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TABLE TABLE OF CONTENTS CONTENTS SYNOPSI S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Abs t r act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Resear c hQues t i ons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Resear chMe t hodol ogy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Chapt er i sat i o nSc heme. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 I NTRODUCTI ON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 I . SECTI ON 41:PRI NCI PLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ESSENTI ALCONDI TI ONSOFS.41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Os t e nsi bl eOwner /Benami dar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Expr essorI mpl i edconsentofr ealowner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Tr ansf erf orconsi der at i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Tr ansf er eeact si nGoodFai t h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Reasonabl eEnqui r ybyTr ansf er ee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 I I . THE HE BENAMITRANSACTI ONS( PROHI BI TI ON)ACT,1988. . . . . . . . . . . . 14 Except i onsundert heAct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Mot i ve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Bur denofPr oof: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 I I I . THE HEBENAMITRANSACTI ONS( PROHI BI TI ON)BI LL,2011. . . . . . . . 19 CONCLUSI ON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 BI BLI OGRAPHY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 BOOKS& STATUTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 WEBLI NKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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TABLE OF CASES
AnodaMohan,v .Ni l phamar i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Beni r am v .kundanLal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Be yasSi nghv .Ram Janam Ahi r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Bhugwanv .Upooc h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Cai r ncr ossvLor i mer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Ch.GurNar ayanv .Sheol alSi ngh. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Gur ubakshSi nghv .Ni kkaSi ngh. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Har devSi nghv .Gur mai lSi ngh. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
JayadayalPoddar v .Bi biHaz ar a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
KannashiVer shiv .Rat anshiNenshi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Ladhi baiv .Ravj iNagshi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Lal aJagmohanDasv .Lal aI ndarPr asad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Li c kbar r ow v .Mason. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Maz harv .Mukht ar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mi t hi l eshKumar iv .Pr em Behar iKhar e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
NagesharPr asadv .Raj aPat e shr i . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Nat hubaiv .Mul c hand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RaiSuni lKumarv .ThakurSi ngh. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,16
RajBal l avDassv .Har i pada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Ramcoomarv .Macqueen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Rootv .Fr enc h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ShamsherChandv .MehrChand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Shei khBahadurAl iv .Shei khDhomu. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Tar abagKhanv .NanakChand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ThakurKr i shnav .Kanhayal al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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V.Sat y anar ayanaRaov .Leel av at hy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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SYNOPSIS Abstract The word "benami" is a Persian word, "be" meaning without and "nam" meaning name. Section 2(1) of the Benami Transactions (Prohibition) Act, 19, defines a Benami Transaction as "an! transaction" in which roert! is transferred to one erson for a consideration aid or ro#ided b! another erson." $n a Benami transaction, a erson (rea% owner) ac&uires roert! without using his own name, but in the name of another. A ' Benamidar has no beneficia% interest in the roert! that stands in his name he reresents, in fact, the rea% owner, and so far as their re%ati#e %ega% osition is concerned, he is a mere trustee for him. 1 Therefore, the Benamidar has the ostensib%e tit%e to the roert! standing in his name but the beneficia% ownershi of the roert! does not #est in him but in the rea% owner.
Research Questions 1. *hat is the ro#isiona% #a%ue of S.+1 of the Transfer of Proert! Act, 12 2. *hat is the re%e#ance of The Benami Transaction (Prohibition) Act, 19 with regard to S. +1 of the Transfer of Proert! Act, 12
Research Methodology A descriti#e and doctrina% research methodo%og! was used for this ro-ect. oncerned statute and boo/s of renowned authors were %oo/ed into for the comi%ation of the resent stud!. Se#era% websites were %oo/ed into for understanding the concet of resent stud!. 0oreo#er #arious artic%es and case %aws were referred inorder to c%ear the %aw oint at the resent time. eferring to a%% the rimar! and secondar! materia% mentioned abo#e, the resent stud! has been comi%ed and resented to the concerned.
Chapterisation Scheme hater 1 Princi%e and 3ssentia%s of S. +1 hater 2 The Benami Transaction (Prohibition) Act, 19 hater 4 The Benami Transaction (Prohibition) Bi%%, 2511
1Ch. Gur Narayan #. Sheolal Singh, A$ 191 P 1+5.
