TaxTMI 
TaxTMI 
1995 (1) TMI 67
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....ect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property. (2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property. (3) Nothing in this section shall apply,-- (a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or (b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity. " In fact the question is answered in the affirmative by a Division Bench of this court in Mithilesh Kumari v. Prem Behari Khare [1989] 177 ITR 97. In that case two learned judges of this court constituting the Division Bench have....
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.... 177 ITR 97 has taken the view that section 3(1) of the Act is prospective in operation. Under these circumstances, they submitted that it would be inconsistent to hold that though the Act is not retrospective it would apply to all pending proceedings at whatever stage they might be and such proceedings would incur dismissal under section 4(1). They submitted that there was a substantive right in the plaintiff under the existing laws which had the sanction of more than a century, under which consistently such benami transactions were recognised and could be enforced by courts of law and that this substantive right is sought to be taken away by section 4(1) and unless there is anything to suggest that it is retrospective in operation, it could not be treated to be retrospective. Learned counsel appearing for the respondents/defendants on the other hand submitted that even though the Act may not be retrospective, at least to the extent it ropes in all past transactions of benami purchases of properties and when rights arising therefrom are sought to be put to an end by section 4(1) which covers any or every property held benami, there is no reason why the said section cannot apply....
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....on proof of relevant facts used to be decreed. The Legislature, however, in its wisdom considered the question of enacting an appropriate legislation for prohibiting such benami transactions. For that purpose earlier the Benami Transactions (Prohibition of the Right to Recover Property) Ordinance, 1988, was promulgated by the President and it was followed by the Act, the different sections of which came into force on the respective dates as mentioned hereinabove. It may also be kept in view that these exercises were undertaken in the light of the Indian Law Commission's 57th Report on benami transactions. This Report was submitted on August 7, 1973, by the Law Commission after studying the benami system as operating in India and England. The Law Commission also examined the implications of the provisions of the Indian Trusts Act, 1882, and other statutory modifications of the benami law as contained in the Code of Civil Procedure, the Transfer of Property Act, the Indian Penal Code and the Income-tax Act. In that Report, the Law Commission suggested retrospective effect to be accorded to the proposed legislation, Fifteen years, however, passed by and Parliament did not take any ste....
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....transactions.--(1) No person shall enter into any benami transactions. (2) Nothing in sub-section (1) shall apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter. (3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence under this section shall be non-cognizable and bailable. " A mere look at the above provisions shows that the prohibition under section 3(1) is against persons who are to enter into benami transactions and it has laid down that no person shall enter into any benami transaction which obviously means from the date on which this prohibition comes into operation, i.e., with effect from September 5, 1988. That takes care of future benami transactions. We are not concerned with sub-section (2), but sub-section (3) of section 3 also throws light on this aspect. As seen above....
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....in respect of any property held benami whether against the person in whose name the property is held or against any other person in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property. It means that once a property is found to have been held benami, the real owner is deprived of such a defence against the person in whose name the property is held or any other person. In other words, in its sweep, section 4(2) engulfs past benami transactions also. (3) When an Act is declaratory in nature, the presumption against its retrospectivity is not applicable. A statute declaring the benami transactions to be unenforceable belongs to this type. The presumption against taking away a vested right will not apply in this case inasmuch as under law, it is the benamidar in whose name the property stands, and law only enabled the real owner to recover the property from him which right has now been ceased by the Act. In one sense there was a right to recover or resist in the real owner against the benamidar. Ubi jus ibi remedium. Where the remedy is barred, the right is rendered unenforceable. (4) When the law nullifies the defences available to....
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....erty. As per section 4(1) no such suit shall thenceforth lie to recover possession of property held benami by the defendant. Plaintiff's right to that effect is sought to be taken away and any suit to enforce such a right after the coming into operation of section 4(1) that is May 19, 1988, shall not lie. The Legislature in its wisdom has nowhere provided in section 4(1) that no such suit, claim or action pending on the date when section 4 came into force shall be proceeded with and shall stand abated. On the contrary, the clear legislative intention is seen from the words "no such claim, suit or action shall lie", meaning thereby that no such suit, claim or action shall be permitted to be filed or entertained or admitted to the portals of any court for seeking such a relief after the coming into force of section 4(1). In Collins English Dictionary, 1979 edition, as reprinted subsequently, the word "lie" has been defined in connection with suits and proceedings. At page 848 of the dictionary while dealing with topic No. 9 under the definition of the term "lie" it is stated as under: " For an action, claim appeal, etc., to subsist; be maintainable or admissible. " The word "li....
