2018 (3) TMI 642 - HC - Benami Property

Applicability of Prohibition of Benami Property Transactions Act, 1988 - trial court has rejected the counter claim on account of the same being barred by Section 4 of the Benami Transactions (Prohibition) Act, 1988 - with effect from 1.11.2016 the Benami Transactions (Prohibition) Act, 1988 was amended and the new Act is now called as the Prohibition of Benami Property Transactions Act, 1988 - it was contended that Since the new Act has now become applicable with effect from 1.11.2016 and the counter claim was filed by the appellant nos. 1 and 2 /defendant nos. 1 and 2 in May, 2017, therefore what will govern the parties is not the Benami Transactions (Prohibition) Act, 1988 but the Prohibition of Benami Property Transactions Act, 1988 Held that - A reading of the provision of Section 2(9)(A)(b)(iv) of the Prohibition of Benami Property Transactions Act, shows that no doubt there can be a transaction, which will not be a benami transaction, if the same is entered into between sisters, but the precondition for applicability of the exception in Section 2(9)(A)(b)(iv) of the Prohibition of Benami Property Transactions Act, is that a person who claims entitlement to a property by the same falling in the exception of Section 2(9)(A)(b)(iv), is a person who is shown as a joint owner in any document, i.e. a document besides the title deeds of the property - In the present case, the only documents which are relied upon by the appellant nos. 1 and 2 /defendant nos. 1 and 2 are the two power of attorneys dated 5.12.2013, and these attorneys in no manner shows any right, title and interest of the appellant nos. 1 and 2 /defendant nos. 1 and 2 in the suit property because these attorneys are simple General Power Of Attorneys executed by the respondents/plaintiffs in favour of the appellant nos. 1 and 2 /defendant nos. 1 and 2 in order to enable the appellant nos. 1 and 2 /defendant nos. 1 and 2 to get the suit property transferred from DDA to the respondents/plaintiffs by execution of Conveyence Deed by the DDA in favour of the respondents/plaintiffs. The claim of the appellant nos. 1 and 2 /defendant nos. 1 and 2 to the suit property is a claim based upon a benami transaction, and which transaction does not fall in the exceptions contained in Section 2(9)(A)(b)(i) to (iv) of the Prohibition of Benami Property Transactions Act, 1988 - appeal dismissed.

Summary

Issues:
1. Interpretation of the Prohibition of Benami Property Transactions Act, 1988.
2. Application of Section 2(9)(A)(b)(iv) of the Prohibition of Benami Property Transactions Act, 1988.
3. Determination of whether the claim is based on a benami transaction.

Analysis:

1. The appeal was filed challenging the trial court's dismissal of the counter claim under the Benami Transactions (Prohibition) Act, 1988. The court noted the amendment to the Act in 2016, renaming it the Prohibition of Benami Property Transactions Act, 1988. The new Act governs transactions from November 1, 2016, onwards, affecting the parties involved in the case.

2. The suit property was claimed by the respondents/plaintiffs, while the appellants/defendants asserted ownership based on payment of consideration. The appellants relied on power of attorneys as evidence of ownership. The trial court rejected the counter claim under the Benami Transactions Act, which was to be reviewed under the Prohibition of Benami Property Transactions Act.

3. Section 4(3) of the Benami Transactions Act was repealed, and its provisions were incorporated into the definition of "Benami Transaction" in the Prohibition of Benami Property Transactions Act. The definition outlines specific exceptions to what constitutes a benami transaction, focusing on transactions where property is held for the benefit of the person providing consideration. The court emphasized the importance of these exceptions in determining the nature of the transaction in question.

4. The court highlighted that only transactions falling under Section 2(9)(A)(b)(i) to (iv) of the Prohibition of Benami Property Transactions Act are exempt from being considered benami transactions. The appellants did not meet the criteria set out in the Act's exceptions, particularly regarding fiduciary relationships, which were now clearly defined under the amended Act.

5. The court examined whether the appellants could benefit from Section 2(9)(A)(b)(iv) of the Act, which provides an exception for transactions between joint owners. However, the court found that the power of attorneys presented did not establish joint ownership or any interest in the suit property for the appellants. Therefore, they could not claim exemption under this provision.

6. Ultimately, the court upheld the trial court's judgment, concluding that the appellants' claim to the suit property was based on a benami transaction not falling within the Act's exceptions. The court provided independent reasoning to support the decision, affirming the trial court's ruling.

7. The appeal was dismissed, and the trial court's judgment was upheld based on the application and interpretation of the Prohibition of Benami Property Transactions Act, 1988.