Benami Property
The term Benami is originated from the Persian language. It literally means the state of being without a name[1].

In Indian laws (in terms of property law), the term Benami transaction is used to connote transfer of a property wherein the transfer is made under a fictitious name or under the name of a third party. The property is transferred to one person in which consideration is paid by another person and that such other person did not intend to provide such consideration for the benefit of the transferee (eventual titleholder).

Historically, the Benami transfers were not prohibited, in contrast, they were well recognised. Formerly through judicial precedents, subsequently through legislations.

In the year 1854, in the case of Gopeekrist Gosain v Gungapersuadit[2], the privy council recognised Benami transactions as they were a part of Hindu custom. Though Benami Transactions was not recognised in England, their validity was upheld in India.

Consequently, in the year 1882, Benami transactions were per se legitimised by the Indian Trusts Act. Sections 81, 82 and 94 of the Indian Trusts Act gave statutory protection to the Benami transactions by labelling such transactions protected by a relationship of trust.[3]

Two types of transactions are often referred to as Benami transactions and are used interchangeably.

Firstly, the transaction wherein a person buys a property with his own money but in the name of another person having no intention to benefit such other person. For example, A sells a property to B, but the sale deed mentions X as the purchaser. Here the sale itself is genuine, but the real purchaser is B, X being his 'Benamidar'.

Secondly, where a person who is the owner of the property executes a conveyance in favour of another person without handing over the possession and with no intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner. This is technically a sham transaction. For example, when A purports to sell his property to B without intending that his title should cease or pass to B.

To intertwin the two aforesaid transaction is an erroneous notion. One common feature in both of the aforementioned scenarios is that the real title is separated from the ostensible title. They are vested in different persons, and the fundamental difference between these two classes of transactions is that in the former(the real Benami transfer) there is an operative transfer resulting in the vesting of title in the transferee. In contrast, in the latter (the mislabelled Benami transfer) there is none such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed.

Moreover, in the former class of cases, it would be necessary, when a dispute arises to ascertain that whether the person named in the deed is the real transferee or it is some other person, the enquiry is into the question as to who paid the consideration for the transfer, Transferee or some third person. However, in the latter class of cases, when the question is whether the transfer is genuine or sham, the point for decision would not be, who paid the consideration but whether any consideration was paid[4].

Pre 1988
As observed earlier, transacting in order to execute a Benami transaction was legal. The cases before the courts were to check the valid ownership of the property. Ownerships were contested amongst Benamidars and Claimants.

Hereinbelow are a few essential features which constitute to be indicators of a Benami transaction.

Consideration Paid vs Financial Assistance
In Bhim Singh v. Kan Singh[5], a case where the issue was whether contribution of money would render a property to be termed as Benami. The Supreme court observed that 'the question whether a transaction is a benami transaction or not, mainly depends upon the intention of the person who has contributed the purchase money.

The courts further said that the principle is recognised in section 82 of The Indian Trusts Act, 1882 which says that where a property is transferred to one person for some consideration paid by another person, and it appears that such person did not intend to provide benefit of such transaction to the transferee, the transferee must hold the property on behalf of the person who paid the consideration of the transfer.

Intention is a subjective criterion, and a mere failure to prove intention will not render a property Benami. There are other indicators which operate as a tool to determine whether a disputed property is of 'Benami' nature. To declare the property 'benami' and provide the benefit to the 'benamidar' [prior to 1988], all the indicators [as discussed hereinbelow] must be examined carefully.

Presumption
In Valliammal (D) By Lrs vs Subramaniam & Ors[6] the question of Law before the supreme court was Whether the lower courts have wrongly casted the onus of proving the 'benami nature of the sale' on the Transferee?

The courts held that there is always a presumption in law that:
The person who purchases the property is the owner of the same. However, This presumption can be repudiated by successfully pleading and proving that the document was taken Benami in name of another person, and the person whose name appears in the document is not the real owner, but only a benami. Heavy burden lies on the person who pleads (claimant) that recorded owner is a Benami-holder.

The Hon'ble Judge further stated that the law is well established, the burden of proving that a particular sale is benami lies on the person who alleges the transaction to be a benami (the one who asserts must prove). Some pointers (both objective and subjective) were laid down by the court.

These were not conclusive but indicative of a transfer to be a Benami transaction:

• The source from which the purchase money came;
• The nature and possession of the property, after the purchase;
• Motive, if any, for giving the transaction a benami colour;
• The position of the parties and the relationship, if any, between the claimant and the alleged benamidar;
• The custody of the title deeds after the sale; and
• The conduct of the parties concerned in dealing with the property after the sale.

Abuse of Law
Drifting from the ground cause of legality (custom), benami transactions were entered between parties to defraud public revenues. The shield of Benami laws was taken to invest unaccounted money. It was claimed that half of Indian economy was running as a parallel black economy, wherein unaccounted money was transacted through different mechanisms, Benami being the one.

Owing to significant impact of these unaccounted transactions on Indian economy, the Indian Government introduced Section 281A in the Income Tax Act, 1961[7]. The section had various punitive actions against the people who failed to furnish sources of income and justification in respect of properties held benami.

