1989 (4) TMI 51 - HC - Benami Property

Issues Involved:
1. Whether a sham transaction qualifies as a "benami" transaction.
2. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988, to sham transactions.
3. Determination of the nature of the transactions in question (sham, nominal, or genuine).
4. Impact of the Benami Transactions (Prohibition) Act, 1988, on pending proceedings.
5. Legal implications of the findings on the transactions by the lower courts.

Comprehensive, Issue-wise Detailed Analysis:

1. Whether a sham transaction qualifies as a "benami" transaction:
The core question addressed was whether sham transactions fall under the definition of "benami" transactions. The judgment differentiates between two types of benami transactions: those where a real transfer occurs but the property is held by a person other than the real owner, and those that are merely sham transactions with no intention of transferring title or possession. The court concluded that sham transactions, which are not intended to transfer any rights and involve no consideration, do not qualify as benami transactions under the Benami Transactions (Prohibition) Act, 1988.

2. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988, to sham transactions:
The court examined whether Section 4 of the Act, which prohibits suits to enforce rights in respect of property held benami, applies to sham transactions. It was determined that Section 4 does not apply to sham transactions because such transactions do not meet the definition of "benami transaction" as per Section 2(a) of the Act. The court emphasized that the Act targets genuine benami transactions where the real owner is different from the ostensible owner, not sham transactions which are merely nominal and not intended to be acted upon.

3. Determination of the nature of the transactions in question (sham, nominal, or genuine):
The court reviewed the evidence and findings of the lower courts, which had determined that the transactions in question were sham and nominal. The plaintiff and the assignee under the 1963 deed (PW 2) both admitted that the assignment was not intended to transfer any rights and was not supported by consideration. Consequently, the subsequent transactions based on this sham assignment were also deemed nominal and not genuine. The court upheld these findings, noting that the transactions were not intended to transfer title or possession and were therefore not genuine.

4. Impact of the Benami Transactions (Prohibition) Act, 1988, on pending proceedings:
The court acknowledged that the Benami Transactions (Prohibition) Act, 1988, applies to all pending proceedings, including those at the second appellate stage. However, since the transactions in question were found to be sham and nominal, the Act's provisions, specifically Section 4, were not applicable. The court cited the Supreme Court's decision in Mithilesh Kumari v. Prem Behari Khare, which clarified that the Act applies retroactively to benami transactions but does not extend to sham transactions.

5. Legal implications of the findings on the transactions by the lower courts:
The findings of the lower courts were that the transactions were sham and nominal. These findings were based on the evidence that no consideration was paid, and no possession was transferred. The court noted that the use of the term "benami" by the lower courts was not accurate in describing the transactions as they were actually sham. The court confirmed that the transactions did not divest the plaintiff of his title or possession, and thus, Section 4 of the Act did not apply. The court dismissed the second appeal, affirming the plaintiff's entitlement to the declaration and injunction sought.

Conclusion:
The second appeal was dismissed, and the court held that sham transactions do not fall under the purview of the Benami Transactions (Prohibition) Act, 1988. The findings of the lower courts that the transactions were sham and nominal were upheld, and the plaintiff was granted the relief sought. The judgment clarified the distinction between sham and benami transactions and the applicability of the Act to each.

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