Benami Transaction in Immovable Property;

Past and Present Laws with Judicial

Pronouncements
Shaikhul Islam Imran

Abstract-
Benami transection is a transaction where one person pays the consideration
money in the name of another and he holds the absolute interest in that property. It
is a prevalent custom or practice from immemorial time. Social and economic
perspective human society gave rise to the custom in this subcontinent. Among
both the Muslim and Hindu community, the custom is not unknown. But with the
evolution of time, people started abusing of it, then law has given bar on certain
circumstances. In this paper, an attempt to crystalize the historic evolution of
Benami transaction until the modern legislation took over the practice with lots of
restriction. The causes for becoming the practice prevalent, the position in modern
legal arena and comparison with related laws as well have shown here. Several
judicial pronouncements have also been referred with critical analysis in
accordance with statutes. Lastly, some recommendations have been suggested to
the reformation of the prevalent law.

Introduction-
In every society, the transaction of property was prevalent from the immemorial
past. With the evolution of time, the forms of transfer of different properties has
also been taken different shape according to needs of the people. Benami
transaction is of this nature and this form of transfer got shaped with the
continuance practice of the community as well. Modern legislation has imposed
restrictions on the prevalent practice of the society in most of the cases. Benami
transaction is of this kind. In this practice, a property is to third party by the money
providing party. The historic evolution of this Benami transaction, past and present
legal consequence of this transaction are discussed below.
Definition and nature of Benami transaction-
Any transaction in which property is transferred to one person for a consideration
paid or provided by another person is Benami. In other words, a transaction in
which the purchase is made in the name of someone other than the real purchaser1.

The word ‘Benami’ is originated from Persia. Here, ‘Be’ means ‘without’ and
‘Nami’ means ‘name’. The term Benami, thus, means without a name. ‘Without a
name’ in the sense that the person under whose name the property is transferred is
neither the real owner nor the money provider mainly.

This custom was prevalent among both the Muslim and Hindu communities in the
subcontinent form unknown time as this customary practice is not accurately
known that when it was actually emerged. It is said that the previous people
believed that some born as fortunate and some are born as unfortunate and that’s
why this practice was prevent. People buy property in those name who are believed
to be fortune. This practice is known in Muslim community as Farzee.

Historic evolution of Benami transaction-

The origin of this practice is somewhat superstitious. It was considered that on the
basis of the birthdate of a person some people were considered as more auspicious
thus property used to buy in their names. Also, another reason is it was a very
convenient way of hiding family affairs from public2. Instead of accurate time of
the origin of this practice, the socio economic condition and political history of this
subcontinent give rise this practice among its citizens. There are different Indian
decisions in support of this view, those are following-
1
http://www.clcbd.org/lawdictionary/54.html
2
Darshan Kadu, What are Benami Transactions in India, India Today (January 20, 2005).
In Panjab Province v Daulat Singh3, the federal court observed that
‘The practice has long been common in this country for intending alieneees of this
land to take document of transfer in the name of their friends or relatives,
sometimes in view to defeat the claim of creditors, sometimes in view to defeat the
claim of creditors, sometimes in view of defeating other members of their family
and sometimes to escape restrictions imposed upon them by the Government’s
Conduct Rules etc.

In Bilas Kanwar v Desraj Ranjit4 the Privy Council went back to the history of
Benami transaction in India and observed that ‘the transaction was a Benami
transaction a dealing common to Hindus and Muslims alike… and has a curious
resemblance to our doctrine of English law that the trust of a legal estate results to
the man who pays purchase money’.

The above stated decisions are of the same view that the practice of Benami
transaction subsisted from a long ago but the determination of actual time is
something impossible. There may have some other reasons for being this practice
prevalent, those are as following-

 The law of Muslim inheritance regarding a child whose father died

during the life time of his grandfather. In this situation, where father
dies during the life time of a grandfather, the child is excluded from the
property of grandfather. Here, the grandfather could buy property to his
grandson’s name. This may be a strong cause for emerging this practice
among the Muslims.

 Considering the fact that the right of property for women under
traditional Hindu law is much limited and to some extent, it can be said
3
A.I.R, 38 (1944) (Federal Court).
4
A.I.R 1916. 96 (Privy Council).
 that this is not a right at all. In this situation, a father or a husband can
buy property in the name of his daughter or wife taking the question of
security in an unwanted situation. This legal issue may give rise to the
practice of Benami transaction among the Hindu community in this
sub-continent.

