Benami Property Transactions: Power of Attorney and the “Beneficial Owner” Test

By | March 19, 2026
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Benami Property Transactions: Power of Attorney and the “Beneficial Owner” Test

This ruling (delivered in early 2026) clarifies the scope of Section 2(8) and 2(9)(A) of the Benami Act, specifically how “control” over a property and the “source of funds” determine the true nature of a transaction. The Adjudicating Authority/Tribunal ruled in favour of the Revenue, confirming that a property held in the name of a third party without real consideration is a Benami asset.

The Legal Conflict: Nominal Ownership vs. Beneficial Control

The Definition of Benami Transaction:

Under Section 2(9)(A), a transaction is “benami” if a property is transferred to, or held by, a person (the Benamidar), and the consideration for such property has been provided by another person (the Beneficial Owner), for whose immediate or future benefit the property is held.

Facts of the Case: The “Loan Recovery” Defense

  • The Origin: The original owner (S) took a cash loan from the alleged Beneficial Owner (SS). When S failed to repay, he executed a Power of Attorney (PoA) in favour of SS.

  • The Transfer: Instead of selling the land to a genuine third party to recover the loan, SS used the PoA to transfer the land to an associate (B, the Benamidar).

  • The Financials: The sale deeds showed cheque payments, but the investigation revealed these cheques were never encashed. They were used solely for “presentation” to the Sub-Registrar.

  • The Sale: A portion of the land was later sold to a third party. The sale proceeds were first moved to B’s account and then immediately transferred to SS’s account.

  • The Defense: SS claimed he was acting in a fiduciary capacity to recover his loan and that the transaction was a legitimate business arrangement.

The Decision: Confirming the Benami Nature

The Authority rejected the appellant’s claims based on several critical findings:

  1. Admission of the Benamidar: The alleged Benamidar (B) admitted he never paid the consideration reflected in the sale deeds and never had physical possession of the original title documents.

  2. Exercise of Control: SS (the Beneficial Owner) maintained absolute control. He held the original deeds, managed the property via the PoA, and ultimately pocketed the sale proceeds.

  3. The “Proceeds” Rule: Under Section 2(8), “Benami Property” includes not just the immovable asset but also the proceeds of sale derived from it. Therefore, the cash received from selling a portion of the land was also classified as Benami property.

  4. Rejection of Fiduciary Relationship: To escape the Benami law, one must show a recognized fiduciary relationship (like a trustee or partner). The Court held that a creditor claiming an “adverse financial interest” (recovering a loan) does not fall within the protected fiduciary categories under Section 2(9)(A)(ii).

Key Takeaways for Property Transactions

  • The “Paper Cheque” Trap: Using cheques in a sale deed that are never intended to be encashed is a major red flag for the Initiating Officer (IO). If the bank trail doesn’t match the registered deed, the transaction is likely to be flagged as Benami.

  • Custody of Title Deeds: The person who holds the original “mother deed” is often viewed as the true owner. If a registered owner doesn’t have the original documents, they are presumed to be a Benamidar.

  • PoA Risks: Using a Power of Attorney to transfer property to “friends” or “associates” without actual money changing hands is a high-risk activity under current Benami laws.

  • Confiscation of Proceeds: If a Benami property is sold, the government can attach the bank accounts where the sale proceeds were deposited, as the money inherits the “Benami” character of the land.

Summary of Section 2(9)(A) “Benami” Triggers

  • Consideration: Provided by someone other than the person in whose name the property stands.

  • Benefit: The property is held for the benefit (immediate or future) of the person providing the money.

  • Possession: The registered owner does not have actual possession or control of the asset.

  • Fiduciary Claims: Must be a recognized category (e.g., Karta of HUF, Trustee, or Director) to be an exception.

