Whenever a property has been purchased by one person for which consideration has been paid or provided by another person, the said transaction is considered to be a “benami” transaction. The proposition of law regarding the ownership of any property would be that the person in whose name the property has been purchased is presumed to be the real owner of the property and the burden of proving the transaction as benami is on the person who asserts that the property was purchased through the funds provided by him. Property means property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property. The Benami Transactions (Prohibition) Act, 1988 is a piece of prohibitory legislation and it prohibits benami transactions subject to stated exceptions. Sections 3,5,8 of the Act came into force on 5-9-1988 and the remaining sections came into force on 19-05-1988.
The object of the Benami Transaction (Prohibition) Act, 1988 is to vest ownership rights in benamidar as against the real owner. The benamidar before the enactment of Benami Transactions (Prohibition) Act, 1988 could not have any right, title and interest in the property which the benamidar could convey. Before the Benami Transactions (Prohibition) Act, 1988 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 ‘A" sells a property to ‘B’ but the sale deed mentions ’C’ as the purchaser. Here the real owner is ‘B’ and ‘C’ 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 ‘loosely’ 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;
(2) Nothing in sub-section (1) shall apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter.
(3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.”
Therefore, purchase of property by any person in the name of his wife or unmarried daughter for the benefit of the wife or the unmarried daughter is not prohibited under the Act. There is a rebuttable presumption that the property had been purchased for the benefit of the wife or unmarried daughter. If the concerned person does not let in any satisfactory evidence to rebut the presumption that the property was purchased for the benefit of the wife or unmarried daughter, the transaction cannot be treated as a benami transaction and he cannot be held to be the real owner. If he fails to prove that the property was purchased not for the benefit of the wife or unmarried daughter he cannot claim that he is the owner of the property.
To prove benami the following aspects should be considered:
(1) the source from which the purchase money came
(2) the nature and possession of the property after the purchase
(3) motive, if any, for giving the transaction a benami colour
(4) the position of the parties and the relationship, if any, between the claimant and the alleged benamidar
(5) the custody of the title deeds after the sale
(6) the conduct of the parties concerned in dealing with the property after the sale.
Section 4 of the Act reads as follows:-
“(1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.
(2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.”
Therefore, on coming into force of the Benami Transactions (Prohibition) Act, 1988 defence raised for the proof of the fact that the property held by a person is in the capacity of a benamidar is expressly prohibited. Neither the court is permitted in law to consider such defence nor to record its findings.