2022 (6) TMI 327 - HC - Benami Property

Benami transaction - availability of joint family property or income - joint family acquisition - Purchase of property in the name of wife (Mrs. A) - Presumption of joint family income and joint family funds - Whether (Mrs. A) held the property for the benefit of the joint family members? - HELD THAT - The plaintiff has nowhere alleged that (Mrs. A) held the property for the benefit of the joint family members. Mere pleading that she was a name lender would not be sufficient. If (Mrs. A) was running the family business and was in a dominant position, then, the purchase of a property from out of the joint family funds would be in the nature of a trust. It can be stated that she was holding the property for the benefit of all the members of the joint family. But such is not a case here. (Mrs. A) was a mere housewife. It was Shanmugavel Asari who purchased the property in the name of his wife from out of the joint family funds. The statute would presume that the purchase was for the benefit of (Mrs. A) and it was not a benami purchase. Of-course, the presumption is rebuttable. To rebut the statutory presumption, there must be firm foundation in pleadings as well as evidence. In the pleadings, there is no averment that (Mrs. A) held the property for the benefit of the joint family members. (Mrs. A) examined herself as D.W.3 and not even a suggestion has been put in this regard. This is a clear case of complete lack of pleadings and lack of proofs. The very purpose of enacting the Central Act 45 of 1988 is to prohibit the benami transactions. Of-course, the statute carved out certain exceptions. But then, every benami transaction cannot be allowed to be sustained by bringing it within the scope of the exceptions. A careful reading of the statutory scheme as applied to the factual matrix leads me to the conclusion that the purchase of the suit property was very much for the benefit of (Mrs. A) and therefore, the appellant did acquire valid title under Ex.A5. The fourth substantial question of law is answered in favour of the appellant. The impugned judgment and decree passed by the first Appellate Court is set aside. The decision of the Trial Court is restored. As per the undertaking given by the appellant, the appellant is directed to deposit a sum of Rs.1.00 lakh within a period of six weeks from the date of receipt of copy of this judgment to the credit of the suit on the file of the Principal District Munsif Court, Sivagangai. The said amount shall remain in court deposit for a period of one year. If the plaintiff Arunachalam decides to accept this judgment, it is open for him to withdraw the said amount.

Summary

Issues Involved:
1. Retroactivity and retrospectivity of the Benami Prohibition Act.
2. Presumption of joint family income and property acquisition.
3. Applicability of the Benami Prohibition Act on the suit transaction.
4. Estoppel against the plaintiff's claim against a bona fide purchaser.

Issue-wise Detailed Analysis:

1. Retroactivity and Retrospectivity of the Benami Prohibition Act:
The first substantial question of law was whether the Benami Prohibition Act is retroactive and retrospective. The court referenced the Supreme Court decision in R. Rajagopal Reddy (1995 2 SCC 630), which clarified that Section 4(1) of the Act is not retrospective. It prohibits suits to enforce rights in respect of benami property from the date the Act came into force, i.e., 19th May 1988. The legislature did not intend to apply Section 4(1) retrospectively to pending suits. The 2016 amendment to the Act, which omitted Subsection 3 of Section 4, is also not retrospective. Therefore, the case was determined based on the unamended provisions.

2. Presumption of Joint Family Income and Property Acquisition:
The trial court had found that the suit property was purchased from joint family funds generated by the joint efforts of the family members. This finding was not challenged by the appellant in the first appellate court, either through cross-objection or under Order 41 Rule 33 of C.P.C. The evidence indicated that Umayal Ammal, in whose name the property was purchased, was a housewife with no independent income. The property was bought for Rs.18,700/- in 1981, and Umayal Ammal was merely a name lender. The second and third substantial questions of law, regarding the presumption of joint family income and acquisition, were thus answered against the appellant.

3. Applicability of the Benami Prohibition Act on the Suit Transaction:
The court examined whether the case fell within the exceptions of Section 4(3) of the Act. Since Umayal Ammal was not a member of the coparcenary, Section 4(3)(a) did not apply. The court then considered Section 4(3)(b), which involves a fiduciary capacity. The plaintiff did not allege that Umayal Ammal held the property for the benefit of the joint family members, nor was there evidence to suggest she was in a fiduciary position. The statutory presumption was that the property was purchased for Umayal Ammal's benefit, not as a benami transaction. The fourth substantial question of law was answered in favor of the appellant, indicating that the purchase was for Umayal Ammal's benefit, thus validating the appellant's title under Ex.A5.

4. Estoppel Against the Plaintiff's Claim Against a Bona Fide Purchaser:
The fifth substantial question of law involved the principle of estoppel. The court noted that the plaintiff had filed the suit before the first alienation of the property. The appellant purchased the property from the fourth defendant, not directly from Umayal Ammal. Therefore, the principle of estoppel did not apply, as the plaintiff did not induce the appellant to purchase the property. The fifth substantial question of law was also answered against the appellant.

Conclusion:
The court concluded that the purchase of the suit property was for the benefit of Umayal Ammal, and the appellant acquired valid title under Ex.A5. The judgment and decree of the first appellate court were set aside, and the trial court's decision was restored. The appellant was directed to deposit a sum of Rs.1.00 lakh within six weeks, which the plaintiff could withdraw if he accepted the judgment. The second appeal was allowed with no costs.