APPELLATE TRIBUNAL SAFEMA , NEW DELHI
Sanjay Sancheti
v.
Initiating Officer, BPU, Raipur*
Justice Munishwar Nath Bhandari, Chairman
and G. C. MISHRA, Member
FPA-PBPT-3166 & 3171/RP/2023
MP-PBPT-4525 & 4536/RP/2023 (Stay)
MP-PBPT-4537/RP/2023 (Exemp.)
FEBRUARY  24, 2026
Ashwani Taneja, Shreya Shandilya, Ayush Saini, Advs. and Ashish Tandon, CA for the Appellant. Kanhaiya Singhal, S.P.P, Ajay Kumar and Ms. Rhythm Bhardwaj, Advs. for the Respondent.
ORDER
Brief facts:
1. The present appeals have been filed u/s 46 of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA, 1988) against the common order dated 19.07.2023 passed by the Adjudicating Authority wherein it is held that Sh. Bhikram Chand Chandak is the Benamidar (BD) and Sh. Sanjay Sancheti is the Beneficial Owner (BO). Certain immovable properties and bank accounts are held as ‘benami property’.
2. The Initiating Officer (IO), Benami Prohibition Unit-Raipur, had made a Reference numbered as R-0210/PBPT/DLI/2022 dated 05.07.2022 to the Adjudicating Authority along with a Provisional Attachment Order (PAO) dated 28.06.2022.
3. The case of the IO is that Sh. Sanjay Sancheti had conspired for purchasing lands situated at Mandir Hasaud, Tehsil- Arang, District: Raipur (total area 1.516 Hectares) in the name of Sh. Bhikam Chand Chandak. During investigation, bank account statement of Sh. Bhikam Chand Chandak maintained at Punjab & Sindh Bank, Raipur Branch was called for. It was followed by summon to Sh. Bhikham Chand Chandak by the IO on 24.02.2022. His statement was recorded on oath wherein he disclosed his source of income to be out of salary in the range of Rs. 7,000/- to Rs. 15,000/- till 2017. It was also admitted that he did not have the actual possession of the lands and even the original sale deed. According to him, both things are under the control of Sh. Sanjay Sancheti. He further admitted that consideration to be paid in cheques for the subject properties/lands registered in his name had never been encashed. The scrutiny of the bank account statements of Sh. Bhikham Chand Chandak revealed that while the two sale deeds were executed on 07.05.2018 and 24.04.2020 in his name while the highest credit bank balance during the period aforesaid was Rs. 8,296/- and Rs. 216/- only. Further, the Income tax Returns filed by Shri Bhikham Chand demonstrated that from A. Y. 2015-16 to 2020-21 total income was Rs. 18,04,100/-.
4. On the basis of the investigation, the IO concluded that the land originally belonged to Sh. Sushil Pagariya who had taken cash loan from Sh. Sanjay Sancheti. When Sh. Sushil Pagariya couldn’t repay the loan to Sh. Sanjay Sancheti, he executed a Power of Attorney in his favor. The terms & conditions of this power of attorney were that Sh. Sanjay Sancheti would sell the lands to third parties out of which he will keep the money received from sale consideration in lieu of the outstanding loan and the surplus will be returned back to Sh. Sushil Pagariya. However, instead of selling the land to any normal buyer and adjusting the outstanding loan amount from the sale consideration, Sh. Sanjay Sancheti, by using that Power of Attorney, transferred the land in favor of Sh. Bhikam Chand Chandak for which no consideration was paid. The cheque detail related to payments mentioned in the Sale deeds were never encashed. In fact, neither any cheques were given by Sh. Bhikam Chand Chandak nor were they credited in the account of Sh. Sushil Pagariya. Out of the 1.516 Hectares of land purchased in the name of Sh. Bhikam Chand Chandak, some portion of lands (0.149 Hectare) were sold out and the sale consideration received in the bank account of Sh. Bhikam Chand Chandak was transferred to the bank account of Sh. Sanjay Sancheti.
5. On the basis of the facts referred above, Provisional Attachment Order has been confirmed by the Adjudicating Authority. Aggrieved by the order of the Adjudicating Authority, appellants have preferred these appeals raising factual and legal issues.
Submissions of the Appellants:
6. The Ld. Counsel for the appellants submitted that that the Adjudicating Authority should have dismissed the reference on the ground that the transaction took place prior to the amendment in the Act of 1988 vide amending Act of 2016 in light of the supreme court judgment in the Union of India v. Ganpati Dealcom Pvt. Ltd. (SC)/(Civil Appeal No. 5783 of 2022). Since, the transaction for arranging of the loan by the Sh. Sanjay Sancheti pre-dates the amendment in PBPT Act,1988, the IO could not have invoked section 2(9) of the PBPTA, 1988 in the view of the judgment (supra).
