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ACKNOWLEDGEMENT
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INTRODUCTION

The Judiciary recognized Benami Transaction at a very early point of time. In an

old decision of the Calcutta Court, a purchase in tile wife's name was held to be
fictitious. The court held that the property vested in the person who actually paid the
purchase money and not necessarily the person whose name was used." The law
provided a substantive right to the purchaser of the property (in the name of the
benamidar), to prove that he was the real owner of the property, and thereby get
appropriate declaration of title and other relief.1

The rule of Section 41 of TPA 1988 is a deduction from the law of estoppel
which is enunciated in the Indian Evidence Act, Section 115. It forms an exception to
the general rule that a person cannot convey a better title than he has himself in the
property (section 27, Sale of Goods Act (III of 1930). The same rule applies to movable
property, enunciated in the Indian Contract Act. Sections 81, 82 and 94 of the Indian
Trusts Act, 1882 (now repealed) and the provisions of Section 281A of the Income Tax
Act, 1961 (now repealed) dealt with “benami transactions” without prohibiting them,
but they only tried to identify the real owner and the benami owner in these
transactions.

These provisions came up for review before the Law Commission which felt
that these provisions must be repealed and they should be replaced by an independent
legislation. The Law Commission, after making a detailed study and examining the
views and opinions of the public, came to the conclusion that such transactions are
carried out by people having funds and wealth from sources not disclosed to the
revenue authorities and with tainted funds to acquire properties in the names of
benamis (to avoid deletion and punitive actions). It is in this background that the
Benami Transactions (Prohibition of the Right to Recover Property) Act, 1988 was
enacted to come into effect from May 19, 1988 in all States, except Jammu and
Kashmir.

1
Sheikh Bahadur Ali v. Sheikh Dhomu, 1Calcutts Sud R. Diw.Rep. 250.
 Page |3

I. SECTION 41: PRINCIPLE

Section 41 of the Transfer of Property Act, 1882 defines transfer of property by

an ostensible owner. It states:

41. Transfer by ostensible owner. – Where, with the consent,

express or implied, of the persons interested in immovable property,
a person is the ostensible owner of such property and transfers the
same for consideration, the transfer shall not be voidable on the
ground that the transferor was not authorized to make it:
Provided that the transferee, after taking reasonable care to
ascertain that the transferor has the power to make the transfer, has
acted in good faith.

This section enacts a rule of estoppel as against the real owner. The principle
underlying this section is that if two innocent persons are defrauded or cheated by one,
who, after transferring the property of one without his consent to another, is no longer
present, and the two persons enter into litigation with respect to the property
transferred, then our of these two apparently innocent persons, the one who, by his
conduct or consent enabled the fraud to take place, will suffer.

The law incorporated in Section 41 is based on the rules laid down by the Privy
Council in the leading case of Ramcoomar v. Macqueen2. Briefly, the facts and the law
laid down in this case were as follows:

One Alexander had purchased some landed properties in Calcutta in the name of
Bunnoo Bibee who was his Mistress. Macqueen was one of the two children born to
him by this Mistress (Bunnoo Bibee). The sale-deed was in the name of Bunnoo Bibee
and she also used to manage the properties. Later on during the life of Alexander,
Bunnoo Bibee sold the properties to Ramdhone (father of Ramcoomar). After the death
of Bunnoo Bibee, Macqueen filed a suit against Ramdhone claiming the properties on
the ground that her father Alexander had left a will in her favour and that her father was

2
AIR. 1963 SC 1917.
 Page |4

the real owner, not Bunnoo Bibee who was merely a benamidar. Ramdhone pleaded
that he was a bona fide purchaser without notice of the benami title of the seller
(Bunnoo Bibee). The Calcutta High Court decided in favour of Macqueen whereupon
Ramcoomar (son of Ramdhone who was then substituted in place of his father) went in
appeal to the Privy Council which reversed the judgment of his Calcutta High Court
and decided in favour of Ramcoomar. Allowing the appeal of Ramcoomar, the Privy
Council held that even assuming that Alexander was the real owner and that Bunnoo
Bibee was merely an apparent (ostensible) owner, since Alexander had allowed (i.e.
given implied consent to) Bunnoo Bibee to hold herself out as the real owner, he or his
representatives could not recover upon their secret title unless they could prove that
purchaser had direct or constructive notice of the real title. Delivering its judgment, the
Privy Council made following well-known observations :

