2026 (2) TMI 1293 - AT - Benami Property

Benami transaction: proof of consideration and control by beneficial owner upholds provisional attachment and dismisses appeals.

Where evidence established that a beneficial owner furnished consideration through advances or loans while legal title stood in a benamidar who lacked ... Benami transaction - provisional attachment under Prohibition of Benami Property Transactions - evidentiary value of statements including third-party statements - requirement of disclosure of source of consideration by benamidar - independence of benami inquiry from criminal FIR - HELD THAT:- The appellant, beneficial owner would charge exorbitant rates of interest and in case of the default by the borrower, to force for adjustment of the amount against the sale deed in the name of benamidar. It is relevant to mention here that a sale deed was not to be executed in the name of the money lender i.e. beneficial owner but a third-party who is none else but the benamidar herein. In view of the above, a case of benami transaction was framed by the respondent. It is for the reason that consideration for purchase of property was to be given by the beneficial owner initially in the shape of loan to the land holder and in case of default in repayment of the loan, property to be registered in the name of benamidars, who were not having means to purchase the property and therefore to circumvent the provision of law, the transaction was evolved through lending of money and in case of default, to register the land in the name of the benamidar without making payment of consideration by them. The aforesaid framework has not been disputed by the appellant, rather, opening argument was raised in reference to the complaint, however, with the clarification that no offence was made out and therefore there was no benami transaction. We, on the face of it, find a framework evolving modus of benami transaction. We may refer the statement of the relevant person which includes the benamidar, Shri Amit Hashubhai Mehta, who admitted that his name was used for extorting high interest on the money given to various persons. He was otherwise as a driver of Shri Jitubhai Vala. The consideration for the property was to be paid in the shape of loan by the beneficial owner and ultimately property to be registered in his name, in case of default in payment of the loan. It is, however, with the disclosure that out of the many properties, one property was purchased by him after taking an amount of Rs.6,80,000/- from Shri Jitubhai Vala, out of which he has already served loan of Rs.2,00,000/-. The aforesaid fact has not been proved with the support of the document. It could have been a loan agreement, bank statement and any other relevant material to show advancement of loan by Shri Jitubhai Vala to the appellant, Shri Amit Hashubhai Mehta. All the transactions either through cheque or cash were carried out on the instructions of Shri Jitubhai Vala. The description of the properties registered in their names was also given. The benamidar stated about receipt of Rs. 15,000/- per month from the beneficial owner while he was working as a driver but he could not support his case by disclosing the source to purchase of the property by inducing the money, rather, it was transacted by the beneficial owner. The document for advancement of a sum of Rs.6,80,000/- for purchase of house has not been referred and therefore it remains for the sake of it even for one property. In view of the above, material produced by the respondent was enough to prove a case of benami transaction. The facts on record show that the statements of the witnesses were recorded not only by the police authorities but even Initiating Officer. It was not out of threat and coercion by the Initiating Officer. No material for it has been shown with reasons. Those statements were sufficient to make out a case of benami transaction and have been relied upon. An allegation of coercion and threat for the sake of it cannot be accepted. No reason for coercion and threat has been given for recording of the statement. It is not that the officers were having enmity with the appellant so as to threat and record the statement under coercion. It is even for other witnesses. Thus, the arguments were raised for the sake of it and otherwise the appellant, benamidars were under obligation to disclose the source of consideration for purchase of the property which they have failed to do so and otherwise evidence brought on record by the respondent shows that consideration was paid by the beneficial owner in the shape of loan to the landholder and thereupon on non-payment of loan, to be adjusted towards consideration for purchase of land. The appellants have failed to demolish the case which was proved by the respondent by sufficient evidence and could not be rebutted by the appellant. At this stage, we may clarify that statement of all related witnesses can be considered which may be even of third-party. The statements of the appellants themselves were sufficient to prove the case of benami transaction. It is more so when the benamidar failed to disclose the source of income, as stated earlier. The benami transaction is proved even by the money trail and the sequence of the documents in order to prove the case. Borrowing of the loan by the land holder has not been denied coupled with the registration of the land in the name of the benamidar without transfer of fund by him to the seller and even no source of income has been disclosed for the aforesaid. Thus, we do not find any merit in the case and accordingly appeals fail and are dismissed. Issues: Whether the transactions challenged are benami transactions such that the provisional attachment order may be confirmed.Analysis: Evidence showed a recurring framework where consideration for purchase was provided by a beneficial owner in the form of advances or loans to landholders, with property being registered in the name of a third party (benamidar) who lacked independent source of funds and whose bank accounts were operated by the beneficial owner. Witness statements, including admissions by benamidar, and the money trail and sequence of documents were relied upon to show that the purported purchasers did not supply consideration and that the beneficial owner controlled funds and accounts. Allegations that statements were recorded under threat or coercion were not supported by material; statements recorded by investigating and initiating authorities were treated as admissible where voluntariness was not shown to be lacking. The tribunal evaluated whether the ingredients of a benami transaction were satisfied by focusing on source of consideration, control of accounts, and documentary and testimonial evidence showing loans advanced by the beneficial owner intended to be converted into ownership on default.Conclusion: The tribunal concluded that the transactions constitute benami transactions and that the provisional attachment order was correctly confirmed; the appeals are dismissed.Ratio Decidendi: A transaction may be held to be benami where the beneficial owner supplies consideration (including by advancing loans) while title is registered in a benamidar who lacks independent source of funds and control of funds and accounts remains with the beneficial owner, and such proof of source and control suffices to uphold provisional attachment under the Prohibition of Benami Transactions Act, 1988.