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A Landmark ruling on Benami Transaction in favour of son !

In a nutshell – a brief background, shorn of unnecessary details is that F – the father purchases some property out of his own funds in the name of his son, during his lifetime his relations with son sour, and he sues for a declaration of his title and permanent injunction against the son, claiming the property to be his self acquired property. Now S.3 Benami Transactions (Prohibition) Act, 1988. His case was squarely covered by Section 4 of the Act, which prohibits recovery of property by real owner on ground that he paid for it. 

4.Prohibition of the right to recover property held benami.- (1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

 (2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.

(3) Nothing in this section shall apply,–

(a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or

(b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity.

Now back to the case – what happens is that father dies during the pendency and legal representatives are brought on record – they now seek leave to amend their pleadings to butress a totally different argument, i.e that the property was an JHF property held by appellant/son for benefit of hte entire family, obviously wanting to circumvent the Benami prohibition by urging the case to have been covered by exception (3) to S.4 of the Benami ACt. 

The Court held though they by virtue of R(4)(2) of O.22 – the LR’s could raise a defence appropriate to their character, however they still cannot lead arguments that are contrary to the basic structure of their predecessor’s arguments, and held their to be not maintainable as no suit lies to recover property alleged to be held benami. 

Here is the judgment in extenso 

By this second appeal filed under Section 100 of the Code of Civil Procedure, 1908 (for short `CPC’), the appellant has challenged the legality and propriety of the judgment & decree dated 10.4.2006 passed by the Additional District Judge (F.T.C.), Pendra Road, in Civil Appeal No.108A/2002, affirming the judgment & decree dated 31.8.2001 passed by the Civil Judge Class-I, Pendra Road, in Civil Suit No.83A/2000, whereby the Civil Judge Class-I has decreed the suit in favour of the respondents.

2. The present second appeal was admitted on 15.9.2011 on the following substantial question of law:- Whether the suit originally filed by plaintiff was not maintainable as barred in terms of Section 4(iii) (b) of the Benami Transactions (Prohibition) Act, 1988 ?

3. As per initial case of the plaintiff father of the appellant namely Radhikacharan Dubey, after his retirement has purchased suit property bearing khasra No.34/6 area 0.03 acre and khasra No.34/9 area 0.05 acre with constructed house over the property at village Tikarsani, Tahsil Pendra Road on payment of consideration of Rs.9,000/- in the name of the appellant. At that time appellant was student and was not having any source of income to purchase such property. Father of the appellant was karta of joint Hindu family. The present appellant was not having any interest over the property. The appellant threatened his father that he will oust him from the suit property, then suit for declaration of title and permanent injunction was filed by father of the appellant.

4. By filing written statement the appellant has denied the adverse allegation made in the plaint and has specifically claimed that he has purchased the property from his own income, his father was not having any interest over the property. During pendency of the suit, father of the appellant died and his mother, three sisters and one brother were impleaded as legal representatives of deceased Radhikaracharan Dubey.

5. They have amended the plaint and have claimed declaration that the property is joint property of the appellant and the respondents. By detailed amendment the present respondents have amended the plaint that husband of respondent No.1 and father of other respondents was karta of joint Hindu Family. After providing opportunity of hearing to the parties, learned Civil Judge Class-I, Pendra Road decreed the suit on the ground that the land was owned by Radhikacharan Dubey and appellant and respondents are heirs of Radhikacharan Dubey, they are entitled for equal shares over the property. While affirming the judgment and decree of the trial Court the lower appellate Court has held that the property has been purchased by Radhikacharan Dubey and not by the present appellant, therefore, as heirs of Radhikacharan Dubey parties are entitled for equal shares.

6. I have heard learned counsel for the parties, perused the judgment & decree impugned, judgment & decree of the trial Court and records of the Courts below.

7. Learned counsel for the appellant vehemently argued that as per claim and plaint allegation Radhikacharan Dubey was karta of joint Hindu family but he has purchased the suit property from his own income and property was his self- acquired property. Sale deed was executed in favour of the present appellant. By pleading made in the plaint virtually Radhikacharan Dubey, father of the appellant has pleaded and proved that it was benami transaction and the property was purchased in the name of the appellant. Learned counsel further argued that after enforcement of Benami Transactions (Prohibition) Act, 1988 (for short `the Act, 1988′), benami transaction has been prohibited. Section 3 of the Act, 1988 prohibits benami transaction, but if the property is purchased in the name of unmarried daughter and wife for their benefits, then same will not be affected by the Act, 1988. Section 4 of the Act, 1988 prohibits filing of suit and claim to enforce any right in respect of any property held benami against the person in whose name the property is held. Sub-section (3) of Section 4 of the Act, 1988 is exception to sub-section (1) of Section 4. Learned counsel also submits that in his plaint Radhikacharan Dubey has not pleaded that he has purchased the property in the name of the appellant and the appellant was coparcener in a Hindu undivided family and he was holding the property for the benefit of coparceners in the family. Radhikacharan Dubey has also not pleaded or claimed that the appellant was a trustee or standing in a fiduciary capacity and the property was holding for the benefit of another person for whom he was a trustee or towards the members whom he stoods in such capacity. As per pleading of the original plaintiff Radhikacharan Dubey the property was self-acquired property, therefore, subsequent amendment in the plaint by the respondents that it was joint Hindu family property was not permissible under Order 22 Rule 3 of the Code. Learned counsel contended that although in case of death of defendant, legal representatives of the defendant may make any defence appropriate to their character as legal representatives of the defendant in accordance with sub- rule (2) of Rule 4 of Order 22 of the Code, but such right is not available to legal representatives of the plaintiff under Rule 3 of Order 22 of the Code. Legal representatives of the deceased plaintiff may only proceed with the suit, therefore, any claim that the property was joint Hindu family property and they are joint owners, was not permissible under the law to them and amendment was also not legally possible.

