The term Benami
is originated from the Persian language. It literally
means the state of being without a name
In Indian laws (in terms of property law), the term Benami transaction is used
to connote transfer of a property wherein the transfer is made under a
fictitious name or under the name of a third party. The property is transferred
to one person in which consideration is paid by another person and that such
other person did not intend to provide such consideration for the benefit of the
transferee (eventual titleholder).
Historically, the Benami transfers were not prohibited, in contrast, they were
well recognised. Formerly through judicial precedents, subsequently through
In the year 1854, in the case of Gopeekrist Gosain v Gungapersuadit
the privy council recognised Benami transactions as they were a part of Hindu
custom. Though Benami Transactions was not recognised in England, their validity
was upheld in India.
Consequently, in the year 1882, Benami transactions were per se legitimised by
the Indian Trusts Act. Sections 81, 82 and 94 of the Indian Trusts Act gave
statutory protection to the Benami transactions by labelling such transactions
protected by a relationship of trust.
Two types of transactions are often referred to as Benami transactions and are
Firstly, the transaction wherein a person buys a property with his own money but
in the name of another person having no intention to benefit such other person.
For example, A sells a property to B, but the sale deed mentions X as the
purchaser. Here the sale itself is genuine, but the real purchaser is B, X being
Secondly, where a person who is the owner of the property executes a conveyance
in favour of another person without handing over the possession and with no
intention of transferring the title to the property thereunder. In this case,
the transferor continues to be the real owner. This is technically a sham
transaction. For example, when A purports to sell his property to B without
intending that his title should cease or pass to B.
To intertwin the two aforesaid transaction is an erroneous notion. One common
feature in both of the aforementioned scenarios is that the real title is
separated from the ostensible title. They are vested in different persons, and
the fundamental difference between these two classes of transactions is that in
the former(the real Benami transfer) there is an operative transfer resulting in
the vesting of title in the transferee. In contrast, in the latter (the
mislabelled Benami transfer) there is none such, the transferor continuing to
retain the title notwithstanding the execution of the transfer deed.
Moreover, in the former class of cases, it would be necessary, when a dispute
arises to ascertain that whether the person named in the deed is the real
transferee or it is some other person, the enquiry is into the question as to
who paid the consideration for the transfer, Transferee or some third person.
However, in the latter class of cases, when the question is whether the transfer
is genuine or sham, the point for decision would not be, who paid the
consideration but whether any consideration was paid.
As observed earlier, transacting in order to execute a Benami transaction was
legal. The cases before the courts were to check the valid ownership of the
property. Ownerships were contested amongst Benamidars and Claimants.
Hereinbelow are a few essential features which constitute to be indicators of a
Consideration Paid vs Financial Assistance
In Bhim Singh v. Kan Singh
, a case where the issue was whether
contribution of money would render a property to be termed as Benami. The
Supreme court observed that 'the question whether a transaction is a benami
transaction or not, mainly depends upon the intention of the person who has
contributed the purchase money.
The courts further said that the principle is recognised in section 82 of The
Indian Trusts Act, 1882 which says that where a property is transferred to one
person for some consideration paid by another person, and it appears that such
person did not intend to provide benefit of such transaction to the transferee,
the transferee must hold the property on behalf of the person who paid the
consideration of the transfer.
Intention is a subjective criterion, and a mere failure to prove intention will
not render a property Benami. There are other indicators which operate as a tool
to determine whether a disputed property is of 'Benami' nature. To declare the
property 'benami' and provide the benefit to the 'benamidar' [prior to 1988],
all the indicators [as discussed hereinbelow] must be examined carefully.
In Valliammal (D) By Lrs vs Subramaniam & Ors
 the question of Law
before the supreme court was Whether the lower courts have wrongly casted the
onus of proving the 'benami nature of the sale' on the Transferee?
The courts held that there is always a presumption in law that:
The person who purchases the property is the owner of the same.
This presumption can be repudiated by successfully pleading and proving that the
document was taken Benami in name of another person, and the person whose name
appears in the document is not the real owner, but only a benami. Heavy burden
lies on the person who pleads (claimant) that recorded owner is a Benami-holder.
