INTRODUCTION

Benami transactions have been a common practice in India since a very long period of time.

The word benami is of Persian origin and literally means property without a name. It

signifies a transaction where a person buys property in the name of another or gratuitously

transfers property to another without an intention to benefit that other.[1]A benami transaction

was one where property was purchased or transferred in the name of one person but another

person paid the consideration for the transfer. The person in whose name the property was

transferred was only the nominal owner while the person from whom the consideration

flowed was the real owner of the property. The practice of Benami transactions was not

restricted to Hindus but was also common among Muslims as furzee transactions. Moreover,

benami transactions were not confined to purchases in the name of a person but also applied

to leases and mortgages i.e. a person may take a lease of property in the name of another or he

may buy property in his own name and subsequently convey or mortgage it to another for a

fictitious consideration.

Benami transactions were noticed as early as the year 1778 in Mr. Justice Hydes notes after

the establishment of British rule in India. In 1854 the committee on a review of cases in

Gopeekrist Gosain Vs. Gungapersuad, (1854) 6 MLA 53, held that 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 intervened in 1976 when it introduced section 281A in the Income-tax Act,

1961 barring the institution of suit in relation to benami properties. But this too did not stop
benami transactions and its consequences, this time the Parliament totally prohibited the

benami transactions and made it an offence also, prohibiting all suits, claims and actions

based upon benami transaction. The Parliament also 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the benami transaction property without compensation repealed section 82 of Indian Trusts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. The Law Commission submitted its 57th Report. To implement the

recommendations of the Law Commission President promulgated the Benami Transaction

(Prohibition of the Right to Recover Property) Ordinance, 1988 on 19th May, 1988 by which

it barred all suits and defences based upon benami transactions. This Ordinance was converted

into an Act by introduction of a Bill in the Parliament.

STATEMENT OF OBJECTS AND REASONS

(1) To implement the recommendations of the Fifty-seventh Report of the Law Commission

in Benami Transactions, the President promulgated the Benami Transactions (Prohibition of

the Right to Recover Property) Ordinance, 1988, on the 19th May, 1988.

(2) The Ordinance provided that no suit, claim or action to enforce any right in respect of any

property held benami shall lie and no defence based on any right in respect of any property

held benami shall be allowed in any suit, claim or action. It however, made two exceptions

regarding property held by a coparcener in a Hindu undivided family for the benefit of the

Coparceners and property held by a trustee or other person standing in a fiduciary capacity for

the benefit of another person. It also repealed section 82 of the Indian Trusts Act, 1882,

section 66 of the Code of Civil Procedure and section 281A of the Income-tax Act, 1961.
(3) The provisions of the Ordinance received a mixed response from the press and the public.

There had been criticism also that the Ordinance was a half-hearted measure and had not

tackled the problem effectively and completely. It was, therefore, felt that the Bill to replace

the Ordinance may be brought out as a comprehensive law on benami transactions touching

all aspects and accordingly, the Law Commission was requested to examine the subject in all

its ramifications. The Law Commission has submitted its 130th Report titled "Benami

Transactions a Continuum" and has made certain recommendations.

(4) The Law Commission has, inter alia, recommended the inclusion of the following

provisions in the Bill to replace the Ordinance, namely: -

(i) benami transactions should cover all kinds of property;

(ii) entering into a benami transaction after the commencement of the new law should be

declared as an offence. However, an exception should be made for transactions entered into

by the husband or father for the transfer of properties in the name of the wife or unmarried

daughter for their benefit. By this, the doctrine of advancement as obtaining in the English

law will be incorporated into the Indian Statute Book;

(iii) Voluntary organisations should be authorised to file complaints about the entering into of

benami transaction and the District Judges should be designated as Tribunals. Even Gram

Nayalayas recommended by the Law Commission may also be utilised for this purpose;

(iv) as both the benamidar and the true owner are equal participants to a criminal transaction,

by prohibiting the true owners right to recover property held benami as provided in the

Ordinance will be provided for an undue enrichment to the benamidar. As such, the
Commission has suggested that the properties should be acquired form him by resorting to a

procedure analogous to Chapter XXA of the Income-tax Act, 1961.It has been suggested that

the same action has to be taken when a benamidar retransfers the property back to the true

owner for an apparent or no consideration to circumvent the provisions of the Ordinance;

(v) in addition to section 82 of the Indian Trusts Act, 1882, as provided in the Ordinance,

sections 81 and 94 of that Act should also be omitted;

(vi) appointment of an authority, like the Charity Commissioner, for supervising private trusts

should be provided for.

(5) The recommendations of the Law commission have been examined. It is felt that all the

recommendations of the Law Commission, except the recommendation regarding authorising

voluntary organisations to file complaints before Tribunals and the appointment of an

authority, like the Charity Commissioner, for supervising private trusts, may be specifically

provided in the Bill, and the other two recommendations would, it is felt, come into effect

automatically as a result of the prohibition of benami transactions and the provision for

acquisition of all properties held benami. The Bill accordingly provides for the following,

among other things, namely: --

(a) entering into benami transactions after the commencement of the new law will be an

offence, with an exception for the transfer of properties by the husband or father for the

benefit of the wife or unmarried daughters;

(b) all the properties held benami will be subject to acquisition by such authority, in such

manner and after following such procedure, as may be prescribed by rules under the proposed

legislation. As a result of the provisions of the Ordinance and the prohibition of entering into
benami transactions, the benamidar would be acquiring the rights to the property by the mere

lending of his name and without investing any money for the purchase of such property.

Accordingly, it is provided that no amount shall be payable for the acquisition of any property

held benami:

(6) The Bill seeks to achieve the above object.

Preamble

Act 45 of 1988

The Bill was passed by both the Houses of Parliament and it received the assent of the

President of 5th September 1988 and became the Benami transaction (Prohibition) Act, 1988

(45 of 1988).

