What is a Benami Transaction?

A transaction or an arrangement :

• Where the property is transferred to or held by a person, and consideration for such property has been provided or paid by another person.
• The property is held, by a person, for the immediate or future benefit, direct or indirect, of the person who has provided or paid consideration.
• Property is held, carried out or made in a fictitious name.
• Where the owner of the property is not aware of, or, denies knowledge of such ownership.
• Where person providing consideration for the property is not traceable or is fictitious.

COURT: Supreme Court. CORAM:L. Nageswara Rao J, M. R. Shah J. (CIVIL APPEAL NO. 1099 OF 2008)

• In order to ascertain whether a particular sale is Benami and apparent purchaser is not the real owner, the burden lies on the person asserting to prove so, such burden has to be strictly discharged based on legal evidence of definite nature.
• It is the intention of the parties which is to be ascertained, very often such intention is very difficult to ascertain. It is not possible to pierce the veil (cover) easily. However, such difficulties would not relieve the person who asserts that the transaction is Benami, of any part of onus(duty or responsibility) that rests on him. The difficulty would not justify the acceptance of mere conjecture or surmise as a substitute of proof.
• The transfer deed for the transaction is a solemn document prepared and executed after considerable deliberation and the person expressly shown as the purchaser or transferee in the deed starts with the initial presumption in his favour that the apparent state of affairs is the real state of affairs.
• The source of money had never been the sole criteria while deciding the nature of Benami transactions it is merely one of the relevant criteria but not determinative in character.
• While considering whether a particular transaction is Benami in nature the following six circumstances can be taken as a guide:
  • The source from which the purchase money came.
  • The nature and the possession of the properties after purchase.
  • Motive, if any for giving the transaction a benami colour.
  • The position of the parties and the relationship if any between the claimant and the alleged Benamidar.
  • The custody of the title deeds after the sale.
  • The conduct of the parties concerned in dealing with the property after the sale.

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