8. Learned counsel for the appellant placed reliance in the matter of R.Rajagopal Reddy (dead) by L.Rs. and others v. Padmani Chandrasekharan (dead) by L.Rs.1 in which the Supreme Court has held that sub-sections (1) and (2) of Section 4 are not retrospective. Suit on behalf of person claiming to be real owner of property to enforce right against property held benami prior to coming into force of Section 4(i) and Section 4(1) does not apply.

9. On the other hand, learned counsel for respondents No.1(A) to 1(E) opposed the appeal and argued that the property was purchased by Radhikacharan Dubey in the name of the present appellant, the present appellant was his son and member of joint Hindu family. Father of the appellant was legally competent to purchase the property in the name of his son, the appellant was holding the property in a fiduciary capacity and same is not barred in terms of clause (b) of sub-section (3) of Section 4 of the Act, 1988. Learned counsel further argued that evidence adduced on behalf of the parties are sufficient to prove that it was joint Hindu family property and the respondents & the appellant are members of joint Hindu family, therefore, both the parties being a members of joint Hindu family property are having equal shares over the joint Hindu family property.

10. Learned counsel for respondents No.1(A) to 1(E) placed reliance in the matter of The Controller of Estate Duty, Lucknow v. Aloke Mitra2 in which the Supreme Court has held that a benami transaction does not vest any title in the benamidar but vests it in the real owner. When the benamidar is in possession of the property standing in his name, he is in a sense the trustee for the real owner; he is only a name-lender or an alias for the real owner. Learned counsel further placed reliance in the matter of Pradeep Kumar v. Mahaveer Pershad and others3 in which the High Court of Andhra Pradesh has held that if the property purchased in the name of minor adopted son then he becomes coparcener of the undivided family due to adoption and prohibition has no application in such case as it was covered by exception to prohibition engrafted. Learned counsel relied upon the matter of Bhim Singh (dead) by L.Rs. and another v. Kan Singh4 in which the Supreme Court has held that two kinds of Benami transactions are generally recognized in India. Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, transaction is called benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner. The second case which is loosely termed as a benami transaction is a case where a person who is the owner of the property executes a conveyance in favour of another without the intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner.

11. As per plaint allegation, father of the appellant has purchased the property on 5.1.1976 in the name of the present appellant who was son of original plaintiff Radhikacharan Dubey. As per plaint allegation, he has purchased the property out of his own income. He has claimed relief that he be declared as owner of the property and the present appellant i.e. original defendant be permanently restrained from interfering in possession of the original plaintiff Radkikacharan Dubey. Plaint clearly reveals that father of the appellant has purchased the property out of his own income in the name of his son appellant. It was his own property and he had claimed declaration of ownership that he was owner of the property and has also prayed for permanent injunction against the appellant. Entire plaint allegation does not whisper that it was joint Hindu family property or purchased by Radhikacharan Dubey for joint Hindu family.

12. Act of 1988 came into force on 20.9.1995. Section 3 of the Act, 1988 prohibits benami transaction which reads as under:-

"3. Prohibition of benami transactions.-(1) No person shall enter into any benami transaction.

(2) Nothing in sub-section (1) shall apply to- (a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter;

(b) the securities held by a-

(i) depository as registered owner

under sub-section (1) of section 10

of the Depositories Act, 1996

(ii) participant as an agent of a

depository.

Explanation.-The expressions "depository" and "Participants shall have the meanings respectively assigned to them in clauses (e) and (g) of sub-section (1) of section 3 of the Depositors Act, 1996.

(3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.

(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence under this section shall be non- cognizable and liable.

13. Section 4 prohibits claim and suit which reads as under:-

"4. Prohibition of the right to recover property held benami.-(1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

(2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.

(3) Nothing in this section shall apply,- (a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or

(b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity."