“It is a principle of natural equity which must be universally applicable that,

where one man allows another to hold himself out as the owner of an estate and
a third person purchases it for value, from the apparent owner in the belief that
he is real owner, the man who so allows the other to hold himself out shall not
be permitted to recover upon the secret title.”

The section is a statutory application of the law of estoppel, the general

principle of which is thus stated by the House of Lords in Cairncross v Lorimer:3

“If a man, either by words or by conduct, has initiated that he consents to an

act which has been done, and that he will offer no opposition to it, although it
could not have been lawfully done without his consent, and he thereby induces
others to do that from which they might have abstained - he cannot question the
legality of the act he had so sanctioned - to the prejudice of those who have so
given faith to his words or to the fair inference to be drawn from his conduct.”

This was the principle behind S. 41 of the Transfer of the Property Act, 1882,
which relates to the principle of Estoppel as has been provided in S. 115 of the Indian
Evidence Act.

3
(1860) 3 Macq 827at p. 829.
 Page |5

ESSENTIAL CONDITIONS OF S. 41

Following conditions are necessary for the applicability of this section:-

i. There is transfer of an Immovable property by ostensible owner with express or

implied consent of the real owner,

ii. The transfer is for consideration

iii. The transferee has acted in good faith, and,

iv. The transferee has exercised reasonable care in finding out the transferor’s
power to make the transfer.4

Ostensible Owner/ Benamidar

Starting from the first essential, it states that there need to be a transfer of
property by the ostensible owner. Ostensible literally means ‘apparent’ or ‘seeming’.
An ostensible owner is the person who apparently or seemingly appears to be the
owner, though in reality he is not. He is the person having all the indicas of the
ownership without being the real owner.5 A Benamidar is an ostensible owner. The
term ‘Ostensible’ excludes such persons who hold possession of property professedly
as agent, guardians or in any other fiduciary character.

According to Black Laws’ Dictionary :

‘Ostensible ownership’ means apparent ownership derived from conduct or words.

Theory of ‘ostensible ownership’ estops an owner of property who clothes another with
an apparent title from the latter asserting his title against an innocent third party who
has been induced to deal with the apparent owner.6

The Benami Transaction (Prohibition) Act of 1988 provides that where a

property is transferred benami (i.e., in the name of another person), the person, in
whose name the property is held, shall become the real owner. The Benamidar

4
Hardev Singh v. Gurmail Singh, AIR 2007 SC 1058.
5
Kannashi Vershi v. Ratanshi Nenshi, AIR 1952 Kutch 85.
6
Black’s Law Dictionary, 6th ed., p. 1100.
 Page |6

represents in fact the real owner, and is a mere trustee for him. So, if the property is
purchased in the name of a benamidar and the indicia of ownership are placed in his
hands, the true owner can only get rid of the effect of alienation by showing that it was
made without his acquiescence and that the purchaser took with notice of that fact7.

The Act provides that no suits, action or claim to enforce any right in respect of
any property held benami against the person in whose name the property is held or any
other person shall lie by the person claiming to be the real owner of the property. In
other words, the real owner is now after the enforcement of the Act cannot claim the
property from the benamidar by any suit, claim or action. The defence of being the real
owner shall also not be allowed. However, an exception has also been given in the Act
where the above stated rule will not apply:-

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 co-parceners 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.

This means that now an ostensible owner or benamidar has become a real owner
except where he is a coparcener in a Hindu Undivided Family or a trustee standing in a
fiduciary capacity. Therefore, the law laid by Section 41 of the Transfer of Property Act
stands modified except where benamidar is a co-parcener or a trustee standing in a
fiduciary capacity.