An Act to prohibit benami transactions and the right to recover property held benami for

matters connected therewith or incidental thereto

BE it enacted by Parliament in the Thirty-ninth Year of the Republic of India as follows: --

1. Short title, extent and commencement

(1) This Act may be called the Benami Transactions (Prohibition) Act, 1988.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) The provisions of sections 3m 5 and 8 shall come into force at once, and the remaining

provisions of this Act shall be deemed to have come into force on the 19th day of May, 1988.

2. Definitions

In this Act, unless the context otherwise requires, --

(a) "Benami transaction" means any transaction in which property is transferred to one person

for a consideration paid or provided by another person:

(b) "prescribed" means prescribed by rules made under this Act;

(c) Property means property of any kind, whether movable or immovable, tangible or

intangible, and includes any right or interest in such property.

3. Prohibition of benami transactions-

(1) No person shall enter into any benami transaction.

(2) Nothing in sub-section (1) shall apply to 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.

(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 (2of 1974),

an offence under this section shall be non-cognizable and bailable.

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.

COMMENTS

(i) Sub-section (1) of section 4 has no application to the claim made in the suit as this is not a

suit filed by or on behalf of defendant No.1 against defendant No.2 or the legal

representatives of defendant No..2, instead it is a suit filed by a third party for specific

performance of the suit contract against the real owner as well as benamidar, Murlidhar

Bapuji Valve v. Yallappa Lalu Chaugule, AIR 1994 Bom 358.

(ii) The defence raised by the contesting respondents that the transaction of the sale under the

sale deed dated 9th October, 1957 executed in favour of the appellants was a benami

transaction is prohibited in view of section 4(2) of the Benami Transactions (Prohibition) Act,

1988; Duvuru Mohand Reddy v. Alluru Nagi Reddy, AIR 1994 SC 1647.
(iii) The defence taken by the defendant that the plot in fact was purchased by him in the

name of his brother i.e. the plot was purchased benami, cannot be allowed by virtue of

section4(2) of the Benami Transactions (Prohibition) Act, 1988; Om Prakash Rawal v. Justice

Amrit Lal Bahri, AIR 1994 HP 27.

(iv) Under section 88 of Indian Trusts Act, an agent or other person bound is in a fiduciary

character to protect the interest of the principal and the former would hold the property for the

benefit of the principal or the person in whose behalf he acted as an agent. Held that a real

purchaser is the respondent, the petitioner as an agent and power of attorney had purchased

the property but ostensibly had his name entered in the sale certificate fraudulently and

without consent of the principal and the question of benami does not arise though section 4

prohibits such a plea; P. V. Sankara Karup v. Leelavathy Nambiar, AIR 1994 SC 2694.

(v) A coparcenery is purely a creature of law and it cannot be created by act of parties

whereas a composite family is the result of an agreement express or implied. There are

incidents to the constitution of a composite family, but all incidents are consequences of the

agreement between the parties. Held that exception is section4(3) could not be attracted in the

present case of an alleged composite family; B. Rajagopal Reddy v. Padmini

Chandrasekharan, AIR 1990 Mad 353.

(vi) On coming into force of the Benami Transactions (Prohibition) Act, defence raised for the

proof of the fact that the property held by a person is in the capacity of a benamidar is

expressly prohibited. Neither the court is permitted in law to consider such defence nor to

record its findings. Held that the Income-tax Deptt. would be prohibited from raising a

defence that the suit property held by the wife is benami and the real owner is her husband;

Smt. Khateeja Bai v. Union of India, AIR 1994 NOC 136 MP.
(vii) The plaintiff cannot lay any claim in view of section 4 to the house on the ground that

they stand in the name of step mother benami for her deceased father, Baghyavathi v.

Lakahmikathammal, AIR 1993 Mad 346.

(viii) The burden of showing that a transfer is a benami transaction lies on the person who

asserts that is such a transaction. The governing principal for determining the question

whether a transaction is benami or not is to be proved by showing that the purchase money

came from a person other than the person in whose favour the property is transferred . The

intention of the person who contributed towards the money has to be inferred from the

circumstances and the relationship of the parties and the motive governing their action in

bringing about the transaction and their subsequent conduct; Mahinder Singh v. Pardaman

Singh, AIR 1992 Del 357.

(ix) In view of section 4, there is a total prohibition against any suit based on benami

transaction and the plaintiff-respondent is not entitled to get any decree in such suit or in

appeal, an appeal being a constitution of suit and in the present case the appeal was pending

before this court. In s suit for recovery of benami property if any appeal is pending on the date

of coming into force of section 4 the appellant court can take inot account the subsequent

legislative changes; Om Prakash v. Jai Prakah, AIR 1992 SC 885.

(x) Section 4 of the Benami Transaction (Prohibition ) Act, must be taken to relate of section 2

of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988. It

is clear that in spite of the recommendation of the Law Commission of India to bar institution

of suits only, the Ordinance making authority has thought if it to bar other proceedings also

and has also provided in express words barring of all claims and actions to enforce the right of

a person alleging to be the real owner against the benamidar. The Legislature by using the
expression shall lie made departure from the usual expression shall be institute clearly

demonstrate its resolve to regulate all such suits, claims or actions also which would be lying

in the court on the date of its commencement; Urmila Bala Dasi v. Probodh Chandra Ghosh,

AIR Cal 283.

(xi) The expression any property held benami is not limited to any particular time, date or

duration i.e. the Benami Transactions (Prohibition) Act, 1988 is retrospective in operation.

Once the property is found to have been held benami no suit, claim or action to enforce any

right in respect thereof shall lie. Sub-section (2) of section 4 similarly nullifies the defences

based on any right in respect of any property held benami. Section 4 in its sweep envisages

past benami transaction also within its retroactivity. In this sense the Act is both a penal and a

disqualifying statute. Held that as the appeal was pending in Supreme Court on

commencement of the Benami Transactions (Prohibition) Act, 1988, the matter becomes sub-

judice and thereafter the Supreme Court had seisin of the whole case and the decree passed

by the lower courts annihilated and the suit dismissed; Mithilesh Kumari v. Prem Behari

Khare, AIR 1989 SC 1247.

(xii) The benamidar before the enactment of Benami Transactions (Prohibition) Act, 1988

could not have any right, title and interest in the property, which the benamidar could convey.