The extensive menace of illegal benami transactions was not effectively abridged and therefore to curb Benami Transactions, the Benami Transactions (Prohibition) Act Bill was passed by both the Houses of Parliament and on 5 September 1988 it became the Benami Transaction (Prohibition) Act, 1988, moreover, Sections 81 and 82 of the Indian Trusts Act, 1882 and Section 281A of the Income Act, 1961 were repealed.

Benami Transaction (Prohibition) Act, 1988
The Benami Transaction (Prohibition) Act, 1988 (hereinafter referred as 'Act, 1988') was enacted in order to prohibit all types of deceptive benami transactions and recovery of property which has been held as benami. The short Act consisted of only nine sections. Though not successful [for the reasons stated later in this paper], but the act was a step ahead to limit Benami transactions and eventually worked as a foundation for the 2016 amendment act.

Hereinbelow are the key sections of the Act, 1988.

Section 2 of the Act, 1988 defined benami transactions as the ones where property is transferred to one person for a consideration paid or provided by another person; Property included both movable and immovable properties.

Section 3 of the Act, 1988 barred Benami transactions except in case of one's wife and unmarried daughter. This section also contained provisions for imprisonment of 3 years (in case one enters into a Benami Transaction).

Section 4 of the Act, 1988 said that that no suit, claim or defence shall be maintained to enforce rights with respect to benami properties.

The exceptions to the same were:

1. 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
2. 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.

Section 5 of the Act, 1988 authorised government to acquire of benami properties and restricted any amount of compensation in return.

Section 6 of the Act, 1988 restricted applicability of the aforesaid provisions to section 53 of the transfer of the property act; Lastly,

Section 7 of the Act, 1988 repealed Sections 81, 82 and 94 of the Indian Trusts Act, 1882 (2 of 1882), section 66 of the Code of Civil Procedure, 1908 (5 of 1908) and section 281A of the Income-tax Act, 1961 (43 of 1961).

Key Judgements
Fiduciary relationship vs benami property
In Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani[8], the courts were determining the ownership in a case where a son paid for the property and entrusted the title deed of the land in question to his father for safe custody in his capacity, as a benami. The courts enunciated that the expression fiduciary relationship and a relationship of a trustee cannot be so interpreted so as to in fact negate the Benami Act itself because all benami transactions actually are in the nature of trust and create a fiduciary relationship and if the expression 'trustee or fiduciary relationship is interpreted liberally to even include within its fold a typical benami transaction, then it would amount to holding that there is no Benami Act at all. The courts barred the suit under Section 4 (1) of the Benami Transactions (Prohibition) Act.

Consideration v Assistance
In Pawan Kumar Gupta Vs. Rochiram Nahe deo[9], the courts again faced the question as to the scope of financial assistance which would attract Benami Transactions (Prohibition) Act. The case was that the appellant took financial assistance from his father to buy a property and the landlord challenged the ownership on the grounds that appellant's father purchased the property

The courts said that the words paid or provided in section 2(a) are disjunctively employed in the clause and each has to be tagged with the word consideration. The Hon'ble judge stated that the correct interpretation would be to read 'paid and provide as 'consideration paid or 'consideration provided.

Moreover, the courts said:
So even if appellant had availed himself of the help rendered by his father for making up the sale consideration that would not make the sale deed a benami transaction so as to push it into the forbidden area envisaged in Section 3(1) of the Benami Act.

Failure of the Act, 1988
Even after enactment of a legislation, there was no significant reduction of Benami Transactions. Failure to curb black money was not due to lack of black letter of law but due to non-implementation of an enacted statute by the administration[10]. The Act, 1988 did not contain any procedural laws.

The Government justified that the Act was not made operational due to apparent gaps and pitfalls in the same[11]. Consequently, the legislators drafted a new bill in tune with the current circumstances, requirements and provided for a proper adjudicating channel.

The Benami Transactions (Prohibition) Amendment Act, 2016
The amendment act of 2016 (hereinafter referred as 'the Amendment Act') is a comprehensive version of the 1988 act. The Amendment Act, 2016 appears to be a promising legislation to address the legal infirmities and gaps that existed in the Act, 1988.

The act contains various provisions for Adjudicating Authority, Composition of Authority, Qualifications for appointment of Chairperson and Members, Powers of Adjudicating Authority, Officers and employees of Adjudicating Authority, Authorities and jurisdiction, Power of authority to impound documents, Power of authority to conduct inquiry, etc.

The scope of benami transactions is extended. As per section 2 (9) of the Amendment Act, a benami transaction is:

1. a transaction or an arrangement where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,
2. a transaction or an arrangement in respect of a property carried out or made in a fictitious name;
3. a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;
4. a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious

This section also excludes some particular transactions from being rendered illegal.

1. These are a Karta, or a member of a Hindu undivided family given that the property is held for the benefit of the family and the consideration for such property paid out of the known sources.
    
2. A person in a particular fiduciary capacity, these are a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose;
    
3. any person buying in the name of his spouse or in the name of his child and the consideration for such property has been paid out of the known sources of the individual;
    
4. any person buying in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual.