In Jayadayal Poddar v. Bibi Hazara,8 the SC observed that whether a person is

ostensible owner is a subjective question depending upon certain facts and
circumstances. Also the following considerations must be taken into account while
deciding whether a person is ostensible owner or not:

(i) Source of the purchase-money i.e. who paid the price?

(ii) Nature of possession after the purchase i.e. who had the possession?

7
Bhugwan v. Upooch 10 WR 185.
8
AIR 1974 SC 171
 Page |7

(iii) Motive for giving benami colour to the transaction i.e. why the property was
purchased in the name of the other person?

(iv) Relationship between the parties i.e. whether the real owner and the
ostensible owner were related to each other or were strangers or friends?

(v) Conduct of the parties in dealing with the property i.e. who used to take care
of and had control over the property?

(vi) Custody of the title deeds.

Express or Implied consent of real owner

In the matter of Ladhibai v. Ravji Nagshi,9 it was observed that the express or
implied consent to ostensible ownership means that some blame attaches to the real
owner and that by some fault of his the world begins to believe that another person is
the owner of the property.

The real owner is not responsible, unless the apparent ownership of the
transferor has been permitted or created by him. He creates or permits the appearance
of ownership either by express words of consent, or by acts or conduct which imply
consent. It is not necessary that he should have been influenced by a fraudulent
intention, for his liability rests upon his having put the transferor in a position which
enabled him to commit a fraud. This is on the principle that 'when one of two innocent
persons must suffer from the fraud of a third, he shall suffer who, by his indiscretion,
has enabled such third person to commit the fraud'.10 The same principle was stated in
somewhat wider terms by J Ashurst in Lickbarrow v. Mason,11as:

“wherever one of two innocent persons must suffer by the acts of a third, he
who has enabled such person to occasion the loss must sustain it.”

The consent of the real owner is express if it is given in clear words authorising
him to make the transfer. But such consent must not be brought about by a
misapprehension of legal rights. The consent is implied if the real owner knows that the

9
AIR1950 Kutch 34 at p.35
10
Root v. French, (1835) 13 Wendell 570
11
(1787) 5 Term Rep 683
 Page |8

benamidar is dealing with his property as if it were his own but remains silent or
acquisces. The real owner’s acquiescence (silence) or inaction implies his consent. In
Anoda Mohan, v. Nilphamari12, A purchased a property in the name of his wife B. B's
name was entered in the revenue records and she used to deal with the property. After
A's death B mortgaged the property to C who took it in good faith believing that B had
authority to make the transfer. It was held that since A himself had entered B's name in
the revenue record and since A allowed her to deal with the property, there was an
implied consent of A to hold out B as an ostensible owner authorising him to transfer
the property. Accordingly, the mortgage could not be avoided and the mortgagee was
protected under this section.

In Beniram v. kundan Lal,13 it was held that Silence may be consent only where
the real owner is aware of his rights. Also it is not a mere acquiescence but something
more from which consent may be inferred. It is not a question of fact but of legal
inference from the facts found.

Section 41 does not apply to minors, and a minor’s guardian who transfers the
property of a minor cannot be treated as an ostensible owner with the consent of the
minor, who by, reason of the disability of infancy, cannot give his consent. The
doctrine of estoppel does not apply to minors, and still less will the court hold an infant
estopped by the acts and omissions of others.

14
In Shamsher Chand v. Mehr Chand, it was stated that this section does not
apply to the minors and he appears to be immune from responsibility of his deception.

In Tarabag Khan v. Nanak Chand,15 it was held that Attestation of the

document by real owner does not by itself imply consent but if it is proved that the
attestation took place in circumstances which involved knowledge of or consent to the
transaction, it may be regarded as implied consent.

12
AIR 1921 Cal. 549
13
21 All. 496 (p.c)
14
AIR 1947 Lah. 147
15
(1932) 138 I.C. 263
 Page |9

Further, in Nathubai v. Mulchand,16 it was stated that religious endowments do

not fall under this section as the property is vested in the shrine and no particular person
can give consent, express or implied.