By the principle of fictional relation back as propounded by the Supreme Court in Mithlesh

Kumari, the benamidar should be deemed to have title to the property on the date he executed

the deed or release. Held that Surendra Kumar was the benamidar and in point of act on the

date of execution of the deed of release he had no right or interest in the property; Ratanlal

Bansilal v. Kishorilal Goenka, AIR 1993 Cal 144.

(xiii) It has been held that the suit is not hit by sections 2 and 4 of the Benami Transactions

(Prohibition) Act, 1988 as the plaintiff has not alleged that the defendant No 1 i.e. one of the

partners was or is a benamidar or that the money was paid by the plaintiff or that the property

was purchased in the name of the defendant No.1 as benamidar apart from that the under

section 14 and 15 of the Partnership Act, a partnership can acquire asserts in the name of

partners and these sections have not been deleted by the Benami Transactions (Prohibition)

Act, 1988; Md. Hasan Hashmi v. Smt. Kaberi Roy, AIR 1993 Cal 70.

(xiv) Section 4 takes into its ambit the right of a real owner vis--vis ostensible owner. The

prohibition under section 4(1) and (2) does not prohibit the right of a third party to get a

declaration. The third party has the right to raise the contention that someone was the real

transferee and the sale deed was only executed in the name of the transferee who was a

benamidar, Gopal Bariha v. Satyanarayan Das, AIR 1991 Ori 131.

(xv) Section 2 of the Benami Transactions (Prohibition of the Right to Recover Property)

Ordinance, 1988 relates to section 4 of the Benami Transaction (Prohibition) Act, 1988 and

according to section 2 of the Benami Transactions (Prohibition of the Right to Recover

Property) Ordinance, 1988, action means a civil proceeding commenced by "writ" or in such

other manner, as may be prescribed by rules of court but does not include a criminal

proceeding, therefore the term "action" is wide enough to take in an appeal or a second

appeal; Velayudhan Ramkrishan v. Rajeev, AIR 1989 Ker 12.

(xvi) In the context and setting of section 4 the word held has to be understood as

"possessed or occupied". If the possession or occupation is not benami, section 4 can have no

application and as a sham transaction or bipartite transaction is not a benami. Section 4 does

not apply to such a transaction; Ouseph Chacko v. Raman Nair, AIR 1989 Ker 317.
(xvii) Section 4 and 7 of the Benami Transactions (Prohibition) Act, 1988 relate to sections 2

and 4 of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance,

1988. Both section 7 of the Benami Act and section 4 of the Benami Ordinance repeal section

82 of the Trusts Act keeping section 81 of the Trusts Act intact. Keeping in view section 81 of

Trusts Act nominal transactions are not intended to be covered and are not hit by section 4;B.

Rayudu, AIR 1989 AP 290.

5. Property held benami liable to acquisition

(1) All properties held benami shall be subject to acquisition by such authority, in such

manner and after following such procedure, as may be prescribed.

(2) For the removal of doubts, it is hereby declared that no amount be payable for the

acquisition of any property under sub-section (1)

COMMENTS

Section 5 of the Benami Transactions (Prohibition) Act, 1988 applies only to tripartite or

benami transactions and not to bipartite or sham transactions, for if it had been so, the

property covered by bipartite transactions would also be liable to be acquired without

compensation or payment of any amount and the Legislature too has not declared it as

opposed to public policy and prohibit the same prospectively; Bhargavy P. Sumaathykutty v.

Janaki Sathyabhama, AIR 1995 Ker 42.

6. Act not to apply in certain cases

Nothing in this Act shall affect the provisions of Section 53 of the Transfer of Property Act,

1882 (4 of 1882), or any law relating to transfer for an illegal purpose.

COMMENTS

The object of the Benami Transaction (Prohibition) Act, 1988 is vest ownership rights in

benamidar as against the real owner. It is not the intention of the Benami Act to protect such

person from the creditors who allege diversion of funds by such persons in a fraudulent

manner in order to escape their liability to the creditor. Therefore when it is alleged that the

diversion of funds (movable property) by defendant No. 1 in favour of the other defendant

was fraudulent and illegal section 6 of the Act Protects such a claim from the applicability of

section 4; M/s PNB Finance Ltd. v. Shital Prasad Jain, AIR 1991 Del 13.

7. Repeal of provisions of certain Acts-

(1) Sections 81, 82 and 94 of the Indian Trusts Act, 1882 (2of 1882), section 66 of the Code of

Civil Procedure, 1908 (5of 1908), and section 281 A of the Income-tax Act, 1961(43 of 1961).

Are hereby repealed.

(2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall affect

the continued operation of section 281 A of the Income tax Act, 1961 (43 of 1961), in the

State of Jammu and Kashmir.

8. Power to make rules

(1) The Central Government may, by notification in the Official Gazette, make rules for

carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules

may provide for all or any of the following matters, namely :-

(a) the authority competent to acquire properties under section 5;

(b) the manner in which, and the procedure to be followed for, the acquisition of properties

under section 5;

(c) any other matter which is required to be, or may be, prescribed

(3) Every rule made under this Act shall be laid, as soon as may be after it is made, before

each House of Parliament, while it is in session for a total period of thirty days which may be

comprised in one session or in two or more successive sessions, and if, before the expiry of

the session immediately following the session or the successive sessions aforesaid, both

Houses agree in making any modification in the rule or both Houses agree that the rule should

not be made, the rule shall thereafter have effect only in such modified form or be of no

effect, as the case may be; so, however, that any such modification or annulment shall be

without prejudice to the validity of anything previously done under that rule.

(9) Repeal and saving

(1) The Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988

(Ordinance 2 of 1988), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance

shall be deemed to have been done or taken under the corresponding provisions of this Act.

.Criminal-Actions, and Criminal-Intentions required for establishing the BENAMI

Whenever a property has been purchased by one person for which consideration has been paid

or provided by another person, the said transaction is considered to be a benami transaction.

