Source: https://taxadvisorindia.com/bare-acts-the-benami-transactions-prohibition-act-1988/
Timestamp: 2019-04-22 06:16:43+00:00

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(1) This Act may be called theBenami Transactions (Prohibition) Act, 1988.
(I) The definition of âbenami transactionâ in clause (a) of section 2 is not restricted in its application to section 3 alone but also applies to Section 4 and 5 of Benami Transaction (Prohibition) Act, 1988. Parliament has conveyed its intention that the word benami transaction is not confined to one section alone and also that the definition would contain only one category tripartite of benami transaction. The parliament has choosen to confine the definition to one category only. The idea was to make the intention abundantly clear that parliament did not want to encircle the second category i.e. bipartite or sham transaction; Bhargavy P. Sumanthykutty v. Janaki Sathyabhama, AIR 1995 Ker 42.
(ii) TheBenami Transactions (Prohibition) Act, 1988is a piece of prohibitory legislation and it prohibits benami transactions subject to stated exception. A retrospective operation is not be given to a statute so as to impair existing rights or obligations. The presumption against retrospective operation is strong in cases in which the statute if operated retrospectively would prejudicially affect vested rights or the illegality of the past transactions, or impair contracts, or impose new duty, or attach new disability in respect of past transactions or consideration already passed and as defined in section 2(a) a transaction must be benami irrespective of its date of duration, i.e. the Benami Transactions (Prohibition) Act, 1988 is retrospective of its date or duration, i.e. the Benami Transactions (Prohibition) Act, 1988 is retrospective in operation; Mithilesh Kumari v. Prem Behari Khare, AIR 1989 SC 1247.
(vi) Before the promulgation of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance and even before the Benami Transactions (Prohibition) Act was passed, two kinds of transaction were recognized by the courts in India. The first kind of benami transaction was called the real benami transaction in which when âAâ sells a property to âBâ but the sale deed mentionsâCâ as the purchaser. Here the real owner is âBâ and âCâ is only the benamidar. The second class or kind of transaction is the sham transaction in which one person purports to transfer his property to another without intending to pass the title to the transferee. This second type of transaction was âlooselyâ called benami transaction. In the first type of transaction since there are three persons involved, it is also referred as tripartite benami transaction. The fundamental difference between the two categories of transactions is that in the former there is an operative transfer resulting in the vesting of title in the transferee, whereas in the latter there is no operative transfer and the transferor continues to retain title of the property notwithstanding execution of the documents; Bhargavy P. Sumathykutty v. Janaki Sathyabhama, AIR 1995 Ker 42.
(x) Section 4 of the Benami Transaction (Prohibition ) Act, must be taken to relate of section 2 of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988. It is clear that in spite of the recommendation of the Law Commission of India to bar institution of suits only, the Ordinance making authority has thought if it to bar other proceedings also and has also provided in express words barring of all claims and actions to enforce the right of a person alleging to be the real owner against the benemidar. The Legislature by using the expression âshall lieâ made departure from the usual expression âshall be instituteâ clearly demonstrate its resolve to regulate all such suits, claims or actions also which would be lying in the court on the date of its commencement; Urmila Bala Dasi v. Probodh Chandra Ghosh, AIR Cal 283.
(xi) The expression any property held benami is not limited to any particular time, date or duration i.e. the Benami Transactions (Prohibition) Act, 1988 is retrospective in operation. Once the property is found to have been held benami no suit, claim or action to enforce any right in respect thereof shall lie. Sub-section (2) of section 4 similarly nullifies the defences based on any right in respect of any property held benami. Section 4 in its sweep envisages past benami transaction also within its retroactivity. In this sence the Act is both a penal and a disqualifying statute. Held that as the appeal was pending in Supreme Court on commencement of the Benami Transactions (Prohibition) Act, 1988, the matter becomes sub-judice and thereafter the âSupreme Courtâ had seisin of the whole case and the decree passed by the lower courts annihilated and the suit dismissed; Mithilesh Kumari v. Prem Behari Khare, AIR 1989 SC 1247.
(xiv) Section 4 takes into its ambit the right of a real owner vis-Ã -vis ostensible owner. The prohibition under section 4(1) and (2) does not prohibit the right of a third party to get a declaration. The third party has the right to raise the contention that someone was the real transferee and the sale deed was only executed in the name of the transferee who was a benamidar, Gopal Bariha v. Satyanarayan Das, AIR 1991 Ori 131.
(xv) Section 2 of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 relates to section 4 of the Benami Transaction (Prohibition) Act, 1988 and according to section 2 of the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988, action means a civil proceeding commenced by âwritâ or in such other manner, as may be prescribed by rules of court but does not include a criminal proceeding, therefore the term âactionâ is wide enough to take in an appeal or a second appeal; Velayudhan Ramkrishan v. Rajeev, AIR 1989 Ker 12.
(xvi) In the context and setting of section 4 the word âheld â has to be understood as âpossessed or occupiedâ. If the possession or occupation is not benami, section 4 can have no application and as a sham transaction or bipartite transaction is not a benami. Section 4 does not apply to such a transaction; Ouseph Chacko v. Raman Nair, AIR 1989 Ker 317.
(2) For the removal of doubts, it is hereby declared that nothing in sub-section (1) shall affect the continued operation of section 281 A of the Income âtax Act, 1961 (43 of 1961), in the State of Jammu and Kashmir.

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