# R. RAJAGOPAL REDDY (DEAD) BY LRS. AND ORS v. PADMINI CHANDRASEKHARAN (DEAD) BY LRS

- **Citation:** [1995] 1 S.C.R. 715
- **Court:** Supreme Court of India
- **Decided:** 1995-01-31
- **Bench:** Kuldip Singh, B.L. Hansaria, S.B. Majmudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/r-rajagopal-reddy-dead-by-lrs-and-ors-v-padmini-chandrasekharan-dead-by-lrs-12896
- **Pages:** 23

## Headnote

Benami Transactions (Prohibition) Act, 1988-Sections 4(1) and
4(2)-Effect of Section 4( 1) on pending proceedings-Claim to prope1ty on
account of it being held benami-Proceedings not finally disposed of when
sec. 4( 1) came into operation-Whether Section 4( 1) can be applied to such
proceedings--H eld, No.
B
c
Various suits were filed years back before coming into operation of
Section 4(1) of the Benami Transactions (Prohibition) Act, 1988, to enforce
right in property held benami against person in whose name such property D
was held or any other person by or on behalf of persons claiming to be
real owner thereof. These proceedings were pending either at the first
appeal stage or Second Appeal stage or in revision before the High Court
or in civil appeals before this court when Section 4(1) came into operation.
The question raised was whether Section 4(1) of the Act could be applied .
to such pending proceedings. The Division Bench of this Court in Mithilesh
E
Kumari v. Prem Behari Khare, [1989] 1 SCR 621, had taken an affirmative
view. The correctness of that view came up for consideration before
another Bench of this court. Ultimately the matters were placed for final
hearing before a three Judge Bench.
The appellants submitted that litigations were already filed by the
parties prior to the coming into force of the Act arid the relevant provisions
thereof and therefore, they had to be governed by the then existing law
which held the field at the time of intiation of these proceedings; that there
F
is nothing in the Act to indicate that any of the provisions of the Act
including Section 4(1) had any retrospective effect; that even the Division G
Bench of this Court in Mithilesh Kuma1i's case had taken the view that
Section 3(1) of the Act is prospective in operation; that it would be
inconsistent to hold that though the Act is not retrospective it would apply
to all pending proceedings at whatever stage they might be and such
proceedings would incur dismissal u/s 4(1); that there was a substantive H
715
716
SUPREME COURT REPORTS
(1995] 1 S.C.R.
A
~ight in the plaintiff under the existing laws under which consistently such
benami transactions were recognized and could be enforced by courts of
law and that this substantive right was sought to be taken away by Section
4(1) and unle~s there was anything to suggest that it is retrospective in
operation, it could not be treated to be retrospective.
B
The respondents/defendants submitted that even though the Act may
be perspective,° at least to the extent it is roping in all past transactions of
benami purchases of properties and when rights arising therefrom are
sought to be put to an end by Section 4(1) which covers any or every
property held benami, there was no reason why that Section could not
C apply to such proceedings at any stage till they got finally decided by the
highest court and that if there is any change in law by which any pending
litigation becomes incompetent, such change in law can be applied !o such
pending proceedings at whatever stage they might be pending before higher
Courts.
D
Disposing of the matter, this Court
HELD : 1.1 Section 4(1) of the Benami Transactions (Prohibition)
Act, 1988, cannot be applied to suit, claim or action to enforce any right
in property held benami against person in whose name such property is
E held or any other person, if such proceeding is initiated by or on behalf of
a person claiming to be real owner thereof, prior to the coming into force
of Section 4(1) of the Act. [720-H, 721-A]
F
Mithilesh Kumari v. Prem Behari Khare, [1989] 1 SCR 621 (DB),
overruled.
1.2. The preamble of the Act itself states that it is an Act to prohibit
benami transactions and the right to recover property held benami, for
matters connected therewith or incidental thereto. Thus it was enacted to
efface the then existing rights of the real owners of properties held by
others benami. Such an act was not given any retrospective effect by the
G legislature.