The proposition of law regarding the ownership of any property would be that the person in

whose name the property has been purchased is presumed to be the real owner of the property

and the burden of proving the transaction as benami is on the person who asserts that the
property was purchased through the funds provided by him. Property means property of any

kind, whether movable or immovable, tangible or intangible, and includes any right or interest

in such property. The Benami Transactions (Prohibition) Act, 1988 is a piece of prohibitory

legislation and it prohibits benami transactions subject to stated exceptions. Sections 3,5,8 of

the Act came into force on 5-9-1988 and the remaining sections came into force on 19-05-

1988.

Benami Transaction (Prohibition) Act, 1988 = whether the facts disclosed would indicate that

even after coming into force of the Act the defence under Secion 4 can be available.

Admittedly, the transaction in question was registered on 24th August, 1970. The suit was

filed on 5th of July 1984 which was long before coming into force of the Act. It is an admitted

position that the written statement in the suit taking plea of benami was also filed by the

appellant long before the Act had come into force. Therefore, it was not a case where Section

4(2) of the Act will have a limited operation in the pending suit after Section 4(2) of the Act

had come into operation. It is true that the judgment of the trial court was delivered after the

Act had come into force but that could not fetter the right of the appellant to take the plea of

benami in his defence. Since the Act cannot have any retrospective operation in the facts and

circumstances of the present case, as held by this Court in the aforesaid decision, we are

therefore of the view that the appellant was entitled to raise the plea of benami in the written

statement and to show and prove that he was the real owner of the suit property and that the

respondent was only his benamidar. ;sub-section (2) of Section 3 clearly says that nothing in

sub-section (1) shall apply to purchase of property of any person in the name of his wife,

unmarried daughter and it shall be presumed, unless the contrary is proved, that suit property

had been purchased for the benefit of the unmarried daughter. = Section 3 deals with
Prohibition of benami transaction. Sub-section (1) clearly prohibits that no person shall enter

into benami transaction. However, sub-section (2) of Section 3 clearly says that nothing in

sub-section (1) shall apply to purchase of property of any person in the name of his wife,

unmarried daughter and it shall be presumed, unless the contrary is proved, that suit property

had been purchased for the benefit of the unmarried daughter. Section 3(2) makes it

abundantly clear that if a property is purchased in the name of an unmarried daughter for her

benefit, that would only be a presumption but the presumption can be rebutted by the person

who is alleging to be the real owner of the property by production of evidences or other

materials before the court. In this case, the trial court as well as the appellate court

concurrently found that although the suit property was purchased in the name of the

respondent but the same was purchased for the interest of the appellant. We are therefore of

the opinion that even if the presumption under section 3(2) of the Act arose because of

purchase of the suit property by the father ( in this case appellant ) in the name of his daughter

( in this case respondent ), that presumption got rebutted as the appellant had successfully

succeeded by production of cogent evidence to prove that the suit property was purchased in

the benami of the respondent for his own benefit. ;whether the concurrent findings of fact

could be set aside by the High Court in the second appeal. = From the judgment of the High

Court we further find that the concurrent findings of fact were set aside not on consideration

of the findings of fact arrived at by the courts below but only on the basis of the arguments of

the learned Advocate of the respondent. This was also not permissible to the High Court in

Second Appeal to come to a contrary findings of its own only on the basis of the arguments of

the learned counsel for the respondent without considering the findings of the trial court as

well as the appellate court. (See [2002(9) SCC 735, Gangajal Kunwar (Smt.) and Ors. Vs.
Sarju Pandey (Dead) by LRs & Ors.] ). It is equally settled that High Court in second appeal

is not entitled to interfere with the concurrent findings of fact arrived at by the courts below

until and unless it is found that the concurrent findings of fact were perverse and not based on

sound reasoning.

PROVISIONS

THE Supreme Court has held that the provisions of the Benami Transactions (Prohibition of

the Right to Recover Property) Act, 1988, did not prohibit a suit being filed against a trustee

for the recovery of the trust property.

The ruling was given by a Division Bench comprising Mr. Justice B.N. Kirpal and Mr. Justice

R.P. Sethi while allowing an appeal in the case of C. Gangacharan Vs. C. Narayanan.

The appellant had sent money from abroad to the respondent to enable him to purchase

immovable properties in his name (appellant). The respondent purchased properties in his

own name and in the names of his other brothers in India.

On July 20, 1983, the appellant filed a suit for possession of the suit properties or its market

value. The case of the appellant was that the money, which was sent was wrongly utilised in

purchasing the properties in the name of the respondent and his b rothers instead of

purchasing the same in the name of the appellant.

On July 31, 1985, the suit for possession was decreed with costs and mesne profits were to be

determined in execution proceedings.

The respondent filed an appeal in the High Court (name not given in the order), which

dismissed the same on August 27, 1987.

A special leave petition, filed by the respondent was dismissed by the Supreme Court on April

7, 1988. The appellant then filed an execution application before the trial court. Before the

said application was disposed of on May 19, 1988, the Benami Trans actions (Prohibition of

the Right to Recover Property) Ordinance, 1988 was promulgated.

Basing on the Ordinance, objections were filed by the respondent to the effect that the decree

could not be executed in view of the provisions of the Ordinance.

The executing court disallowed the objections and thereafter the respondent filed a revision

petition before the High Court.

By its judgment, dated August 2, 1988, the High Court held that the Ordinance prohibited the

recovery of the possession of the suit properties which was being held by the respondent as a

benami of the appellant. The Ordinance subsequently became an Act.

The Supreme Court, in its order, noted the High Court had already given a categorical finding

to the effect that the respondent was only a trustee and the case was governed by Section 82

of the Indian Trust Act.

``Section 4 of the Act which contains the prohibition to recover the property held in benami

expressly provides in sub-section (3), clause (b) that the said section is not to apply, inter alia,

in a case where the property is held in the name of a truste e''.

In view of the finding of the High Court in its judgment, the Supreme Court said, the

properties were being held in the name of the respondent as a trustee. The question of the

respondent invoking the provisions of the Ordinance or the Act did not arise. The provisions

of the Act did not prohibit a suit being filed against a trustee for the recovery of the trust

properties.
``That apart, this court in R. Rajagopal Reddy (dead) by Lawyers and others vs. Padmini

Chandrasekharan (dead) by Lawyers (1995) has held that the Act and the Ordinance were not

retrospective in operation and the Act did not apply to pending suits'', the court observed.

