Preamble; An Act to prohibit benami transactions and the right to recover property held benami and for matters connected therewith or incidental thereto.
‘BENAMI’ the word is combination of a Persian Words, as ‘be” means without and “nam” means name, i.e. “Benami” means “Without Name”. Benami, denotes any transaction made by a person without using his name on the name of other person.
Since prior to enactment of PBPT Act, 1988, the Benami Transactions are legally allowed and recognized by the Courts and name “Benami” generally not used in any statute.
As held in Anacapa Vs. Ramaswamy AIR 1925 Mad. 1005; – A “benami” transaction is one where a person “beneficial owner” buys property in the name of another “benzamide”, without indicating an intention to benefit the other.
Let’s us discuss “BENAMI TRANSACTIONS”;
Section 2(a) of the Act, 1988, define; “benami transaction”, to mean “any transaction in which property is transferred to one person for a consideration paid or provided by another person”.
The main ingredients of a “benami transaction” are;
The Amended Act, 2016 has been charged definition of Clause 9 in Section 2 as follows;
Section 2(9)(A): Benami Transaction, transaction or arrangement, where consideration provided by person other than the transferee or the person, in whose name property is held.
Exceptions; following transaction would not be regarded as “benami transactions;
Section 2(9)(B): Benami Transaction, transaction or arrangement in respect of property carried out in a fictitious name;
Section 2(9)(C): Benami Transaction, transaction or arrangement in respect of property where owners deny knowledge of ownership or not aware of ownership;
Section 2(9)(D): Benami Transaction, property transaction or arrangement in, where person providing consideration is not traceable;
Note: the exception referred in Section 2(9)(A) are not applicable in Section 2(9)(B) to (D) as referred above.
As mentioned above, there are four categories of “benami transactions”;
Note: (i) if any transaction does not fall within the scope of any of these four sub-clauses, it is not a “benami transaction” and property involved is not a “benami property”.
(ii) “benzamide” may be any person-individual or HUF or Firm or Company or AOP or BOI or Artificial Juridical Person.
(iii) any property which is subject matter of any of four transaction is a “benami property”.
(iv) “beneficial owner” may be any person-individual or HUF or Firm or Company or AOP or BOI or Artificial Juridical Person.
(v) Either “beneficial owner” or “benamidar” may be fictitious or untraceable but not both.
LETS’ CONSIDER EXCEPTION IN CASE PROPERTY HAS BEEN TRANSFERRED THROUGH POWER OF ATTRNEY;
Explanation 2(9) clarifies that “benami transaction” shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to Section 53A of the Transfer of Property Act, 1882 if, under any law for the time being in force;
Thus, by virtue of Explanation to Section 2(9), Power of Attorney transactions will not be regarded as Benami Transactions. The Explanation has been applicable in property transaction with retrospective effect.
But Explanation to Section 2(9) does not confer perfect legal title to the Power of Attorney Holder, but same transaction will be outside the purview of Benami Transactions.
Suraj Lamp & Industries (P). Ltd. Vs State of Haryana  14 – Supreme Court held that as under on the validity of a SA (Sale Agreement)/GPA (General Power of Attorney)/WILL transactions as under;
Note: It is further stated that the above decisions shall not in any way affect the validity of Sale Agreements and Power of Attorney executed in genuine transactions.
Now lets’ consider a case of Joint Development Agreement , in which a person enters into agreement with builder and developer to develop land or parcel of land belong to him and authorise builder or developer to develop the land or parcel of land through an Agreement of Sale and grant Power of Attorney empowering the builder to execute agreements of sale or conveyances in regard to in land or parcel of land in favor of perspective purchasers.
In various states the development agreement and power of attorney are regulated by law and subject to appropriate stamp duty.
The aforesaid observations of Hon’ble’ Supreme Court regarding “SA/GPA/WILL Transactions” are not intended to apply to such bona fide genuine transactions.
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