Proving A Benami Transaction

Updated: May 30 2004, 05:30am hrs
The Benami Transactions (Prohibition) Act, 1988 has been in force for more than a decade. In a landmark judgment of the Calcutta High Court in the case of Smt. Usha Bhar v Sanat Kumar Bhar ([2004] 135 Taxman 526), several guidelines have been laid down.

The High Court held that in a suit claiming a property as benami, there should be cogent and sufficient evidence to conclude that the apparent is not the real. In order to ascertain whether a particular sale is benami and the apparent purchaser is not the real owner, the burden lies on the person asserting to prove so. Such burden has to be strictly discharged based on legal evidence of a definite nature. Such evidence directly proves the fact of benami or establishes circumstances unerringly and reasonably.

It is the intention of the parties which is to be ascertained. Very often such intention is shrouded in a thick veil. It is not possible to pierce the veil easily. However, such difficulties would not relieve the person who asserts that the transaction is benami, of any part of the onus that rests on him. The difficulty would not justify the acceptance of a mere conjecture or surmise as a substitute for proof. The proof has to be weighed against a document prepared and executed showing the person expressly as purchaser or transferee. That follows the initial presumption of the apparent state of affairs being the real state of affairs.

However, the question is largely one of fact. For determining that question, no formula can be evolved nor can a formula so evolved be uniformly applied in all situations. However, in such circumstances, it is the probabilities and inferences which are to be gathered in order to discover the relevant indicia. It is not sufficient to show circumstances which may create suspicion. In order to determine whether a transaction was or is a benami one, the following guidelines should be followed : (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, and (6) the conduct of the parties concerned in dealing with the property after the sale.

In the absence of any evidence as to who supplied the consideration money, it cannot be presumed that the consideration money was advanced by the husband. The party asserting has to affirmatively prove that the transaction is not real. Under Hindu Law, there is no presumption that the transaction standing in the name of the wife is the husbands transaction. There is no presumption one way or the other. In the case of property purchased and standing in the name of a Hindu woman, when there is positive evidence that the woman herself has some means of her own, the onus of proving that it has been purchased with the funds of the husband in her name is on the person alleging the same. Mere suspicion that the money of the husband may have been utilised for the purchase will not suffice to establish that the purchase is benami.

There can be no doubt that when a plea of benami is taken, the ostensible title cannot be displaced except on clear and cogent proof of benami character. Several relevant circumstances bear on the question, but the source of the purchase money has always been considered to be of primary importance. The onus of proof is the same in the case of a sale deed standing in the name of a female. There is no presumption in law that merely because the female was accompanied by her husband at the time of purchase, the sale deed must be presumed to be benami for the husband.

In the instant case, the facts were that there was no proof with regard to the motive of the purchase of property by the husband in the name of his wife. S, the husband, was residing separately from his other brothers. He was carrying on business independent of his brothers. There was no allegation that S was a member of the joint family. Therefore, in order to avoid his brothers, he had purchased the property in the name of the wife. Admittedly, the wife was always in possession of the property. The deed was registered in her name. The land was applied for and allotted to her. The rent receipts were issued by the wife to tenants of the property. The municipal tax receipts showed that tax was paid by the wife in respect of the property.

Thus, the conduct of the parties did not indicate anything towards benami transaction. The wife always asserted the property to be her own and exercised all rights of possession in respect of the same. No one had disputed the possession of the wife in respect of the property.

There was nothing to doubt that the custody of the title deed was with the wife after the sale. The conduct of the parties also did not indicate the benami character of the transaction. Thus, none of the tests mentioned above seem to have been satisfied. In conclusion, the Court pointed out that evidence needs to be of a definite character and of substance. The evidence available on record did not lead to the conclusion of a benami transaction. The wife was held to be the true owner of the property.

This important judgment lays down the principle that a lady who has property in her name is the legal owner thereof, unless there is cogent evidence to show that the property was purchased in her benami name by another person who had contributed the funds.

The author is Advocate, Supreme Court