Post-Act suits cannot enforce rights in pre-existing benami

Post-Act suits cannot enforce rights in pre-existing benami properties, which face government acquisition.

Issue

Whether a plaintiff can maintain a suit to enforce rights or protect possession over a property purchased benami before 1988 if the suit is filed after the Benami Act’s commencement.
Whether the original sellers or their legal heirs can assert continued ownership over a property transferred via a benami transaction.

Facts

The plaintiff filed a lawsuit seeking a permanent prohibitory injunction to restrain the defendants from interfering with his possession or alienating the suit land.
The plaintiff claimed that his predecessor purchased the land in 1948-49 under two registered sale deeds.
The transaction was executed benami in the name of Hira Nand because non-residents of Kandaghat were legally barred from purchasing property at that time.
The defendants, who were the legal heirs of the original sellers, countered the suit by claiming title and possession over the land.

Decision

The court held that Section 4 of the Benami Act creates an absolute bar on enforcing any right in respect of a benami property by a person claiming to be the real owner.
The statutory prohibition applies fully to this case because the suit was instituted after the commencement of the Benami Act, making the pre-1988 timing of the actual transaction irrelevant.
The court determined that the protection of the plaintiff’s possession over the benami property is legally impermissible and cannot be used to bypass Section 4.
The claims of the defendants asserting that the original sellers retained ownership were rejected as completely unsustainable.
Under Section 5 of the Act, benami properties are liable to be acquired by the Central Government without any compensation, thereby dissolving the claims of both the real purchaser and the original owners.

Key Takeaways

Prospective Litigation Bar: The Benami Act completely bars the enforcement of rights in benami properties for any suit filed after its enactment, regardless of how far back the transaction took place.
Possession Rules Stand Fixed: A real owner cannot use a claim of physical possession or ask for an injunction against alienation to skirt the statutory prohibition of the Act.
Extinguishment of Private Rights: Once a property is identified as benami, private claims of ownership from both the buyer and seller are extinguished, as the property becomes liable for state forfeiture without payment.

HIGH COURT OF HIMACHAL PRADESH

Braham Dev Sood

Janki

Rakesh Kainthla, J.

RSA Nos. 241 and 251 of 2005^†

MAY 29, 2026

Karan Singh Kanwar, Mohinder Verma and Mohinder Singh Verma, Advs. for the Appearing Parties.

ORDER

1. The present appeals are directed against the judgment and decree dated 16.02.2005, passed by learned District Judge, Solan District Solan, H.P. (learned Appellate Court) vide which the judgment and decree dated 13.08.2003, passed by learned Senior Sub Judge, Solan, District Solan, H.P. (learned Trial Court) were upheld and the appeal and the cross objections preferred by the appellant (plaintiff before the learned Trial Court) were dismissed. (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned trial Court for convenience).

2. Briefly stated, the facts giving rise to the present appeal are that the plaintiff filed a civil suit before the learned Trial Court seeking a permanent prohibitory injunction for restraining the defendants from alienating the suit land mentioned in para-1 of the plaint and interfering with his possession. It was asserted that the plaintiff’s predecessor-in-interest had purchased the suit land through a registered sale dated No.51, dated 20.10.1948, and Sale deed No. 61 dated 23.11.1949 in the name of Hira Nand as Benami. The plaintiff’s predecessor could not get the Sale deed executed in his name because the persons who were not residing at Kandaghat were barred from purchasing property. Pandit Hira Nand was the permanent resident of Kandaghat and entitled to purchase the land; therefore, the land was purchased in his name, but the possession continued with the plaintiff’s predecessor-in-interest. He developed the suit land, constructed a building and raised a retaining wall. The defendants have no concern with the suit land. A settlement was carried out in the area, and the suit land was shown in the ownership of defendants No.1 to 15 and in the plaintiff’s possession. The defendants threatened to alienate the suit land and dispossess the plaintiff. Hence, the suit was filed to seek the relief mentioned above.