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INTRODUCTION The 6udiciar! recogni7ed Benami Transaction at a #er! ear%! oint of time. $n an o%d decision of the a%cutta ourt, a urchase in ti%e wife8s name was he%d to be fictitious. The court he%d that the roert! #ested in the erson who actua%%! aid the urchase mone! and not necessari%! the erson whose name was used." The %aw ro#ided a substanti#e right to the urchaser of the roert! (in the name of the benamidar ), to ro#e that he was the rea% owner of the roert!, and thereb! get aroriate dec%aration of tit%e and other re%ief.2 The ru%e of Section +1 of TPA 19 is a deduction from the %aw of estoe% which is enunciated in the $ndian 3#idence Act, Section 11. $t forms an e:cetion to the genera% ru%e that a erson cannot con#e! a better tit%e than he has himse%f in the roert! (section 2;, Sa%e of
benami transactions? without rohibiting them, but the! on%! tried to identif! the rea% owner and the benami owner in these transactions. These ro#isions came u for re#iew before the @aw ommission which fe%t that these ro#isions must be reea%ed and the! shou%d be re%aced b! an indeendent %egis%ation. The @aw ommission, after ma/ing a detai%ed stud! and e:amining the #iews and oinions of the ub%ic, came to the conc%usion that such transactions are carried out b! eo%e ha#ing funds and wea%th from sources not disc%osed to the re#enue authorities and with tainted funds to ac&uire roerties in the names of benamis (to a#oid de%etion and uniti#e actions). $t is in this bac/ground that the Benami Transactions (Prohibition of the ight to eco#er Proert!) Act, 19 was enacted to come into effect from 0a! 19, 19 in a%% States, e:cet 6ammu and ashmir.
2 Sheikh Bahadur Ali #. Sheikh Dhomu, 1a%cutts Sud . iw.e. 25.
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I.
SECTION 41: PRINCIPLE
Section +1 of the Transfer of Proert! Act, 12 defines transfer of roert! b! an ostensib%e owner. $t statesC
41. Transfer by ostensible owner. Where, with the consent,
exress or imlied, o! the ersons interested in immo"able roerty, a erson is the ostensible owner o! such roerty and trans!ers the same !or consideration, the trans!er shall not be "oidable on the ground that the trans!eror was not authori#ed to make it$ %ro"ided that the trans!eree, a!ter taking reasonable care to ascertain that the trans!eror has the ower to make the trans!er, has acted in good !aith.
This section enacts a ru%e of estoe% as against the rea% owner. The rinci%e under%!ing this section is that if two innocent ersons are defrauded or cheated b! one, who, after transferring the roert! of one without his consent to another, is no %onger resent, and the two ersons enter into %itigation with resect to the roert! transferred, then our of these two aarent%! innocent ersons, the one who, b! his conduct or consent enab%ed the fraud to ta/e %ace, wi%% suffer. The %aw incororated in Section +1 is based on the ru%es %aid down b! the Pri#! ounci% in the %eading case of &amcoomar #. 'ac(ueen). Brief%!, the facts and the %aw %aid down in this case were as fo%%owsC Dne A%e:ander had urchased some %anded roerties in a%cutta in the na me of Bunnoo Bibee who was his 0istress. 0ac&ueen was one of the two chi%dren born to him b! this 0istress (Bunnoo Bibee). The sa%eEdeed was in the name of Bunnoo Bibee and she a%so used to manage the roerties. @ater on during the %ife of A%e:ander, Bunnoo Bibee so%d the roerties to amdhone (father of amcoomar). After the death of Bunnoo Bibee, 0ac&ueen fi%ed a suit against amdhone c%aiming the roerties on the ground that her father A%e:ander had %eft a wi%% in her fa#our and that her father was
3 A$. 19=4 S 191;.
P a g e | ! the rea% owner, not Bunnoo Bibee who was mere%! a benamidar. amdhone %eaded that he was a bona !ide urchaser without notice of the benami tit%e of the se%%er (Bunnoo Bibee). The a%cutta Figh ourt decided in fa#our of 0ac&ueen whereuon amcoomar (son of amdhone who was then substituted in %ace of his father) went in aea% to the Pri#! ounci% which re#ersed the -udgment of his a%cutta Figh ourt and decided in fa#our of amcoomar. A%%owing the aea% of amcoomar, the Pri#! ounci% he%d that e#en assuming that A%e:ander was the rea% owner and that Bunnoo Bibee was mere%! an aarent (ostensib%e) owner, since A%e:ander had a%%owed *i.e. gi#en im%ied consent to) Bunnoo Bibee to ho%d herse%f out as the rea% owner, he or his reresentati#es cou%d not reco#er uon their secret tit%e un%ess the! cou%d ro#e that urchaser had direct or constructi#e notice of the rea% tit%e. e%i#ering its -udgment, the Pri#! ounci% made fo%%owing we%%E/nown obser#ations C +t is a rincile o! natural e(uity which must be uni"ersally alicable that, where one man allows another to hold himsel! out as the owner o! an estate and a third erson urchases it !or "alue, !rom the aarent owner in the belie! that he is real owner, the man who so allows the other to hold himsel! out shall not be ermitted to reco"er uon the secret title.The section is a statutor! a%ication of the %aw of estoe%, the genera% rinci%e of which is thus stated b! the Fouse of @ords in Cairncross " orimer$/ +! a man, either by words or by conduct, has initiated that he consents to an act which has been done, and that he will o!!er no oosition to it, although it could not ha"e been law!ully done without his consent, and he thereby induces others to do that !rom which they might ha"e abstained 0 he cannot (uestion the legality o! the act he had so sanctioned 0 to the re1udice o! those who ha"e so gi"en !aith to his words or to the !air in!erence to be drawn !rom his conduct.This was the rinci%e behind S. +1 of the Transfer of the Proert! Act, 12, which re%ates to the rinci%e of 3stoe% as has been ro#ided in S. 11 of the $ndian 3#idence Act.
