BENAMI PROPERTY TRANSACTIONS: A BRIEF INTRODUCTION
S.P.Nigam & Meeta Nigam
Advocates,Supreme Court
Mob.9911348814,8745045011
Benami Transactions were first time noticed in India in the year 1778 in Hon’ble Justice Hyde’s notes during British rule in India. In 1854 the committee on review of cases in Gopeekrist Gosain versus Gungapersuad,(1854)6 MIA 53,held that the benami transaction is a custom of the country and must be recognized till otherwise ordered by law.In 1882 sections 81 and 82 of Indian Trusts Act gave legislative recognition to the practice of benami transactions and the courts were bound to enforce it. Such benami transactions abused and defrauded public revenues and creditors.The parliament for the first time interceded in the year 1976 when it introduced section 281A in the Income Tax Act,1961 barring the institution of suit in relation to benami properties. But it could not stop the benami transactions and its consequences. This time parliament totally prohibited the benami transactions and made it an offence also prohibiting all suits, claims and actions based upon benami transaction. The parliament in order to stop the abuse and fraud by the benami transaction property without compensation repealed section 82 of Indian Trusts act and section 281A of the Income Tax Act alongwith other consequential repeal. The Law commission was requested to examine the subject on benami transactions in all its ramifications. Thereafter Law Commission submitted its 57thReport and to implement the recommendations of report Hon’ble President promulgated the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance,1988 on 19th May,1988. The Law Commission through its 130th Report made the detailed analysis of the situation and of the ordinance and gave recommendations and thereafter, Benami Transactions (Prohibition) Bill, 1988 was introduced in the Rajya Sabha on 31st August, 1988 and received the assent of the President on 5th day of September, 1988, which had much to the disappointment of those advocating strong law against Benami transactions.
BENAMI PROPERTY
Benami property means property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property.
BENAMI TRANSACTION
Benami transaction is a transaction or arrangement whereby the identity of real owner (beneficial owner) of property is concealed by showing someone else(benamidar) as owner on record. The beneficial owner provides or pays consideration for purchase of property.
In other words, Benami Transaction means any transaction in which property is transferred to one person for a consideration of paid or provided by another person. There are basically two types of benami transactions 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, this type of transaction would be benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is real owner.
- 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 also the transaction would be benami and the transferor continues to be the real owner.
A transaction is a benami transaction or not, depends upon the intention of the person who has contributed the purchase money or who has executed the conveyance deed. Thus the intention is the subsistence of the Benami Transaction.
INSTANCES OF BENAMI TRANSACTIONS
- When A sells properties to B but the sale deed mentions the name of C as the purchaser. Here the sale itself is genuine but the consideration has been paid or provided by B and B is the real purchaser of the property but the same has been purchased by B with the wrong intention in the name of Benamidar C. This type of transactions would be called benami transactions.
- When A purports to sell his property to B without intending that his title should cease or pass to B ,/span>
The fundamental difference between these two types of transaction is that whereas in the former there is an operative transfer resulting in the vesting of title in the transferee ,in the latter there is none such, the transferor continuing to retain the title notwithstanding the execution of transfer deed.
PENALTY FOR BENAMI TRANSACTION
Any person who enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into the benami transaction, shall be guilty of the offence of benami transaction and shall be punished with rigorous imprisonment for a term which shall not be less than one year, but which may extend to seven years and also be liable to fine which may extend to 25% of the fair market value of the property.