2025 (1) TMI 1332 - AT - Benami Property

Prohibition of Benami Property Transactions - Provisional Attachment Order - real owner - relationship between the alleged Benamidar (Sh. Onkar Singh) and the Beneficial Owner (Sh. Dwarika Gupta) - only contention advanced on behalf of the Appellants is the existence of a fiduciary relationship between the alleged Benamidar and him thus bringing it under exception provided u/s 2(9)(A)(ii) of the PBPT Act 1988 as amended by the Act of 2016. HELD THAT - In the present case it is categorically asserted by the Appellant in all the pleadings that the properties had been bought in the name of the Benamidar by the Beneficial Owner because of the prohibition under the Chhattisgarh Land Revenue Code on purchase land of Scheduled Tribe by non-ST person as per section 165(6). Thus the entire transaction of the appellant was to contravene the provisions of a law. We are of the view that the agreement / authority letter placed by the Appellants on record cannot be relied upon. The Ld. AA noted certain discrepancies. Furthermore it is clearly evident from the facts on record that the two appellants in these two appeals were hand-in-glove with each other in the entire set of transactions. As such it would not have been difficult for them to create a self-serving document of this nature to justify their actions which were in defiance not only of the Chhattisgarh Land Revenue Code but also the letter and spirit of the PBPT Act 1988 (as amended in 2016). In the present case not only was there a transfer of title to the property in the name of the Benamidar Sh. Onkar Singh but also the same was for the unlawful purpose of circumventing the law regarding purchase of tribal land by non-tribals. On both counts therefore the exception under Section 2(9)(A)(ii) is not available to the appellants in the present case. The relevant facts are that the said properties were owned by persons belonging to ST community and Sh. Dwarika Gupta has asked Sh. Onkar Singh to purchase the same on his behalf and also provided him with Sh. Onkar Singh to purchase the same on his behalf and also provided him with the necessary funds. The initial sale deeds were transferred in favour of Sh. Divya deep Gupta son of Sh. Dwarika Gupta. From these facts it is evident that not only the lands were purchased in the name of the benamidar (Sh. Onkar Singh) for consideration provided by the beneficial owner (Sh. Gupta) but the same were held by the former for the benefit of the latter. The subsequent transfer by Sh. Onkar Singh to Divya deep Gupta s/o Dwarika Gupta would therefore be direct contravention of Section 6 of the Act and as such null and void. Accordingly the same has rightly been attached as benami property. The appellant s contention in this regard is therefore rejected. Matter be remitted back to the Ld. Adjudicating Authority for a factual verification as to whether the properties at serial no. 4 to 10 belonged to or stood in the name of Shri Onkar Singh Gond and to record a fresh finding whether they constituted benami properties within the meaning of the PBPT Act 1988 (as amended by the Act of 2016). The Ld. AA would afford the Appellant a reasonable opportunity to be heard and to adduce necessary documentary evidence in this regard. The needful would be done within a period six months from the date of communication of this order. It is made clear that the matter is remanded back to the Ld. AA only for the limited purpose as stated in the preceding paragraph. In reference to the other properties constituting the subject matter of this appeal namely the properties listed at Sl. Nos. 1-3 11 12 13-15, 16 paragraphs 3 to 57 the appeal shall stand dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in the judgment include:

• Whether the properties in question were benami properties under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act, 1988).
• Whether the relationship between the alleged Benamidar (Sh. Onkar Singh) and the Beneficial Owner (Sh. Dwarika Gupta) fell within the exception of "fiduciary capacity" under Section 2(9)(A)(ii) of the PBPT Act, 1988.
• Whether the transactions were designed to circumvent the provisions of the Chhattisgarh Land Revenue Code, particularly regarding the purchase of tribal land by non-tribals.
• The applicability of the amended PBPT Act, 2016 to transactions occurring before its enactment.

2. ISSUE-WISE DETAILED ANALYSIS

Benami Nature of the Properties:

• The Court examined whether the properties were held benami, with Sh. Onkar Singh as the Benamidar and Sh. Dwarika Gupta as the Beneficial Owner. The properties were purchased in the name of Sh. Onkar Singh using funds provided by Sh. Dwarika Gupta.
• Evidence included statements from Sh. Onkar Singh acknowledging that he acted under the direction of Sh. Dwarika Gupta and did not have the financial capacity to purchase the properties independently.
• The Court found that the transactions were indeed benami as defined under Section 2(8) of the PBPT Act, 1988, given that the properties were held for the benefit of the person who provided the consideration (Sh. Dwarika Gupta).

Fiduciary Capacity Exception:

• The appellants argued that the relationship between Sh. Onkar Singh and Sh. Dwarika Gupta was fiduciary, thus exempting the transactions from being classified as benami under Section 2(9)(A)(ii) of the PBPT Act.
• The Court analyzed the definition and scope of "fiduciary capacity," referencing legal texts and precedents. A fiduciary relationship is characterized by trust, confidence, and good faith.
• The Court concluded that no fiduciary relationship existed between Sh. Onkar Singh and Sh. Dwarika Gupta. The evidence showed that Sh. Onkar Singh merely lent his name for the transactions, without any real discretion or control, which negated the existence of a fiduciary relationship.

Circumvention of Chhattisgarh Land Revenue Code:

• The transactions were scrutinized for their intent to bypass legal restrictions on the purchase of tribal land by non-tribals as per the Chhattisgarh Land Revenue Code.
• The Court found that the transactions were structured to defeat the statutory prohibition, as admitted by the appellants themselves, thereby violating Section 53 of the PBPT Act, which penalizes such contraventions.

Retrospective Application of PBPT Act, 2016:

• The appellants contended that properties acquired before the 2016 amendment should not be subjected to the amended provisions.
• The Court referred to the Supreme Court's decision, which clarified that the amended provisions do not apply retrospectively. Consequently, properties acquired before the amendment, such as those at serial numbers 16 and 17, could not be held as benami under the amended Act.

3. SIGNIFICANT HOLDINGS

Core Principles Established:

• The Court reaffirmed that a fiduciary relationship requires genuine trust and discretion, which was absent in this case.
• Transactions designed to circumvent statutory protections for tribal lands are void and punishable under the PBPT Act.
• The retrospective application of the PBPT Act, 2016, is limited, and transactions prior to its enactment are not covered by the amended provisions.

Final Determinations:

• The properties at serial numbers 1 to 15 were confirmed as benami and the attachment upheld, except for properties at serial numbers 16 and 17, where the attachment was revoked due to the non-retrospective application of the 2016 amendment.
• The matter regarding properties at serial numbers 4 to 10 was remanded to the Adjudicating Authority for factual verification.
• The appeals were dismissed concerning the other properties, with the Court emphasizing the lack of a fiduciary relationship and the intent to contravene the law.