4 (1=5) 4 0ac& 2;at . 29.
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ESSENTIAL CONDITIONS OF S. 41 Go%%owing conditions are necessar! for the a%icabi%it! of this sectionCE i.
There is transfer of an $mmo#ab%e roert! b! ostensib%e owner with e:ress or im%ied consent of the rea% owner,
ii.
The transfer is for consideration
iii.
The transferee has acted in good faith, and,
i#.
The transferee has e:ercised reasonab%e care in finding out the transferors ower to ma/e the transfer.
#stensible #$ner% &enamidar Starting from the first essentia%, it states that there need to be a transfer of roert! b! the ostensib%e owner. Dstensib%e %itera%%! means 'aarent or 'seeming. An ostensib%e owner is the erson who aarent%! or seeming%! aears to be the owner, though in rea%it! he is not. Fe is the erson ha#ing a%% the indicas of the ownershi without being the rea% owner .= A Benamidar is an ostensib%e owner. The term 'Dstensib%e e:c%udes such ersons who ho%d ossession of roert! rofessed%! as agent, guardians or in an! other fiduciar! character. According to B%ac/ @aws ictionar! C 23stensible ownershi4 means aarent ownershi deri"ed !rom conduct or words. 5heory o! 2ostensible ownershi4 estos an owner o! roerty who clothes another with an aarent title !rom the latter asserting his title against an innocent third arty who has been induced to deal with the aarent owner .6
5 7arde" Singh #. Gurmail Singh, A$ 255; S 15. 6 8annashi 9ershi #. &atanshi Nenshi, A$ 192 utch . 7 B%ac/s @aw ictionar!, = th ed., . 1155.
P a g e | 1' The Benami Transaction (Prohibition) Act of 19 ro#ides that where a roert! is transferred benami (i.e., in the name of another erson), the erson, in whose name the roert! is he%d, sha%% become the rea% owner. The Benamidar reresents in fact the rea% owner, and is a mere trustee for him. So, if the roert! is urchased in the name of a benamidar and the indicia of ownershi are %aced in his hands, the true owner can on%! get rid of the effect of a%ienation b! showing that it was made without his ac&uiescence and that the urchaser too/ with notice of that fact . The Act ro#ides that no suits, action or c%aim to enforce an! right in resect of an! roert! he%d benami against the erson in whose name the roert! is he%d or an! other erson sha%% %ie b! the erson c%aiming to be the rea% owner of the roert!. $n other words, the rea% owner is now after the enforcement of the Act cannot c%aim the roert! from the benamidar b! an! suit, c%aim or action. The defence of being the rea% owner sha%% a%so not be a%%owed. Fowe#er, an e:cetion has a%so been gi#en in the Act where the abo#e stated ru%e wi%% not a%!CE 1. *here the erson in whose name the roert! is he%d is a coarcener in a 7indu :ndi"ided ;amily and the roert! is he%d for the benefit of the coEarceners in the fami%!, or 2. *here the erson in whose name the roert! is he%d is a trustee or other erson standing in a !iduciary caacity, and the roert! is he%d for the benefit of another erson for whom he is a trustee or towards whom he stands in such caacit!. This means that now an ostensib%e owner or benamidar has become a rea% owner e:cet where he is a coarcener in a Findu Hndi#ided Gami%! or a trustee standing in a fiduciar! caacit!. Therefore, the %aw %aid b! Sect ion +1 of the Transfer of Proert! Act stands modified e:cet where benamidar is a coEarcener or a trustee standing in a fiduciar! caacit!. $n
8 Bhugwan #. :ooch 15 * 1. A$ 19;+ S 1;1
P a g e | 11 circumstances. A%so the fo%%owing considerations must be ta/en into account whi%e deciding whether a erson is ostensib%e owner or notC (i)
Source of the urchaseEmone! i.e. who aid the rice
(ii)
Iature of ossession after the urchase i.e. who had the ossession
(iii)
0oti#e for gi#ing benami co%our to the transaction i.e. wh! the roert! was urchased in the name of the other erson
(i#)
e%ationshi between the arties i.e. whether the rea% owner and the ostensib%e owner were re%ated to each other or were strangers or friends
(#)
onduct of the arties in dea%ing with the roert! i.e. who used to ta/e care of and had contro% o#er the roert!