7. It was also argued that Sh. Bhikam Chand Chandak cannot be treated as benamidar in respect of the subject movable properties namely the two bank accounts held at State Banck of India (A/c No. 10822771601) and Jila Sahakari Kendriya Bank Maryadit (A/c no. 624003026592) which are admittedly owned, and operated by the appellant Sh. Sanjay Sancheti. It was argued that under the scheme of the PBPT Act, 1988, a property can be held as “benami property” only when it stands in the name of the alleged benamidar while the consideration is provided by another person for his benefit. In the present case, the alleged ‘benami property’ i.e. the bank accounts are not held in the name of the benamidar, Sh. Bhikam Chand Chandak, negating the essential ingredient of a benami transaction. Consequently, Sh. Bhikam Chand Chandak cannot be held as a benamidar in respect of the movable properties.
8. It was also submitted that the IO failed to consider that the subsequent transactions in the bank account executed by the Sh. Sanjay Sancheti were under the General Power of Attorney holder. The transactions were undertaken solely for the purpose of discharging his obligations towards Sh. Shushil Pagariya who was not made a party to the proceedings by the respondents.
The respondent failed to examine the true nature of the underlying transactions which demonstrate that the sale of properties took place between Sh. Bhikam Chand Chandak and Sh. Shushil Pagariya for which the consideration was provided by cheques as mentioned in the sale deed. The fact that payment was structured, paid in parts to settle gradually by the buyers from the secondary sale proceeds was ignored by the respondent. Sh. Sanjay Sancheti was only acting as per directions of Sh. Shushil Pagariya and using the funds as received from Sh. Bhikam Chand Chandak to repay the outstanding loans of Sh. Shushil Pagariya to the lenders / creditors which can be corroborated from the bank statements as also the Affidavits of the lenders who confirmed the receipt of monies.
9. Moreover, the Adjudicating Authority failed to appreciate the fact that the subject immovable properties were never in ownership/possession of the Sh. Sanjay Sancheti. He had acted in the capacity of the General Power of Attorney holder on behalf of Sh. Shushil Pagariya. The IO failed to established the financial trail and identify the true recipient of the payments made by Sh. Bhikam Chand Chandak, which were undisputedly conducted through transparent banking channels. He alone had provided the consideration for the subject properties in question, as mentioned in the sale deeds to Sh. Shushil Pagariya, and the payment of consideration was subsequently utilized by the Sh. Sanjay Sancheti to settle the outstanding loans of Sh. Shushil Pagariya. Such a business arrangement cannot fall within the purview of a benami transaction. Also, Sh. Sanjay Sancheti eminently qualifies to the specific exception listed in sub clause (ii) of section 2(9)(A).
10. It was also argued that the Adjudicating Authority failed to appreciate the very fact that the onus of proving a benami transaction rests entirely on the shoulders of the IO. In this regard, the Ld. Counsel for the appellant cited the recent judgment in Mangathai Ammal v. Rajeswari (SC)/(Civil Appeal No. 4805 of 2019) and in Smt. P. Leelavathi v. V. Shankarnarayana Rao (SC)/(Civil Appeal No. 1099 of 2008) and Tribunal’s judgement in the case of Smt. Pamela Bhardwaj and Sh. Ramneek Singh v. Initiating Officer, BPU Circle 1(1) dated 21.06.2019.
11. It is submitted that the IO passed the attachment orders u/s 24(4)(b)(i) of the PBPTA, 1988 without complying the procedure for attachment of the subject properties as prescribed in the PBPTA, 1988 and rule 5 of the PBPT rules, 2016.
12. On behalf of the appellant Sh. Bikram Chand Chandak, it was argued that the property in question was legally purchased through two registered sale deeds dated 07.05.2018 and 17.06.2020. There is no proof that the consideration was paid by the alleged Beneficial Owner. It was also submitted that around May 2018, the landowner, Shri Sushil Pagariya, was unable to sell the subject property on his own. The prospective buyers either showed no interest or sought to exploit his financial distress therefore he sought assistance of a land broker, Sh. Bhikam Chand Chandak. It was mutually agreed that Sh. Bhikam Chand Chandak would facilitate resale of the property, subject to the title being first transferred in his name to assure prospective purchasers of a risk-free transaction. It was further agreed that the property would be acquired on credit through post-dated cheques, with payment to be made upon realization from subsequent sales. Pursuant to this understanding, Sh. Sushil Pagariya instructed his General Power of Attorney holder, Shri Sanjay Sancheti, to transfer the property in favor of Shri Bhikam Chand Chandak, and accordingly, the subject property was transferred through duly registered sale deeds, with title deeds handed over thereafter.
