1994 (7) TMI 6 - HC - Benami Property

Summary

Issues Involved:
1. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988 to sham transactions.
2. Interpretation of "benami transaction" under the Benami Act.
3. Legislative intent behind the Benami Act's provisions.
4. Impact of the repeal of sections 81 and 82 of the Indian Trusts Act on the Benami Act.

Detailed Analysis:

1. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988 to Sham Transactions:
The primary issue is whether Section 4 of the Benami Act applies to sham transactions. The court examined conflicting views from previous judgments, specifically Bhaskaran Nambiar J.'s decision in Ouseph Chacko v. Raman Nair and Balakrishnan J.'s observation in C.T. Mohanan v. C. Yesoda. The court ultimately agreed with Bhaskaran Nambiar J.'s view that sham transactions do not fall within the purview of the Benami Act.

2. Interpretation of "Benami Transaction" under the Benami Act:
The Benami Act defines "benami transaction" in Section 2(a) as a transaction where property is transferred to one person for a consideration paid by another. The court clarified that this definition only includes the first category of benami transactions, termed as "tripartite benami transactions," where three parties are involved. The second category, "bipartite benami transactions" or sham transactions, where the transferor retains the title despite the transfer, is not covered by this definition.

3. Legislative Intent Behind the Benami Act's Provisions:
The court emphasized the importance of legislative intent, stating that the primary goal of statutory interpretation is to ascertain and effectuate the law-makers' intention. The court noted that the Benami Act's definition of "benami transaction" is meant to be exhaustive and applies to the entire Act, not just Section 3. The use of the word "means" instead of "includes" in the definition indicates a restrictive intent, covering only tripartite transactions.

4. Impact of the Repeal of Sections 81 and 82 of the Indian Trusts Act on the Benami Act:
The court analyzed the repeal of sections 81 and 82 of the Indian Trusts Act, which pertain to real benami transactions. Section 81 deals with transfers where the beneficial interest is not intended to be disposed of, aligning with tripartite transactions. The court concluded that the repeal of these sections does not imply that sham transactions are included within the Benami Act's scope. The court also dismissed the argument that the inclusion of section 81 in the repeal provision indicates an intention to cover sham transactions.

Conclusion:
The court concluded that the Benami Act, specifically Section 4, does not apply to sham transactions. The legislative intent, as reflected in the Act's definition and the repeal provisions, is to address only real benami transactions (tripartite transactions). Consequently, the court dismissed C.R.P. No. 1446 of 1989 and directed that the appeals A.S. No. 84 of 1984 and A.S. No. 424 of 1981 be heard and disposed of on their merits.