(#i)
ustod! of the tit%e deeds.
()press or *mplied consent o+ real o$ner $n the matter of adhibai #. &a"1i Nagshi, >? it was obser#ed that the e:ress or im%ied consent to ostensib%e ownershi means that some b%ame attaches to the rea% owner and that b! some fau%t of his the wor%d begins to be%ie#e that another erson is the owner of the roert!. The rea% owner is not resonsib%e, un%ess the aarent ownershi of the transferor has been ermitted or created b! him. Fe creates or ermits the aearance of ownershi either b! e:ress words of consent, or b! acts or conduct which im%! consent. $t is not necessar! that he shou%d ha#e been inf%uenced b! a fraudu%ent intention, for his %iabi%it! rests uon his ha#ing ut the transferor in a osition which enab%ed him to commit a fraud. This is on the rinci%e that 8when one of two innocent ersons must suffer from the fraud of a third, he sha%% suffer who, b! his indiscretion,
1! A$195 utch 4+ at .4
P a g e | 12 has enab%ed such third erson to commit the fraud8.11 The same rinci%e was stated in somewhat wider terms b! 6 Ashurst in ickbarrow #. 'ason ,>@asC +where"er one o! two innocent ersons must su!!er by the acts o! a third, he who has enabled such erson to occasion the loss must sustain it.The consent of the rea% owner is e:ress if it is gi#en in c%ear words authorising him to ma/e the transfer. But such consent must not be brought about b! a misarehension of %ega% rights. The consent is im%ied if the rea% owner /nows that the benamidar is dea%ing with his roert! as if it were his own but remains si%ent or ac&uisces. The rea% owners ac&uiescence (si%ence) or inaction im%ies his consent. $n Anoda 'ohan, #. Nilhamari>) , A urchased a roert! in the name of his wife B. Bs name was entered in the re#enue records and she used to dea% with the roert!. After A8s death B mortgaged the roert! to who too/ it in good faith be%ie#ing that B had authorit! to ma/e the transfer. $t was he%d that since A himse%f had entered B8s name in the re#enue record and since A a%%owed her to dea% with the roert!, there was an im%ied consent of A to ho%d out B as an ostensib%e owner authorising him to transfer the roert!. According%!, the mortgage cou%d not be a#oided and the mortgagee was rotected under this section. $n Beniram #. kundan al, >/ it was he%d that Si%ence ma! be consent on%! where the rea% owner is aware of his rights. A%so it is not a mere ac&uiescence but something more from which consent ma! be inferred. $t is not a &uestion of fact but of %ega% inference from the facts found. Section +1 does not a%! to minors, and a minors guardian who transfers the roert! of a minor cannot be treated as an ostensib%e owner with the consent of the minor, who b!, reason of the disabi%it! of infanc!, cannot gi#e his consent. The doctrine
11 &oot #. ;rench, (14) 14 *ende%% ;5 12 (1;;) Term e =4 13 A$ 1921 a%. +9 14 21 A%%. +9= (.c)
P a g e | 13 of estoe% does not a%! to minors, and sti%% %ess wi%% the court ho%d an infant estoed b! the acts and omissions of others. $n Shamsher Chand #. 'ehr Chand,
1
it was stated that this section does not
a%! to the minors and he aears to be immune from resonsibi%it! of his decetion. $n 5arabag 8han #. Nanak Chand,> it was he%d that Attestation of the document b! rea% owner does not b! itse%f im%! consent but if it is ro#ed that the attestation too/ %ace in circumstances which in#o%#ed /now%edge of or consent to the transaction, it ma! be regarded as im%ied consent. Gurther, in Nathubai #. 'ulchand,>6 it was stated that re%igious endowments do not fa%% under this section as the roert! is #ested in the shrine and no articu%ar erson can gi#e consent, e:ress or im%ied.
,rans+er +or consideration The rinci%e rotecting the transferee a%ies on%! where the transfer is for consideration. $t does not a%! to gifts or gratuitous transfers. Therefore, the rea% owner is not rec%uded from den!ing a gift made b! an ostensib%e owner. Fowe#er, if the transfer is with consideration it ma! be an! /ind of transfer of roert! e.g. it ma! be sa%e, e:change, mortgage or %ease.
,rans+eree acts in -ood .aith This essentia% is based on the rinci%e that +7e who seeks e(uity must do e(uity-. $t is necessar! that transferee acts in good !aith, i.e., he has urchased the roert! in the honest be%ief that transferor had ower to transfer the roert!.
