Judgment updates

Under the English law, when real or personal property is purchased in the name of a stranger, a resulting trust will be presumed in favour of the person who is proved to have paid the purchase money in the character of the purchaser. It is, however, open to the transferee to rebut that presumption by showing that the intention of the person who contributed the purchase money was that the transferee should himself acquire the beneficial interest in the property. There is, however, an exception to the above rule of presumption made by the English law when the person who gets the legal title under the conveyance is either a child or the wife of the person who contributes the purchase money or his grand child, whose father is dead. The rule applicable in such cases is known as the doctrine of advancement which requires the court to presume that the purchase is for the benefit of the person in whose favour the legal title is transferred even though the purchase money may have been contributed by the father or the husband or the grand-father, as the case may be, unless such presumption is rebutted by evidence showing that it was the intention of the person who paid the purchase money that the transferee should not become the real owner of the property in question. the doctrine of advancement is not in vogue in India. The counterpart of the English law of resulting trust referred to above is the India law of benami transactions. Two kinds of benami transactions are generally recognized in India. Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called benami. n that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner. The second case which is loosely termed as a benami transaction is a case where a person who is the owner of the property executes a conveyance in favour of another without the intention of transferring the title to the property thereunder. In this case, the transferor continues to be the real owner. The difference between the two kinds of benami transactions referred to above lies in the fact that whereas in the former case there is an operative transfer from the transferor to the transferee though the transferee holds the property for the benefit of the person who has contributed the purchase money, in the latter case, there is no operative transfer at all and the title rests with the transferor notwithstanding the execution of the conveyance. One common feature, however, in both these cases is that the real title is divorced from the ostensible title and they are vested in different persons. The question whether a transaction is a benami transaction or not mainly depends upon the intention of the person who has contributed the purchase money in the former case and upon the intention of the person who has executed the conveyance in the latter case. The principle underlying the former case is also statutorily recognized in Section 82 of the Indian Trusts Act 1882, which provides that 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. This view is in accord with the following observations made by this Court in Meenakshi Mills, Madurai v. The Commissioner of Income-tax, Madras (1956) SCR 691 at page No. 722:-

“In this connection, it is necessary to note that the word ‘benami’ is used to denote, two classes of transactions which differ from each other in their legal character and incidents. In one sense, it signifies a transaction which is real, as for example when A sells properties to B but the sale deed mentions X as the purchaser. Here the sale itself is genuine, but the real purchaser is B, X being his benamidar. This is the class of transactions which is usually termed as benami. But the word ‘benami’ is also occasionally used, perhaps not quite accurately, to refer to a sham transaction, as for example, when A purports to sell his property to B without intending that, his title should cease or pass to B. The fundamental difference between these two classes of transactions is that whereas in the former there is an operative transfer resulting in the vesting of title in the transferee, in the latter there is none such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed. It is only in the former class of cases that it would be necessary, when a dispute arises as to whether the person named in the deed is the real transferee or B, to enquire into the question as to who paid the consideration for the transfer, X or B. But in the latter class of cases, when the question is whether the transfer is genuine or sham, the point for decision would be, not who paid the consideration but whether any consideration was paid.”

15. In Mohammad Sadiq Ali Khan v. Fakhr Jahan Begum (1932) 59 Ind App 1 (PC) the facts were these:A Mahomedan bought an immovable property taking the conveyance in the name of his daughter who was five years of age. The income was credited to separate account, but it was in part applied to purposes with which she had no concern. Upon her marriage, the deed was sent for the inspection of her father-in-law. After the death of the donor it as contended that the property was part of his estate, the purchase being benami. The Judicial Committee of the Privy Council held that there was a valid gift to the daughter because there was proof of a bona fide intention to give, and that intention was established. In the course of the above decision, it was observed thus:-

“The purchase of this property was a very natural provision by Baqar Ali for the daughter of his favourite wife, and though there may be no presumption of advancement in such cases in India, very little evidence of intention would be sufficient to turn the scale. The sending of the deed for the inspection of the lady’s father-in-law, which the Chief Court held to be established, was clearly a representation that the property was hers, and their Lordships agree with the learned Judges in the conclusion to which they came.”

16. In Manmohan Das v. Mt. Ramdei AIR 1931 PC 175 Lord Macmillan speaking for the Judicial Committee observed:

“In order to determine the question of the validity or invalidity of the deed of gift in question it is of assistance to consider:

‘the surrounding circumstances, the position of the parties and their relation to one another, the motives which could govern their actions and their subsequent conduct.’ Dalip Singh v. Nawal Kunwar, (1908) 35 Ind App 104 (PC) always remembering that the onus of proof rests upon the party impeaching the deed.”

17. The principle enunciated by Lord Macmillan in the case of Manmohan Das (supra) has been followed by this Court in Jaydayal Poddar v. Mst. Bibi Hazra (1974) 2 SCR 90 where Sarkaria, J. observed thus:

“It is well settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. This burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of a benami is the intention of the party or parties concerned; and not unoften such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of the serious onus that rests on him; nor justify the acceptance of mrere conjectures or surmises, as a substitute for proof. The reason is that a deed is a solemn document prepared and executed after considerable deliberation and the person expressly shown as the purchaser or transferee in the deed, starts with the initial presumption in his favour that the apparent state of affairs is the real state of affairs. Though the question, whether a particular sale is benami or not, is largely one of fact, and for determining this question, no absolute formulae or acid tests, uniformally applicable in all situations, can be laid down; yet in weighing the probabilities and for gathering the relevant indicia, the courts are usually guided by these circumstances:(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.”

18. The principle governing the determination of the question whether a transfer is a benami transaction or not may be summed up thus:(1) The burden of showing that a transfer is a benami transaction lies on the person who asserts that it is such a transaction; (2) if it is proved that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary; (3) the true character of the transaction is governed by the intention of the person who has contributed the purchase money and (4) the question as to what his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct, etc.[ AIR 1980 SC 727 : (1980) 2 SCR 628 : (1980) 3 SCC 72 (SUPREME COURT OF INDIA) Bhim Singh (dead) by L. R. s and another Versus Kan Singh]