This being so, the High Court, the apex court said, fell in error in setting aside the decision of

the executing court and in holding that the right of the appellant to recover possession had

come to an end by virtue of the said Act.

JAYALALITHA CASE

Inordinate and unexplained delay and further continuance of the criminal proceedings pending

against the petitioner would certainly amount to abuse of process of Court.

Objection based on denial of right to speedy trial should first be addressed before the High

Court, this Court has no hesitation to invoke and exercise the extraordinary inherent power

under Section 482 of Cr.P.C. to quash the entire proceedings.

(vi)This Court finds inapplicable the decisions in Jamuna Chaudhary and Surya Sankaram

Karri's cases since this Court does not find any reason to find that the investigating officer has

acted unfairly. The reliance in J.Satyanarayana and Mohanlal Soni's cases is misplaced as in

State of Tamil Nadu v. N.Suresh Rajan and others [2014 (3) SCC (Cri) 529], the Supreme

Court has informed thus:

.While passing the order of discharge, the fact that the accused other than the two Ministers

have been assessed to income tax and paid income tax cannot be relied upon to discharge the

accused persons particularly in view of the allegation made by the prosecution that there was

no separate income to amass such huge properties. The property in the name of an income tax

assessee itself cannot be a ground to hold that it actually belongs to such an assessee. In case

this proposition is accepted, in our opinion, it will lead to disastrous consequences. It will give

opportunity to the corrupt public servants to amass property in the name of known persons,

pay income tax on their behalf and then be out from the mischief of law.
(vii)The reliance on the judgment in Selvi.J.Jayalalitha's case is to be stated only to be

rejected as in Niranjan Hemchandra Sashittal and another v. State of Maharashtra [2013

Cri.L.J.2143 (SC)], the Supreme Court has informed thus:

It is to be kept in mind that on one hand, the right of the accused is to have a speedy trial and

on the other, the quashment of the indictment or the acquittal or refusal for sending the matter

for re- trial has to be weighed, regard being had to the impact of the crime on the society and

the confidence of the people in the judicial system. There cannot be a mechanical approach.

From the principles laid down in many an authority of this Court, it is clear as crystal that no

time limit can be stipulated for disposal of the criminal trial. The delay caused has to be

weighed on the factual score, regard being had to the nature of the offence and the concept of

social justice and the cry of the collective. In the case at hand, the appellant has been charge-

sheeted under the Prevention of Corruption Act, 1988 for disproportionate assets. The said Act

has a purpose to serve. The Parliament intended to eradicate corruption and provide deterrent

punishment when criminal culpability is proven. The intendment of the legislature has an

immense social relevance. In the present day scenario, corruption has been treated to have the

potentiality of corroding the marrows of the economy. There are cases where the amount is

small and in certain cases, it is extremely high. The gravity of the offence in such a case, in

our considered opinion, is not to be adjudged on the bedrock of the quantum of bribe. An

attitude to abuse the official position to extend favour in lieu of benefit is a crime against the

collective and an anathema to the basic tenet of democracy, for it erodes the faith of the

people in the system. It creates an incurable concavity in the Rule of Law. Be it noted, system

of good governance is founded on collective faith in the institutions. If corrosions are allowed

to continue by giving allowance to quash the proceedings in corruption cases solely because
of delay without scrutinizing other relevant factors, a time may come when the unscrupulous

people would foster and garner the tendency to pave the path of anarchism.

It can be stated without any fear of contradiction that corruption is not to be judged by

degree, for corruption mothers disorder, destroys societal will to progress, accelerates

undeserved ambitions, kills the conscience, jettisons the glory of the institutions, paralyses the

economic health of a country, corrodes the sense of civility and mars the marrows of

governance. It is worth noting that immoral acquisition of wealth destroys the energy of the

people believing in honesty, and history records with agony how they have suffered. The only

redeeming fact is that collective sensibility respects such suffering as it is in consonance with

the constitutional morality. Therefore, the relief for quashing of a trial under the 1988 Act has

to be considered in the above backdrop.

(viii)All that a Court is required to do in considering a petition for discharge u/s.239 Cr.P.C.

only is to satisfy itself as to the existence or absence of a prima facie case. The reasons

informed by the Court below easily meet such benchmark.

Crl.O.P.Nos.26062 & 26063 of 2007 These petitions seek quash of proceedings in Special

C.C.No.2 of 2006 pending on the file of learned Special Judge I/X Additional Judge, Chennai.

Once a prima facie case is made out, no occasion arises to consider favourably the petitions

seeking quash of proceedings in Special C.C.No.2 of 2006 pending on the file of learned

Special Judge I/X Additional Judge, Chennai.

In the result,

(i)Criminal Appeal No.33 of 1999 shall stand dismissed.

(ii)Criminal Appeal No.982 of 1998 shall stand partly allowed. The order of learned Chief

Judge, Small Causes Court, Chennai, passed in Crl.M.P.Nos.6601 and 6602 of 1997 in

Crl.O.P.No.7 of 1997 on 11.08.1998 raising the attachment of properties held by third parties

is affirmed.

(iii)The order of the learned Chief Judge, Small Causes Court, Chennai, passed in

Crl.M.P.No.785 of 1997 in Crl.O.P.No.7 of 1997 and Crl.M.P.No.863 of 1998 in

Crl.M.P.No.785 of 1997 in Crl.O.P.No.7 of 1997 on 11.08.1998, raising the interim

attachment/refusing the extension of interim attachment regards properties standing in the

names of A2 to A4 are set aside. The attachment of properties standing in the names of A2 to

A4 are made absolute. However, the same shall extend only to properties listed as Item

Nos.13 to 20, 29, 31 to 36, 40 to 46 and 51.

(iv)Criminal Revision Nos.1318 and 1319 of 2007 shall stand dismissed.