15A$ 19+; @ah. 1+; 16 (1942) 14 $.. 2=4 17 4. Bom.@..4 at .4;
P a g e | 14 his art. Princi%es of e&uit!, on which this section is based, rotects the interest on%! of a bona !ide urchaser. Thus, this section can rotect the interest of on%! such urchaser whose own conduct is e&uitab%e and -ust. $n the absence of goodEfaith, the ourt ma! resume co%%usion between ostensib%e owner and the urchaser. According%!, if the transaction is a sham (fa%se) one, Section +1 cannot a%! because the transferee wou%d then be in the /now%edge of the rea%it!.1 *here the arties %i#e in the same #i%%age and ha#e /now%edge of the fact that another erson and not the se%%er was in ossession of the roert!, the ourt ma! resume absence of goodEfaith. Simi%ar%!, /now%edge of an! re#ious dea%ings with the roert! or, /now%edge of the defecti#e tit%e of the transferor deri#es the urchaser of the rotection under this section. 19 $n Gurubaksh Singh #. Nikka Singh,@? there was a artition of -oint fami%! roert! but there was a%so some disute o#er the resecti#e shares. *hi%e the ob-ection and a%ication for the correction of mista/e was sti%% ending, a art of the roert! was so%d. The Sureme ourt he%d that since arties %i#ed in the same #i%%age and the facts estab%ished be!ond reasonab%e doubt that the urchaser had /now%edge of the disuted tit%e of the se%%er, the urchaser had no goodEfaith. The ourt obser#ed that in the absence of goodEfaith on his art, the urchaser cou%d not c%aim the benefit of Section +1. $n 'a#har #. 'ukhtar ,@> it was stated that the usua% search is for a eriod of 12 !ears and when there are no circumstances whate#er to indicate that the search of the registration office shou%d be made for a %onger eriod the transferee need not ma/e such a search.
Reasonable (n/uiry by ,rans+eree
18 &ai Sunil 8umar #. 5hakur Singh, A% 19+ Pat. 5. 1 ala
P a g e | 15 which a man of ordinar! rudence shou%d ta/e whi%e ma/ing in&uiries regarding the tit%e of an immo#ab%e roert!. But it is not ossib%e to %a! down an! genera% ru%e regarding the nature of en&uir! to be made b! the transferee which ma! be ca%%ed as 8reasonab%e care8 for a%% the cases. The standard of en&uir! e:ected from the transferee deends uon the facts and surrounding circumstances which ma! #ar! according to the different circumstances of each case.22 Fowe#er, the en&uir! made b! the urchaser must be di%igent and not suerficia% or casua%. Some secific circumstance or fact shou%d be ointed out as a starting oint of an en&uir! which might ha#e %ed to some resu%t. e#enue records are not records of tit%e. $n Nageshar %rasad #. &a1a %ateshri, @) A was the rea% owner of the roert!. $n the re#enue records, instead of a name of B was entered b! mista/e. B mortgaged the roert! to C who acceted the mortgage re%!ing on the re#enue register. A denied the transfer on the ground that B was not authori7ed to mortgage the roert!. C c%aimed the benefit of this section on the ground that he had ta/en reasonab%e care in ascertaining the tit%e of B b! insecting the re#enue records. The Pri#! ounci% he%d that since he had not e:ercised reasonab%e care in en&uiring about the authorit! of B, he cannot get the benefit of this section. The court obser#ed that if C had made further en&uiries, he cou%d ha#e found that Bs name was entered into the register b! mista/e and A had a%read! raised an ob-ection against the wrong entr! of Bs name in the register.
22 Beyas Singh #. &am
P a g e | 16
II.
T"E BENA#I TRANSACTIONS $PRO"IBITION% ACT& 188
According to the @aw ommission of $ndia there can be four main factors for the ad#ent of Benami Transactions in $ndia.2+ •
;irst of the reasons can be the e:istence of a 6oint Findu Gami%! S!stem, which might had induced a desire to ma/e secret ro#isions, 2 %eading to the ractice of benami.
•
Second , can be to defraud the creditors, when .. Bhattachar!a obser#es that since the first estab%ishment, the British
•
5hird , can be the scheme to e#ade ta:es hence changing the focus from indi#idua% being a #ictim to the state being the #ictim.
•
;ourth, according to Po%%oc/, 'ractices of this /ind natura%%! grow u in a state of societ! where there is an areciab%e ris/, from one generation to another, of hosti%e con&uest or confiscations. 2;
24 ;th eort of @aw ommission of $ndia, ara 1.;. 25 *est and Buh%er, 'Findu @aw, + thedn, . 1;, =4. 26.. Bhattachar!a, 6oint Findu Gami%!, (Tagore @aw @ectures) (1+E), . +=9E +;5. 27 Po%%oc/, '@aw of Graud, misreresentation mista/e (19+) . 4E +.
