2020 (2) TMI 1172 - HC - Benami Property

Benami transaction - petition sued for partition of immoveable properties and dissolution of partnership firms in terms of the Agreement/Family Settlement dated 11th March, 2014 between the plaintiffs and the defendants - HELD THAT - Plaintiffs are required to take a categorical stand, whether are bound by the partition affected vide the Agreement/Family Settlement dated 11th March, 2014 or are proceeding on the premise that there has been no partition and if are proceeding on the latter premise, to satisfy that they have a share in accordance with law in the properties, title to which is held by others and/or right in the partnership firms, notwithstanding being not a partner thereof. The law recognises jointness only in the event of existence of a coparcenary and no coparcenary is pleaded. In relation to partnership also, the law distinguishes between partnership firm under the Partnership Act, 1932 and a Joint Hindu Family Business Firm to which the Partnership Act is not applicable. Though the Benami Law also admits of exceptions but no case of the title holders or the partners being trustees or having held property for the benefit of others, has been pleaded. The counsel for the plaintiffs seeks time to consider. - Matter adjourned.

Summary

Issues: Partition of immoveable properties, dissolution of partnership firms, validity of Agreement/Family Settlement, seeking relief of partition after prior partition, seeking relief of dissolution after dissolution of partnership firms, alternative relief of rendition of accounts, requirement for plaintiffs to take a categorical stand, recognition of jointness in coparcenary, distinction between partnership firm and Joint Hindu Family Business Firm, exceptions under Benami Law, need for pleading trusteeship or property held for the benefit of others.

In this judgment, the plaintiffs have filed a suit for the partition of immoveable properties and dissolution of partnership firms based on an Agreement/Family Settlement dated 11th March, 2014. The court noted that even though the parties agreed to properties being joint and to partition, this agreement does not make the properties joint in law. The court highlighted the Prohibition of Benami Property Transactions Act, 1988, which prohibits the court from recognizing agreements not in accordance with property transfer laws. The court emphasized that if properties have already been partitioned as per the agreement, the plaintiffs cannot seek partition again; they can only seek specific performance of the unfulfilled parts of the agreement, like recovery of possession. Similarly, if partnership firms have been dissolved, the plaintiffs can only seek relief such as accounts or recovery of dues, not dissolution again.

The court pointed out that the plaintiffs must clarify whether they are bound by the partition mentioned in the agreement or if they claim there was no partition. They need to establish their share in the properties or partnership firms legally held by others. The court stressed that jointness is recognized only in the presence of a coparcenary, which was not pleaded in this case. Additionally, the court highlighted the distinction between partnership firms under the Partnership Act, 1932, and Joint Hindu Family Business Firms not covered by the Partnership Act.

Furthermore, the court noted that while exceptions exist under the Benami Law, the plaintiffs did not plead any case of title holders or partners acting as trustees or holding property for others' benefit. The counsel for the plaintiffs requested time to consider the matter, and the case was listed for further hearing on 14th February, 2020.