## Text

_Characters 0–39,800 of 56,817. This is a partial read: ask again with offset=39800 for what follows._

l
R. RAJAGOPAL REDDY (DEAD) BY LRS. AND ORS.
A
v.
PADMINI CHANDRASEKHARAN (DEAD) BY LRS.
JANUARY 31, 1995
[KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.]
Benami Transactions (Prohibition) Act, 1988-Sections 4(1) and
4(2)-Effect of Section 4( 1) on pending proceedings-Claim to prope1ty on
account of it being held benami-Proceedings not finally disposed of when
sec. 4( 1) came into operation-Whether Section 4( 1) can be applied to such
proceedings--H eld, No.
B
c
Various suits were filed years back before coming into operation of
Section 4(1) of the Benami Transactions (Prohibition) Act, 1988, to enforce
right in property held benami against person in whose name such property D
was held or any other person by or on behalf of persons claiming to be
real owner thereof. These proceedings were pending either at the first
appeal stage or Second Appeal stage or in revision before the High Court
or in civil appeals before this court when Section 4(1) came into operation.
The question raised was whether Section 4(1) of the Act could be applied .
to such pending proceedings. The Division Bench of this Court in Mithilesh
E
Kumari v. Prem Behari Khare, [1989] 1 SCR 621, had taken an affirmative
view. The correctness of that view came up for consideration before
another Bench of this court. Ultimately the matters were placed for final
hearing before a three Judge Bench.
The appellants submitted that litigations were already filed by the
parties prior to the coming into force of the Act arid the relevant provisions
thereof and therefore, they had to be governed by the then existing law
which held the field at the time of intiation of these proceedings; that there
F
is nothing in the Act to indicate that any of the provisions of the Act
including Section 4(1) had any retrospective effect; that even the Division G
Bench of this Court in Mithilesh Kuma1i's case had taken the view that
Section 3(1) of the Act is prospective in operation; that it would be
inconsistent to hold that though the Act is not retrospective it would apply
to all pending proceedings at whatever stage they might be and such
proceedings would incur dismissal u/s 4(1); that there was a substantive H
715
716
SUPREME COURT REPORTS
(1995] 1 S.C.R.
A
~ight in the plaintiff under the existing laws under which consistently such
benami transactions were recognized and could be enforced by courts of
law and that this substantive right was sought to be taken away by Section
4(1) and unle~s there was anything to suggest that it is retrospective in
operation, it could not be treated to be retrospective.
B
The respondents/defendants submitted that even though the Act may
be perspective,° at least to the extent it is roping in all past transactions of
benami purchases of properties and when rights arising therefrom are
sought to be put to an end by Section 4(1) which covers any or every
property held benami, there was no reason why that Section could not
C apply to such proceedings at any stage till they got finally decided by the
highest court and that if there is any change in law by which any pending
litigation becomes incompetent, such change in law can be applied !o such
pending proceedings at whatever stage they might be pending before higher
Courts.
D
Disposing of the matter, this Court
HELD : 1.1 Section 4(1) of the Benami Transactions (Prohibition)
Act, 1988, cannot be applied to suit, claim or action to enforce any right
in property held benami against person in whose name such property is
E held or any other person, if such proceeding is initiated by or on behalf of
a person claiming to be real owner thereof, prior to the coming into force
of Section 4(1) of the Act. [720-H, 721-A]
F
Mithilesh Kumari v. Prem Behari Khare, [1989] 1 SCR 621 (DB),
overruled.
1.2. The preamble of the Act itself states that it is an Act to prohibit
benami transactions and the right to recover property held benami, for
matters connected therewith or incidental thereto. Thus it was enacted to
efface the then existing rights of the real owners of properties held by
others benami. Such an act was not given any retrospective effect by the
G legislature. Sub-section (1) of Section 4 states 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 shall lie
by or on behalf of a person claiming to be the real owner of such property.
As per Section 4(1) no such suit shall thenceforth lie to recover the
H possession of the property held benami by the defendant. Plaintiff's right
R.R. REDDYv. P. CHANDRASEKHARAN
717
to that effect is sought to be taken away and any suit to enforce such a A
right after coming into operation of Section 4(1) that is 19th May, 1988,
shall not lie. The legislature in its wisdom has nowhere provided in Section
4(1) that no such suit, claim or action pending on the date when Section
4 came into force shall not be proceeded with and shall stand abated. On
the contrary, clear legislative intention is seen from the words "no such
claim, suit or action shall lie", meaning thereby no such suit, claim or
action shall be permitted to be filed or entertained or admitted to the
portals of any Court for seeking such a relief after coming into force of
Se~tion 4(1). [728-C-Fl
B
The word 'lie' in connection with the suit, claim or action is not C
defined by the Act. If one goes by the dictionary meaning it would mean
that such suit, claim or action to get any property declared benami will
not be admitted on behalf of such plaintiff or applicant against the
concerned defendant in whose name the property is held on and from the
date on which this prohibition against entertaining of such sμits comes