P a g e | 1 The @aw ommission, after ma/ing a detai%ed stud! and e:amining the #iews and oinions of the ub%ic, came to the conc%usion that such transactions are carried out b! eo%e ha#ing funds and wea%th from sources not disc%osed to the re#enue authorities and with tainted funds to ac&uire roerties in the names of benamis (to a#oid de%etion and uniti#e actions). $t is in this bac/ground that the Benami Transactions (Prohibition of the ight to eco#er Proert!) Act, 19 was enacted to come into effect from 0a! 19, 19 in a%% States, e:cet 6ammu and ashmir. This Act made engaging in benami transaction a crimina% offence, and denied an! %ega% recognition to benami transactions. The im%ementation of the Act was art of a %arger o%ic! of the Par%iament to minimi7e ine&ua%ities in income and e%iminate ine&ua%ities in status, faci%ities and oortunities not on%! amongst grous of eo%e residing in different areas or engaged in different #ocations." The state directed its o%ic! towards ensuring that the ownershi and contro% of the materia% resources of the communit! are so distributed as best to subEser#e the common good and that the oeration of the economic s!stem does not resu%t in concentration of wea%th and means of roduction to the common detriment. Some of the fo%%owing ro#isions of the Act of 19 ha#e been reroduced herein be%owC •
A >Benami Transaction? has been defined under Section 2(a) of the Act to mean a transaction in which a erson (transferor) transfers roert! to another erson (transferee) for a consideration aid or ro#ided b! a third erson.
•
The transferee in the abo#e case is on%! a >benami? (name %ender) for the third erson, who is the rea% owner. The consideration is rea%%! aid or ro#ided for b! the third art! i.e., the rea% owner on%!.
•
Io erson sha%% enter into an! benami transaction. There is a tota% rohibition and ban on it. Fowe#er, Section 4(2) made c%ear that the rohibition does not a%! to a erson who bu!s roert! in the name of his wife and unmarried daughter. The %aw wi%% resume that the urchasing the roert! was made on%! for the benefit of the wife or unmarried daughter, un%ess the contrar! is ro#ed.
•
The act of carr!ing out such a benami transaction has been made into a cognisab%e offence unishab%e u to three !ears imrisonment or with fine or
P a g e | 1! with both. A%% arties to the transaction are he%d to be offenders under Section 4(4) of the Act. •
The rea% owner of the roert! %ega%%! %oses a%% his right and interest in the roert! against the benami owner and cannot %ega%%! fi%e a suit, ma/e a c%aim or ta/e action against the benami owner to ta/e o#er the roert!. There is a tota% rohibition against the rea% owner asserting his ownershi rights against the benami owner 2.
•
The roert! owned and he%d in the name of the benami owner is %iab%e to be ac&uired b! the go#ernment through a cometent authorit! (aointed under the Act for this urose) without a!ing an! comensation whatsoe#er 29.
•
Fowe#er, the onus of ro#ing whether a transaction is benami is on%! on the erson who a%%eges that it is such. The erson shou%d ro#e that the consideration was not aid or ro#ided for b! the transferee and in fact the consideration was actua%%! aid or ro#ided for b! a third art! who is a%%eged to be the rea% owner 45.
•
This being a %ega% re&uirement, the Act has not become #er ! effecti#e in curbing or rohibiting benami transactions or unishing the ersons in#o%#ed. This is a serious restriction in the a%ication of the Act41.
()ceptions under the Act According to, the Benami Transaction (Prohibition) Act, 19, Benami transactions are rohibited but there are certain e:cetions to this ru%e and the! are as fo%%owingC
28 &ai Sunil 8umar #. 5hakur Singh, A$ 19+ Pat 5. 2 5hakur 8rishna #. 8anhayalal , A$ (19=1) A%% 25=. 3! 'ithilesh 8umari #. %rem Behari 8hare, A$ 199 S 12+;. 31 bid .
P a g e | 1"
The roert! ma! be urchased b! a erson in the name of his wife or unmarried daughter.
The roert! which is he%d b! a coarcener in a Findu Hndi#ided Gami%! and the roert! he%d for the benefit of the other coarceners of the fami%! wi%% not amount to a Benami transaction.
The roert! he%d b! a trustee or other erson who, in a fiduciar! caacit! has the benefit of another erson for whom he has a trustee wi%% a%so norma%%! not amount to a Benami transaction. Giduciar! caacit! means being in a osition of a trustee and being in a osition where the erson can be stated to ha#e duties of good faith, trust, confidence and transarenc! and one who must e:ercise a high standard of care in managing another ersons mone! or roert!. These were the few e:cetions as been ro#ided for in the Benami Act. These
e:cetions are been go#erned b! S. +1 of the Transfer of Proert! Act, 12 as the Benami Transaction (Prohibition) Act, 19 is ina%icab%e to them.