Reasoning for the prevalence of this practice; past and present-

There are lots of reasons behind the Benami transaction was came into being and
even in the present time, the practice is prevalent but the imposition of legal bar on
this transaction give rise a different pictures. The reasons are following-

 Muslim law of inheritance:

The law of Muslim inheritance regarding a child whose father died during
the lifetime of his grandfather. In this situation, where father dies during
the life time of a grandfather, the child is excluded from the property of
that grandfather. Here, the grandfather could buy property to his
grandson’s name. This may be a cause for emerging this practice among
the Muslims.

 Traditional Hindu inheritance:

Considering the right of property for women under traditional Hindu law is
much limited and to some extent, it can be said that this is not a right at all.
In this situation, a father or a husband can buy property in the name of his
daughter or wife taking the question of security in an unwanted situation.
This legal issue may give rise to the practice of Benami transaction among
the Hindu community in this sub-continent.

 Defrauding the creditors:

 Defrauding the creditors by making the property hide in the name of
another person. In this approach, the modern transaction of banking and
other financial firms may lose a huge amount of money, if would not
prohibited.

 Tax evasion:
In the recent time, the practice of Benami transaction is made for using it
as an effective mode of tax evasion. This may be the biggest reason of
practicing Benami transaction for evading tax to the authority. By using
the property under the name of another person, a person can defense on the
ground that he does not belong the property as it is not under his/her name.
The prohibition of Benami transaction takes much importance in this
regard.

 By passing the Ceiling limit:

Laws relating to ceiling limit of land work as an important tool to ensure
equitable distribution of property. But many people, with a view to by
passing this ceiling law, buy property in the name of others due to which
properties get concentrated within some individuals. In our legal context, if
Benami transaction were allowed, then men could enjoy property beyond
the limit prescribed by law, namely, exceeding 60 standard Bighas of land.

Past legal position; before The Land Reforms Ordinance 1984-

In the past time, especially before The Land Reforms Ordinance 1984, Benami
transaction was valid and an accepted one in a larger extent. Law reflects the
custom or usage of the society and this issue was the same as the practice of
Benami transaction was conducted by the general people. But this validity was not
unfettered in nature, rather was subject to some restrictions imposed by law in
certain cases. In the previous time, this right was, generally, made to subject to the
following restrictions or Benami transaction got validity if it under following
conditions-

 If the Benami transaction does not violate the statutory provisions of

law.

 If the transaction is not used to defraud the creditors since the owner
had a defense that the property is not under his name.

 If the Benami transaction does not violate any policy of the

Government, then it got validity or legal protection.

Though, the Benami transaction was permitted under law but in practice, there
were some problems regarding the dispute arose between the owner and the
Benamder, especially when the question absolute right or interest arose. In other
words, the property was transferred in the name of another person but for the
benefit of the owner and also the money was provided by the owner , but the
question of absolute ownership regarding the transfer of the tittle. In such situation,
the court made some objective test under respective circumstances, which are
following-

 The source of purchase money. In other word, who paid the money of
that property and this may be important most test as applied by the
court.

 Nature of the possession of the property after the purchase. In other

words, who had that possession of the property?

 What types of relationship subsisted between the owner and the

Benamder. Whether the real owner and the Benamder were related to
each other or were strangers or friends?
  Motive of the owner were examined that why the property was
purchased in the name of the Benamder?

 Conduct of the parties in dealing with the property. In other words, who
used to take care of and control over the property?

 Custody of the title deeds after the sale5.

The above mentioned tests are given by an Indian case, Jayadayal Peddar v Bibi
Hezra6, and most of those tests have also been given in HCD in Rupe Jahan
Bagum and Others V Lutfer Ali Chowdhury and Others 7. In the HCD, the court
made the following observation-

‘…the essence of a Benami transaction is the intention of the party or parties

concerned. The source from which the purchase money case, the nature and
possession of the property, the motive for making the Benami transaction, the
position of the parties and their relationships, the custody of the parties concerned
in dealing with the property have been by the superior Courts of the subcontinent
to be pertinent questions for determining the Benami nature of transaction’.

