2016 (9) TMI 1590 - HC - Benami Property

Court rejects defendant's Benami claim due to post-Act filing, affirms fiduciary exemption. Property restraint ordered.

The court found that the defendant's claim of ownership based on a Benami transaction was barred under Section 4 of the Benami Transaction (Prohibition) ... Benami transaction - battle between a divorced couple - wife filed Title Suit - fiduciary relationship - Whether the Learned Trial Courts below committed substantial error of law in arriving at the finding of Benami ignoring the point that the husband could not take the plea of Benami in the written statement in view of the statutory bar contained in Section 4(2) of the Benami Transaction (Prohibition) Act, 1988 - whether the plaintiff was acting as (sic) fiduciary capacity in relation to the purchase of the property in question? - HELD THAT:- When the property was purchased in the name of this plaintiff/appellant in the year 1979 there was no cloud in the marital relationship between the parties. As already said that evidence is galore that the entire consideration money came from either the defendant personally or from his private limited companies. It is immaterial whether the defendant violated the provisions of the companies act or whether such money was reimbursed to the company. It is true that after purchasing the property the parties shifted to the suit flat and the defendant is still residing there. The marriage between the parties was dissolved on 26.09.1984 that is roughly after six years of the execution of those deeds and the suit was filed on 2nd of July, 1987 that is after a gap of 2 year 9 months of the divorce. Thus, when a fat amount (as per money value of 1978-79) was given to the wife for the purchase of the suit flat this court is satisfied that the husband had good faith on his wife and that the relationship at that point of time was 'fiduciary' one. The plaintiff/appellant was like a 'trustee' vis-à-vis her husband, if he is treated as 'trust'. The cumulative effect of the circumstances noted above, when seen in the light of the substantial amount paid by the defendant/husband that puts the plaintiff/appellant in 'fiduciary capacity' vis-à-vis her husband. Such being the case the transaction is completely saved from the mischief of Section 4 of the Act by reason of the same falling under Sub-Section 3(b) of Section 4. Thus, reiterate that the plea of banami as raised by the respondent/defendant was not, therefore, barred by the said Act of 1988. It is true that in the written statement the claim was not made by the defendant that the wife was in a fiduciary relationship with her husband and on that score the learned Advocate on behalf of the appellant submitted that this ground cannot be taken up by this court. I am sorry to say that this being one legal question it is immaterial whether it was urged in the pleading. Thus, the argument of Mr. Chatterjee on this point is not convincing to this court and answered in the negative. Thus, both the substantial question of law as framed is answered accordingly. Thus, in view of the discussions so long made, this court is satisfied that there is no merit in second appeal and the second appeal is dismissed accordingly. Issues Involved:1. Whether the Learned Trial Courts below committed substantial error of law in arriving at the finding of Benami ignoring the point that the husband could not take the plea of Benami in the written statement in view of the statutory bar contained in Section 4(2) of the Benami Transaction (Prohibition) Act, 1988.2. Whether the Learned Courts below committed substantial error of law in arriving at the finding of Benami without considering the question whether the plaintiff was acting as fiduciary capacity in relation to the purchase of the property in question.Detailed Analysis:Issue 1: Substantial Error of Law and Benami Transaction Plea:The court examined whether the trial courts committed a substantial error of law by allowing the defendant to claim the property as a Benami transaction despite the statutory bar under Section 4(2) of the Benami Transaction (Prohibition) Act, 1988. The plaintiff argued that the defendant's claim was barred under Section 4(2) of the Act, which prohibits any defense based on Benami transactions. The defendant contended that the money for the property was provided by him and his companies, making him the real owner despite the property being registered in the plaintiff's name. The court noted that the written statement was filed after the Act came into force, making the defendant's claim barred under Section 4(1). The court highlighted the statutory prohibition against any suit based on Benami transactions, referencing the Supreme Court's decision in Om Prakash vs. Jai Prakash, which emphasized the total prohibition under Section 4 of the Act. The court concluded that the defendant's admission of a Benami transaction in his written statement substantiated the plaintiff's claim, making the trial courts' findings erroneous.Issue 2: Fiduciary Capacity and Legal Considerations:The court addressed whether the plaintiff acted in a fiduciary capacity in relation to the property purchase. The defendant argued that the relationship between the husband and wife was fiduciary, making the property held by the wife as a trustee for the benefit of the husband and his family. The court examined various legal definitions and precedents, including the Supreme Court's decision in Marcel Martins vs. M. Printer, which described fiduciary relationships as those based on confidence and trust. The court found that at the time of the property purchase, there was no marital discord, and the money came from the defendant or his companies. The court concluded that the relationship was fiduciary, with the plaintiff acting as a trustee for the defendant. This fiduciary relationship exempted the transaction from the prohibition under Section 4 of the Act, as per Section 4(3)(b). The court dismissed the argument that the fiduciary relationship was not pleaded in the written statement, emphasizing that it was a legal question not bound by pleadings.Conclusion:The court upheld the concurrent findings of the trial and first appellate courts, confirming that the property was purchased with the defendant's funds and held in a fiduciary capacity by the plaintiff. The court dismissed the second appeal, affirming the judgments and decrees of the lower courts. The court also restrained the defendant from alienating or encumbering the property for one month.