Moti0e Gor the urose of deciding whether a transaction is of benami nature, the moti#e of the erson ad#ancing the consideration for the transaction is the most re%e#ant factor. This #iew was e:ressed b! the Sureme ourt in a case in which the c%aim was for artition b! the daughter of the roert! of her father. Fer brothers refuted this c%aim sa!ing that the roerties in &uestion were urchased b! their father in their names and were their ersona% roerties. The court he%d that the transaction was in the nature of a benami urchase. The Sureme ourt re#ersed this decision because the %ower court had not ta/en into consideration of the intention of the father who ro#ided the consideration and the tota%it! of the circumstances. 42
&urden o+ roo+ The burden of roof is on the erson who sets u the benami and, if the burden is not discharged, the ostensib%e tit%e wi%% re#ai%. A%though the initia% burden of roof was on the erson a%%eging that a transaction was benami, the ractice was that e#en a
32 9. Satyanarayana &ao #. eela"athy, A$ 255; S 2=4;.
P a g e | 2' s%ight &uantit! of e#idence to show that it was a Benami Transaction sufficed toEshift the resumtion, as Benami Transaction were #er! fami%iar in $ndia. The true character of the transaction was determined b! the intention of the erson who contributed the urchase mone!. The intention was determined based on the re%ationshi of the arties, the moti#e for the transaction, the custod! of the tit%e deeds, the a!ment of considerations and actua% ossession of the roert! in disute. 44 The burden of showing that a transfer is a benami transaction %ies on the erson who asserts that it is such a transaction. 1. $f it is ro#ed that the urchase mone! came from a erson other than the erson in whose fa#or the roert! is transferred, the urchase is rima facie assumed to be for the benefit of the erson who su%ied the urchase mone!, un%ess there is e#idence to the contrar!. 2. The true character of the transaction is go#erned b! the intention of the erson who contributed the urchase mone!. 4. The &uestion as to what the intention was has to be decided on the basis of the surrounding circumstances, the re%ationshi of the arties, the moti#es go#erning their action in bringing about the transaction and their subse&uent conduct, etc.4+ Based on the abo#e conditions, the Sureme ourt set aside the decision of the Figh ourt and assed a decree directing the defendant to de%i#er the ossession of the suit house to %aintiffs.
33So%i% Pau%, 0u%%a, 'The Transfer of Proert! Act, Iew e%hiC Butterworths, 1999 at 291. 34 &a1 Balla" Dass #. 7ariada, A$ 19 a% 2
P a g e | 21
III. T"E BENA#I TRANSACTIONS $PRO"IBITION% BILL& 2!11 $t has a term of imrisonment of u to three !ears or fine or both. $t is near%! 22 !ears since the Act was assed, but it has made abso%ute%! no imact. The benami dea%s are widesread and are one of the main cause for ro%iferation of b%ac/ mone!. Though the Act ro#ides that there wou%d be no benami dea%s, no #isib%e action has been ta/en against ersons resorting to such dea%s free%!. This is because of %ac/ of roer machiner! to im%ement the Act. There ha#e been no instances to show that in e:ercise of ower conferred under section , roerties he%d benami ha#e been ac&uired b! the
P a g e | 22 The Benami Transactions (Prohibition) Bi%%, 2511 has been introduced b! the 0inistr! of Ginance on August 1, 2511. $t brings the fo%%owing conc%usionsC •
The Benami Transactions (Prohibition) Bi%%, 2511 was introduced b! the 0inistr! of Ginance in the @o/Sabha on August 1, 2511 to enact a new %egis%ation to rohibit benami transactions. This Bi%% re%aces the e:isting Benami Transactions (Prohibition) Act, 19.
•
The Bi%% defines benami transaction as an arrangement where (a) roert! is he%d b! a erson (other than in fiduciar! caacit!) on beha%f of another erson who has aid for it or (b) the transaction is made for a roert! in a fictitious name or (c) the owner of the roert! is not aware of or denies /now%edge of such ownershi. A benamidar is a erson or fictitious erson in whose name the roert! is he%d or transferred.
•
The Bi%% rohibits a%% ersons from entering into benami transactions. An! roert! he%d in benami sha%% be confiscated b! the centra% go#ernment. Dnce a roert! is confiscated, a%% rights and tit%e of such roert! sha%% #est com%ete%! in the centra% go#ernment and no comensation sha%% be a!ab%e. These ro#isions do not a%! to an! transaction entered into b! an indi#idua% in the name of his souse, brother or sister, or an! %inea% ascendant or descendant ma! not be considered benami.
•
The Bi%% restricts the right of an! erson who is c%aiming to be the rea% owner to reco#er such roert!. $n addition, no erson sha%% be ab%e to reEtransfer such roert! to the beneficia% owner.
•
The authorities for the urose of this Act sha%% inc%ude (a) $nitiating Dfficer who is an Assistant ommissioner of $ncome Ta: , (b) Aro#ing Authorit! who is a 6oint ommissioner of $ncome Ta:, and (c) Administrator who is an $ncome Ta: Dfficer.