Transfer for consideration

The principle protecting the transferee applies only where the transfer is for
consideration. It does not apply to gifts or gratuitous transfers. Therefore, the real
owner is not precluded from denying a gift made by an ostensible owner. However, if
the transfer is with consideration it may be any kind of transfer of property e.g. it may
be sale, exchange, mortgage or lease.

Transferee acts in Good Faith

This essential is based on the principle that “He who seeks equity must do
equity”. It is necessary that transferee acts in good faith, i.e., he has purchased the
property in the honest belief that transferor had power to transfer the property. Good-
faith means bona fide intention.

Where a person purchases property with full knowledge that the transferor is
merely an apparent owner his intention is not bona fide and there is no good- faith on
his part. Principles of equity, on which this section is based, protects the interest only of
a bona fide purchaser. Thus, this section can protect the interest of only such purchaser
whose own conduct is equitable and just. In the absence of good-faith, the Court may
presume collusion between ostensible owner and the purchaser. Accordingly, if the
transaction is a sham (false) one, Section 41 cannot apply because the transferee would
then be in the knowledge of the reality.17 Where the parties live in the same village and
have knowledge of the fact that another person and not the seller was in possession of
the property, the Court may presume absence of good-faith. Similarly, knowledge of
any previous dealings with the property or, knowledge of the defective title of the
transferor deprives the purchaser of the protection under this section. 18 In Gurubaksh
Singh v. Nikka Singh,19 there was a partition of joint family property but there was also

16
3. Bom.L.R.535 at p.537
17
Rai Sunil Kumar v. Thakur Singh, AlR 1984 Pat. 80.
18
Lala Jagmohan Das v. Lala Indar Prasad, Al. 1929 Oudh. 160
19
AIR 1963 SC 1917
 P a g e | 10

some dispute over the respective shares. While the objection and application for the
correction of mistake was still pending, a part of the property was sold. The Supreme
Court held that since parties lived in the same village and the facts established beyond
reasonable doubt that the purchaser had knowledge of the disputed title of the seller, the
purchaser had no good-faith. The Court observed that in the absence of good-faith on
his part, the purchaser could not claim the benefit of Section 41.

In Mazhar v. Mukhtar,20 it was stated that the usual search is for a period of 12
years and when there are no circumstances whatever to indicate that the search of the
registration office should be made for a longer period the transferee need not make such
a search.

Reasonable Enquiry by Transferee

Good-faith or bona fide intention of the transferee is not enough. To attract the
provisions of this section the transferee must also have exercised reasonable care in
ascertaining the title and authority of the transferor. Reasonable care means that care
which a man of ordinary prudence should take while making inquiries regarding the
title of an immovable property. But it is not possible to lay down any general rule
regarding the nature of enquiry to be made by the transferee which may be called as
'reasonable care' for all the cases. The standard of enquiry expected from the transferee
depends upon the facts and surrounding circumstances which may vary according to the
different circumstances of each case.21 However, the enquiry made by the purchaser
must be diligent and not superficial or casual. Some specific circumstance or fact
should be pointed out as a starting point of an enquiry which might have led to some
result.

Revenue records are not records of title. In Nageshar Prasad v. Raja Pateshri,22
A was the real owner of the property. In the revenue records, instead of a name of B
was entered by mistake. B mortgaged the property to C who accepted the mortgage
relying on the revenue register. A denied the transfer on the ground that B was not
authorized to mortgage the property. C claimed the benefit of this section on the ground
that he had taken reasonable care in ascertaining the title of B by inspecting the revenue

20
AIR 1938 All 64
21
Beyas Singh v. Ram Janam Ahir, AIR 1961 Pat. 16
22
(1915) 20 Cal.W.N.265,34 I.C. 673 P.C.
 P a g e | 11

records. The Privy Council held that since he had not exercised reasonable care in
enquiring about the authority of B, he cannot get the benefit of this section. The court
observed that if C had made further enquiries, he could have found that B’s name was
entered into the register by mistake and A had already raised an objection against the
wrong entry of B’s name in the register.
 P a g e | 12

II. THE BENAMI TRANSACTIONS (PROHIBITION)

ACT, 1988

According to the Law Commission of India there can be four main factors for
the advent of Benami Transactions in India.23

 First of the reasons can be the existence of a Joint Hindu Family System, which
might had induced a desire to make secret provisions,24 leading to the practice
of benami.