The Hon'ble Judge further stated that the law is well established, the burden of
proving that a particular sale is benami lies on the person who alleges the
transaction to be a benami (the one who asserts must prove). Some pointers (both
objective and subjective) were laid down by the court.
These were not conclusive but indicative of a transfer to be a Benami
Abuse of Law
- The source from which the purchase money came;
- The nature and possession of the property, after the purchase;
- Motive, if any, for giving the transaction a benami colour;
- The position of the parties and the relationship, if any, between the
claimant and the alleged benamidar;
- The custody of the title deeds after the sale; and
- The conduct of the parties concerned in dealing with the property after
Drifting from the ground cause of legality (custom), benami transactions were
entered between parties to defraud public revenues. The shield of Benami laws
was taken to invest unaccounted money. It was claimed that half of Indian
economy was running as a parallel black economy, wherein unaccounted money was
transacted through different mechanisms, Benami being the one.
Owing to significant impact of these unaccounted transactions on Indian economy,
the Indian Government introduced Section 281A in the Income Tax Act, 1961.
The section had various punitive actions against the people who failed to
furnish sources of income and justification in respect of properties held benami.
The extensive menace of illegal benami transactions was not effectively abridged
and therefore to curb Benami Transactions, the Benami Transactions (Prohibition)
Act Bill was passed by both the Houses of Parliament and on 5 September 1988 it
became the Benami Transaction (Prohibition) Act, 1988, moreover, Sections 81 and
82 of the Indian Trusts Act, 1882 and Section 281A of the Income Act, 1961 were
Benami Transaction (Prohibition) Act, 1988
The Benami Transaction (Prohibition) Act, 1988 (hereinafter referred as 'Act,
1988') was enacted in order to prohibit all types of deceptive benami
transactions and recovery of property which has been held as benami. The short
Act consisted of only nine sections. Though not successful [for the reasons
stated later in this paper], but the act was a step ahead to limit Benami
transactions and eventually worked as a foundation for the 2016 amendment act.
Hereinbelow are the key sections of the Act, 1988.
Section 2 of the Act, 1988 defined benami transactions as the ones where
property is transferred to one person for a consideration paid or provided by
another person; Property included both movable and immovable properties.
Section 3 of the Act, 1988 barred Benami transactions except in case of one's
wife and unmarried daughter. This section also contained provisions for
imprisonment of 3 years (in case one enters into a Benami Transaction).
Section 4 of the Act, 1988 said that that no suit, claim or defence shall be
maintained to enforce rights with respect to benami properties.
The exceptions to the same were:
- where the person in whose name the property is held is a coparcener in a
Hindu undivided family and the property is held for the benefit of the
coparceners in the family; or
- where the person in whose name the property is held is a trustee or
other person standing in a fiduciary capacity, and the property is held for
the benefit of another person for whom he is a trustee or towards whom he
stands in such capacity.
Section 5 of the Act, 1988 authorised government to acquire of benami properties
and restricted any amount of compensation in return.
Section 6 of the Act, 1988 restricted applicability of the aforesaid provisions
to section 53 of the transfer of the property act; Lastly,
Section 7 of the Act, 1988 repealed Sections 81, 82 and 94 of the Indian Trusts
Act, 1882 (2 of 1882), section 66 of the Code of Civil Procedure, 1908 (5 of
1908) and section 281A of the Income-tax Act, 1961 (43 of 1961).
Fiduciary relationship vs benami property
In Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani
, the courts were determining
the ownership in a case where a son paid for the property and entrusted the
title deed of the land in question to his father for safe custody in his
capacity, as a benami. The courts enunciated that the expression fiduciary
and a relationship of a trustee
cannot be so interpreted so as
to in fact negate the Benami Act itself because all benami transactions actually
are in the nature of trust and create a fiduciary relationship and if the
expression 'trustee or fiduciary relationship
is interpreted liberally to
even include within its fold a typical benami transaction, then it would amount
to holding that there is no Benami Act at all. The courts barred the suit under
Section 4 (1) of the Benami Transactions (Prohibition) Act.
