Benami prohibition in pending suits allows factual defences and permissible amendments, even where the statute applies retrospectively.

Sections 3 and 4 of the Benami Transactions (Prohibition) Act, 1988 were treated as operating in pending proceedings, so the statutory bar could govern continuing litigation. However, the defendants were not shut out at the threshold from proving that the transaction was sham or that the alleged benamidar never held possession, and evidence on that factual plea was allowed. The Court also permitted substantial amendment of the written statement to add pure legal and alternative defences, including constitutional challenge, limitation, trust, fiduciary relationship, part performance, and inapplicability of the Act, while rejecting vague or repetitive amendments.

---

---

Issues: (i) Whether sections 3 and 4 of the Benami Transactions (Prohibition) Act, 1988 operated retrospectively so as to affect pending proceedings and bar the defence based on benami ownership; (ii) whether the defendants should be permitted to amend their written statement to raise additional pleas, including constitutional challenge, limitation, trust, part performance and inapplicability of the Act.

Issue (i): Whether sections 3 and 4 of the Benami Transactions (Prohibition) Act, 1988 operated retrospectively so as to affect pending proceedings and bar the defence based on benami ownership.

Analysis: Section 4 was treated as applying to pending suits and appeals because the legislative change could be taken into account in a continuing proceeding. The bar under section 4 was analysed in the setting of a real owner seeking to enforce rights in property held benami, and the Act was read as prohibiting such recovery or defence where the property is in the possession and holding of a benamidar. The Court distinguished a case where the alleged benamidar never had possession and the transaction was pleaded to be a mere name-lending or sham arrangement. On that footing, the defence was held not to be automatically excluded at the threshold, and evidence could still be led on the factual nature of the transaction.

Conclusion: The Act was held to be retrospective in operation, but the defendants were not barred at this stage from leading evidence on their plea that the transaction was sham and that the Act did not apply on the facts.

Issue (ii): Whether the defendants should be permitted to amend their written statement to raise additional pleas, including constitutional challenge, limitation, trust, part performance and inapplicability of the Act.

Analysis: Amendments that introduced a fresh cause of action were declined, but those that only added an alternative or additional approach to the same factual matrix were permitted. The constitutional challenge to the Act was allowed as a pure legal plea. Pleas based on limitation, inapplicability of the Act, trust or fiduciary relationship, irrevocable licence, part performance under the agreement, and effect of admissions in the agreement were also allowed because they expanded the existing defence without changing its basic foundation. Vague, repetitive, or purely argumentative amendments were rejected.

Conclusion: The defendants were allowed to amend their written statement substantially, but not in respect of the vague or repetitive pleas; the plaintiff's application to strike off issues and to prevent evidence was dismissed.

Final Conclusion: The order upheld the applicability of the 1988 Act as a governing provision for pending litigation while preserving the defendants' opportunity to contest its factual application and to refine their defence by permissible amendment.

Ratio Decidendi: A statutory bar against benami claims in pending proceedings does not automatically exclude a defence where the pleadings assert that the transaction was a sham or that the alleged benamidar never held the property in possession, and amendments introducing only an additional legal approach to the same facts may be allowed.

---