2019 (10) TMI 218 - HC - Benami Property

Whether not the claim in the suit, insofar as of declaration, is barred by the Prohibition of Benami Property Transactions Act, 1988? HELD THAT - From the tenor of the plaint it appears that when the plaintiff claims to be doing everything, he would certainly know whether his wife was an income tax assessee or not and as to how the property was dealt with in the income tax returns of the plaintiff and the defendant. It also needs adjudication, whether without saying the property is being held benami by an individual in the income tax returns, a plea of benami can be entertained - Though the senior counsel for the plaintiff has also contended that the defendant, on the basis of the plaintiff also being a 50% owner of the property, be at least restrained from dealing with the property but till there is a proper plaint before this Court and till the plaintiff takes a categorical stand with respect to benami, it is not deemed appropriate to entertain the suit. The senior counsel for the plaintiff, under instructions, gives up the relief claimed of declaration and confines the suit to that for prohibitory and mandatory injunction only - Subject to the aforesaid, the suit is entertained.

Summary

Issues involved:
1. Declaration of sole ownership of property.
2. Mandatory injunction for handing over the original Sale Deed.
3. Permanent injunction against parting with possession or creating third-party interest.
4. Application of Prohibition of Benami Property Transactions Act, 1988.
5. Requirement of pleading known sources of income for property purchase.
6. Compliance with statutory provisions for exemption from benami law.
7. Consideration of income tax status of the defendant.
8. Entertaining a plea of benami without specific averments.
9. Restraining dealing with property pending clarification on benami status.

Analysis:
1. The plaintiff filed a suit against his wife seeking a declaration of sole ownership of a property, a mandatory injunction for the original Sale Deed, and a permanent injunction against parting with possession or creating third-party interest. However, the plaintiff admitted in the plaint that the property was in joint names.
2. The court raised concerns about the claim's compliance with the Prohibition of Benami Property Transactions Act, 1988. The plaintiff's counsel cited an exemption clause but failed to provide averments of the property being purchased from known sources of income.
3. The court emphasized the necessity for the plaintiff to plead and prove that the property's consideration came from their known income sources before claiming exemption from benami laws.
4. The court highlighted the legislative intent to balance benami transaction laws with income concealment prohibitions, requiring specific pleas and evidence of known income sources for property purchases.
5. The plaintiff's reference to a precedent case was deemed insufficient without proper compliance with statutory provisions in the plaint.
6. The court questioned the income tax status of the defendant and the lack of clarity on how the property was dealt with in tax returns, indicating the need for detailed adjudication on the benami status.
7. The plaintiff's counsel abandoned the declaration claim and limited the suit to injunction relief, leading to the court entertaining the suit subject to compliance with statutory provisions.
8. Summons and notices were issued to the defendant, and both parties were restrained from dealing with the property until further orders, emphasizing compliance with procedural rules by a specified date.