Consideration v Assistance
In Pawan Kumar Gupta Vs. Rochiram Nahe deo
, the courts again faced the
question as to the scope of financial assistance which would attract Benami
Transactions (Prohibition) Act. The case was that the appellant took financial
assistance from his father to buy a property and the landlord challenged the
ownership on the grounds that appellant's father purchased the property
The courts said that the words paid or provided
in section 2(a) are
disjunctively employed in the clause and each has to be tagged with the word consideration
. The Hon'ble judge stated that the correct interpretation would
be to read 'paid and provide as 'consideration paid or 'consideration
Moreover, the courts said:
So even if appellant had availed himself of the help
rendered by his father for making up the sale consideration that would not make
the sale deed a benami transaction so as to push it into the forbidden area
envisaged in Section 3(1) of the Benami Act.
Failure of the Act, 1988
Even after enactment of a legislation, there was no significant reduction of
Benami Transactions. Failure to curb black money was not due to lack of black
letter of law but due to non-implementation of an enacted statute by the
administration. The Act, 1988 did not contain any procedural laws.
The Government justified that the Act was not made operational due to apparent
gaps and pitfalls in the same. Consequently, the legislators drafted a new
bill in tune with the current circumstances, requirements and provided for a
proper adjudicating channel.
The Benami Transactions (Prohibition) Amendment Act, 2016
The amendment act of 2016 (hereinafter referred as 'the Amendment Act') is a
comprehensive version of the 1988 act. The Amendment Act, 2016 appears to be a
promising legislation to address the legal infirmities and gaps that existed in
the Act, 1988.
The act contains various provisions for Adjudicating Authority, Composition of
Authority, Qualifications for appointment of Chairperson and Members, Powers of
Adjudicating Authority, Officers and employees of Adjudicating Authority,
Authorities and jurisdiction, Power of authority to impound documents, Power of
authority to conduct inquiry, etc.
The scope of benami transactions
is extended. As per section 2 (9) of the
Amendment Act, a benami transaction is:
This section also excludes some particular transactions from being rendered
- a transaction or an arrangement where a property is transferred to, or
is held by, a person, and the consideration for such property has been
provided, or paid by, another person; and the property is held for the
immediate or future benefit, direct or indirect, of the person who has
provided the consideration,
- a transaction or an arrangement in respect of a property carried out or
made in a fictitious name;
- a transaction or an arrangement in respect of a property where the owner
of the property is not aware of, or, denies knowledge of, such ownership;
- a transaction or an arrangement in respect of a property where the
person providing the consideration is not traceable or is fictitious
- These are a Karta, or a member of a Hindu undivided family given that
the property is held for the benefit of the family and the consideration for
such property paid out of the known sources.
- A person in a particular fiduciary capacity, these are a trustee,
executor, partner, director of a company, a depository or a participant as
an agent of a depository under the Depositories Act, 1996 and any other
person as may be notified by the Central Government for this purpose;
- any person buying in the name of his spouse or in the name of his child
and the consideration for such property has been paid out of the known
sources of the individual;
- any person buying in the name of his brother or sister or lineal
ascendant or descendant, where the names of brother or sister or lineal
ascendant or descendant and the individual appear as joint-owners in any
document, and the consideration for such property has been provided or paid
out of the known sources of the individual.
The act of 1988 contained provisions where a person may file a suit for
recovering a property held benami(Section 4(3), Act 1988). However, the
Amendment Act removed these exceptions. As per the Amendment Act, a person can
not recover his benami property on any ground and under any circumstance.
Moreover, a benamidar cannot transfer the property held on his name, such
transfer would be null and void.
Is the applicability retrospective?
In Niharika Jain Vs Union of India, the Rajasthan High Court observed that
unless a contrary intention is reflected in a legislation, it is presumed and
intended to be prospective.
Moreover, where an amendment affects rights or
imposes obligations or castes new duties or attaches a new disability, it is to
be treated as prospective ; and Benami Amendment Act, 2016 neither appears to be
Clarificatory nor curative. Accordingly, the Rajasthan High Court held that the
Amendment Act is prospective.
