What is benami transaction? Is it prohibited in law to purchase a property in other's name?
ADV.PRASAD (property, family) 15 July 2009
Benami Transactions means benami purchase in false name of another person,who does not pay the consideration but merely lends his name,while the real title vests in another person who actually purchased the property and he is the beneficial owner and this time the Parliament totally prohibited the benami transactions and made it an offence also, prohibiting all suits, claims and actions based upon benami transaction.
Sachin Bhatia (Advocate) 15 July 2009
A V Vishal (Advocate) 16 July 2009
The definition of "benami transaction " 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) The Benami Transactions (Prohibition) Act, 1988 is 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.
Sub-section (2) of section 3 of the Benami Transactions (Prohibition) Act, 1988 contemplates that when a property is purchased by a person in the name of his wife, there is a reputable presumption that the property had been purchased for the benefit of the wife. The first respondent has not let in any satisfactory evidence to rebut the presumption that the petition mentioned property was purchased for the benefit of the petitioner. Therefore it has been held that the transaction is not a benami transaction and that the first respondent is not the real owner of the petition mentioned property; Rajam Ammal v. P.K. Pillai, AIR 1991 Mad 310.
(ii) Sub-section (2) of section 3 of the Benami Transactions (Prohibition) Act, 1988 will not save acquisition of property in the name of wife of a corparcener by the by the joint family as it is a benami transaction; Rameshwar Mistry v. Babulal Mistry, AIR 1991 Pat 53.
(iii) Sections 3 and 4 of the Behami Transactions (Prohibition) Act, 1988 have to be read together and understood together. They are not disjunctive provisions in a comprehensive legislation intended to prohibit benami transactions. Both section 3 and 4 are complementary to each other to achieve the same object i.e. prohibition of benami transactions, Ouseph Chacko v. Raman Nair, AIR 1989 Ker 317.
Section 5 of the Benami Transactions (Prohibition) Act, 1988 applies only to tripartite or benami transactions and not to bipartite or sham transactions, for if it had been so, the property covered by bipartite transactions would also be liable to be acquired without compensation or payment of any amount and the Legislature too has not declared it as opposed to public policy and prohibit the same prospectively; Bhargavy P. Sumaathykutty v. Janaki Sathyabhama, AIR 1995 Ker 42.
prof s c pratihar (medical practitioner &legal studies) 17 July 2009
calcutta high court c.o no .4785 of 2006udgment delivered on sept 25th 2008=====Benami Transactions ( Prohibition )Act 1988---HELD: section 3 ---Prohibition in respect of benami transaction----Exception in case of wife and unmarried daughter.(2009)!WBLR(cal)402.
Vishwa Bhushan Arya (Service) 28 July 2009
The prohibition in law is that the one who pays consideration and purchases in others name, cannot claim that he is the true owner after this Act.
Nitish Banka (lawyer) 21 January 2018
A Benami property is a property wherein the person who actually pays the consideration of the property (purchaser), purchases the property in the name of other person (benamidar), however the purchaser did not intends to make that other person beneficiary of the propertyThe sole purpose of Benami transaction is to facilitate the purchaser to hide him from the transaction for a various number of reasons like protecting himself from creditors, legal heirs, evading taxes etc.
Benami transaction may seem improper but they are not purely illegal unless it is a sham transaction wherein the transfer of the property actually does not takes place but takes place only on the papers. However with the enactment of Benami prohibition act, 1988, section 3(3) of the said act makes the person entering into the Benami transaction as a punishable offence, though according to section 3(2) of the said act there are exceptions which makes benami transaction as legal, mainly
However the transfer of title in the property may not be said to be illegal in spite prohibition in Benami prohibition act, 1988
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By Adv. Nitish Banka
Practicing Advocate District and High courts in Delhi/NCR