2017 (10) TMI 1634 - HC - Benami Property

Benami Transactions - existence of HUF pleaded - exception which is pleaded by the appellant/plaintiff to avoid the application of the provision of Section 4(1) of the Benami Act is the existence of HUF and which will not apply because respondents/defendants being females are not coparceners and the exception under Section 4(3) of the Benami Act applies if the property claimed to be an HUF is in the name of a coparcener - HELD THAT - As there is no entitlement to claim a right in a property which is benami by virtue of Section 4(1) of the Act. Benami property means a property which is purchased in the name of one person and funds are paid for purchase by another person with the intention that the benami owner is only a nominal owner and the actual owner is the person who has paid the funds. The Benami Act was passed in the year 1988 to nullify benami transactions as most of the benami transactions had their roots in illegalities, including existence of unaccounted or illegal moneys. Traditional concept of Hindu Law of a male person when he inherits a property from his paternal ancestors then in such a case the inherited property becomes an HUF property is a concept which no longer prevails after passing of the Hindu Succession Act. HUF therefore comes into existence only if a person inherits the property from his male ancestor prior to passing of the Hindu Succession Act, 1956 or if HUF is created after the passing of Hindu Succession Act by a person throwing his self-acquired property/individual property in common hotchpotch. In the present case, there is no pleading of the appellant/plaintiff having inherited the suit property prior to the year 1956 and therefore the only case is of existence of HUF after the year 1956 and which could have accrued only if there was a specific pleading of throwing of the individual property of the appellant/plaintiff into common hotchpotch and which is not so. Proper pleading of existence of HUF is all the more so required in the present case because the HUF which is pleaded to exist is not of the appellant/plaintiff and his immediate family members being his wife or his sons or the wives of his sons, inasmuch as, the respondents/defendants are the wives of the nephews of the appellant/plaintiff. In such extended degree relationship not within the family an HUF does not come into existence merely by uttering a mantra of there being a Joint Hindu Family or Hindu Undivided Family. What are the requirements of an HUF and how an HUF property comes into existence has been dealt with by this Court, after referring to the ratios of the judgments of the Supreme Court in the cases of Chander Sen 1986 (7) TMI 7 - SUPREME COURT and Yudhishter 1986 (12) TMI 380 - SUPREME COURT in the case of Surender Kumar v. Dhani Ram and Others 2016 (1) TMI 1435 - DELHI HIGH COURT Thus illegality in the impugned judgment by which the suit plaint has been rejected, inasmuch as, the suit was barred by Benami Act.

Summary

Issues Involved:
1. Exemption Applications
2. Delay Condonation
3. Benami Transactions (Prohibition) Act, 1988
4. Hindu Undivided Family (HUF) and Coparcenary Rights
5. Pleadings and Legal Requirements for HUF

Detailed Analysis:

1. Exemption Applications:
The court addressed multiple exemption applications (C.M. Appl. Nos. 36273-74/2017 and 36275/2017), allowing them subject to all just exceptions. These applications were disposed of without further detailed analysis.

2. Delay Condonation:
The appellant filed an application (C.M. Appl. No. 36272/2017) seeking condonation of a 37-day delay in filing the appeal. The court allowed this application, thus condoning the delay based on the reasons stated in the application.

3. Benami Transactions (Prohibition) Act, 1988:
The primary issue revolved around the applicability of the Benami Transactions (Prohibition) Act, 1988 (Benami Act). The trial court had dismissed the suit under Section 96 CPC, citing Sections 3 and 4 of the Benami Act. The appellant/plaintiff had claimed that the suit property, though purchased in the names of the defendants (wives of his nephews), was funded by him. The trial court rejected this claim, emphasizing that the Benami Act prohibits any suit to enforce rights over benami property unless exceptions under Section 4(3) are met.

4. Hindu Undivided Family (HUF) and Coparcenary Rights:
The appellant argued that the property was part of a Joint Hindu Family (HUF) and thus should fall under the exceptions of Section 4(3) of the Benami Act. The trial court, however, noted that the defendants were wives of the appellant's nephews and not coparceners in the HUF. According to Hindu law, coparceners are male members who inherit rights by birth in the joint family property. Since the defendants were not coparceners, the exception under Section 4(3)(a) did not apply.

5. Pleadings and Legal Requirements for HUF:
The court stressed the importance of proper pleadings to establish the existence of an HUF. It was highlighted that after the Hindu Succession Act, 1956, inherited property does not automatically become HUF property unless it was inherited before 1956 or explicitly thrown into a common hotchpotch. The appellant failed to provide specific pleadings or evidence to demonstrate the creation of an HUF or that the property was an HUF asset. The court referred to precedents like *Commissioner of Wealth Tax, Kanpur v. Chander Sen* and *Yudhishter v. Ashok Kumar* to underline that post-1956, inherited property is considered self-acquired unless specific conditions are met.

Conclusion:
The court upheld the trial court's judgment, agreeing that the suit was barred by the Benami Act. The appellant's claims did not meet the exceptions under Section 4(3) of the Benami Act, and the pleadings were insufficient to establish the property as HUF property. The appeal was dismissed.