Section 41 of The Transfer of Property Act, 1882
Section 41 of the Transfer of Property act is an exception the general principle
'nemo dat quod non habet
, it legalises the transfer of a property by an
ostensible owner given that the transferee took reasonable care and acted in
Foundations of this section were laid down in Ramcoomar v Mac-queen
judicial committee said that in cases where a person holds property on behalf of
the owner, and a third party purchases it, for a value from the apparent owner
in belief that he is the owner, then the man who allows the other to hold
himself out shall not be permitted to render the transaction void unless he can
show that the purchaser had direct notice or something which amounts to be a
constructive notice of the real title. Moreover, the judicial committee called
it a principle of Natural Equity.
An ostensible owner is a person who apparently or seemingly appears to be the
owner, though in reality he is not. He is a person having all indicas of
ownership having real ownership. A professional agent or a manager is not an
ostensible owner, nor can a menial servant constitute to be an ostensible
owner. While in case where a woman owns the, and her husband manages it as
if he is the owner (formerly, a common case in India). He can be called an
ostensible owner, while the real owner is the wife
In the case as discussed earlier, where A sells a property to B, but the sale
deed mentions X as the purchaser, X being his Benamidar will also be an
If a person purchases that particular land from X, then B, the real owner can
not recover the land unless he shows that the purchaser had an actual or a
constructive notice of the real title.
Generalis Specialibus Non Derogant
The situation has changed after the introduction of The Benami Property
The Benami Transaction (Prohibition) Act, 1988 being a special legislation would
prevail over the general legislation i.e. The Transfer of the property Act,
Taking the aforesaid example, where A sells a property to B, but the sale deed
mentions X as the purchaser, X being his Benamidar will also be an ostensible
owner. In this case, real owner has no right to recover the land from the
ostensible owner (Benamidar).
As per Section 6 of the amendment Act, 2016, X being a benamidar cannot
retransfer the purchased property to the beneficial owner or any of his
representatives. Subsequent transfers by a benamidar are null and void.
The provisions of the Amendment Act, 2016 vis a vis definition of benami
property and its exceptions are comprehensive. However, the provisions under the
Amendment Act, 2016 are subjective wherein intention of the real owner
vital role. As per Section 2 (9)(A)(b), a transaction will be of Benami
if the property is transferred to a third person and held for the immediate or
future benefit, of the person who has provided the consideration. While this
section does not provide about sources of income of the person who provided the
consideration, the intention of legislators can be ascertained when the act is
inspected in totality.
Moreover, The differentiation of a bonafide gift [of a property] wherein some
different person [A] provides the consideration, while the ownership vests in a
third person[B], it is the intention of [A] in question. However, to ascertain
the intention of a person [one who offers the gift], one can look at the
criterions set by the Hon'ble supreme court in Valliammal v Subramaniam & Ors
Furthermore, to confiscate a benami property, the aforesaid criterions must be
considered in totality, but the 'source of the consideration' would be the key
factor for determination.
- Gopeekrist Gosain vs. Gungapersaud Gosain MANU/PR/0006/1854
- Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani, MANU/DE/3774/2015
- Meenakshi Mills, Madurai v. CIT, 1957 AIR 49
- Bhim Singh v. Kan Singh, 1980 AIR 727
- Valliammal (D) By Lrs vs Subramaniam & Ors, AIR 2004 SC 4187
- Section 281A, the Income Act, 1961
- Ibid, at 3.
- Pawan Kumar Gupta Vs. Rochiram Nahe deo, AIR 1999 SC 1823
- Sneha Bhawnani, Benami Transactions-Genesis and Analysis, 
- Pardeep Sahni, Governance For Development: Issues And Strategies, 
- Niharika Jain Vs Union of India, 2019 (3) RLW 1947 (Raj.)
- Ramcoomar v Mac-queen, (1872) L.R. Ind Ap Supp. 40:18 W.R. 166
- Kannashi Vershi v Ratanshi Nenshi, AIR 1952 Kutch 85.
- Chooni lal v Nilmadhab, (1925) 41 Cal Lj 374
- Dr. Poonam Pradhan Saxena, Property Law, 3rd edition
- Section 6, The Benami Property (prohibition) amendment Act, 2016
Award Winning Article Is Written By: Mr.Gunjeet Singh
Authentication No: MA33117689913-1-0321
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