Anwar  Ali v.  Nur-Ul-Haq and  Another, Khandu  valad Keru v.  Tatia valad  Vithoba.  See  also  Mohd.  Yusuf  and another v.  Abdul Wahid  and S.A.A.  Annamallai Chettiar  v. Molaiyan  and  others.  Our  attention  has  been  drawn  to Explanation VIII  to s.  11 in  the Code  of Civil Procedure recently inserted by the Code of Civil Procedure (Amendment) Act, 1976.  Section 97(3) of the Amendment Act declares that the new  provision applies  to pending  suits,  proceedings, appeals and applications. In our opinion the Explanation can be of no assistance, because it operates only where an issue has been heard and finally decided in the earlier suit.      Accordingly, we  hold that  the finding rendered by the Court of  Small  Causes  in  the  two  suits  filed  by  the appellant that  the document executed by the respondent is a sale deed  cannot operate  as res  judicata in  the  present suit.      The next  contention on behalf of the appellant is that sub-s.(1) of  s. 92  of the Evidence Act bars the respondent from contending that there was no sale and, it is submitted, the respondent should not have been permitted to lead parole evidence in  support of  the contention.  Section 91  of the Evidence Act provides that when the terms of contract, or of a grant,  or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the 1183 terms of  such  contract,  grant  or  other  disposition  of property, or  of such  matter, except  the document  itself. Sub-s. (1)  of s.  92 declares  that when  the terms  of any contract, grant  or other  disposition of  property, or  any matter required  by law  to be  reduced to  the  form  of  a document, have been proved according to the last section, no evidence  of  any  oral  agreement  or  statement  shall  be admitted, as  between the  parties to any such instrument or their  representatives  in  interest,  for  the  purpose  of contradicting, varying,  adding to, or subtracting from, its terms And  the first proviso to s. 92 says that any fact may be proved  which would  invalidate any  document,  or  which would entitle  any person  to any  decree or  order relating thereto; such  as fraud,  intimidation, illegality,  want of due execution,  want of capacity in any contradicting party, want or failure of consideration, or mistake in fact or law. It is  clear to  us that the bar imposed by sub-s. (1) of s. 92 applies only when a party seeks to rely upon the document embodying the  terms of  the transaction. In that event, the law declares  that the  nature and intent of the transaction must be  gathered from  the terms of the document itself and no evidence  of any  oral  agreement  or  statement  can  be admitted as  between the  parties to  such document  for the purpose of  contradicting or  modifying its  terms. The sub- section is  not attracted  when the  case of a party is that the transaction  recorded in the document was never intended to be  acted upon  at all  between the  parties and that the document is  a sham.  Such a  question arises when the party asserts that  there was  a different  transaction altogether and what  is recorded  in the document was intended to be of no consequence  whatever. For  that purpose oral evidence is admissible to  show that  the document  executed  was  never intended to  operate as  an agreement  but that  some  other agreement altogether  not  recorded  in  the  document,  was entered into  between the  parties. Tyagaraja  Mudaliyar and another  v.   Vedathanni.  The  Trial  Court  was  right  in permitting the respondent to lead parole evidence in support of her  plea that  the sale deed dated January 7, 1953 was a

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sham document and never intended to be acted upon. It is not disputed that  if the  parole evidence  is  admissible,  the finding of  the court below in favour of the respondent must be  accepted.   The  second  contention  on  behalf  of  the appellant must also fail.      In the result, the appeal is dismissed with costs. S.R.                                       Appeal dismissed. 1184