Person Alleging That Property Is Benami Has To Displace Initial Burden Of Proving It Through Evidence/Circumstances - SC

The Supreme Court has observed that one who alleges that a property is benami and is held, nominally, on behalf of the real owner - in cases which form the exception, under Section 4 (3) of Benami Transaction (Prohibition) Act, 1988 – has to displace the initial burden of proving that fact through evidence, or cumulatively through circumstances.

"As a matter of law, the principle that one who alleges that a property is benami and is held, nominally, on behalf of the real owner - in cases which form the exception, under Section 4 (3) – has to displace the initial burden of proving that fact. Such proof can be through evidence, or cumulatively through circumstances.", the Bench of CJI UU Lalit, Justice S. Ravindra Bhat and Justice Sudhanshu Dhulia observed.

Section 4 of Benami Transaction (Prohibition) Act, 1988 states about prohibition of the right to recover property held benami with an exception under (3) – "Nothing in this section shall apply, -- (a) 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 (b) 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".

The facts of the case were that one Laxmi Prasad had purchased a property (first property) in the name of Vijay Kumar (i.e., his son and first defendant). Similarly, he purchased more properties in the name of his two sons - Vijay Kumar and Rajendra Kumar.

According to Laxmi Prasad, these properties were bought by him for the proper maintenance and education of his children.

Vijay Kumar sold the first property to a purchaser.

Laxmi Prasad filed a suit against his two sons (first and second defendants) and the purchasers of the property seeking setting aside of the sale deed. The plaintiffs urged that they and the first and second defendants, were members of a HUF, and that original first defendant (Vijay Kumar) was a benami owner who could not have alienated the suit property.

It was alleged that the properties were paid for or purchased by Laxmi Prasad and that the first two defendants, minors, had no source of income.

The Trial Court dismissed the suit on the ground that the original plaintiff had failed to prove by cogent evidence that the suit property was purchased for the welfare of the co-parceners of the HUF and declared that the first defendant had the right to sell the disputed properties in his name.

The Appellate Court declined plaintiffs' appeal holding that the first plaintiff himself intended for the first defendant to be the absolute owner, and it was not a benami transaction. The High Court also dismissed the appeal, with costs.

Aggrieved, the daughter of Laxmi Prasad approached Supreme Court.

Counsel, Kunal Verma, appearing on behalf of the petitioners, contended that the defendants, i.e., the two sons, were minors with no independent source of income. They neither had the capacity to purchase the said properties, nor alienate them. It was urged that the plaintiffs were joint owners of the property, and being coparceners, out of love and affection, the properties were registered in the names of the defendant sons.

Counsels, K. Krishna Kumar and Yugandhara Pawar Jha, appearing on behalf of the respondents defended the impugned judgment and insisted that the High Court had correctly appreciated the matter by dismissing the suit as being barred by Section 4 (1) of the Benami Transaction (Prohibition) Act, 1988.

The Supreme Court noted that nothing was on record, to support the plea of first defendant (Vijay Kumar) that he was the real and true owner of the property.

The Court placed reliance on its judgment in the case of Binapani Paul v. Pratima Ghosh where the approach of the Court was outlined in cases where it was claimed that a property or set of properties, are benami.

The Court observed that the first plaintiff, Laxmi Prasad, had averred that the properties were purchased for the maintenance and education of his children. The Court further observed that he had averred that the two sons (i.e., ostensible owners) were minors, with no source of income at the time of purchase.

The Court noted that "The first defendant, and those claiming through him, as subsequent purchasers, did not lead any evidence to show that the first defendant had the means or any source of income, to purchase the property, quite apart from the fact that he was a dependent of Laxmi Prasad, and minor at the time of acquisition of the properties.".

"In the light of these factors, and the law declared by this court which has elaborated the circumstances under which a claim against a benami owner can be said to be proved, under Section 4(3)(a) of the Act, the conclusions drawn by the trial court and first appellate court, are plainly erroneous, given the evidence on record.", the Court added.

Cause Title- Pushpalata v. Vijay Kumar (dead) Thr. LRs. & Ors.

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