2026 (2) TMI 620 - HC - Benami Property

Benami Transactions fiduciary exception is fact dependent; summary dismissal improper, appeal allowed and matter remitted

Where the plaint pleaded that purchase funds were provided by the plaintiff and the nominal owner held the property in a fiduciary capacity, the ... Benami transaction - fiduciary relationship - Section 4(3)(b) of the Benami Act - Order VII Rule 11 CPC - summary dismissal - mixed question of law and fact - onus of proof - repeal and effect of Section 7 on Section 4(3)(b) - tenant on account of non-payment of rent and legal proceedings for eviction were initiated - HELD THAT:- A reading of the plaint, as a whole, reveals that the Appellant specifically pleaded the existence of a fiduciary relationship between himself and his father and asserted that the suit property was held by the latter for the benefit of the former. The learned Single Judge extracted portions of the plaint wherein the Appellant described the transaction as “benami”. However, whether the fiduciary relationship pleaded was genuine, real and pre-existing, or whether the transaction was merely a benami arrangement clothed as a fiduciary one, could not have been conclusively determined without permitting the parties to lead evidence. The issue as to the applicability of the exception carved out under Section 4(3)(b) of the Benami Act is, therefore, a mixed question of law and fact. Once issues had been framed and the suit had proceeded to trial, the learned Single Judge erred in short-circuiting the adjudicatory process by dismissing the suit on the ground of maintainability, particularly when the onus to prove the bar under the Benami Act had been placed on the Respondent and the parties were in process of leading the evidence. The mere use of the expression “benami” in the plaint could not, by itself, extinguish the statutory exception under Section 4(3)(b), especially when foundational facts constituting a fiduciary relationship were specifically pleaded. The correctness or otherwise of the Appellant’s claim that his father held the suit property in a fiduciary capacity, and that the transaction falls within the protective umbrella of Section 4(3)(b), can only be adjudicated upon a full appreciation of the pleadings and evidence. In the present case, however, issues had already been framed, the onus to establish the statutory bar under the Benami Act was cast upon the respondent, and the suit had progressed to trial. The plaint herein contains specific and categorical pleadings of a pre-existing fiduciary relationship, including entrustment of funds, management of the property for and on behalf of the Appellant, and holding of the property in a fiduciary capacity, matters requiring adjudication on evidence. Unlike J.M. Kohli, where the plea of trust was held to be a mere incident of a benami transaction barred by statute, the present case raises a mixed question of law and fact falling within the ambit of Section 4(3)(b) of the Benami Act, thereby rendering summary dismissal impermissible. Thus, the Impugned Order cannot stand and is, accordingly, set aside. The present appeal is allowed. The parties, through their counsels, are directed to appear before the learned Single Judge on 25.02.2026. Issues: Whether the learned Single Judge was justified in treating maintainability under the Benami Transactions (Prohibition) Act, 1988 as a pure question of law and in dismissing the suit summarily without permitting adjudication of the pleaded fiduciary relationship under Section 4(3)(b) of the Benami Act.Analysis: The plaint contained specific pleadings that the suit property was purchased with funds remitted by the plaintiff and that the named owner held the property in a fiduciary capacity for the plaintiff. Issues had been framed and the suit had proceeded to trial with the onus to prove the statutory bar placed on the respondent. Authorities interpreting fiduciary relationships indicate that the existence of such a relationship depends on factual context and must ordinarily be determined on evidence. Where foundational facts relevant to the exception in Section 4(3)(b) are pleaded and trial has commenced, the question whether a transaction is benami or falls within the fiduciary exception is a mixed question of law and fact and is not amenable to summary dismissal on the basis of plaint averments alone.Conclusion: The learned Single Judge erred in treating the issue as a pure question of law and in dismissing the suit summarily; the impugned order is set aside and the appeal is allowed, with the matter remitted for further proceedings before the Single Judge.Ratio Decidendi: Where specific pleadings and framed issues raise a claimed fiduciary relationship, the applicability of Section 4(3)(b) of the Benami Transactions (Prohibition) Act, 1988 is a mixed question of law and fact requiring adjudication on evidence and cannot be finally determined by summary dismissal under Order VII Rule 11 CPC.