14. After death of Radhikacharan Dubey the respondents have impleaded as legal representatives of Radhikacharan Dubey in accordance with Order 22 Rule 3 read with Rule 11 of the Code. Rule 3 and Rule 4 (1) & (2) of Order 22 of the Code relate to impleading of legal representatives of the parties and their right to continue with the suit which reads as under:-

"Order 22. 1.xxx xxx xxx xxx

2. xxx xxx xxx xxx

"3. Procedure in case of death of one of several plaintiffs or of sole plaintiff.-(1) Where one of two or more plaintiffs dies and the right to sue does not survive to the surviving plaintiff or more plaintiffs alone, or a sole plaintiff or sole surviving plaintiff dies and the right to the sue survives, the Court, on an application made in that behalf, shall cause the legal representative of the deceased plaintiff to be made a party and shall proceed with the suit. (2) Where within the time limited by law no application is made under sub-rule (1) the suit shall abate so far as the deceased plaintiff is concerned, and, on the application of the defendant, the Court may award to him the costs which he may have incurred in defending the suit, to be recovered from the estate of the deceased plaintiff.

4. Procedure in case of death of one of several defendants or of sole defendant.-(1) Where one of two or more defendants dies and the right to sue does not survive against the surviving defendant or defendants alone, or a sole defendant or sole surviving defendant dies and the right to sue survives, the Court, on an application made in that behalf, shall cause the legal representative of the deceased defendant to be made a party and shall proceed with the suit.

(2) Any person so made a party may make any defence appropriate to his character as legal representative of the deceased defendant. (3) xxx xxx xxx

(4) xxx xxx xxx

(5) xxx xxx xxx."

As per Rule 3 (1) of Order 22 of the Code, legal representative of the deceased plaintiff may be made a party and they "shall proceed with the suit", but as per Rule 4 (2) of Order 22 of the Code, legal representative of the deceased defendant so made a party "may make any defence appropriate to his character as legal representative". He is not required to continue the defence of defendant, inter alia, he is permitted to make any defence, but by using the ward and shall proceed with the suit in Rule 3 of Order 22 of the Code, legislature has restricted the legal representative of the plaintiff from making any claim or pleading contrary to the claim or pleading of the original plaintiff.

15. The present respondents i.e. legal representatives of original plaintiff Radhikacharan Dubey were only permitted to proceed with the suit and were not permitted to make any pleading or claim contrary to original claim of the plaintiff. Original plaintiff has claimed that it was his self-acquired property, he has not claimed that it was joint Hindu family property and it be declared that all the members of joint Hindu family were owners or title holders, therefore, the present respondents were not entitled to make such amendment or claim contrary to the claim of original plaintiff.

16. As held by the Supreme Court in the matter of The Controller of Estate Duty, Lucknow and Bhim Singh (supra), definitely property purchased in the name of son was benami property and son was only Benamidar.

17. In the present case, as per claim of Radhikacharan Dubey he has purchased the property in the name of the present appellant i.e. the appellant was Benamidar, but after enforcement of the Act, 1988, Radhikacharan Dubey was not entitled to claim any right over such property in the light of Sections 3 & 4 the Act, 1988.

18. As per clause (a) of sub-section (1) of Section 3 of the Act, 1988, the property may be held in the name of coparcener for the benefit of coparceners in the family and any suit, claim or action against coparcener is not prohibited in terms of clause (a) of sub-section (3) of Section 4 of the Act, 1988.

19. As held by the High Court of Andhra Pradesh in the matter of Pradeep Kumar (supra), if the property purchased in the name of minor adopted son then he becomes coparcener of the undivided family due to adoption, but in the present case the appellant was not coparcener.

20. Original plaintiff or present respondents/legal representatives of the plaintiff have neither pleaded nor proved that the appellant was holding the property as a trustee or in a fiduciary capacity for the benefit of other persons for whom he was a trustee or was standing in a fiduciary capacity, inter alia, as per original pleading and amended pleading, the property was owned by Radhikacharan Dubey as his self-acquired property or property was owned by joint Hindu family. Nothing has been pleaded by original plaintiff or his legal representatives that the appellant was a trustee or standing in a fiduciary capacity for the present respondents, original plaintiff and for others. Inter alia, it has been specifically pleaded that the owner was the plaintiff and he has purchased the property in the name of the present appellant.

21. Patently case of the present respondents or original plaintiff do not fall within the exception of clause (a) of sub-section (3) of Section 3 or clause (a) & (b) of sub- section (3) of Section 4 of the Act, 1988, inter alia, as per pleading it was benami property and after coming into force of the Act, 1988, the real owner was prohibited for filing suit, claim or action to enforce any right in respect of any property held benami in terms of sub-section (1) of Section 4 of the Act, 1988.

22. In terms of Order 22 Rule 3 (1) of the Code, the present respondents were not entitled to amend their plaint or make claim other than the claim of original plaintiff. As per pleading of the plaintiff the appellant was Benamidar and suit was not maintainable in terms of Section 4 (1) and Section 3 (a) & (b) of the Act, 1988.

23. Consequently, substantial question of law formulated for the decision of this appeal is decided as positive. On the basis of finding on substantial question of law, the appeal deserves to be allowed and it is hereby allowed. Civil Suit filed against the appellant deserves to be dismissed and it is hereby dismissed.

3 thoughts on “A Landmark ruling on Benami Transaction in favour of son !

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