Holding

A finding of title by a Small Causes Court does not constitute res judicata in a later regular suit, and Section 92(1) does not preclude oral evidence when the document is alleged to be a sham.

Summary

The respondent borrowed money from the appellant and executed a nominal sale deed and rent note for a house, claiming the documents were a sham and that the rent represented interest. The appellant sued in the Court of Small Causes for rent recovery, which decreed that the documents were a genuine sale deed, making the respondent a tenant. The respondent then filed a suit for declaration of ownership, arguing the earlier decrees were not res judicata and that oral evidence could be admitted to show the documents were sham, invoking Section 92 of the Evidence Act. The Supreme Court held that a finding of title by a Small Causes Court does not operate as res judicata in a regular civil suit because the issue was incidental, and that Section 92(1) does not bar oral evidence when a party alleges a document was never intended to be acted upon. Consequently, the trial court’s decree in favour of the respondent was upheld and the appellant's appeal dismissed.

Issues considered

Whether a finding of title to immovable property by a Court of Small Causes can operate as res judicata in a subsequent regular civil suit for declaration of title.
Whether Section 92(1) of the Indian Evidence Act bars the admission of oral evidence to prove that a document was a sham and not intended to be acted upon.

Legislation cited

Code of Civil Procedures. 11, s. 97(3)
Indian Evidence Act, 1872s. 91, s. 92

Subjects

res judicataSmall Causes Courttitle to immovable propertyoral evidenceSection 92 Evidence Actsham documentcivil proceduredeclaration suit

Judgment

A 1176

GANGABAI W/O RAMBILAS GILDA
v.
CHHABUBAI W/O PUKHARAJJI GANDHI
.8
November 6, 1981

[D.A. DESAI AND R.S. PATHAK, JJ.J

-
Res judicata, bar of-Question of tille in Small Cause Suit can be regarded
c 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.

Being in need of money, respondent entered into an agreement with the
D 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 through..
out and carried on repairs from time to time. Since the appellant was attempt-
ing to enforce the document as a sale deed by filing suits in tbe Court . of Small
Causes for recovery of rent and the said suits had resulted in a decree, the res-
E pondent filed a suit for declaration that she was and continued to be owner of the
house property. The documents executed on January 7, 1953,~i t 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
bad passed to her. It was further pleaded that the decrees passed by the Court
of SmaH Causes operated as res judicata barring the respondent from pleading
that the sale deed w.as merely a nominal transaction. Reliance was also placed
F 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
G 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 heacd and finally decidc:d 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 inade
the basis of a pica of res judicata. A question of title in a Small Cause suit
H can be regarded as incidental ionly to the substantial issue in the suit and
cannot operate as res judicata in a subsequent suit in which the question of title
ii directly raised. [1181 O-IJ82A-CJ
ClANGAbAI v. cllllABUBAI

I :2. Explanation Vlll to section II of the Code of Civil Procedure operates
A
only where an issue has been heard and finally decided in the earlier suit.
[1182 D-EJ

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 respon-
dent is a sale deed cannot operate as res judicata. [1182 E]
B
Poholi Mullick v. Fukeer Chunder Patnaik, (1874) 22 Suth W.R. 349; Chtt
Ram and Others v. Ganga, 1086 Allahabad Weekly Notes; Anwar Ali v. Nur-Ul-
Haq and Another,(1901) 4 Allahabad Law Journal 517; Khandu Va/ad Keru v.
Tatia valad Vithoba, (1871) 8 Bombay H.C.R.A.C. 23(24) (DB); Mohd. Yusuf and
another v. Abu/ Wahid, A.LR. 1948 All. 296 and S.A.A. Annamalai Che1tiar v.
Molaiyan and others, A.LR. 1970 Mad. 396, approved.

Muhammad Abdul Ghafur Khan v. Gokul Prasad and others, A.I.R. 1914 All.
c
527; Gulabchand Chhotalal Parikh v. State of Bombay, [1965) 2 S.C.R. 574; Madan
Kishor and Another v. Mahabir Prasad and others 1 A.l.R. 1929 All. 816; Ram
Dayal Sonar v. Sukh Mango/ Ka/war, A.l.R. 1937 All. 676; Ganga Prasad v. Nandu
Ram, A.LR. 1916 Patna 75; Gantsh Das v. Feroze Din, A.l.R. 1934 Lahore 355,
Puttangowda Mallangowda Patil v. Nilkanth Kalo Deshpande, XV Bombay Law
Reporter 773; Asgarali R.Jshanalli and another v. Kayumalli Ibrahimji, A.l.R. 1956
Bombay 236: Lala Jageshwar Prasad v. Shyam Behari Lal, A.I.R. 1967 All. 125;
0
Shyam Behari Lal v. Lala Jogeshwar Prasad, [19701 3 S.C.C. 591; Manzural Haq
and ano1her 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 or11l
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 docu-
E

ment was never intended to be acted upon at all between the parties and that the
document is a shant. Such a question arises when the party asserts that that
there was a different transaction altogether and what is recorded in the document F
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. G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1537 of
1970.

Appeal by special leave from the judgment and order dated H
the J0/30th June, 1969 of the Bombay High Court, Nagpur Bench,
Nagpur in Appeal No. 90 of 1962. ·
1I 'i8 Sirt>REME touii.t REPOR'tS [1982} 1 s.c.~.

A U. R. La/it and A. G. Ratnaparkhi, for the Appellant.