3. The suit was opposed by filing a written statement by defendants No.1 to 15, taking preliminary objections regarding the lack of maintainability, the suit being collusive, the suit being barred by time, and the plaintiff being estopped by his act and conduct to file the suit. The contents of the plaint were denied on the merits. It was specifically denied that the plaintiff’s predecessor-in-interest had purchased the land in the name of Hira Nand and that he or the plaintiff remained in possession of the suit land. It was asserted that the plaintiff had applied for the correction of Khasra Girdawaries, and his name was entered in the column of possession regarding 1-1 bigahs of the land. The rest of the plaintiff’s claim was rejected, and he has not filed any appeal against the order. Plaintiff is out of possession, and there is no question of his dispossession. Therefore, it was prayed that the suit be dismissed and a decree of possession be passed in favour of the defendants regarding the land mentioned in the counterclaim by demolition of the structure.

4. A replication denying the contents of the written statement and affirming those of the plaint was filed.

5. The learned Trial Court framed the following issues on 01.05.1998 and additional issues on 09.06.2003: –

Whether the plaintiff is entitled for the relief of permanent prohibitory injunction as prayed for? OPP

Whether the suit is collusive between the plaintiff and defendants No.16 to 19, as alleged? OPP

2-A

Whether the suit is hit under Section 4(1) of the Benami Transaction (Prohibition) Act, as alleged? OPD.

Whether the plaintiff is out of possession, and a suit for injunction is not maintainable? OPD.

Whether the suit time-barred? OPD.

Whether the plaintiff is estopped from filing the present suit as alleged?

Whether the defendants No.1 to 15 are entitled to possession of one Bigha and one Biswa of land as alleged? OPD.

Whether the counter claim is time barred? OPP.

Whether the plaintiff is owner in possession of the suit land? OPP.

Whether the plaintiff is in lawful possession of Khasra No. 649, 651, 652, 653 and 654 as alleged? OPP.

10.

Relief.

6. The parties were called up to produce the evidence, and the plaintiff examined himself (PW-1), Ved Parkash (PW-2), Ramchander (PW-3), Umesh Kumar (PW-4) and Dalip Singh (PW-5). The defendant examined Davinder Kumar (DW-1) and Kamlesh Sharma (DW-2)

7. Learned Trial Court held that the admitted case of the plaintiff is that the land was purchased Benami in the name of Hira Nand by the plaintiff’s predecessor. Section 4(1) of the Benami Transactions (Prohibition) Act 1988 (Benami Act) bars the setting up of a claim that the property was purchased Benami. The defendants’ predecessor had sold the land, and the defendants were not entitled to possession. Hence, the learned Trial court answered issue 2-A in the affirmative, the rest of the issues in the negative and dismissed the suit.

8. Being aggrieved by the judgment and decree passed by the learned Trial Court, the plaintiff filed an appeal, and the defendants filed cross-objections which were decided by the learned District Judge, Solan (learned Appellate Court). Learned Appellate Court held that the transaction had admittedly taken place in 1948-49 and was set up after the commencement of the Benami Act. Any plea regarding the property being Benami cannot be taken before the Court after the commencement of the Benami Act. Plaintiff is in possession of a part of the suit land. The defendants also admitted this fact. Since the plaintiff had no title, he was not entitled to an injunction. The Sale deeds were executed by the predecessor-in-interest of the defendants, but their names continued to be recorded in the revenue record. The defendants were not the owners of the suit land and were not entitled to possession; hence, the appeal and cross objections were dismissed.

9. Being aggrieved by the judgment and decree passed by the learned Courts below, the plaintiff and defendants have filed these two appeals, which were admitted on 25.08.2006, on the following substantial questions of law:

RSA No.241 of 2005:

Whether Sale deed dated 28.10.1948, Ex.PW-2/A and Sale deed dated 23.11.1949 Ex. PW-3/A are Benami transactions for the plaintiff and defendants, and are hit by Section 4 of the Benami Transactions (Prohibition) Act, 1988, and the plaintiff cannot take any benefit against the defendants under these Sale deeds?

Whether the learned District Judge has mixed up suit land 1 and suit land 2 mentioned in para 2 of the impugned judgment, while discussing points No.2 and 3, which has resulted into erroneous findings?

Whether the two Courts below have misconstrued, misinterpreted and misapplied the pleadings, oral and documentary evidence and have erred in not decreeing the suit, who is in settled possession as the owner of the suit land?

