2002 (8) TMI 878 - HC - Benami Property

Summary

Issues Involved:
1. Interplay of the Benami Transactions (Prohibition) Act, 1988 with the Indian Trusts Act, 1982.
2. Application for amendment of the plaint under Order 6, Rule 17 of the Code of Civil Procedure.
3. Whether the proposed amendment is hit by the Benami Transactions (Prohibition) Act, 1988.
4. Interpretation of fiduciary capacity under Section 4(3)(b) of the Benami Act.

Detailed Analysis:

1. Interplay of the Benami Transactions (Prohibition) Act, 1988 with the Indian Trusts Act, 1982:
The judgment discusses the deletion of Sections 81 & 82 in Chapter IX of the Indian Trusts Act, 1982, by the Benami Transactions (Prohibition) Act, 1988. This deletion indicates the legislative intent to not allow the pre-1988 concepts of trusteeship or fiduciary capacity to continue as defenses against the prohibition of benami transactions.

2. Application for amendment of the plaint under Order 6, Rule 17 of the Code of Civil Procedure:
The plaintiff sought to amend the plaint to include properties allegedly purchased by Smt. Raj Rani Bhasin in the name of defendant No. 3, claiming these properties were held in trust for her benefit and are liable to be partitioned. The defendant objected, arguing that the proposed amendments were prohibited by the Benami Transactions (Prohibition) Act, 1988.

3. Whether the proposed amendment is hit by the Benami Transactions (Prohibition) Act, 1988:
The defendant argued that the proposed amendments were clearly hit by the Benami Transactions (Prohibition) Act, 1988, as the transactions described by the plaintiff fit the definition of "benami transaction" under Section 2(a) of the Act. The court agreed, noting that the transaction described by the plaintiff, where the mother paid for the property but it was purchased in the name of her son (defendant No. 3), is a benami transaction and thus prohibited by Sections 3 and 4 of the Act.

4. Interpretation of fiduciary capacity under Section 4(3)(b) of the Benami Act:
The plaintiff relied on the proviso to Section 4 of the Benami Act, which excludes from the prohibition situations where the property is held by a trustee or in a fiduciary capacity. However, the court clarified that after the repeal of Sections 81 and 82 of the Indian Trusts Act, 1882, only specific instances of fiduciary capacity, such as property held by a partner in a partnership firm, are excluded from the prohibition. The court distinguished between a genuine fiduciary relationship and a benami transaction, concluding that the plaintiff's case did not fall within the fiduciary exception provided in Section 4(3)(b).

Conclusion:
The court dismissed the application for amendment, holding that the proposed amendments were barred by the Benami Transactions (Prohibition) Act, 1988. The court emphasized that the legislative intent was to prohibit benami transactions and not allow defenses based on trusteeship or fiduciary capacity as they existed before the 1988 amendments. The judgment reflects a strict interpretation of the Benami Transactions (Prohibition) Act, ensuring that its prohibitions are effectively enforced.