 Second, can be to defraud the creditors, when K.K. Bhattacharya observes that
since the first establishment, the British Government, in the exercise of its
legislative functions, have time to time made attempts to check the inveterate
practice obtaining in India of holding property by one person in the name of
another but the practice, having its origin in the dishonest motive of defrauding
creditors of their just and lawful dues, had been prevalent here since a long time
that the legislature can not altogether put an end to it by a drastic enactment
declaring it to be absolutely illegal.25

 Third, can be the scheme to evade taxes hence changing the focus from
individual being a victim to the state being the victim.

 Fourth, according to Pollock, ‘practices of this kind naturally grow up in a state

of society where there is an appreciable risk, from one generation to another, of
hostile conquest or confiscations.’26

The Law Commission, after making a detailed study and examining the views
and opinions of the public, came to the conclusion that such transactions are carried out
by people having funds and wealth from sources not disclosed to the revenue
authorities and with tainted funds to acquire properties in the names of benamis (to
avoid deletion and punitive actions). It is in this background that the Benami

23
57th Report of Law Commission of India, para 1.7.
24
West and Buhler, ‘Hindu Law’, 4thedn, pp. 157, 563.
25
K.K. Bhattacharya, Joint Hindu Family, (Tagore Law Lectures) (1884-85), pp. 469- 470.
26
Pollock, ‘Law of Fraud’, misrepresentation mistake (1894) pp. 83- 84.
 P a g e | 13

Transactions (Prohibition of the Right to Recover Property) Act, 1988 was enacted to
come into effect from May 19, 1988 in all States, except Jammu and Kashmir.

This Act made engaging in benami transaction a criminal offence, and denied
any legal recognition to benami transactions. The implementation of the Act was part of
a larger policy of the Parliament to minimize inequalities in income and eliminate
inequalities in status, facilities and opportunities not only amongst groups of people
residing in different areas or engaged in different vocations." The state directed its
policy towards ensuring that the ownership and control of the material resources of the
community are so distributed as best to sub-serve the common good and that the
operation of the economic system does not result in concentration of wealth and means
of production to the common detriment. Some of the following provisions of the Act of
1988 have been reproduced herein below:

 A “Benami Transaction” has been defined under Section 2(a) of the Act to
mean a transaction in which a person (transferor) transfers property to another
person (transferee) for a consideration paid or provided by a third person.

 The transferee in the above case is only a “benami” (name lender) for the third
person, who is the real owner. The consideration is really paid or provided for
by the third party i.e., the real owner only.

 No person shall enter into any benami transaction. There is a total prohibition
and ban on it. However, Section 3(2) made clear that the prohibition does not
apply to a person who buys property in the name of his wife and unmarried
daughter. The law will presume that the purchasing the property was made only
for the benefit of the wife or unmarried daughter, unless the contrary is proved.

 The act of carrying out such a benami transaction has been made into a
cognisable offence punishable up to three years imprisonment or with fine or
with both. All parties to the transaction are held to be offenders under Section
3(3) of the Act.

 The real owner of the property legally loses all his right and interest in the
property against the benami owner and cannot legally file a suit, make a claim
or take action against the benami owner to take over the property. There is a
 P a g e | 14

total prohibition against the real owner asserting his ownership rights against
the benami owner27.

 The property owned and held in the name of the benami owner is liable to be
acquired by the government through a competent authority (appointed under the
Act for this purpose) without paying any compensation whatsoever28.