The learned counsel for the appellants did not raise any other issue than referred to above during the course of hearing despite an opportunity to raise any other legal or factual issue. The learned counsel for the appellants rather showed his satisfaction to the issues referred above and made a prayer for appropriate order thereby to cause interference in the impugned order.
Submission of respondents:
13. The appeal was contested by the respondents. It was submitted that the appellant Sh. Bhikam Chand is the benamidar and appellant Sh. Sanjay Sancheti is the beneficial owner since the requirement under section 2(9)(A) of the PBPTA, 1988 has been fulfilled and therefore the impugned properties were rightly held to be ‘benami’. The Ld. Counsel for the respondent agreed with the grounds on the basis of which the Adjudicating Authority has confirmed the PAO and submitted that argument of the appellants holds no merit.
Findings and analysis:
14. We have heard the arguments and perused the documents on record.
15. The IO has alleged that Sh. Sanjay Sancheti had planned to acquire agricultural land admeasuring 1.516 hectares at Mandir Hasaud, Raipur, in the name of Shri Bhikam Chand Chandak, who was an employee of Sh. Madanlal Sancheti (f/o Sh. Sanjay Sancheti). The said land belonging to one Sh. Sushil Pagariya who had taken a cash loan from Sh. Sanjay Sancheti. Since, Sh. Sushil Pagariya defaulted on the loan repayment, he executed a Power of Attorney in favor of Sh. Sanjay Sancheti in order to sell the land and adjust the loan amount. Instead of selling the land to any third party, Sh. Sanjay Sancheti misused the General Power of Attorney to transfer land to Sh. Bhikam Chand Chandak without consideration. A portion of land was later sold, and the sale consideration for the same was transferred to the bank account of Sh. Sanjay Sancheti.
16. The Ld. Counsel for the appellants argued that the IO has based his entire case on the alleged transaction involving the appellant, Sh. Sanjay Sancheti, who arranged a loan for Sh. Sushil Pagariya in the year 2015-2016. The IO claimed that the loan constituted the consideration for the purchase of the subject properties on behalf of the Sh. Sanjay Sancheti. However, since, alleged consideration was paid prior to 1.11.2016 thus no proceedings could have been launched under the PBPTA, 1988 for any transaction prior to 01.11.2016 in the light of the judgement of the Hon’ble Supreme Court in the Ganpati Dealcom Pvt. Ltd. (supra).
We have considered the argument and find that the judgement supra has been recalled by the order of the apex court vide its order dated 18.10.2024, it is otherwise a fact that the definition of ‘benami transaction’ under section 2 (9) (A) of the PBPTA, 1988 envisages not only ‘transfer’ of property but also the ‘holding’ of property, meaning thereby that if someone is holding property subsequent to the amendment of 2016, it would be covered by the Amending Act of 2016 provided all the other conditions are satisfied. This Tribunal has reiterated the same in its judgement of Prism Scan Express (P.) Ltd. v. Initiating Officer, Deputy Commission of Income-tax (BPU-2) (SAFEMA – New Delhi)/appeal no. FPA-PBPT-1079/MUM/2020 dated 15.12.2023. The relevant paragraphs are cited below:
“18. As per the definition quoted above, the benami transaction means a transaction or an arrangement where a property is transferred to or is held by a person and the consideration of such property has been provided or paid by another person. The aforesaid definition is applicable to this case. According to the definition, “benami transaction” does not mean only transfer of property, but include even its holding by a person without payment of consideration rather it was paid or provided by another person. Since it has come on record that on the date of survey, subsequent to amendment by the Amending Act 2016 and even show cause notice, the shares were held by the appellant Companies, it would fall in the definition of “Benami Transaction” under the Amending Act of 2016.
.
.
.
22. The perusal of the paras quoted above not only makes a reference of the amended provisions but also deals with the issues over the constitutional validity of the provisions of the Act of 1988 and the Amending Act of 2016. The conclusions thereupon were drawn by the Apex court in para 130 quoted above. The benami transaction prior to the Amending Act 2016 were not to be touched in reference to the amended provisions.