RSA No. 251 of 2005

Whether the inferences and conclusions, as drawn by the learned District Judge against the present appellants, are neither supported by material on record, nor by provisions of law?

Whether the findings in the impugned judgment and decree, as passed by the learned District Judge, to the extent those are against the appellants, are self-contradictory and unsustainable under the law, those having arisen on account of mis-reading and misinterpretation and respective claims of the parties and provisions of law, as applicable?

Whether the learned District Judge, having held that the Sale deeds Ex. PW-2/A and Ex.PW-3/A pertaining to 5 biswa of land, dated 20.10.1948 and area measuring 13 biswa, as per the Sale deed dated 30.11.1949, are hit by the provisions of Benami Transaction (Prohibition) Act; therefore, the natural consequence is that sellers S/Sh. Shiv Ram and Basti Ram in the eyes of law are held to be owners of this land, and the present appellants, being their legal heirs and successors, automatically have to he held owners thereof, and therefore, on the basis of title, they are entitled to the decree of possession?

Whether the Courts below have failed to exercise the jurisdiction in accordance with law, by failure to appreciate, consider and discuss the counter claim, as well as objections, as filed by the appellants.

10. I have heard Mr. Karan Singh Kanwar, learned counsel for the appellants except appellants Nos. 14 and 22 in RSA No. 241 of 2005 & respondent No.1 in RSA No. 251 of 2005 and Mr. Mohinder Verma learned counsel for the appellants in RSA No. 251 of 2005 and respondent No.1(a)(i) to 1(a) (vii), 1(b) to 1(d), 2(a) to 2(d), 3 to 8, 10, 11(a) to 11(e), 15 to 17, 19 to 21 in RSA No. 241 of 2005.

11. Mr Karan Singh Kanwar, learned counsel for the appellants except appellants Nos. 14 and 22 in RSA No. 241 of 2005 & respondent No.1 in RSA No. 251 of 2005, submitted that the learned Courts below erred in holding that the provisions of the Benami Act applied retrospectively. The Act was prospective Hira Nand, the person in whose name the Sale deeds were registered or his successors, have not contested the plaintiff’s claim. The plaintiff is in possession and is entitled to protect his possession against the whole world except the true owner. The defendants are taking advantage of the revenue entries in their favour and are selling the land. Therefore, he prayed that the present appeal be allowed and judgments and decrees passed by learned Courts below be set aside.

12. Mohinder Verma learned counsel for the appellants in RSA No. 251 of 2005 and respondent No.1(a)(i) to 1(a) (vii), 1(b) to 1(d), 2(a) to 2(d), 3 to 8, 10, 11(a) to 11(e), 15 to 17, 19 to 21 in RSA No. 241 of 2005 submitted that the learned Courts below had rightly held that the suit was barred by the provisions of Benami Act. The Sale deed in favour of Hira Nand was meant to defeat the provisions of law and is not enforceable. The defendants continued to have title, and the learned Courts below erred in holding that the defendants were not entitled to possession having lost their title. Therefore, he prayed that the RSA No. 251 be allowed and the counterclaim be decreed

13. I have given a considerable thought to the submissions made at the bar and have gone through the records carefully.

RSA No. 241 of 2005

Substantial question of law No.1

14. It is an admitted case of the plaintiff that his predecessor had purchased the land in the name of Hira Nand vide Sale deed No.51, dated 20.10.1948 and Sale deed No. 60, dated 23.11.1948, as Benami. This fact was asserted in para. 1 of the plaint. It was further asserted that the reason for the purchase in the name of Hira Nand was that a person not residing at Kandaghat could not purchase the property at Kandaghat, whereas Hira Nand, being a local resident, was competent to purchase the property; therefore, the land was purchased as Benami in the name of Hira Nand.

15. The plaintiff Braham Dev Sood (PW-1) stated that the land was purchased in the name of Pandit Hira Nand because the land could not have been purchased by his father. No person objected to the possession of the plaintiff’s predecessor or, thereafter, the possession of the plaintiff.