 However, the onus of proving whether a transaction is benami is only on the

person who alleges that it is such. The person should prove that the
consideration was not paid or provided for by the transferee and in fact the
consideration was actually paid or provided for by a third party who is alleged
to be the real owner29.

 This being a legal requirement, the Act has not become very effective in curbing
or prohibiting benami transactions or punishing the persons involved. This is a
serious restriction in the application of the Act30.

Exceptions under the Act

According to, the Benami Transaction (Prohibition) Act, 1988, Benami

transactions are prohibited but there are certain exceptions to this rule and they are as
following:

 The property may be purchased by a person in the name of his wife or unmarried
daughter.

 The property which is held by a coparcener in a Hindu Undivided Family and the
property held for the benefit of the other coparceners of the family will not amount
to a Benami transaction.

 The property held by a trustee or other person who, in a fiduciary capacity has the
benefit of another person for whom he has a trustee will also normally not amount
to a Benami transaction. Fiduciary capacity means being in a position of a trustee
and being in a position where the person can be stated to have duties of good faith,

27
Rai Sunil Kumar v. Thakur Singh, AIR 1984 Pat 80.
28
Thakur Krishna v. Kanhayalal, AIR (1961) All 206.
29
Mithilesh Kumari v. Prem Behari Khare, AIR 1989 SC 1247.
30
Ibid.
 P a g e | 15

trust, confidence and transparency and one who must exercise a high standard of
care in managing another person’s money or property.

These were the few exceptions as been provided for in the Benami Act. These
exceptions are been governed by S. 41 of the Transfer of Property Act, 1882 as the
Benami Transaction (Prohibition) Act, 1988 is inapplicable to them.

Motive

For the purpose of deciding whether a transaction is of benami nature, the

motive of the person advancing the consideration for the transaction is the most
relevant factor. This view was expressed by the Supreme Court in a case in which the
claim was for partition by the daughter of the property of her father. Her brothers
refuted this claim saying that the properties in question were purchased by their father
in their names and were their personal properties. The court held that the transaction
was in the nature of a benami purchase. The Supreme Court reversed this decision
because the lower court had not taken into consideration of the intention of the father
who provided the consideration and the totality of the circumstances.31

Burden of Proof :

The burden of proof is on the person who sets up the benami and, if the burden
is not discharged, the ostensible title will prevail. Although the initial burden of proof
was on the person alleging that a transaction was benami, the practice was that even a
slight quantity of evidence to show that it was a Benami Transaction sufficed to-shift
the presumption, as Benami Transaction were very familiar in India. The true character
of the transaction was determined by the intention of the person who contributed the
purchase money. The intention was determined based on the relationship of the parties,
the motive for the transaction, the custody of the title deeds, the payment of
considerations and actual possession of the property in dispute.32

The burden of showing that a transfer is a benami transaction lies on the person
who asserts that it is such a transaction.

31
V. Satyanarayana Rao v. Leelavathy, AIR 2007 SC 2637.
32
Solil Paul, Mulla, ‘The Transfer of Property Act’, New Delhi: Butterworths, 1999 at 291.
 P a g e | 16

1. If it is proved that the purchase money came from a person other than the
person in whose favor the property is transferred, the purchase is prima facie
assumed to be for the benefit of the person who supplied the purchase
money, unless there is evidence to the contrary.

2. The true character of the transaction is governed by the intention of the

person who contributed the purchase money.

3. The question as to what the intention was has to be decided on the basis of
the surrounding circumstances, the relationship of the parties, the motives
governing their action in bringing about the transaction and their subsequent
conduct, etc.33

Based on the above conditions, the Supreme Court set aside the decision of the
High Court and passed a decree directing the defendant to deliver the possession of the
suit house to plaintiffs.