Thus, the past legal position is that the Benami transaction was valid and accepted
one under a broad circumstances where it does not create any statutory violation of
law. In determining the ownership of the transfer, the court conducted the above
mentioned tests in the respective circumstances.

Present legal position-

5
Jayadayal Peddar v Bibi Hezra, AIR, 1974, SC, 171.
6
Ibid.
7
17 BLD (AD) 1997.
The supreme authority of our law to prohibit Benami transaction is The Land
Reforms Ordinance of 1984. Section 5 of the said order deals with the prohibition
of Benami transaction. The section runs as following-

Section 5-
PROHIBITION OF BENAMI TRANSACTION OF IMMOVABLE PROPERTY

(1) No person shall purchase any immovable property for his own benefit in the
name of another person.

(2) Where the owner of any immovable property transfers or bequeaths it by a

registered deed, it shall be presumed that he has disposed of his beneficial
interest therein as specified in the deed and the transferee or legatee shall be
deemed to hold the property for his own benefit, and no evidence, oral or
documentary, to show that the owner did not intend to dispose of his beneficial
interest therein or that the transferee or legatee holds the property for the
benefit of the owner, shall be admissible in any proceeding before any Court
or authority.

(3) Where any immovable property is transferred to a person by a registered deed,

it shall be presumed that such person has acquired the property for his own benefit,
and where consideration for such transfer is paid or provided by another person it
shall be presumed that such other person intended to pay or provide such
consideration for the benefit of the transferee, and no evidence, oral or
documentary, to show that the transferee holds the property for the benefit of any
other person or for the benefit of the person paying or providing the consideration
shall be admissible in any proceeding before any Court or authority.

Explanation-
Section 5 postulates that the transfer deed itself in a Benami transaction is not void
rather the money providing party cannot claim the interest of that property which
has been given to the Benamder. Further, the section is very much clear that the
person paying the consideration cannot be given the opportunity to produce any
evidence in a court to show that the property was purchased for his/her own benefit
and court will assume that the property was transferred for the benefit of the
Benamder.

Judicial pronouncements-
Some judicial pronouncements of Bangldesh Supreme Court regarding Benami
transaction is given below-

S N Kabir V Fatema Bagum and Others8-

 Synopsis of facts-
In this case, appellant SN Kabir, the husband, purchased some urban area in the
name of his wife, Fatema Bagum, the Benamder in a . Through the transfer deed,
the husband purported to retain the interest of the purchased property for his own
benefit but the wife, subsequently, refused to give the interest. Then the dispute
arose between the husband and the wife. The husband filed a suit claiming the
property as his own.

 Issues to decide-

 Whether the term ‘immovable property’ in section 5 of the said

Ordinance includes only rural agricultural or not?

 Whether the husband under the present law can retain any interest
through a Benami transaction?

8
SN Kabir V Fatema Bagum and Others, 66 DLR (AD) 2014.
  Arguments for the appellant-
Mr. Mahmudul Islam, the learned counsel appearing on behalf of the appellant,
submitted that
 The term ‘immovable property’ in The Land Reform Ordinance,
1984 applies only in respect of agricultural land and as such the
decision given by the HCD to be set aside.

 He further submitted that the property must belong to him, the

husband, as he paid the consideration money and there is no
income of his wife, namely, the respondent. So, the decision of
HCD cannot be upheld.

 Arguments for the respondent-

 The learned counsels, Mr. Abdul Wadud Bhuyan and

Mr.Mahbubey Alam, submitted that the impugned judgment
delivered by the HCD must be held as the decision was made in
accordance with the section 5 of the Land Reforms Ordinance of
1984.

 Decision-

 The court found that the decision delivered by the HCD was made
in accordance with law and as such the appeal was set aside.

 The court further observed regarding the submission of Mr.

Mahmudul Islam, the learned counsel for the appellant, the term
‘immovable property’ in section 5 of the ordinance is applied in
both the agricultural and non-agricultural (urban) land.
  In other words, the legislature did not lack in expression and the
exclusion of the term ‘agricultural’ in the preamble was deliberate.
So, the term ‘immovable property’ in said ordinance applies to
both the immovable property, namely, agricultural and non-
agricultural land.

