2023 (8) TMI 2 - HC - Benami Property

Benami transaction - real owner of property - beneficial wight in suit property - property is the self acquired property of defendant no.2 - Defendant no.1 purchased the property before the act came into force - HELD THAT - The Hon ble Supreme Court in the case of R. Rajagopal Reeddy, 1995 (1) TMI 67 - SUPREME COURT has held that the plaint would not lie under section 4(1) of the Benami Transactions (Prohibition) Act for a claim to enforce any right in respect of any property held benami, against the person in whose name the property is held after coming into effect of the Act, even if the transactions were prior in point of time. Also under section 4(2) of the Act if a suit is filed by plaintiff who claims to be owner of the property on the basis of ownership document and claims ownership on the basis that the property is in his name, after the coming in force of the Act no defence would be permitted or allowed in any such suit, claim or action by or on behalf of the person claiming to be the real owner of such property held benami. Section 4(2) restricts the defence of a pre-existing right. Such a provision the Hon ble Supreme Court has held in the case of R. Rajagopal Reddy (supra), cannot be retrospective or retroactive by necessary implication. However, what is prohibited is the defence to be taken on that day when the act came into force. Thus, even if the transaction is prior in point of time, defence based by the owner of the property who holds the property benami in the name of some other person is not permissible under section 4(2) of the Benami Transactions (Prohibition) Act after the Act comes into force. In the instant case, the defence is taken much prior to the coming into force of the Benami Transactions (Prohibition) Act and the defence once allowed cannot be subsequently taken away. The defence was taken in the year 1982 much before the act came into force. In the instant case, the defence of benami transaction by defendant no.2 in favour of plaintiff is taken by the person (defendant no.1), who has purchased the property before the act came into force. On the date of the act coming into force there was no property in the name of the plaintiff, as such, whether a plea of declaration of ownership on the basis of sale deed in its favour prior to the coming into force of the Benami Transactions (Prohibition) Act can be maintained by the plaintiff against the purchaser of the property from the real owner who purchased the property benami in the name of the plaintiff, is itself doubtful. Defence was taken by defendant no.1 of benami transaction by defendant no.2 in favour of the plaintiff and that the defendant no.2 being the real owner of the property was entitled to sell the suit property to the defendant no.1 was taken much prior to the coming into force of the Benami Transactions (Prohibition) Act and in view of the judgment of the 3 Judges bench of R. Rajagopal Reddy (supra), the defence of benami transaction taken prior to the coming into the act is available and the Benami Transactions (Prohibition) Act is not retroactive to that extent. The Prohibition of Benami Property Transactions Act, 1988 is not applicable to the instant case. Next Question of Law raised for the appellant that the permission was required to be taken under section 8 of the Guardianship Act from the mother of the appellant is also not tenable in view of the fact that the property is the self acquired property of defendant no.2 and the appellant plaintiff had no right in the suit property, thus the question of taking permission from the district court under section 8 of the Guardianship Act does not arise.

Summary

Issues Involved:
1. Preponderating circumstances and substantial question of law.
2. Application and scope of Benami Transactions (Prohibition) Act.
3. Bar under Section 8 of the Hindu Minority and Guardianship Act, 1957.

Summary:

Issue 1: Preponderating Circumstances and Substantial Question of Law
The appellant challenged the orders of the trial court and the first appellate court, which dismissed his suit for setting aside a sale deed and declaring him the owner of the property. The High Court noted that no substantial questions of law were formulated when the second appeal was admitted. The appellant later formulated substantial questions of law, including the consideration of preponderating circumstances as a substantial question of law.

Issue 2: Application and Scope of Benami Transactions (Prohibition) Act
The appellant contended that the Benami Transactions (Prohibition) Act was not considered, which ousts the defense of the defendants. The trial court and appellate court had held that the suit land was the self-acquired property of defendant no.2 and not the plaintiff's property. The appellant argued that the Benami Transactions (Prohibition) Act, which came into force in 1988, should apply retrospectively. However, the High Court referred to the Supreme Court's judgment in R. Rajagopal Reeddy, which clarified that the Benami Transactions (Prohibition) Act is not retrospective and does not apply to defenses taken before the Act came into force. Therefore, the defense taken by defendant no.1 in 1982 was valid, and the Act was not applicable to the case.

Issue 3: Bar under Section 8 of the Hindu Minority and Guardianship Act, 1957
The appellant argued that the sale deed executed by defendant no.2 without permission from the district court under Section 8 of the Guardianship Act was void. The trial and appellate courts found that the property was the self-acquired property of defendant no.2, and thus, the question of obtaining permission did not arise. The High Court upheld this finding, stating that since the property was not the plaintiff's, no permission under the Guardianship Act was required.

Conclusion:
The High Court dismissed the second appeal, answering both substantial questions of law against the appellant, and disposed of the pending civil application.