16. Section 4 of Benami Transactions (Prohibition) Act as it stood on the date of the filing of the suit provided that no suit, claim or action to enforce any right in respect 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. Thus, it is impermissible to institute a suit after the commencement of the Benami Act in respect of the property by claiming it as Benami. The Act has two exceptions regarding the property purchased in the name of a coparcener or in a fiduciary capacity. It was laid down by the Hon’ble Supreme Court in R. Rajagopal Reddy v. Padmini Chandrasekharan 213 ITR 340 (SC)/(1995) 2 SCC 630 that Section 4 (1) of the Benami Act does not apply to the proceedings initiated by or on behalf of the person, claiming to be the real owner thereof, prior to the coming into force of Section 4(1) of the Benami Act. The judgment of Hon’ble Supreme Court in Mithilesh Kumari v. Prem Behari Khare (1989) 2 SCC 95 was overruled to this extent. It was observed:

“21. As a result of the aforesaid discussion, it must be held, with respect, that the Division Bench erred in taking the view that Section 4(1) of the Act could be pressed into service in connection with suits filed prior to the coming into operation of that section. Similarly, the view that under Section 4(2) in all suits filed by persons in whose names properties are held, no defence can be allowed at any future stage of the proceedings that the properties are held benami, cannot be sustained. As discussed earlier, Section 4(2) will have a limited operation even in cases of pending suits after Section 4(2) came into force if such defences are not already allowed earlier. It must, therefore, be held, with respect, that the decision of this Court in Mithilesh Kumari case [(1989) 2 SCC 95 : (1989) 1 SCR 621] does not lay down correct law so far as the applicability of Section 4(1) and Section 4(2) to the extent hereinabove indicated, to pending proceedings when these sections came into force, is concerned. Accordingly, the question for consideration is answered in the negative.”

17. This judgment was followed in Union of India v. Ganpati Dealcom (P.) Ltd. 447 ITR 108 (SC)/(2023) 3 SCC 315, and it was observed:

“73. Section 4 remains the same as under the 1988 Act, barring the fact that Section 4(3) has integrated the exceptions provided under the definition of “benami transaction” in terms of Section 2(9). The civil consequences provided under Section 4 continue to apply even post the 2016 Act. The interpretation of the aforesaid section, as given in the R Rajagopal Reddy case [R. Rajagopal Reddy v. Padmini Chandrasekharan, (1995) 2 SCC 630], continues to apply.”

18. Thus, only the proceedings pending on the date of commencement of the Benami Act were saved, and the provisions of the Act will apply to the proceedings initiated after the commencement of the Act. In the present case, the proceedings were initiated after the commencement of the Benami Act, and those would be affected by the Benami Act.

19. In Manjula v. D.A. Srinivas (SC)/2026 SCC OnLine SC 831 , the plaintiff was barred from purchasing the land by the provisions of the Karnataka Land Reforms Act 1961; therefore, the plaintiff funded the purchase in the name of another, who converted the land for non-agricultural use, and the plaintiff sought the transfer in his name. The Hon’ble Supreme Court held that the transaction was a Benami arrangement prohibited under the Benami Act. It was observed:

“26.2. The pleadings further disclose that since the Plaintiff or his company was disentitled from directly purchasing the lands, a mechanism was devised whereby the Plaintiff allegedly funded the purchase in the name of another, caused the lands to be converted for non-agricultural use, and thereafter sought transfer in his own favour. The Plaintiff also claims to have paid the entire consideration. Such an arrangement was plainly intended to defeat the statutory mandate of the Karnataka Land Reforms Act and is therefore hit by Section 23 of the Contract Act. The MOUs, being founded upon an unlawful object, are illegal and void, and no rights can arise therefrom.

26.3. That apart, the transaction, in substance, bears all the indicia of a benami arrangement of the kind sought to be prohibited under the Benami Act. What cannot be done directly cannot be permitted to be achieved indirectly. The Plaintiff, through careful drafting, seeks to portray the suit as one founded solely on the Will. However, the pleadings in the plaint, as also the recitals in the Will, expressly refer to the MOUs and thereby reveal the underlying illegal arrangement between the Plaintiff and the deceased. Though the expression “benami” is not used in the plaint, a meaningful and substantive reading unmistakably discloses such an arrangement. It is trite that substance must prevail over form. Courts are not bound by mere labels in pleadings and must read between the lines to ascertain the true nature of the transaction. The plaint, therefore, was wholly unsustainable in law, and the trial Court was justified in rejecting the same.”

