Preamble; An Act to prohibit benami transactions and the right to recover property held benami and for matters connected therewith or incidental thereto.
'BENAMI' the word is combination of a Persian Words, as 'be' means without and 'nam' means name, i.e. 'Benami' means 'Without Name'. Benami, denotes any transaction made by a person without using his name on the name of other person.
Since prior to enactment of PBPT Act, 1988, the Benami Transactions are legally allowed and recognized by the Courts and name 'Benami' generally not used in any statute.
As held in Anacapa Vs. Ramaswamy AIR 1925 Mad. 1005; - A 'benami' transaction is one where a person 'beneficial owner' buys property in the name of another 'benzamide', without indicating an intention to benefit the other.
Let us discuss 'BENAMI TRANSACTIONS';
Section 2(a) of the Act, 1988, define; 'benami transaction', to mean 'any transaction in which property is transferred to one person for a consideration paid or provided by another person'.
The main ingredients of a 'benami transaction' are;
1. Transfer of property for consideration; and
2. The consideration is provided not by the transferee but another person on behalf of transferee.
The Amended Act, 2016 has been charged definition of Clause 9 in Section 2 as follows;
Section 2(9)(A): Benami Transaction, transaction or arrangement, where consideration provided by person other than the transferee or the person, in whose name property is held.
Exceptions; following transaction would not be regarded as 'benami transactions;
(i) Karta or member of HUF holding HUF property if consideration for property provided or paid out of know sources of HUF;
(ii) Property hold by a person standing in fiduciary capacity;
(iii) Property held in the name of spouse or any child of an individual and consideration for property paid or provided out of known sources of individual;
(iv) Property held jointly in the names of an individual and his brother/sister/lineal ascendant/ lineal descendant, where consideration for property paid or provided out of known sources of individual;
(v) Genuine stamp duty paid Power of Attorney transactions referred to in Section 53A of Transfer of Property Act, where contract (agreement to sell) is registered and transferee has taken possession and paid consideration to transferor but property remain in transferors' name.
Section 2(9)(B): Benami Transaction, transaction or arrangement in respect of property carried out in a fictitious name;
Section 2(9)(C): Benami Transaction, transaction or arrangement in respect of property where owners deny knowledge of ownership or not aware of ownership;
Section 2(9)(D): Benami Transaction, property transaction or arrangement in, where person providing consideration is not traceable;
Note: the exception referred in Section 2(9)(A) are not applicable in Section 2(9)(B) to (D) as referred above.
As mentioned above, there are four categories of 'benami transactions';
I. transaction or arrangement, where consideration provided by person other than the transferee or the person, in whose name property is held.
II. transaction or arrangement in respect of property carried out in a fictitious name;
III. transaction or arrangement in respect of property where owners denies knowledge of ownership or not aware of ownership;
IV. property transaction or arrangement in, where person providing consideration is not traceable.
Note: (i) if any transaction does not fall within the scope of any of these four sub-clauses, it is not a 'benami transaction' and property involved is not a 'benami property'.
(ii) 'benzamide' may be any person-individual or HUF or Firm or Company or AOP or BOI or Artificial Juridical Person.
(iii) any property which is subject matter of any of four transaction is a 'benami property'.
(iv) 'beneficial owner' may be any person-individual or HUF or Firm or Company or AOP or BOI or Artificial Juridical Person.
(v) Either 'beneficial owner' or 'benamidar' may be fictitious or untraceable but not both.
LET'S CONSIDER EXCEPTION IN CASE PROPERTY HAS BEEN TRANSFERRED THROUGH POWER OF ATTORNEY;
Explanation 2(9) clarifies that 'benami transaction' shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to Section 53A of the Transfer of Property Act, 1882 if, under any law for the time being in force;
i) Consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continuous to hold ownership of such property;
ii) Stamp duty on such transaction or arrangement has been paid and
iii) The contract has been registered.
Thus, by virtue of Explanation to Section 2(9), Power of Attorney transactions will not be regarded as Benami Transactions. The Explanation has been applicable in property transaction with retrospective effect.
But Explanation to Section 2(9) does not confer perfect legal title to the Power of Attorney Holder, but same transaction will be outside the purview of Benami Transactions.
Suraj Lamp & Industries (P). Ltd. Vs State of Haryana  14 - Supreme Court held that as under on the validity of a SA (Sale Agreement)/GPA (General Power of Attorney)/WILL transactions as under;
• SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property.
• The Immovable Property can be legally and lawfully transferred/conveyed only by registered deed of conveyance.
• Transactions in nature of 'GPA Sales or SA/GPA/WILL Transfer' do not convey title and do not amount to transfer, nor can they be recognised a valid mode of transfer of immovable property.
• The court will not treat such transactions as completed or concluded transfers or as conveyance as they neither convey title nor create any interest in an immovable property. They cannot be recognised as deeds of title, except to the limited extent of Section 53A. such transactions cannot be relied upon or made the basis for mutations in Municipal or Revenue records.
• What is stated above is not only applied to deeds of conveyance in regard to freehold property but also to transfer leasehold property.
• A lease can be validly transferred only under a Registered Assignment of Lease. It is time that an end is put to the pernicious practice of SA/GPA/WILL transactions known as 'GPA Sales'.
• It well settled legal position that SA/GPA/WILL transactions are not 'transfer 'or 'sale' and that such transactions cannot be treated as completed transfers or conveyances. They can continue to be treated as existing agreement of sale.
• Nothing prevents affected parties from getting registered deeds of conveyance to complete their title.
• The said 'SA/GPA/WILL transactions' may also be used to obtain specific performance or to defend possession under Section 53 A of Transfer of Properties Act, 1882.
Note: It is further stated that the above decisions shall not in any way affect the validity of Sale Agreements and Power of Attorney executed in genuine transactions.
Now lets' consider a case of Joint Development Agreement , in which a person enters into agreement with builder and developer to develop land or parcel of land belong to him and authorise builder or developer to develop the land or parcel of land through an Agreement of Sale and grant Power of Attorney empowering the builder to execute agreements of sale or conveyances in regard to in land or parcel of land in favour of perspective purchasers.
In various states the development agreement and power of attorney are regulated by law and subject to appropriate stamp duty. The aforesaid observations of Hon'ble Supreme Court regarding 'SA/GPA/WILL Transactions' are not intended to apply to such bona fide genuine transactions.
DISCLAIMER: The information / articles & any replies to the comments on this article are provided purely for informational & educational purposes only& are purely based on the understanding / knowledge of the author. They do not constitute any legal advice or legal opinions. The information / articles & any replies to the comments are intended but not promised or guaranteed to be correct or up-to-date and should in no way to be taken /considered as legal advice / opinion. Therefore, author cannot take any responsibility for the results or any consequences of any attempt to use or adopt any of the information or replies presented in the blog. You are requested /advised not to act on any information/ articles & replies given on comments without consulting any Practicing Professional.