(v)Criminal Original Petition Nos.26062 and 26063 of 2007 shall stand dismissed. The trial

Court is directed to dispose of the case in Special C.C.No.2 of 2006 on the file of learned

Special Judge I/X Additional Judge, Chennai, on a day-to-day basis, in any event, not later

than four months from today.

It is the duty of this Court to inform and record its great displeasure in the action/inaction of

the State agencies in earnestly not pursuing the proceedings before this Court. What is the

effect?
In a case in which wrong doings between 1991 and 1996 are alleged, the final report has been

filed in 2006. The order of the Court below was of the year 1998. Since then, over 17 long

years, the matter has been pending before this Court. A perusal of the docket suggests that the

matter has not been listed between September 2001 and November 2011. Leave alone the

question of why in a case alleging offences under the Prevention of Corruption Act, 1988,

more particularly, disproportionate possession of assets, the First Information Report of the

year 1996 resulted in the filing of a charge sheet only after 10 long years, the questions, of

who is responsible for pendency of proceedings before this Court over 17 long years, what, if

any, are the vested interests and are none accountable, cry for an answer.

24.06.2015 Index:yes Internet:yes gm Note to office:

Issue order copy by 25.06.2015 To

1.The Chief Judge, Small Causes Court, Chennai.

2.The Deputy Superintendent of Police, Vigilance & Anti Corruption, C.S.V.I. Chennai.

3.The Inspector of Police, Vigilance and Anti Corruption, Erode Detachment at Erode.

4.The Public Prosecutor, High Court, Madras.

JUDGEMENTS

1. Abetment and criminal conspiracy failed

Section 107 of the IPC deals with abetment of a thing. Abetment is constituted by instigating a

person for committing an offence or intentionally hiding a person committing it. Instigation

necessarily connotes some suggestion or support or stimulation to the commission of the act
itself. Sometimes, illegal omission also comes under the purview of the abetment. Though the

prosecution has adduced evidence, nearly about 259 witnesses, prosecution mainly relies on

registration of 165 documents i.e., sale deeds and registration of the documents at the

residence of Accused No.1. In the instant case, the case of the prosecution is that, Accused

No.1 has amassed wealth and she has parted with this amount to Accused Nos. 2 to 4 to

acquire immovable properties, namely, agricultural lands, sites and 32 firms and companies.

There is a positive evidence to the effect that the Accused, firms and companies have

borrowsaed a a loan in a sum of Rs.24,17,31,274/-. Besides, they also borrowed loans from

private parties. This loan borrowed by private parties has not been considered by this Court.

However, the evidence reveals that this amount has been utilized for purchase of agricultural

lands, sites, firms and companies. Therefore, the question of Accused No.1 abetting for

Accused Nos. 2 to 4 for acquiring the immovable properties does not arise. Accused Nos. 1 to

4 individually secured loans from the banks and they have acquired the properties. Therefore,

the charge under Section 107 read with section 109 of the Act must fail.

Page 821-822 of Cunha judgement: One of the peculiar features of the rules of evidence

relating to conspiracy is that, anything said or done by any one of the conspirators having

reference to their common offence, is under certain circumstances evidence against the other.

The reason of the law is that, within the scope of conspiracy, the position of the conspirators is

analogous to that of partners, one being considered the agent of the other.

Page 887: In so far as the complicity of A-2 to A-4 in the alleged offence is concerned, there

is overwhelming evidence indicating the circumstances of active abetment and conspiracy by

the A-2 to A-4 in the commission of the above offence u/Sec. 13 (1)(e) of the Act. Though it is

argued by the learned counsel for the accused that, except the fact that A-1 to A-4 were
residing together under the common roof, there is no other evidence to show that they were

parties to the criminal conspiracy, yet, the circumstances proved in evidence conclusively

establish that all the accused acted in a concert with each other with the sole object to acquire

and hold properties and assets disproportionate to the known source of income of A-1.

2. Kumaraswamy order

Pg 894-895

Section 10 of the Indian Evidence Act deals with things said or done by the Conspirator in

reference to common desire. This section will come into play only when Court is satisfied that

there are reasonable ground to believe that two or more persons have conspired together i.e. to

say there must be prima facie evidence. Where 895 evidence is only circumstantial, the

circumstance in their totality must be such as would not only be consistent with the guilt of

the Accused, but also inconsistent with any reasonable hypothesis of his innocence.

3. Living together not proof of abetment

Kum Page 895: Just because Accused Nos. 2 to 4 stay along with Accused No.1, that itself is

not component which the Court can come to the conclusion that Accused Nos. 1 to 4 abetted

and conspired and acquired the property in an improper way.

Cunha Page 891-892: Though the factum of A-1 to A-4 residing together by itself may not

lead to the inference that there was meeting of mind to pursue the object of conspiracy. The

very fact, A-2 to A-4 have engaged themselves in constituting firms and acquiring large tracts

of land out of the funds provided by A-1 indicate that, all the accused congregated in the

house of A-1 not for social living nor A-1 allowed them free accommodation out of
humanitarian concern, rather the facts and circumstances proved in evidence undoubtedly

point out that A-2 to A-4 were accommodated in the house of A-1 pursuant to the criminal

conspiracy hatched by them to hold the assets of A-1.

4. Failed to establish benami transactions

Kum Page 902: The prosecution mainly relies on evidence of the Sub-Registrar and brokers

and also the sale deeds. Except marking the sale deeds, there is no other evidence. The burden

lies on the prosecution to establish benami transaction. The prosecution has not adduced any

evidence with regard to allegation of benami transaction.

Kum Page 903: The allegation of prosecution is that Accused Nos.2 to 4 purchased the

property from the ill gotten money of Accused No.1. The value of immovable property

acquired amounts to Rs.6,24,09,120/- i.e., agricultural lands. Kodanadu Tea Estate was

acquired by Accused Nos. 2 to 4 and it is worth about Rs.3.50 Crores. The prosecution itself

has shown the property of Accused Nos. 1 to 4 firms and companies to the extent of

Rs.9,34,26,053.56/- whereas the loan borrowed by Accused Nos. 1 to 4 and also firms and

companies is to the extent of Rs.24,17,31,274/-.

