New Delhi: The Supreme Court has set aside a Karnataka High Court order of 2024 that restored a property suit, declaring that the disputed properties were benami and directing their confiscation by the central government under the Prohibition of Benami Property Transactions Act, 1988 as amended in 2016.
A Bench led by Justices R. Mahadevan and J.B. Pardiwala last week held that the suit, filed by appellants claiming ownership of agricultural land based on a 2018 will, was barred by law and ought to have been rejected at the threshold. It held that the plaint admissions established a benami transaction, and that a will cannot be used to return property to the real financier.
The court restored a trial court order of 2023 that rejected the plaint under Order VII, Rule 11 of the Code of Civil Procedure, observing that a meaningful reading of the pleadings showed an attempt to enforce a benami transaction disguised as a testamentary claim.
The case arose from a civil suit seeking declaration of title and injunction over immovable properties. The properties in dispute were the self‑acquired assets of one late K. Raghunath, who had executed a registered will dated 2018 bequeathing the same to his wife. Acting upon the said will, the appellants caused the revenue records to be duly mutated in their names and have, since then, remained in lawful and peaceful possession and enjoyment of the properties.
Benami transactions involve property transfers where the property is held in the name of one person while the consideration is provided by another, typically with the object of concealing real ownership. The enactment of the Prohibition of Benami Property Transactions Act, 1988 marked a significant legislative step to curb such practices.
The Act was further strengthened by the 2016 amendments which expanded the scope of the law, clarified exceptions, and introduced a comprehensive mechanism for adjudication and confiscation of benami properties.
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Funds from one, title for another
According to the court, one of the appellants himself admitted that the purchase money for the lands had come from him while the properties were acquired in the name of another individual.
“This squarely attracts the definition of a benami transaction,” the Bench said, adding that clever drafting could not overcome a statutory bar under the Benami Act.
The court rejected the argument that the suit was based purely on a will, noting that the will was allegedly executed to return the property to the real financier, precisely what the law prohibits.
‘No fiduciary relationship’
The bench also dismissed the appellant’s claim that the respondent held the property in a fiduciary capacity, clarifying that the Benami Act recognises fiduciary relationships only in limited, defined categories such as trustees, executors, partners or company directors.
The court said that the appellant pleaded that the respondent late K. Raghunath was an employee in companies run by his father. “An employer-employee or commercial arrangement cannot automatically be treated as fiduciary,” the judgement said.
Importantly, the court ruled that the 2016 amendments to the Prohibition of Benami Property Transactions Act operate retrospectively insofar as they pertain to confiscation, adjudication, and procedural mechanisms.
It held that confiscation of benami property is a civil consequence aimed at depriving persons of unlawfully held assets, rather than a penal punishment. Consequently, the amended provisions empowering authorities to identify, adjudicate, and confiscate benami properties can be applied to transactions predating the amendment.
Alfreza Ahmed is an alum of ThePrint School of Journalism, currently interning with ThePrint.
(Edited by Nardeep Singh Dahiya)
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