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....the only effect of the retroactivity of section 4(1) and nothing more than that. From the conclusion that section 4(1) shall apply even to past benami transactions to the aforesaid extent, the next step taken by the Division Bench that therefore, the then existing rights get destroyed and even though suits by real owners were filed prior to the coming into operation of section 4(1) they would not survive, does not logically follow. So far as section 4(2) is concerned, all that is provided is that if a suit is filed by a plaintiff who claims to be the owner of the property under the document in his favour and holds the property in his name, once section 4(2) applies, no defence will be permitted or allowed in any such suit, claim or action by or on behalf of a person claiming to be the real owner of such property held benami. The disallowing of such a defence which earlier was available, itself, suggests that a new liability or restriction is imposed by section 4(2) on a pre-existing right of the defendant. Such a provision also cannot be said to be retrospective or retroactive by necessary implication. It is also pertinent to note that section 4(2) does not expressly seek to app....
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....ion 4(2) places a bar on a defendant pleading 'benami', after the coming into force of the Act. In this context, it would be anamolous if the bar in section 4 is not applicable if a suit pleading 'benami' is already filed prior to the prescribed date, and it is treated as applicable only to a suit which he filed thereafter. It would have the effect of classifying the so-called 'real' owners into two classes--those who stand in the position of plaintiffs and those who stand in the position of defendants. This may be clarified by means of an illustration. A and B are 'real' owners who have both purchased properties, say in 1970, in the names of C and D, respectively, who are ostensible owners, viz., benamidars. A files a suit in February, 1988, i.e., before the coming into force of the Act against C, for a declaration of his title saying that C is actually holding it as his benamidar. According to the petitioner's argument, such a plea would be open to A even after the coming into force of the Act, since the suit has already been laid. On the other hand, if D files a suit against B at the same time for declaration and injunction, claiming himself to be the owner, but B's opportunity ....
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....the Indian Trusts Act, 1882 (2 of 1882), section 66 of the Code of Civil Procedure, 1908 (5 of 1908), and section 281A of the Income-tax Act, 1961 (43 of 1961), are thereby repealed. We have already seen section 82 of the Indian Trusts Act which gave almost for a period of a century or more a legal right to the real owner to claim against the purported owner that the consideration paid was by the real owner and the transferee held the property for the benefit of the person paying consideration for supporting the transaction. It is this right which got destroyed by section 7 of the Act with effect from May 19, 1988. If any suits or proceedings were pending prior to that date, invoking section 82 of the Indian Trusts Act, what is to happen to such suits is not answered by section 4(1) of the Act or by any other provisions of the Act. We have, therefore, to turn to the General Clauses Act, 1897, for finding out an answer. Section 6 of the General Clauses Act lays down: " where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears the repeal shall not-....
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....ssed at whatever stage they might be pending between the parties. Therefore, interpretation of section 4(1) by the Division Bench would directly conflict with the legislative scheme emanating from section 82 of the Indian Trusts Act, 1882, read with section 6 of the General Clauses Act discussed above. Even otherwise, it is now well-settled that where a statutory provision which is not expressly made retrospective by the Legislature seeks to affect vested rights and corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary implication. In Maxwell on the Interpretation of Statutes, 12th edition (1969) (at page 261), the learned author has made the following observations based on various decisions of different courts, specially Athlumney, In re [1898] 2 QB 547, at pages 551, 552: " 'Perhaps no rule of construction is more firmly established than this--that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expre....
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....y statutes": " The presumption against retrospective operation is not applicable to declaratory statutes. As stated in Craies on Statute Law and approved by the Supreme Court: 'For modern purposes, a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word "declared" as well as the word enacted'. But the use of the words 'it is declared' is not conclusive that the Act is declaratory for these words may, at times, be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is 'to explain' an earlier Act, it would be without object unless construed retrospective. An explanatory Act is gene....