33
Raj Ballav Dass v. Haripada, AIR 1985 Cal 2
 P a g e | 17

III. THE BENAMI TRANSACTIONS (PROHIBITION)

BILL, 2011

It has a term of imprisonment of up to three years or fine or both. It is nearly 22

years since the Act was passed, but it has made absolutely no impact. The benami deals
are widespread and are one of the main cause for proliferation of black money. Though
the Act provides that there would be no benami deals, no visible action has been taken
against persons resorting to such deals freely.

This is because of lack of proper machinery to implement the Act. There have
been no instances to show that in exercise of power conferred under section 5,
properties held benami have been acquired by the Government or confiscated to
indicate the deterrence of the legislation. The Act does not inculcate fear of any kind
for those, who are dealing in benami names. The adverse impact of benami transactions
on the country's economy is large. It bifurcates income earning activities into fragments
leading to loss of tax revenue. These have been resorted to commit frauds and cheating.
These lead to substantial litigation, where the burden of proving benami is on the
Government, but it does not get discharged substantially because the facts are in the
knowledge of respective parties. Apart from this, the Central Vigilance Commission
(CVC) has also been lobbying for a law to confiscate benami transactions for more than
a decade now. A draft anti-corruption strategy drawn up by the CVC had recommended
dovetailing enforcement of this law to the unique identification project. Owing to the
infirmities in the existing Act, formulation of rules was not possible without a
comprehensive legislation by repealing the Act.

As a consequence of the above and due to the pressure on the Government to

act against corruption, the Government has recently approved a proposal to bring a new
legislation for stricter control over benami transactions. A new Benami Transactions
(Prohibition) Bill 2011 shall replace the existing Act, plugging the loopholes in the
existing law. The new Bill contains elaborate provisions dealing with the definition of
benami transaction and benami property, prohibited benami transactions, consequences
of entering into a prohibited benami transaction and the procedure for implementing the
benami law.
 P a g e | 18

The Benami Transactions (Prohibition) Bill, 2011 has been introduced by the
Ministry of Finance on August 18, 2011. It brings the following conclusions:

 The Benami Transactions (Prohibition) Bill, 2011 was introduced by the

Ministry of Finance in the LokSabha on August 18, 2011 to enact a new
legislation to prohibit benami transactions. This Bill replaces the existing
Benami Transactions (Prohibition) Act, 1988.

 The Bill defines benami transaction as an arrangement where (a) property is

held by a person (other than in fiduciary capacity) on behalf of another person
who has paid for it; or (b) the transaction is made for a property in a fictitious
name; or (c) the owner of the property is not aware of or denies knowledge of
such ownership. A benamidar is a person or fictitious person in whose name
the property is held or transferred.

 The Bill prohibits all persons from entering into benami transactions. Any
property held in benami shall be confiscated by the central government. Once a
property is confiscated, all rights and title of such property shall vest completely
in the central government and no compensation shall be payable. These
provisions do not apply to any transaction entered into by an individual in the
name of his spouse, brother or sister, or any lineal ascendant or descendant may
not be considered benami.

 The Bill restricts the right of any person who is claiming to be the real owner to
recover such property. In addition, no person shall be able to re-transfer such
property to the beneficial owner.

 The authorities for the purpose of this Act shall include; (a) Initiating Officer
who is an Assistant Commissioner of Income Tax , (b) Approving Authority
who is a Joint Commissioner of Income Tax, and (c) Administrator who is an
Income Tax Officer.

 These authorities shall have same powers as vested in a civil court while trying
a suit in matters such as inspection, production of documents, issuing
commissions, etc.
 P a g e | 19

 The Bill provides that the Adjudicating Authority and the Appellate Tribunal
established under the Prevention of Money laundering Act, 2002, shall also be
the same for the purposes of this Act.

 If the Initiating Officer has reason to believe that a property is held benami, he
may issue a notice to the benamidar and call for documents and reports for
inquiry.

 The Initiating Officer may issue a notice, after the approval from the Approving
Officer, to provisionally attach any property, which he has reason to believe is
held benami.

 The Initiating Officer or the Adjudicating Authority may impound or retain any
books of accounts that it may feel is required for the inquiry, for a period not
exceeding three months from the date of attachment of the property.

