1991 (6) TMI 26 - HC - Benami Property

Summary

Issues Involved:
1. Validity of the transfer made in favor of the 1st defendant without recording a finding under Section 41 of the Transfer of Property Act.
2. Validity of the transfer made by the 1st defendant in favor of the 5th defendant.
3. Prospective operation of Section 3 and its punitive provisions under the Benami Transactions (Prohibition) Act, 1988.
4. Bar to a suit by a person claiming as the real owner under Section 4 of the Benami Transactions (Prohibition) Act, 1988.
5. Applicability of exceptions under Section 4(3) of the Benami Transactions (Prohibition) Act, 1988.

Issue-wise Detailed Analysis:

1. Validity of the Transfer Made in Favor of the 1st Defendant:
The lower appellate court concluded that the sale deed dated July 19, 1928, was a benami transaction intended for the joint family. However, it held the transfer to the 1st defendant valid without recording a finding under Section 41 of the Transfer of Property Act. The court noted that the first defendant purchased the property without notice of the benami nature, as there was no evidence of such notice. The plaintiff failed to establish that the first defendant had actual or constructive notice of the benami nature of the transaction.

2. Validity of the Transfer Made by the 1st Defendant in Favor of the 5th Defendant:
The first defendant sold the suit property to the 5th defendant during the pendency of the suit. The court held that the 5th defendant, being a purchaser during the pendency of the suit, is entitled to the benefit of the finding in favor of the first defendant. The court emphasized that the plaintiff did not provide evidence to show that the first defendant had notice of the benami nature of the transaction.

3. Prospective Operation of Section 3 and its Punitive Provisions:
Section 3 of the Benami Transactions (Prohibition) Act, 1988, which prohibits entering into benami transactions and makes the breach punishable, is prospective in operation. The court clarified that sub-section (1) of Section 3 applies to transactions taking place after the Act's commencement. Sub-section (2) of Section 3, which provides an exception for purchases in the name of a wife or unmarried daughter, is also prospective.

4. Bar to a Suit by a Person Claiming as the Real Owner:
Section 4 of the Benami Transactions (Prohibition) Act, 1988, bars any suit, claim, or action to enforce any right in respect of any property held benami. This applies to past transactions and pending proceedings. The court referred to the Supreme Court's interpretation in Mithilesh Kumari v. Prem Behari Khare, which held that Section 4 applies retrospectively, barring suits based on past benami transactions.

5. Applicability of Exceptions under Section 4(3):
The court examined whether the case fell under the exceptions in Section 4(3) of the Act. The exceptions include properties held by a coparcener in a Hindu undivided family or by a trustee in a fiduciary capacity. The court found that the property was in the name of Gangamma, who was not a coparcener, and there was no plea that Gangamma held the property as a trustee or in a fiduciary capacity. Therefore, the exceptions did not apply.

Conclusion:
The court concluded that the appeal is barred by Section 4 of the Benami Transactions (Prohibition) Act, 1988, as the appellant sought to enforce a right based on a benami transaction. The appeal was dismissed with costs, upholding the validity of the transfers made to the 1st and 5th defendants and confirming the prospective operation of Section 3 and the retrospective bar under Section 4 of the Act.