As Civil Suit To Enforce Claim In Benami Property Is Barred, Criminal Proceeding By 'Real' Owner Also Impermissible: Supreme Court

In a recent decision related to the Benami Act, the Supreme Court held that the person claiming to be the owner of the Benami property cannot institute a suit/proceedings against the person in whose name the properties are held. “It is, thus, clear that the complainant (person claiming to be an owner of benami property) in spite of having made investments in the land deals which were evidently benami transactions, could not have instituted any civil proceedings for recovery against the person(s) in whose name, the properties were held which would be the accused-appellants herein.”, the bench comprising Justices BR Gavai and Sandeep Mehta said.The Court also held that criminal proceedings on the same set of allegations are also not maintainable. Quashing the criminal proceedings under Section 406 and 420 of the Indian Penal Code over the alleged failure to return the investment made in the benami property, the Court observed :"Since by virtue of the provisions contained in Sections 4(1) and 4(2) of the Benami Act, the complainant is prohibited from suing the accused for a civil wrong, in relation to these benami transactions, as a corollary, allowing criminal prosecution of the accused in relation to the self-same cause of action would be impermissible in law."Benami Transaction means any transaction in which property is transferred to one person for a consideration paid or provided by another person. Section 4 of the Benami Transactions (Prohibition), Act 1988 (“Benami Act”) bars the right of the person who paid consideration to recover property held to be benami and prohibits them from raising a defence based on any right in respect of any property held benami either against the person in whose name the property is held or against any other person. In the present case, the respondent purchased some property while she was working in the government sector, however, the purchase was made in the name of the appellant, who insisted the respondent to invest in the property. The consideration of the property was paid by the respondent; however, the property was held in the name of the appellant because the respondent didn't want to purchase the property in her name due to her government job. In the meantime, when the dispute arose between the respondent and appellant, where it was alleged by the respondent that her due share of profit in the land held by the appellant was not given to her, therefore the criminal complaint was registered against the appellant/accused by the respondent/complainant under Sections 406 and 420 of IPC. Upon placing reliance on Section 4 of the Benami Act, the Judgment authored by Justice Sandeep Mehta observed that by virtue of the provisions contained in Sections 4(1) and 4(2) of the Benami Act, the complainant is prohibited from initiating a criminal prosecution of the accused in relation to the Benami transaction. Further, the court held that the initiation of the criminal proceedings for this is also impermissible. The upshot of the discussion was that the Court held that even the initiation of civil proceedings regarding the recovery of the profit from the benami property held by the appellant wouldn't be permissible in view of the bar contained under Section 4 of the Benami Act. “At the cost of repetition, it may be reiterated that in view of the clear bar contained in Section 4 of the Benami Act, the complainant could not have sued ( in a civil suit) the accused appellants for the same set of facts and allegations which are made the foundation of the criminal proceedings. Since, if such allegations do not constitute an actionable civil wrong, in such circumstances, allowing the prosecution of the accused appellants for the very same set of facts, would tantamount to abuse of the process of law.”, the court observed. Accordingly, the criminal proceedings initiated against the appellant/accused were quashed.Counsels For Petitioner(s) Mr. Dama Seshadri Naidu, Sr. Adv. Mr. Pai Amit, Adv. Mr. Tushar Bakshi, AOR Mrs. Naresh Bakshi, Adv. Mr. Abhiyudaya Vats, Adv. Mr. Ashish Jacob Mathew, Adv. Counsels For Respondent(s) Mr. D. Kumanan,Adv. Mr. Veshal Tyagi,Adv. Mr. M.P. Parthiban, AOR Ms. Priyaranjani Nagamuthu, Ms. Shalini Mishra, Adv. Mr. R. Sudhakaran, Mr. T. Hari Hara Sudhan, Mr. Bilal Mansoor, Mr. Shreyas Kaushal, Mr. P.V.K. Deivendran, Adv.Case Title: C. SUBBIAH @ KADAMBUR JAYARAJ AND OTHERS VERSUS THE SUPERINTENDENT OF POLICE AND OTHERSCitation : 2024 LiveLaw (SC) 403Click here to read/download the judgment

As Civil Suit To Enforce Claim In Benami Property Is Barred, Criminal Proceeding By 'Real' Owner Also Impermissible: Supreme Court

Yash Mittal

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