S. S. Khanduja for the Respondent.

The Judgment of the Court was delivered by
B
PATHAK, J: This appeal by special leave arises out of a dee·
laratory suit in respect of title to a honse property.

The respondent filed a suit in the Court of the Second Joint

c
Civil Judge, Amrawati alleging that the house situated near Sarafa
Bazar in Amrawati had been purchased by her in 1950 for Rs. 4,000
and thereafter improvements had been affected by her to the pro-
perty. 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 simul-
taneously 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,
D
and that the rent paid by her represented in fact interest at 18% on
the loan. She continued in possession of the house property through-
out 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 re-
covery of rent. As two suits had resulted in decrees, she considered
E
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, trans-
action, 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
F
pleading that.the sale deed was merely a nominal transaction. Reli-
. ance 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
G
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
1-1 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
CANGABAI v. CHHABUBAI (Pathak, J.) 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 B
may settle the dispute by negotiated compromise. It seems, how-
ever, 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 princi- c
ples of res judicata, precluded the trial of the question whether the
sale transaction was a genuine transaction. The other point con-
cerns the operation of section 92 of the Evidence Act.

The successive suits were filed by the appellant against the
respondent in the Court of 1Small Causes for recovery of arrears of u
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, E
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 thats. 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 F
\· 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 G
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 Gu!abchand Chhotala/ Parikh v. State of Bombay(1) where H
(ll [1965] 2 S.C.R. 574.
1180 SUPREME COURT REPORTS [1982) l S.C.l.

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
B 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

c 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.

D 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 Ghofur 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,
E Provincial Small Cause Courts Act on a finding that the relief
c!aimed 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
F title was involved in the suit and on finding so it was open to it to
return the plaint. That was also the view expressed by it in Ram
Dayal Sonar v. Sukh Mangat Ka/war('). So also in Ganga Prasad v. ·I
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
G should not be decided summarily. To the same effect was the view
expressed by the Lahore High Court in Ganesh Das v. Feroze Din.( 5 )

(I) A.l.R. 1914 All.
H (2) A.l,R. 1929 All. 816.
(:l) A.LR. 1937 All. 676.
(4) A.l.R. 1916 Patna 75.
(5) A.J.R. 1934 Lahore 355.
OANGABAI v. CHHABUBAI (Pathak, J.) j 181

In Puttangowda Mal/angowda Patil v. Ni1kanth Kalo Deshpande('),
the Bombay High Court .declared that a Court of Small Causes A
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
Roshanal/i and another v. KaJumalli lbrahimji('), 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 B
. ; Behari Lal('). There a learned Single Judge took the view that as a
Court of Small Causes is a Court of exclusive jurisdiction the res-
trictive conditions imposed by s 11 of the Code of Civil Procedure
requiring "two-fold rompetency" 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 compe- c
tent 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 exclllsive jurisdiction. We find, however, that the view D
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 "prefer-
ential jurisdiction" but not as court of "exclusive jurisdiction".
It was also held by the Full Bench that a decision rend- E
ered 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 M unsif 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 F
also taken by the Punjab High Court in Pareshw.7r! 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
G
(I) XV Bombay Law Reporter 77 J.
(2) A.I.R. 1956 Bombay 236.
(3) A.I.R. 1967 All .125.
s.c,c.
(4) [1970] 3 591.
(5) A.LR. 1970 All. 604.
(6) A.J.R. 1959 Punjab 420, H
1182 stJi>ltllidE COURT REPORtS [1982J I s.C.R

A be pleaded as a bar in a subseqpent regular civil suit for the deter-
mination 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
B 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 substan-
tial issue in the suit and cannot operate as res judicata in a subse- ;'
c
quent suit in which the question of title is directly raised. Poholi
Mullick v. Fukeer Chunder Patnaik('), Chet Ram and Others v.
Ganga,('} Anwar Ali v. Nur-Ul-Haq and Another,('} Khandu valad Keru
v. Talia valad Vithoba( 4 }. See also Mohd. Yusuf and another v. Abdul
--
\

Wahid(') and S.A.A. Annamalai Chettiar v. Mo/aiyan and others('). Our
attention has been drawn to Explanation VIII to s. 11 in the Code
D 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.

E 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.
F (I} 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 parol 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
G 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

(I) [1874] 22 Suth W.R. 349.
(2) 1886 Allahabad Weekly Notes.
(3) [1907] 4 Allahabad Law Journal 517.
H (4) [ 1871] 8 Bombay H.C.R.A.C. 23 (24) (DB).
(5) A.LR. 1948 All. 296.
(6) A.l,R. 1970 Mad. 396.
GANGAllAI v. CHHABUBAI (Pathak J.) 1183

terms of such contract, grant or other disposition of property, or A
of such matter, except the document itself. Sub-s. (I) of s. 92
declares that when the terms of any contract, grant or other dis-
position 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 B
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 c
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 trans-
action. 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
D
..
, 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
E
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. F
Tyagaraja Mudaliyar and another v. Vedathanni.(') The Trial Court
was right in permitting the respondent to lead parol evidence in
support of her plea that the sale deed dated January 7, 1953 was a
sham document and never intended to be acted upon. It is not
disputed that if the parol evidence is admissible, the finding of the
court below in favour of the respondent must be accepted. The G
second contention on behalf of the appellant must also fail.

In the result, the appeal is dismissed with costs.

S.R. Appeal dismissed. H
(!) A.l.R. 1936 Privy Council 70.