23. It is not in doubt that benami transaction prior to the amendment is to be governed by Judgement of the Apex Court and for it, certain provisions of the Amending Act, which includes even provision of forfeiture would not apply. It would, however, be relevant to find out whether benami transaction is of a period prior to the amendment or even subsequent to it also.
24. For the aforesaid, we need to reiterate the definition of “Benami Transaction.” It not only refers in the transfer of property but also its holding and thereby, if somebody is holding the benami properties subsequent to the amendment, it would come in the sweep of “benami transaction”.
25. If it is a case of transfer of property prior to the amendment in the definition of “Benami Transaction” and such property is not held by the benamidar as on the date of the amendment or subsequent to it, then the Amending Act of 2016 would not be applicable to such a transaction.
26. In other case, where though transfer of the property is prior to the Amending Act 2016, but it is still held by the benamidar even subsequent to the amendment, it would be a “benami transaction” under the Amending Act, 2016.”
In the light of above, we don’t find any merit on the aforesaid issue raised by the appellants.
17. The Ld. Counsel for the appellant also argued that movable properties i.e. the bank accounts in the name of the appellant Sh. Sanjay Sancheti were attached without any tangible material brought on record. Moreover, since the bank accounts are in name of the alleged beneficial owner and not the benamidar, the basic condition for the properties to be termed as ‘benami’ is not satisfied as the subject movable properties were owned, held and operated by the beneficial owner only.
It is true that the bank accounts were in the name of Sh. Sanjay Sancheti, the alleged beneficial owner and not the in the name of Sh. Bhikam Chand Chandak, the alleged benamidar. However, the facts of the case reveal that the lands under question were acquired in the name of Sh. Bhikam Chand and some portion was sold for a consideration of Rs. 23,84,875/-. Since, the entire land was held to be ‘benami’ u/s 2(8) of PBPT Act, 1988, that amount so received in lieu of selling a portion of the said ‘benami’ land becomes benami property. Section 2 (8) of the PBPTA, 1988, defines that “benami property” means any property which is subject matter of a benami transaction and also includes any form of such property. The documents on record show that IO has adequately stated reasons in the SCN under section 24(1) dated 31.03.2022 and the PAO also has been issued after complying with the statutory requirement of the PBPTA, 1988.
In the view of the above, we don’t find any cause to interfere with the impugned order on this ground raised by the appellants.
18. The Ld. Counsel for the appellants also argued that the IO failed to consider that the transactions in the bank account executed by the appellant were being done under the General Power of Attorney and were only to discharge obligations of Sh. Shushil Pagariya who was the prime mover and was not made party to the proceedings by the respondents.
In this regard we are of the view that the terms and conditions of the General Power of attorney clearly specify that the appellant Sh. Sanjay Sacheti would sell the lands to third parties out of which he would keep the money received from the sale consideration in lieu of the outstanding loan and the surplus would be returned back to Shri Sushil Pagariya. The appellant Sh. Sanjay Sacheti violated the terms & conditions of the General Power of Attorney as instead of selling the lands to the buyer and adjusting the outstanding amount from the sale consideration, the appellant Sh. Sanjay Sancheti transferred the lands in the name of Shri Bhikam Chand Chandak for which no consideration was paid. The cheque details related to the payment mentioned in the registry deed are only for presentation purposes. In fact, no cheques were encashed. The legal title remains in the name of Shri Bhikam Chand Chandak and the agreement to sell was executed between Shri Sanjay Sancheti and the sellers which shows that Sanjay Sancheti was the ultimate beneficiary.
19. The Ld. Counsel for the appellants also claimed exception under sub clause (ii) of section 2(9)(A) which reads as below:
(9) “benami transaction” means,—
.
.
(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified by the Central Government for this purpose;”
The bare perusal of the above clause shows that use of the word “and” gives it an inclusive definition. The clause can be read into two parts. The first part refers to a person who holds or manages the property in trust and confidence not for their own benefit but solely for the benefit of another person, the second part specifies the list of persons covered under fiduciary capacity. The first part of the clause is required to be given an interpretation to fulfill the purpose of the statue as otherwise the very purpose of the Act would be defeated. Notably, sub-clause (ii) is inclusive. Some instances of such fiduciary capacity are specifically mentioned in the sub-clause which include a trustee, an executor, a partner, a director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of FPA-PBPT-2584, 2590/RP/2023 Page 22 of 34 1996) as well as any other person as may be notified by the Central Government for this purpose.