•
These authorities sha%% ha#e same owers as #ested in a ci#i% court whi%e tr!ing a suit in matters such as insection, roduction of documents, issuing commissions, etc.
P a g e | 23
•
The Bi%% ro#ides that the Ad-udicating Authorit! and the Ae%%ate Tribuna% estab%ished under the Pre#ention of 0one! %aundering Act, 2552, sha%% a%so be the same for the uroses of this Act.
•
$f the $nitiating Dfficer has reason to be%ie#e that a roert! is he%d benami, he ma! issue a notice to the benamidar and ca%% for documents and reorts for in&uir!.
•
The $nitiating Dfficer ma! issue a notice, after the aro#a% from the Aro#ing Dfficer, to ro#isiona%%! attach an! roert!, which he has reason to be%ie#e is he%d benami.
•
The $nitiating Dfficer or the Ad-udicating Authorit! ma! imound or retain an! boo/s of accounts that it ma! fee% is re&uired for the in&uir!, for a eriod not e:ceeding three months from the date of attachment of the roert!.
•
The Ad-udicating Dfficer, after hearing the erson whose roert! is attached, ma! ma/e an order for the confiscation of the roert! he%d benami.
•
The Administrator sha%% ha#e the ower to recei#e and manage the roert! which has been confiscated. The Administrator sha%% issue the notice for the surrender or forcib%e ta/eo#er of ossession of the benami roert!.
•
An! erson aggrie#ed b! an order of the Ad-udicating Dfficer sha%% aea% to the Ae%%ate Tribuna%. An! erson aggrie#ed b! the Ae%%ate Tribuna% in turn ma! aea% to the Figh ourt.
•
An! erson who enters into benami transactions, or abets or induces another erson to enter into such transactions sha%% be unishab%e with an imrisonment for si: months to two !ears, and %iab%e to a fine of u to 2 er cent of the fair mar/et #a%ue of the roert! he%d in benami. $n addition, an! erson who wi%fu%%! gi#es fa%se information sha%% be %iab%e to an imrisonment of three months to two !ears and a fine of u to 15 er cent of the mar/et #a%ue of the roert!. The Bi%% ro#ides for Secia% ourts to tr! such cases.4
35httCKKwww.rsindia.orgKbi%%trac/KtheEbenamiEtransactionsErohibitionEbi%%E2511E1911K
P a g e | 24
CONCLUSION The %egis%ation of 19 rohibits a%% the Benami transactions sub-ect to few e:cetions. $t has made such transactions a crimina% offense. The Act of 19 has rohibited Benami transactions retrosecti#e%! and is intended to curb the menace of ta: e#asion, defrauding creditors, escaing abo%ition of Limandari statutes and comu%sor! nationa%i7ation. esearcher is of the #iew that there shou%d be some im%ementing agenc! at the %oca% %e#e%s, to chec/ benami transactions (when the! are with dishonest moti#es). 0ore benami transactions wi%% come to %ight with %oca% monitoring agencies. Dtherwise, it is on%! (if at a%%) when the rea% owner and benamidar fa%% out that the benami transaction comes to %ight. $n addition these agencies shou%d %oo/ after the interests of the wea/er sections of societ! (usua%%! the benamidar) who ha#e %imited access to %aw. The 145th @aw ommission eort made some usefu% suggestions in this regard. The reort recommended the in#o%#ement of #o%untar! in enforcement of %aws, as that wou%d he% achie#e a constitutiona% cu%ture of obedience to %aws. ertain authori7ed nonEgo#ernment organi7ations shou%d be emowered to %a! a com%aint before a tribuna%. The tribuna% can in#estigate the com%aint and then ro#ided the aroriate redressa%. As an a%ternati#e, the reort recommended that @iaison Dfficers attached to
P a g e | 25
BIBLIO'RAP"Y &##S S,A,,(S
Singh A#tar (r.), 5extbook on 5he 5rans!er o! %roerty Act , 4 rd ed., Hni#ersa% @aw Pub%ishing o., Iew e%hi, 2514.
Triathi, <. P. (r.), 5he 5rans!er o! %roert Act , 1;th ed., entra% @aw Pub%ications, A%%ahabad, 2511.
0a%%ic/ 0. ., A Commentary on 5rans!er o! %roerty Act , 2nd ed., 3astern @aw Fouse, a%cutta, 2551.
0itra B. B., Commentary on 5rans!er o! %roerty Act , 11th ed., e%hi @aw Fouse, e%hi, 2559.
Sinha . ., 5he 5rans!er 3! %roerty ,1th ed., entra% @aw Agenc!, A%%ahabad, 251+.
The Transfer of Proert! Act, 12
The Benami Transactions (Prohibition) Act, 19
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P a g e | 26
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