2020 (5) TMI 11 - HC - Benami Property

Court Rules Petitioner as True Property Owner; Bank Ordered to Transfer Ownership via Private Treaty.

The HC concluded that the petitioner is the real owner of the property, with the 5th respondent being merely the ostensible owner. The court directed the ... Benami transactions - Prohibition of the right to recover property held benami - family dispute between spouses causes collateral damage on others related to them leading to even financial institutions acting arbitrarily and causes hardship to them - HELD THAT:- A very large amount of money for the purchase of the subject property was supplied by the petitioner and his wife, the close relationship between the petitioner, petitioner’s wife, her sister (the 8th respondent) and the 5th respondent whom she married, created a position of confidence and trust on the first three persons and of good faith in the 5th respondent; and the ostensible title of the 5th respondent is being held by him in a fiduciary capacity for the benefit of petitioner and his wife. Also the possession of the property is with the petitioner admittedly. Admittedly the petitioner attended the registration of the sale of the subject property as a proxy for the 5th respondent. Therefore the instant case falls within Sec.4 (3) (b) of the Benami Transactions (Prohibitions) Act,1988 and is not hit by Sec.3 thereof. It is settled law that Section 54 of the Transfer of Property Act does not lay down a law as to whether in all situations an apparent state of affairs as contained in a deed of sale would be treated to be the real state of affairs. It does not bar a benami transaction. There is no embargo in getting a property registered in the name of one person; although the real beneficiary thereof would be another. [see Jai Narain Parasrampuria v. Pushpa Devi Saraf - [2006 (8) TMI 527 - SUPREME COURT] Though the regd. sale deed dt.5.3.2016 stands in the name of the 5th respondent, he has no title to it and the actual owner is the petitioner and his wife. Petition is disposed of declaring that the 5th respondent was only the ostensible owner of the subject property and the real owner was the petitioner who financed the purchase of the subject property; and respondent nos.1 to 4 and 7 are directed to transfer the subject property to the petitioner by private treaty invoking Rule 8(5)(d) of the Security Interest Enforcement Rules, 2002 subject to the petitioner mortgaging the said property to the Bank to repay the balance payable to it and continuing to pay the installments fixed by it without fail. Interlocutory Application Nos.2 and 3 of 2019 are dismissed, and Interlocutory Application Nos.4, 5, 6 of 2019 and 1 of 2020 are allowed. No order as to costs. Issues Involved:1. Classification of the Home Loan Account as a Non-Performing Asset (NPA)2. Legitimacy of the Benami Transaction Claim3. The Bank's Actions under the SARFAESI Act4. Petitioner's Right to Challenge the Bank's Actions5. Alternative Remedies and Jurisdiction of the High CourtDetailed Analysis:1. Classification of the Home Loan Account as a Non-Performing Asset (NPA)The petitioner challenged the Bank's action of classifying the home loan account of the 5th respondent as an NPA. The Bank issued a notice under Section 13(2) of the SARFAESI Act, 2002, alleging that the loan account was classified as an NPA on 10.10.2018 and demanded payment of Rs. 54,66,865 within two months. The petitioner objected to this classification, stating that he had been making payments towards the loan and requested permission to continue doing so.2. Legitimacy of the Benami Transaction ClaimThe petitioner claimed that he financed the purchase of the property in the name of the 5th respondent due to banks' reluctance to grant loans to advocates. The court examined whether this constituted a benami transaction under the Prohibition of Benami Transactions Act, 1988. The court referred to the Supreme Court's decision in Mangathai Ammal vs. Rajeswari, which held that amendments to the Benami Transactions Act in 2016 do not apply retrospectively. The court also considered the six parameters set by the Supreme Court in Valliammal v. Subramaniam to determine a benami transaction, focusing on the source of purchase money, the nature of possession, and the relationship between the parties.3. The Bank's Actions under the SARFAESI ActThe Bank initiated proceedings under the SARFAESI Act, issuing a symbolic possession notice and proposing an e-auction of the property. The petitioner argued that the Bank should have considered his objections and his offer to pay the installments. The court found that the Bank's actions were arbitrary and violative of Articles 14 and 300A of the Constitution of India. The court also noted that the Bank failed to prove the affixture of the notice under Section 13(4) of the Act, which vitiated its actions.4. Petitioner's Right to Challenge the Bank's ActionsThe court held that the petitioner, having financed the purchase and being the real owner of the property, had the right to approach the court under Article 226 of the Constitution. The court rejected the Bank's contention that the petitioner had no contractual or legal basis for his claim, stating that the petitioner would fall into the category of both borrower and mortgagor if the 5th respondent was a benamidar.5. Alternative Remedies and Jurisdiction of the High CourtThe court addressed the Bank's argument that the petitioner should have availed the remedy under Section 17 of the SARFAESI Act. The court cited the Supreme Court's decisions in ABL International Ltd. vs. Export Credit Guarantee Corporation of India Ltd. and Popatrao Vyankatrao Patil vs. State of Maharashtra, which held that the existence of an alternative remedy is not an absolute bar to entertaining a writ petition. The court found that the Bank's actions were arbitrary and that the petitioner should not be driven to a lengthy and expensive civil suit.Conclusion:The court declared that the 5th respondent was only the ostensible owner of the property and that the real owner was the petitioner. The court directed the Bank to transfer the property to the petitioner by private treaty under Rule 8(5)(d) of the Security Interest Enforcement Rules, 2002, subject to the petitioner mortgaging the property to the Bank and continuing to pay the installments. The court dismissed the interlocutory applications filed by the Bank and the 5th respondent and allowed the applications filed by the petitioner and the 8th respondent.