In a recent judgment delivered by the Delhi High Court [Baljeet Kalra vs. Surjeet Singh and Others], it has been held Section 4 of the Benaami Transactions Prohibition Act can be applicable (wherever trust is pleaded) only in cases of fraud and not otherwise.
Sec. 4. Prohibition of the right to recover property held Benami :
(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.
(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 consequences of the Benami Transactions (Prohibition) Act, 1988 were harsh as they brought to an end the ownership rights of an actual owner against the Benami owner. Before passing of the Benami Act, a de jure owner could also file a suit against de facto owner and thereby claim ownership of the property on the ground that ostensible owner was only a Benamidar. The legal provisions which helped the plaintiff in such a suit prior to passing of the Benami Act were inter alia the provisions of Sections 81, 82 and 94 of the Indian Trusts Act, 1882 and as per which provisions a Benami owner was actually a trustee for the real owner. Section 7 of the Benami Act specifically repeals the aforesaid sections of the Indian Trusts Act, 1882 and also Section 66 of the CPC which had similar substance.
While interpreting Section 4 (3)(c), the High Court held that even though in every benami transaction, there is an element of Trust, however the same is not sufficient to enable to be a defense under that section.
In a way, therefore, there may be some ostensible conflict between the provision of Section 4(3)(b) of the Benami Act and Section 7 of the same Act which repeals the provisions of the Indian Trusts Act, 1882 however, one has to read and interpret Section 4(3)(b) in a manner which is in accord with the legislative intention to bar claims against properties held as Benami. The concept of trust was always inbuilt once a transaction was a Benami transaction as the Benamidar was the trustee for the real owner. But in spite of the concept of trust being inbuilt in Benami transactions, the Benami Act provided that no rights could be asserted in a Benami property by the actual/de jure owner.
Putting it differently, once Sections 81, 82 and 94 of the India Trusts Act, 1882 have been repealed, they cannot be brought in from the back door, so to say, by giving the same content contained in the repealed provisions of Sections 81, 82 and 94 of the Indian Trusts Act, 1882 to Section 4(3)(b) of the Benami Act. If we give such an interpretation, the entire Benami Act will fall and it will be as if the same has not been enacted. Therefore. Section 4(3)(b) which provides that the property which is held as a trustee or in a fiduciary capacity must be interpreted in the sense that the trustee or a person who is holding the property in a fiduciary capacity has either committed a fraud and got the property title in his name or is in furtherance of law holding property in his name however in the capacity of a trustee or in fiduciary capacity, although the real owner is somebody else. Repealed Sections 81, 82 and 94 of the Indian Trusts Act, 1882 read as under:
’81. Where the owner of property transfers or bequeaths it and it cannot be inferred consistently with the attendant circumstances that the intend to dispose of the beneficial interest therein, the transferee or legatee must hold such property for the benefit of the owner or his legal representative.
82. Where property is transferred to one person for a consideration paid or provided by another person, and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must hold the property for the benefit of the person paying or providing the consideration.
Nothing in this session shall be deemed to affect the Code of Civil Procedure, Section 317, or Act No. XI of 1859 (to improve the law relating to sales of land for arrears of revenue in the Lower Provinces under the Bengal Presidency), Section 36.
94. In any case not coming within the scope of any of the proceeding sections, where there is no trust, but the person having possession of property has not the whole beneficial interest therein, he must hold the property for the benefit of the persons having such interest, or the residue thereof (as the case may be), to the extent necessary to satisfy their just demands.’
Thus holding the High Court decreed the suit under Order 12.6 CPC, without even referring it to trial. The case is a classical illustration as to how important pleadings are and what can be the consequence of improper drafting.