2011 (1) TMI 1518 - SC - Benami Property

Supreme Court: Benami Transactions Act not retroactive. Land ownership declared. Permanent injunction granted.

The Supreme Court held that Section 4 of the Benami Transactions (Prohibition) Act, 1988 does not apply retroactively to suits filed before the Act's ... Benami Transactions - Suit for recovery of House Property - Whether the suit of the first Appellant for the recovery of her house property filed prior to the Benami Transactions (Prohibition) Act, 1988 coming into force could be considered to be prohibited by Section 4 of that Act? HELD THAT:- In the present case it has already been established that the Appellant had purchased the property out of her own funds. Therefore, it could certainly be expected that when she came to know about the clandestine sale of her property to Respondent No. 1, she would send him a notice, which she sent on 8.4.1987. As noted earlier, the notice is sent from one house on the College Road to another house on the same road in the city of Pathankot. The agreement of purchase is signed by the Defendant No. 3 five days thereafter i.e. 13.4.1987. The Appellant had produced a copy of the notice along with postal certificate in evidence. There was no allegation that the postal certificate was procured. In the circumstances, it could certainly be presumed that the notice was duly served on Respondent No. 1 before 13.4.1987. The High Court, therefore, erred in interfering in the finding rendered by the Additional District Judge that Respondent No. 1 did receive the notice and, therefore, was not a bona fide purchaser for value without a notice. The judgment of the High Court, therefore, deserves to be set aside. The Appellants through their counsel have, however, in all fairness offered to compensate the first Respondent herein by paying him the amount of ₹ 30,000/- with appropriate interest. The first Respondent did not evince any interest in this suggestion. Yet, the end of justice will be met, if this amount of ₹ 30,000/- is returned by the Appellants to him as offered by them with simple interest at the rate of 10%. The judgment and order passed by the High court are set aside - Appeal allowed. Issues Involved:1. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988 to suits filed before the Act came into force.2. Determination of the real owner of the suit property.3. Legality of the sale deed executed by Defendant No. 2 in favor of Defendant No. 3.4. Whether Defendant No. 3 was a bona fide purchaser without notice.5. Presumption of service of notice sent under postal certificate.Issue-wise Detailed Analysis:1. Applicability of Section 4 of the Benami Transactions (Prohibition) Act, 1988:The Supreme Court considered whether the suit filed by the first Appellant for recovery of her house property before the Benami Transactions (Prohibition) Act, 1988, came into force could be prohibited by Section 4 of the Act. The trial court initially held that the suit was barred by Section 4 of the Act, following the precedent set in Mithilesh Kumari v. Prem Behari Khare. However, the first appellate court reversed this decision based on the subsequent Supreme Court ruling in R. Rajagopal Reddy v. Padmini Chandrasekharan, which clarified that Section 4 of the Act does not apply retroactively to suits filed before the Act came into force. The Supreme Court upheld this interpretation, emphasizing that the High Court erred by not considering the binding precedent set in R. Rajagopal Reddy.2. Determination of the Real Owner:The trial court, first appellate court, and the Supreme Court consistently found that the first Appellant had purchased the suit house using her funds. Despite the sale deed being executed in the names of her son and brother-in-law, the evidence, including bank drafts and testimony from a bank clerk, supported her claim as the real owner. The Supreme Court reaffirmed this finding, stating that the Defendant No. 2's claim of contributing half the purchase price was unsupported by evidence.3. Legality of the Sale Deed Executed by Defendant No. 2:The first appellate court held that the sale deed executed by Defendant No. 2 in favor of Defendant No. 3 (Respondent No. 1) was null and void, as Defendant No. 2 had no right to sell the property without the consent of the real owner, the first Appellant. The Supreme Court agreed with this conclusion, noting that the High Court failed to appreciate the implications of the established fact that the first Appellant was the real owner.4. Bona Fide Purchaser Without Notice:The trial court initially found Defendant No. 3 to be a bona fide purchaser without notice, as the service of the notice dated 8.4.1987 was not proven. However, the first appellate court reversed this finding, presuming that the notice was served based on the postal certificate and the proximity of the parties' residences. The Supreme Court supported this presumption, citing legal principles that allow for such an inference in the absence of evidence to the contrary. The High Court's dismissal of this presumption was deemed erroneous.5. Presumption of Service of Notice:The Supreme Court referenced several legal precedents to support the presumption that a letter sent under postal certificate is deemed to have been delivered in due course. The Court emphasized that this presumption is permissible under Section 114 of the Evidence Act and is strengthened by the absence of any allegations of fraud or irregularity in obtaining the postal certificate. The Supreme Court concluded that the first appellate court was correct in presuming the service of the notice, thereby negating Defendant No. 3's claim of being a bona fide purchaser without notice.Conclusion:The Supreme Court allowed the appeal, setting aside the High Court's judgment and reinstating the first appellate court's decision. It declared the first Appellant as the owner of the suit house and issued a permanent injunction against the Defendants from alienating or interfering with her possession of the property. The Court also directed the Appellants to compensate the first Respondent with Rs. 30,000 plus interest, reflecting a fair resolution of the dispute. Additionally, the first Respondent was ordered to pay Rs. 10,000 in costs to the first Appellant.