20. It was further held that when the lis comes before the Court disclosing a Benami transaction, the Court is duty-bound to consider the applicability of the Act and enforce the statutory prohibition. It was observed:

“22.13. Further, when a lis comes before a Court disclosing a benami transaction, the Court is duty-bound to consider the applicability of the Act and enforce the statutory prohibition. The amended provisions merely introduced a complete machinery for attachment, adjudication and appeals. Though attachment and adjudication were elaborately structured for the first time, these provisions are essentially procedural and regulatory, intended to ensure fairness and avoid arbitrary action before confiscation. Unless the amendment is given retroactive operation, the very object of making the legislation workable would be defeated.”

21. Therefore, in view of the binding precedents of the Hon’ble Supreme Court, it is impermissible to give effect to a Benami transaction, and the learned Courts below had rightly held that even though the transactions had taken place before the commencement of Benami Act, it was not possible to give effect to the transaction in a suit instituted after the commencement of the Act, hence, this substantial question of aw is answered accordingly.

Substantial question of law No.2.

22. The suit was filed regarding the property purchased vide Sale deed number 51 and Sale deed No.60. Learned District udge had described the property as suit land-1 and suit land-2 for convenience. This did not affect the outcome of the decision because the nature of the property remained Benami, and the suit continued to be hit by the provisions of the Benami Act. Hence, this substantial question of law is answered accordingly.

Substantial question of law No.3.

23. Section 4 of the Benami Act prohibits a person claiming to be the real purchaser from enforcing any right in respect of the Benami property against any person. Thus, there is an absolute prohibition to enforce any right, and this prohibition cannot be circumvented by saying that the plaintiff is entitled to protect his possession against the whole world except the true owner. This would amount to enforcing the right arising out of the property purchased Benami. A Benami property is liable to confiscation, and the Hon’ble Supreme Court had ordered such a course in Manjula (supra). Therefore, it is impermissible to protect the possession of the plaintiff regarding the Benami property. Hence, this substantial question of law is answered accordingly.

RSA No. 251 of 2005.

Substantial question of law No.1

24. Mr Mohinder Vemra, learned counsel for the appellant, submitted that the transaction set up by the plaintiff was Benami, which would not confer any right upon any person. The defendants were entitled to get possession based on their title, which they had never lost. This submission cannot be accepted. As held above, the property sold/purchased Benami is liable to be confiscation to the Central Government, and the defendants cannot claim any right over it; therefore, the learned Courts below had rightly declined the relief of possession to the defendants, and this substantial question of law is answered accordingly.

Substantial question of law No.2

25. Learned Courts below had rightly held that the Sale deed in favour of Hira Nand was executed by the predecessorin- interest of the defendants, who had lost title by virtue of the Sale deed. A Benami property is liable to confiscation, and the defendants could not have asserted any claim on the suit land. Therefore, there is no misreading or misinterpretation of the claims of the parties, and this substantial question of law is answered accordingly.

Substantial question of law number No.3

26. The defendants cannot claim any title on the land as noted above. They lost their title when their predecessor executed a Sale deed in favour of Hira Nand. The effect of the Benami Act is that the Benami property is liable to acquisition as per Section 5 of the Act without the payment of any amount. Therefore, the Act itself provides for the acquisition and does not provide that the property would be retained by the owners. Hence, the claim that the sellers would continue to be the owners of the land is not sustainable, and this substantial question of law is answered accordingly.

Substantial question of law No.4

27. Learned Courts below had rightly appreciated and discussed the counter-claim as well as the cross objections; therefore, there is no infirmity in the judgment and decrees passed by learned Courts below. This substantial question of law is answered accordingly.

Final order:

28. In view of the above, the present appeals fail, and they are dismissed. The Central Government will take steps for the acquisition of the land as per the provisions of the Benami Transactions (Prohibition) Act.

29. Both the appeals stand disposed of in the aforesaid terms, so also the pending applications, if any.

30. The record of the learned Courts below be returned along with a copy of this judgment.f