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Issues: (i) Whether the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988 applies retrospectively so as to bar a benami defence in a pending second appeal; (ii) whether the Ordinance violates the freedom under Article 19(1)(f) of the Constitution of India.
Issue (i): Whether the Ordinance applies retrospectively so as to bar a benami defence in a pending second appeal.
Analysis: The Ordinance was construed from its text, object and background as a measure intended to extinguish the previously recognised right of a real owner to recover property held benami and to disallow any defence founded on benami title. The expressions "no suit, claim or action" and "no defence" were read as widely phrased enough to extend to pending proceedings, including appeals and second appeals, since an appeal is a continuation of the suit and an "action" was taken to include civil proceedings of wide import. The deletion of the draft protection for property held benami at the commencement of the Act was treated as significant, showing that past transactions were not to be preserved. The Court therefore treated the Ordinance as operating on transactions already entered into and litigation already pending.
Conclusion: The Ordinance applies retrospectively and bars the benami defence in the pending second appeal.
Issue (ii): Whether the Ordinance violates the freedom under Article 19(1)(f) of the Constitution of India.
Analysis: The Court held that constitutional validity had to be judged in the light of the statutory object, the social and economic background, and the mischief sought to be suppressed. Benami transactions were viewed as having developed into a device for defeating revenue, concealing assets and promoting corrupt practices. In that setting, the prohibition was treated as a justified legislative response and not as an impermissible abridgment of protected freedom. The measure was therefore regarded as a valid restriction in the public interest.
Conclusion: The Ordinance does not violate Article 19(1)(f) of the Constitution of India.
Final Conclusion: The benami defence was held to be unavailable in the pending litigation, the Ordinance was upheld as applicable to past and pending matters, and the appeal failed.
Ratio Decidendi: A statute that in clear terms prohibits benami suits, claims and defences may operate on pending proceedings and prior transactions where its language, object and legislative context show an intention to extinguish the earlier right and to suppress a perceived public mischief.
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