5. Unverified costing & estimates; Engineers valuing pandal etc did not see, therefore hearsay

Kum Page 905-906: I have adopted the square rate and cost of construction per square rate is

taken as Rs.28,000/-. The marbles or granites samples were not sent to the suppliers.Quotation

is not procured. They have simply guessed the rate and assessed the value of granite and

marbles. The construction cost was valued at Rs.27,79,88,945/- by the DV & AC. The

construction area measured by way of square feet is about 1,66,839.68 sq. feet. It amounts to

1668.39 squares. The learned Sessions Judge has simply on guess work has reduced the cost
of construction to the extent of 20% without verifying the evidence and the material placed on

record.

Kum Page 906: Engineers valued pandal based on plan. Their evidence is to the effect that

without inspecting the pandal, they have given statement of expenditure that might have

occurred. Their evidence is hear-say.

Cunha Page 366: 67.7) I have carefully gone through Ex.P.1019 and the evidence of PW.181.

I am in full agreement with the counsel for A-1 that PW.181 was neither an eye witness to the

marriage arrangements made at the venue nor had he any personal knowledge about the

expenses incurred thereto. But, in appreciating the evidence of this witness, it is pertinent to

note that the submissionSpl.C.C.208/2004 367 of the learned Spl. P.P. is that, PW.181 is

examined only as an expert witness to speak about the cost of the arrangements. In order to

prove that the various arrangements noted by PW.181 in his report Ex.P.1019 were in fact

carried out at the venue, the prosecution has examined large number of witnesses and

therefore, the evidence of PW.181 has to be analysed in the context of the evidence of the

other witnesses who have given elaborate evidence regarding each and every item of the

arrangements in connection with the marriage.

6. Wedding expenses paid by bride's family

Kum Page 907: In our Hindu customs, it is bride's family members who take care of marriage

expenditure. Nominal expenditure will be borne by bridegroom's family. Just because

Accused No.1 was Chief Minister at that time, we cannot saddle all the marriage expenses on

her part.
Cunha Page 438-440: 72.37) The circumstances surrounding the opening of the account for

the alleged purpose of maintaining the marriage expenses by DW.1 who is not the immediate

member of the family of the bride is another factor leading to doubt the defence set up by the

accused. The opening of a bank account to meet the marriage expenses is a strange and

unnatural. Commonly, parents save for the marriage of their wards either in the form of

deposits or bank savings or raise loans. In the instant case, accused have come up with a novel

story that a fresh account was opened and thereafter money was remitted to that account from

the family companies and family of the bride. But neither DW.1 nor the accused have named

the persons who remitted the money to this account. The entries contained in Ex.D.15 show

that, the account was opened on 14.08.1995 by remitting cash of Rs.1,001/- and on

22.08.1995, a sum of Rs.34,000/-, Rs.7 lakhs, Spl.C.C.208/2004 439 Rs.22,35,500/-,

Rs.58,80,000/-, Rs.17,80,521/- is remitted to this account and on 23.08.95, Rs.28 lakhs has

been remitted. 72.38) Even with regard to the source of the money remitted to this account,

the version of DW.1 is that, it is remitted by the family members. There is no evidence as to

which of the family members remitted this money. Curiously, during the argument it is

submitted that, enquiry was conducted by the Income Tax Authorities and the department has

accepted the case of DW.1 that it is foreign remittance. This theory is not spoken to by DW.1

in his evidence making it evident that the theory of foreign remittance is an afterthought

which cannot be given any credence. 72.39) Another circumstance which leads to disbelieve

the contention of the accused is that, none of the witnesses or relatives of the bride have come

forward to say that DW.1 looked after the marriage expenses. There is absolutely no

corroboration whatsoever to the testimony of DW.1. On the other hand, it has come in

evidence that the father of the bride gave Rs.14 lakhs into the hands of PW.200 towards the
expenses. If bank account was opened to meet the marriage expenses and all the arrangements

were looked after by DW.1 as contended by the accused, there is no explanation as to why the

father of the bride had to pay Rs.14 lakhs to PW.200. 72.40) The evidence of DW.1 is silent as

to the arrangement made by him in connection with the marriage. There is not even a stray

sentence in his entire evidence that he made the payment through cheques from the above

account towards the marriage expenses. This is yet another circumstance to show that the

opening of Ex.D.15 and the story of issuance of cheque is only a make believe story which

has taken shape only after the closure of the evidence of the prosecution.

7. Not taken into account loans and income from Kodanad tea estate

Kum Page 909-910: The case of the prosecution that Accused No.1 amassed wealth and

acquired agricultural lands, sites, floated firms, became Directors of the companies cannot be

believed because the money that has been spent for acquiring the said properties can be

inferred from the loans borrowed from the Nationalized Banks. Besides, Accused was having

an income from Kodanadu Tea Estate for about ten months.

On perusal of evidence of PW.71, it is clear that Kodanadu Tea Estate generated income to the

extent of Rs.7 Crores. This is the income generated from the tea estate. The Investigating

Agency has valued the building constructed in the tea estate and also pipes laid down in the

tea estate. But, it is very strange that they have not assessed the income of the tea estate and

added to Annexure-III i.e., income during check period between 1.7.1991 to 30.4.1996. The

Investigating Agency has omitted this income in Annexure-III. Even defence has not

examined any witness as to what is the income generated from the tea estate and they have
also not claimed the same. Therefore, this court has not considered this income while

calculating disproportionate assets.

Kum Page 916: Though the Trial Court in its judgment mentioned that the accused availed

loan by the Indian Bank, but it has not considered the same as income. Therefore, the Trial

Court has erred in not considering the loans as income.

8. Hostile witnesses recalled

Kum Page 917: It is the contention of the learned counsel for the appellants that without

treating the witnesses as hostile, the witnesses were recalled and cross-examined. The

questions are put in such a manner that whether what they have stated in the examination-

inchief is correct or in the cross-examination is correct by securing answer to this question

and also by adopting this method, they cannot wipe-out the answers elicited in the cross-

examination. This is also one of the factors, which weigh in favour of the accused. If the

witness gives different statements at different stages, it is unsafe to place reliance on them.