The act of 1988 contained provisions where a person may file a suit for recovering a property held benami(Section 4(3), Act 1988). However, the Amendment Act removed these exceptions. As per the Amendment Act, a person can not recover his benami property on any ground and under any circumstance. Moreover, a benamidar cannot transfer the property held on his name, such transfer would be null and void.

Is the applicability retrospective?
In Niharika Jain Vs Union of India[12], the Rajasthan High Court observed that unless a contrary intention is reflected in a legislation, it is presumed and intended to be prospective.

Moreover, where an amendment affects rights or imposes obligations or castes new duties or attaches a new disability, it is to be treated as prospective ; and Benami Amendment Act, 2016 neither appears to be Clarificatory nor curative. Accordingly, the Rajasthan High Court held that the Amendment Act is prospective.

Section 41 of The Transfer of Property Act, 1882
Section 41 of the Transfer of Property act is an exception the general principle 'nemo dat quod non habet, it legalises the transfer of a property by an ostensible owner given that the transferee took reasonable care and acted in good faith.

Foundations of this section were laid down in Ramcoomar v Mac-queen[13], the judicial committee said that in cases where a person holds property on behalf of the owner, and a third party purchases it, for a value from the apparent owner in belief that he is the owner, then the man who allows the other to hold himself out shall not be permitted to render the transaction void unless he can show that the purchaser had direct notice or something which amounts to be a constructive notice of the real title. Moreover, the judicial committee called it a principle of Natural Equity.

Ostensible owner
An ostensible owner is a person who apparently or seemingly appears to be the owner, though in reality he is not. He is a person having all indicas of ownership having real ownership[14]. A professional agent or a manager is not an ostensible owner, nor can a menial servant constitute to be an ostensible owner[15]. While in case where a woman owns the, and her husband manages it as if he is the owner (formerly, a common case in India). He can be called an ostensible owner, while the real owner is the wife[16]

In the case as discussed earlier, where A sells a property to B, but the sale deed mentions X as the purchaser, X being his Benamidar will also be an ostensible owner.

If a person purchases that particular land from X, then B, the real owner can not recover the land unless he shows that the purchaser had an actual or a constructive notice of the real title.

Generalis Specialibus Non Derogant

The situation has changed after the introduction of The Benami Property (Prohibition) Act.

The Benami Transaction (Prohibition) Act, 1988 being a special legislation would prevail over the general legislation i.e. The Transfer of the property Act, 1882.

Taking the aforesaid example, where A sells a property to B, but the sale deed mentions X as the purchaser, X being his Benamidar will also be an ostensible owner. In this case, real owner has no right to recover the land from the ostensible owner (Benamidar).

As per Section 6 of the amendment Act, 2016[17], X being a benamidar cannot retransfer the purchased property to the beneficial owner or any of his representatives. Subsequent transfers by a benamidar are null and void.

Conclusion
The provisions of the Amendment Act, 2016 vis a vis definition of benami property and its exceptions are comprehensive. However, the provisions under the Amendment Act, 2016 are subjective wherein intention of the real owner plays a vital role. As per Section 2 (9)(A)(b), a transaction will be of Benami nature if the property is transferred to a third person and held for the immediate or future benefit, of the person who has provided the consideration. While this section does not provide about sources of income of the person who provided the consideration, the intention of legislators can be ascertained when the act is inspected in totality.

Moreover, The differentiation of a bonafide gift [of a property] wherein some different person [A] provides the consideration, while the ownership vests in a third person[B], it is the intention of [A] in question. However, to ascertain the intention of a person [one who offers the gift], one can look at the criterions set by the Hon'ble supreme court in Valliammal v Subramaniam & Ors (supra).

Furthermore, to confiscate a benami property, the aforesaid criterions must be considered in totality, but the 'source of the consideration' would be the key factor for determination.

End-Notes:

1. https://www.lexico.com/definition/benami
2. Gopeekrist Gosain vs. Gungapersaud Gosain MANU/PR/0006/1854
3. Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani, MANU/DE/3774/2015
4. Meenakshi Mills, Madurai v. CIT, 1957 AIR 49
5. Bhim Singh v. Kan Singh, 1980 AIR 727
6. Valliammal (D) By Lrs vs Subramaniam & Ors, AIR 2004 SC 4187
7. Section 281A, the Income Act, 1961
8. Ibid, at 3.
9. Pawan Kumar Gupta Vs. Rochiram Nahe deo, AIR 1999 SC 1823
10. Sneha Bhawnani, Benami Transactions-Genesis and Analysis, [2016]
11. Pardeep Sahni, Governance For Development: Issues And Strategies, [2004]
12. Niharika Jain Vs Union of India, 2019 (3) RLW 1947 (Raj.)
13. Ramcoomar v Mac-queen, (1872) L.R. Ind Ap Supp. 40:18 W.R. 166
14. Kannashi Vershi v Ratanshi Nenshi, AIR 1952 Kutch 85.
15. Chooni lal v Nilmadhab, (1925) 41 Cal Lj 374
16. Dr. Poonam Pradhan Saxena, Property Law, 3rd edition
17. Section 6, The Benami Property (prohibition) amendment Act, 2016
    
    
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