The Kerala High Court, in a recent ruling, said that the intention of both the parties is an important factor in determining if the transaction made was Benami or not! This could be ascertained from the tests shown by the Apex Court for this exact purpose. A Division Bench of Justice A. Muhamed Mustaque and Justice Sophy Thomas also mentioned that if there is no evidence to the contrary, if a husband makes a property purchase by joining his wife as a name lender, he remains the beneficiary of such property. Still, if the purchase were made in her favour, then the wife would become the beneficiary.
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What is the Benami Transaction Act?
In Hindi, ‘Benami’ translates to ‘no name’ or ‘without a name’. In a literal sense, Benami property or Benami transaction would then mean a property where a person’s name isn’t used. Still, instead, the usage of another person or a fictitious person is made.
The original law of Benami transactions was written in The Benami Transactions (Prohibition) Act, 1988. The then Act consisted of 8 sections. The same act was later amended by The Benami Transactions (Prohibition) Amendment Act, 2016, and now consists of 72 Sections.
What is Benami Property?
Any property, be it tangible or intangible, movable or immovable, that has been the subject matter of a Benami transaction is considered a Benami property.
What is a Benami transaction?
Let’s try and understand what a Benami transaction is via an example-
Let’s assume that a property has been purchased and registered in X’s name. However, it is Z who pays for the property. X only says Yes to hold the property for Z. This would make Z the beneficial owner of the property purchased.
In a Benami transaction, the property is transferred or held by a person (X), and the consideration for such property is paid by another person (Z) for whose benefit such property is held.
Case in Point!
The case that made the act the talk of the town in Kerala has rather peculiar facts. The alleged man had an illegitimate relationship with his employee and fathered a child with her. He then later brought the child to his home, keeping his wife under the guise that the kid was from an unwed nurse and was abandoned and put up for adoption. Since the couple had been unsuccessful in having kids despite years of trying and many treatments, the wife raised the kid for five years as their own before realising that her husband was the child’s biological father.
Upon knowing about the affair, the grief-stricken wife returned to her home. The husband refused to end his relationship with the mother of the child; hence, the wife then decided to file for divorce. The couple had spent 16 years of their lives together, establishing numerous businesses and acquiring various properties under their name, jointly and severally. Both the parties, the husband and the wife, filed for a declaration, stating that the opposite party was only a name lender in the transactions of the properties and that they were the beneficial owner of the same. They also claimed injunctions against each other.
At first, the Family Court had dissolved their marriage, partly allowing the wife’s plea for the case and dismissing the husband’s plea for declaration as to the beneficial owner. Challenging the Family Court’s order, the husband filed an appeal before the state’s High Court.
The Court, in session, analysed the meaning of ‘Benami’ as we did as well in the news piece, before concluding that a Benami transaction means the transfer by or to a person who only acts as an apparent owner in place of the beneficial owner, whose name was not disclosed. The Bench in session also established that whether a transaction is real or Benami entirely depends on the beneficiary’s intention.
What was the Verdict?
As per Section 2(a) of the Benami Transactions Act, Benami Transaction is any transaction where the property is transferred to an individual for a consideration provided or paid by another individual. Section 3(2)(a) specifies that nothing prevents an individual from purchasing property under the name of the wife or unmarried daughter, and only if the contrary is proved; until then, it is presumed that the said property was purchased for the benefit of the wife or unmarried daughter.
Hence, to find out if the transaction alleged is a Benami transaction and to make certain who was the Benamidar and who was the beneficiary, the Bench applied context in each transaction. “If it is found that the person in whose name the property stands was only a name lender, and the property was purchased for the benefit of the beneficial owner, expending his own money, then, of course, the Benamidar may not get any right, title or interest over the properties held in his/her name.” The High Court accordingly decided on the nature of each transaction and later disposed of the plea.
