Intention Of Parties A Key Factor To Ascertain Benami Transactions: Kerala High Court

The Kerala High Court recently ruled that the intention of the parties is a key factor in determining if a transaction was benami or not, which could be ascertained from the tests laid down by the Apex Court for this purpose.A Division Bench of Justice A. Muhamed Mustaque and Justice Sophy Thomas also laid down that as long as there is no evidence to the contrary, when a husband purchases property joining his wife as a name lender, he is still the beneficiary of such property, but if it was purchased in her favour, then she would be the beneficiary. "When husband purchases property as part of his real estate business joining his wife as a name lender in the title document, even availing bank loans in her name to pay the consideration, it cannot be said that the purchase was for the benefit of the wife, when there is clear evidence to prove the benami nature of the transaction. But when there is evidence to show that the husband purchased the property or executed document in favour of his wife, unless the contrary is proved, it will be treated as the property of the wife purchased for her benefit.""The intention of the parties is a key factor in determining the nature of the transaction, which could be gathered from the relationship between parties, their conduct previous and subsequent to the transaction, source of money for purchase, possession of the property, possession of the title documents, repayment of loan, etc. etc."The case has peculiar facts where a man had an illicit relation with his employee and had a child with her. Later, he brought the child home to his wife under the guise that the child was abandoned by an unwed nurse and up for adoption. Since the couple had not been successful in having kids despite years of treatment, the wife agreed and raised the child for five years as their own, now realising that her husband was his biological father. However, upon coming to know of the affair, the anguished wife returned to her home. Since the husband refused to give up his relationship with the employee, the wife filed for divorce. The couple had lived together for more than 16 years doing various businesses and acquiring a lot of properties in their name jointly and severally. Both the parties filed for a declaration that they were the beneficial owner and the opposite party was only a name lender in the property transactions and claimed injunction against each other. The Family Court dissolved their marriage, dismissed the husband's plea for declaration as the beneficial owner and allowed in part the wife's plea for the same. Challenging this order, the husband filed an appeal before the High Court. Senior Advocate S. Sreekumar appeared for the husband and Advocate G.S. Reghunath for the wife in the matter. The Court initially analysed the meaning of 'benami' before concluding that a Benami transaction means the transfer by/to a person who only acts as an ostensible owner in place of the real owner, whose name is not disclosed. The Bench also established that the question of whether a transaction was real or benami depends upon the intention of the beneficiary. It was also recalled that the Supreme Court in Java Dayal Peddar vs. Bibi Hazra (AIR 1974 Supreme Court 171) had laid down 6 tests to determine if a transaction is benami or not. Further, it was noted that the transactions in this case spanned from 1998 to 2005, which implies that the Benami Transactions (Prohibition) Act, 1988 is applicable here. As per Section 2(a) of the Act, a 'benami transaction' is any transaction in which property is transferred to one person for a consideration paid or provided by another person. Section 3(2)(a) stipulates that nothing prevents a person from purchasing property in the name of his wife/unmarried daughter, and unless the contrary is proved, it is presumed that the said property has been purchased for the benefit of the wife/unmarried daughter.Therefore, to find out if the transaction alleged is a benami and to ascertain who was the benamidar and the beneficiary, the Bench applied the six tests in each transaction."If it is found that the person in whose name the property stands was only a name lender, and the property was actually purchased for the benefit of the beneficial owner, expending his own money, then of course, the benamidar may not get any right, title or interest over the properties held in his/her name."The Court accordingly decided the nature of each transaction and disposed of the plea. Case Title: C.C Joy v. C.D Mini & Anr.Citation: 2022 LiveLaw (Ker) 287Click Here To Read/Download The Order

Intention Of Parties A Key Factor To Ascertain Benami Transactions: Kerala High Court

Hannah M Varghese

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