 The Adjudicating Officer, after hearing the person whose property is attached,
may make an order for the confiscation of the property held benami.

 The Administrator shall have the power to receive and manage the property
which has been confiscated. The Administrator shall issue the notice for the
surrender or forcible takeover of possession of the benami property.

 Any person aggrieved by an order of the Adjudicating Officer shall appeal to

the Appellate Tribunal. Any person aggrieved by the Appellate Tribunal in turn
may appeal to the High Court.

 Any person who enters into benami transactions, or abets or induces another
person to enter into such transactions shall be punishable with an imprisonment
for six months to two years, and liable to a fine of up to 25 per cent of the fair
market value of the property held in benami. In addition, any person who
wilfully gives false information shall be liable to an imprisonment of three
months to two years and a fine of up to 10 per cent of the market value of the
property. The Bill provides for Special Courts to try such cases.34

34
http://www.prsindia.org/billtrack/the-benami-transactions-prohibition-bill-2011-1911/
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CONCLUSION

The legislation of 1988 prohibits all the Benami transactions subject to few
exceptions. It has made such transactions a criminal offense. The Act of 1988 has
prohibited Benami transactions retrospectively and is intended to curb the menace of
tax evasion, defrauding creditors, escaping abolition of Zimandari statutes and
compulsory nationalization.

Researcher is of the view that there should be some implementing agency at the
local levels, to check benami transactions (when they are with dishonest motives).
More benami transactions will come to light with local monitoring agencies. Otherwise,
it is only (if at all) when the real owner and benamidar fall out that the benami
transaction comes to light. In addition these agencies should look after the interests of
the weaker sections of society (usually the benamidar) who have limited access to law.
The 130th Law Commission Report made some useful suggestions in this regard. The
report recommended the involvement of voluntary in enforcement of laws, as that
would help achieve a constitutional culture of obedience to laws. Certain authorized
non-government organizations should be empowered to lay a complaint before a
tribunal. The tribunal can investigate the complaint and then provided the appropriate
redressal. As an alternative, the report recommended that Liaison Officers attached to
Gram Nayalayas, should be given the duty to supervise the enforcement of the Act and
to lay a complaint before a tribunal.
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BIBLIOGRAPHY

BOOKS & STATUTES

 Singh Avtar (Dr.), Textbook on The Transfer of Property Act, 3rd ed., Universal
Law Publishing Co., New Delhi, 2013.

 Tripathi, G. P. (Dr.), The Transfer of Propert Act, 17th ed., Central Law
Publications, Allahabad, 2011.

 Mallick M. R., A Commentary on Transfer of Property Act, 2nd ed., Eastern Law
House, Calcutta, 2001.

 Mitra B. B., Commentary on Transfer of Property Act, 11th ed., Delhi Law House,
Delhi, 2009.

 Sinha R. K., The Transfer Of Property ,15th ed., Central Law Agency, Allahabad,
2014.

 Gour Hari Singh, Commentary on Transfer of Property Act, 11th ed., Delhi Law
House, Delhi, 2009.

 The Transfer of Property Act, 1882

 The Benami Transactions (Prohibition) Act, 1988

WEBLINKS

 http://saarclaw.org/expert_talk_detail.php?eid=1021

 http://admis.hp.nic.in/himpol/Citizen/LawLib/C025.HTM

 http://en.wikipedia.org/wiki/Benami_Transactions_(Prohibition)_Act,_1988

 http://www.prsindia.org/uploads/media/Benami/Benami%20Transaction%20(Prohibi
tion)%20Bill.%202011.pdf

 http://lawexplainedindia.wordpress.com/2013/05/09/benami-transaction-defined-
and-the-relation-between-the-terms-benamidar-and-ostensible-owner/

 http://www.lawnotes.in/Section_41_of_Transfer_of_Property_Act,_1882

 http://lawmirror.com/search/search.php?q=section+41+transfer+of+property+act.&s
el=headnote&page=1