1999 (12) TMI 56 - SC - Income Tax

Supreme Court Rules Benami Transactions Act Not Retrospective

C. Gangacharan Versus C. Narayanan

The Supreme Court allowed the appeal, setting aside the High Court judgment. The appellant was appointed as a receiver for the property, entitled to ... Whether the money which was sent was wrongly utilised in purchasing the properties in the name of the respondent and the brothers instead of purchasing the same in the name of the appellant? Held that:- Section 4 which contains the prohibition to recover the property held benami expressly provides in sub-section (3), clause (b), that the said section is not to apply, inter alia, in a case where the property is held in the name of a trustee. This court in R. Rajagopal Reddy v. Padmini Chandrasekharan [1995 (1) TMI 67 - SUPREME Court] has held that the said Act and the Ordinance were not retrospective in operation and the Act did not apply to pending suits which had already been filed and entertained prior to the coming into force of section 4 of the Act. This being so, the High Court in the present case fell in error in setting aside the decision of the executing court and in holding that the right of the appellant to recover possession bid come to an end by virtue of the said Act. Thus the appeal is allowed and the judgment of the High Court under, appeal is set aside Issues:1. Appellant sent money for property purchase, but respondent bought properties in his name and brothers' names.2. Decree for possession granted to appellant in 1985.3. Respondent raised objections under Benami Transactions Ordinance, 1988.4. High Court allowed respondent's objections based on the Ordinance.5. High Court judgment contradicted by Supreme Court citing Indian Trusts Act and Benami Transactions Ordinance.6. Supreme Court held Act not retrospective and allowed the appeal, setting aside High Court judgment.7. Appellant appointed as receiver for the property and entitled to possession and deposited amount.Analysis:1. The appellant sent money to the respondent for purchasing property in the appellant's name. However, the respondent bought properties in his own name and his brothers' names, leading to a dispute over ownership of the properties. The appellant filed a suit for possession of the property or its market value in 1983, alleging that the money sent was misused by the respondent.2. The trial court decreed the suit for possession in favor of the appellant in 1985, with costs and mesne profits to be determined later. The High Court dismissed the respondent's appeal in 1987, recognizing the appellant as the beneficial owner based on the evidence presented. The court invoked section 82 of the Indian Trusts Act to establish the appellant's right to recover possession of the properties.3. Following the decree, the appellant filed an execution application in 1988. However, the respondent raised objections under the Benami Transactions Ordinance, 1988, claiming that the decree could not be executed due to the provisions of the Ordinance. The executing court initially rejected the objections, leading the respondent to file a revision petition before the High Court.4. The High Court allowed the respondent's objections, citing the Benami Transactions Ordinance, 1988, and prohibiting the recovery of possession of the property held by the respondent as a benami of the appellant. This decision was based on the belief that the Ordinance prevented the execution of the decree in favor of the appellant.5. The Supreme Court intervened, emphasizing that the executing court cannot disregard a decree from a competent court unless it is void or lacks jurisdiction. The Supreme Court referred to a previous judgment and clarified that the Benami Transactions Act was not retrospective and did not apply to pending suits filed before its enactment. The Court held that the High Court erred in setting aside the decision of the executing court based on the Act.6. Consequently, the Supreme Court allowed the appeal, setting aside the High Court judgment and ruling in favor of the appellant. The appellant was directed to deposit a sum towards annual mesne profits, and upon the appellant's success in the appeal, he was appointed as a receiver for the property. The appellant was entitled to retain possession as the absolute owner and withdraw the deposited amount from the trial court.This detailed analysis covers the issues, legal implications, and the progression of the case leading to the Supreme Court's final judgment.