Rupe Jahan Bagum and Others V Lutfer Ali Chowdhury and Others9

 Burden of proof-
In this case, the Supreme Court decided that the burden of proof in a Benami
transaction in the following words
“The burden of proofing that a particular transaction is a Benami one and the
apparent recipient of the document is the real owner always rests upon the person
asserting it to be so. This burden has to be strictly discharged by adducing legal
evidence of a definite character which would either directly proof the fact of
Benami or established the circumstances unerringly and reasonably raising an
inference of that face”10.

The court further delivered some tests to determine whether the transaction is
Benami or not in the following words
“The essence of a Benami transaction is the intention of the party or parties
concerned. The source from which the purchase money case, the nature and
possession of the property, the motive for making the Benami transaction, the
position of the parties and their relationships, the custody of the parties concerned
in dealing with the property have been by the superior Courts of the subcontinent
to be pertinent questions for determining the Benami nature of transaction”11

Comments on the cited cases-

9
Rupe Jahan Bagum and Others V Lutfer Ali Chowdhury and Others, 17 BLD (AD) 1997.
10
Ibid.
11
Rupe Jahan Bagum and Others V Lutfer Ali Chowdhury and Others, 17 BLD (AD) 1997.
  In S N Kabir V Fatema Bagum and Others12 case, the court decided
the applicability of the term ‘immovable property’ under section 5
of The Land Reforms Ordinance, 1994. The court showed the term
is applicable in both the agricultural and non-agricultural land.
This explanation is outstanding as the court make an improvement
a vacuum in the said section. If that explanation was not
promulgated by the SC, then the people can use Benami
transaction in the urban area and get an effective instrument of
violating the law of ceiling. In other words, people can get
property in excess of 60 standard Bighas by using Benami
transaction in the urban area, namely, the non-agricultural land.

 In Rupe Jahan Bagum and Others V Lutfer Ali Chowdhury and

Others13 the SC gave some tests as to procedures of burden of
proof and some tests to determine whether there is any Benami
transaction actually subsisted between the parties concerned. A
question can be arose in this regard that does the court gave the
tests to override the section 5 of The Land Reforms Ordinance
since the tests and burden of proof seem to determine the actual
owner. But this not the cause, rather the observations have to look
simultaneously, with the section 5 of the said ordinance that after
determination of the owner and the Benamder, under whose name
the property has been purchased, the claim of the money provider
party will be excluded.

Thus, there is no scope for making a negative explanation as to violate the

ordinance. But the fact is that, further clarification was much necessary as to legal
position of Benami transaction for further non-clearance.

Comparison with Indian law-

12
S N Kabir V Fatema Bagum and Others, 66 DLR (AD) 2014.
13
17 BLD (AD) 1997.
Four years later after the enactment of The Land Reforms Ordinance in 1984 in our
country, the Indian parliament enacted The Benami Transaction Prohibition Act in
1988. There are several differences between the two laws in comparison of
different issues. Some of that differences are given below-

 As regards to the prohibited party-

The Land Reforms Ordinance in 1984, our law, prohibits all types of
Benami transaction in the sense that the owner/money provider cannot claim
the interest over the Benamder. But the Indian authority gives a limited way
making Benami transaction. According to Indian law a person can make
Benami transaction in the name of his wife and daughter under section 3 (2)
of the Benami Transaction Prohibition Act in 1988. The section runs as
following-
“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 of the unmarried daughter”

 As regards to the harshness-

The Land Reforms Ordinance in 1984 is much soft that The Indian law
regarding the consequence of making Benami transaction. Bangladeshi law
does not prescribe any penalty rather only the claim of owner/money
provider party is barred by section 5 of the Land Reforms Ordinance in
1984. On the other hand, the Indian law prescribes a form of penalty in
making of Benami transaction under section 3 (3) of the Benami Transaction
Prohibition Act in 1988. The section runs as following-
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.

 As regards to the remedy-

The Land Reforms Ordinance, 1984 of Bangladesh provides civil remedy, whereas
the Benami Transaction Prohibition Act, 1988 of India provides criminal remedy
by imposing penalty upon Benami transaction.

Conclusion-
In the last, it can be said that the prohibition of Benami transaction has a
significant role of financial benefit of the state, since the people in most of the
cases, used it as an effective instrument of tax evasion. In a larger extent, this
practice was prevalent for getting property exceeding the limit of ceiling imposed
by law. But this restriction may not be imposed in some cases for the benefit of the
society and of the people.