The definition is not exhaustive and may also include other such relationships which answer to the description of “fiduciary capacity”. The appellant Sh. Sanjay Sancheti has claimed that a fiduciary relationship existed between him and benamidar. On a bare perusal of the documentary evidence in this regard paint a different picture. Since, fiduciary relationship is based on trust and confidence along with the obligation on part of the fiduciary to act solely and exclusively for the benefit of the principal without deriving any personal benefits. In the present case, the conduct of the appellant Sh. Sanjay Sancheti demonstrates that he exercised complete dominion and control over the subject properties including the execution for the Agreement to Sell, retention of the original title deeds and even orchestration of subsequent transfer. Moreover, the claim of the appellant, Sh. Sanjay Sancheti, that the said properties were sold to recover the loan amount is inherently contrary to the existence of a fiduciary relationship as Sh. Sanjay Sancheti claimed an adverse financial interest in the property. This relationship does not fall within any of the recognized or notified categories expressly contemplated under sub-clause (ii) of section 2(9)(A).
20. The definition of a ‘benami transaction’ under section 2 (9)(A) of the PBPTA, 1988 envisages two conditions to fulfilled in order to term a transaction/ arrangement as a benami transaction. The first limb of the definition requires that the property is transferred to or is held by a person where consideration for such property has been paid by another person. The second limb of the Act requires the property to be held for the immediate or future benefit of the person who has provided the consideration. In the present case, the evidence brought on record establishes that the impugned immovable properties though held in the name of Shri Bhikam Chand Chandak, were acquired without any consideration having been paid by him and were held for the immediate and future benefit of Shri Sanjay Sancheti. Sh. Bikram Chand admitted in his statement dated 24.02.2022 that he lacked the financial capacity as he has categorically admitted that his income was modest. He also admitted that he neither paid the consideration reflected in the sale deeds nor had possession or custody of the original title documents. Moreover, the cheques mentioned in the registered instruments were merely for presentation purposes and were never encashed. This was further corroborated via the bank records revealing negligible balances at the relevant point in time and the absence of any financial trail linking the alleged benamidar to the purchase consideration. Whereas the conduct of Sh. Sanjay Sancheti demonstrates control over the properties both prior to and subsequent to their transfer, as is evident from his execution of agreements to sell, custody of original title deeds, exercise of authority under the power of attorney, and the ultimate receipt of sale proceeds upon sale of a portion of the land.
21. The Ld. Counsel for the appellant Sh. Bhikam Chand claimed that since, Sh. Sunil Pagariya was unable to sell his land, he engaged his assistance in order to sell the land. It was mutually agreed that Shri Bhikam Chand Chandak would facilitate resale of the property, subject to the title being first transferred in his name to assure prospective purchasers of a risk-free transaction and therefore pursuant to this understanding, Shri Sanjay Sancheti transferred the property in favor of Shri Bhikam Chand Chandak. This contention of Sh. Bhikam Chand Chandak is contradicted by his own admission that the original sale deeds remained in the custody and control of Shri Sanjay Sancheti. Moreover, execution of agreements to sell by Shri Sanjay Sancheti and the ultimate flow of sale consideration into his bank account demonstrate that effective control and beneficial interest lied with Sh. Sanjay Sancheti.
22. We have gone through the judgements stated by the appellants in their argument. These cases are based on different factual matrix and cannot be applied to the facts of the present case.
23. In the light of the above discussion, we see no cause to interfere with the order of the Ld. AA.
24. Appeals are dismissed. Pronounced in open court.