Taking into consideration of overall circumstances and material placed on record, in my view,

the Judgment and finding recorded by the Trial Court suffers from infirmity and it is not

sustainable in law.

WHAT THE HIGH COURT FOUND

The High Court found a number of holes in the prosecution's arguments. Justice

Kumaraswamy ruled that there was not enough evidence to suggest that Jayalalithaa was

linked to the 32 companies, and the presence of her associates on the board was not enough.
The HC also found that the prosecution and trial court had erred in their judgement that bank

loans worth Rs 24.17 crore was used as an income by the companies linked to the accused. It

also ruled that the value of the properties owned by Jayalalithaa and her associates was only

Rs 6.24 crore not Rs 20.07 crore as the trial court had stated.

To the allegation of her spending Rs 22.53 crore on refurbishment and renovation the High

Court found this to be untrue and ruled the amount was only Rs 5.10 crore.

"Everything assessed is done more or less on guesswork rather than actual price prevailing

during the check period," the High Court said.

One piece of evidence that the special judge had taken into consideration to assess the

quantum of illegal income of Jayalalithaa was Rs 14 crore of unaccounted deposits of cash

into the bank accounts of a newspaper, Namadhu MGR, operated by a firm with Jayalalithaa

as a partner. The High Court over-ruled this saying this was accumulated through collection of

deposits of Rs 18,000 made by each of an estimated 9000 subscribers of the newspaper.

Lastly, the High Court also found fault with the fact that she spent Rs 3 crore on her son's

wedding, where musicians A R Rahman and Mandolin Srinivas were performing. " Just

because Accused No 1 was Chief Minister at that time, we cannot saddle all marriage

expenses on her part. Relying on income tax returns towards expenditure of marriage, I

consider that she has spent about Rs 28,68,000", the High Court ruled.

In the end, Justice Kumaraswamy found that the accused had assets worth Rs 37.59 crore

against a total income of Rs 34.76 crore with disproportion worth Rs 2.82 crore. The court,

therefore, acquitted them as the percentage of disproportionate assets is 8.12 percent, which is

within the permissible limit.

CONCLUSION

There are no studies or records to show whether the BTPA has succeeded in achieving its

purpose but from the preceding section, it is evident that the Act in its present form has too

many loopholes for it to ever achieve its purpose. An example of the failure of the Act is that

this researcher could not find any cases dealing with benami transactions, which were filed

before the Courts after the passing of the Act except those relating to retrospectivity of the

Act.

It is submitted that to change a century old practice, change in the law by itself shall not serve

the purpose. Change has to be through a gradual process. At the same time, the glaring

loopholes in the Act sufficiently ensure that the practice need not change, as the provisions of

the Act shall not be implemented. Is this merely a product of poor legislative drafting or due

to lack of political will to bring about change? One possible reason for the legislators lack of

commitment could be that more often than not our lawmakers are themselves responsible for

evasion of taxes and they find entering into benami transactions a convenient way to carry out

their ends.

Yet if we want that the prohibition of this practice to be strictly enforced, the law needs to be

drastically amended. In this regard, the following recommendations may be taken note of-:

The definition of benami transactions should be amended to include within its ambit sham

transactions.

The Central government should make rules regarding acquisition of property under this Act at

the earliest.
A provision should be enacted in the law not only barring the real owner but also the

benamidar from having any claim to the property. There is really no justification for the

benamidar having a right to the property since neither the consideration for the same was paid

by him nor was the property purchased for his benefit.

The exceptions provided in the Act with regard to purchase of property in the name of wife or

unmarried daughter as also regarding purchase of property by a Hindu coparcener are liable to

misuse and hence must be repealed. However, the exception with regard to a trustee holding

property for the benefit of a person may be retained.

The lack of litigation, after the Act has shown as already discussed that either the fact that the

benamidars are close relations of the real owner or the threat of criminal prosecution once

they fall out shall prevent the benamidars from coming to Court and asserting their rights.

Therefore, the Act should not depend upon acquiring property held benami based on the

benamidars coming to Court. Large-scale surveys should be conducted by the government in

collaboration with non-governmental organisations to determine the extent of benami

property and all such land should be acquired.This land can be used for the benefit of poor

peasants to whom it may be distributed.

Such amendments coupled with proper enforcement of the law may help in checking the

violation of tax and revenue laws and at the same time provide land to the government for

carrying out development activities.

However, for carrying out such drastic amendments and ensuring proper enforcement of the

amended law, political will and legislative commitment is required. It is doubtful whether in

light of increasing corruption amongst our politicians this will be forthcoming in the near

future.
BIBLIOGRAPHY

Gurusharan Varandani, Law Relating to Benami Transactions: A Myth or Reality 13(3)

Cochin University Law Review 261 (1989).

Raghu Raman C.S. Critical Appraisal of the Law Relating to Benami Transactions 2

Supreme Court Journal 23 (1997).

H.M. Seervai, Constitutional Law of India: A Critical Commentary 1 (4th ed., New Delhi:

Universal Book Traders, 1999).

Maynes Treatise on Hindu Law and Usage (Justice Alladi Kuppuswamy ed,, 14th ed., New

Delhi: Bharat Law House, 1998).

Mulla, 1 Principles of Hindu Law (Satyajeet A. Desai ed., 17th ed., New Delhi: Butterworths,

1998).

Paras Diwan, Modern Hindu Law (Faridabad: Allahabad Law Agency, 1998).

S.K. Mitra, Mitra on Hindu Law (Allahabad: Orient Publishing House, 2000).

Salmond on Jurisprudence (12th ed., P.J. Fitzgerald ed., Bombay: N.M. Tripathi Pvt. Ltd.,

1966).

http://www.dnaindia.com/money/report-government-to-soon-bring-bill-to-curb-benami-

transactions-arun-jaitley-2084963

http://www.scoopwhoop.com/news/why-the-high-court-acquitted-jayalalithaa/

http://blog.scconline.com/post/2015/05/27/benami-transactions-prohibition-amendment-bill-

2015/