into force. [728-H, 729-A]
D
The legislature in its wisdom has not expressly made Section 4
retrospective. Then to imply by necessary implication that Section 4 would
have retrospective effect and would cover pending litigation filed prior to
coming into force of the Section would amount to taking a view which run E
counter to the legislative scheme and intent projected by various provisions
of the Act. On the express language of Section 4(1) any right inhering in the
real owner in respect of any property held benami would get effaced once
Section 4(1) operated, even if such transaction had been entered into prior
-4.-
to the coming into operation of Section 4(1), and hence-after Section 4(1)
applied no suit can lie in respect to such a past benami transaction. To that · F
extent the Section may be retroactive. [729-C-D]
Mithilesh Kumari v. Prem Bihari Khare, [1989] 1 SCR 621, approved.
1.3. Section 4(2) provided that if a suit is filed by a plaintiff who
claims to be the owner of the property under the document in his favour G
and holds the property in his name, once Section 4(2) applies, no defence
will be permitted or allowed in any such suit, claim or action by or on
behalf of a person claiming to be the real owner of such property held
benami. The disallowing of such a defence which earlier was available,
itself suggests that a new liability or restriction is imposed by Section 4(2) H
718
SUPREME COURT REPORTS
[1995] 1 S.C.R.
A
on a pre-existing right of the defendant. Such a provision also cannot be
said to be retrospective or retroactive by necessary implication. Section
4(2) does not expressly seek to apply retrospectively. So far as such a suit
which is covered by the sweep of Section 4(2) is concerned, the prohibition
of Section 4(1) cannot apply to it as it is not a claim or action filed by the
B plaintiff to enforce right in respect of any property held benami. On the
contrary, it is a suit, claim or action flowing from the sale deed or title
deed in the name of the plaintiff. Even though such a. suit might have been
filed prior to 19-5-1938, if before the stage of filing of defence by the real
owner is reached, Section 4(2) becomes operative from 19th May, 1988,
then such a defence, as laid down by Section 4(2) will not be allowed to
C such a defendent. However, that would not mean that Section 4(1) and 4(2)
only on that score can be treated to be impliedly retrospective so as to
cover all the pending litigations in connection with enforcement of such
rights of real owners who are parties to benami transactions entered into
prior to the coming into operation of the Act and specially Section 4
D thereof. It is also pertin~nt to note that Section 4(2) enjoins that no such
defence 'shall be allowed' in any claim, suit or action by or on behalf of
person claiming to be the real owner of such property. That is to say no
such defence shall be allowed for the first time after coming into operation
of Section 4(2). If such a defence is already allowed in a pending suit prior
to the coming into operation of Section 4(2), enabling an issue to be raised
E on such a defence, then the Court is bound to decide the issue arising from
such an~lready allowed defence as at the relevant time when such defence
was allowed Section 4(2) was out of picture. [729-H, 730-A-F]
I
i
i
1.4. In the operation of Sections 4(1) and (2), no discrimination can
+
F
be said to have been made amongst different real owners of property. In
fact, those cases in which suits are filed by real owners or defences are
allowed prior to coming into operation of Section 4(2), would form a
seprate class as compared to those cases where a stage for filing such suits
or defences has still n!'t reached by the time Section 4(1) and (2) start
G
operating. Consequently, latter type of cases would form a distinct category
of cases. There is no question of discrimination being meted out while
dealing with these two classes of cases differently. A real owner who has
already been allowed defence on that ground prior to coming into operation of Section 4(2) cannot be said to have been given a better treatment
as compared to the real owner who has still to take up such a defence and
H in the meantime he is hit by the prohibition of Section 4(2). Equally there
-;-. '
R.R. REDDYv. P. CHANDRASEKHARAN
719
ca~not be any comparison between a real owner who has filed such suit A
earlier and one who does not file such suit till Section 4(1) comes into
operation. All real owners who stake their claims regarding benami transactions after Section 4(1) and (2) came into operation are given uniform
treatment by these provisions, whether they come as plaintiffs or as
defendants. [731-H, 732-A-C]
1.5. A conjoint rel\ding of Section 82 of the Indian Trusts Act and
Section 6(b), (d) and (e) of the General Clauses Act clearly enjoins that if
suits are pending wherein the plaintiff have put forward claims under the
then existing Section 82 of the Indian Trusts Act, such proceedings are to
B
be continued by assuming that the repealing of Section 82 has not been C
effected in connection with such pending proceedings. [733-E]
2. Where a statutory provision which is riot expressly made
retrospective by the legislature seeks to affect vested rights and corresponding obligation of parties, such provision cannot be said to have
any retrospective effect by necessary implication. [734-A]
D
Maxwell on Interpretation of Statutes, 12th Edn. (1969), referred to.
In Re Athlumney [1898] 2 QB 551; Garikapati v. N. Subbiah Chaudhary, AIR (1957) SC 540, relied on.
There is nothing in the Act to show that Section 4{1) has to apply
retrospectively to all pending proceedings wherein such a right is sought
to be exercised by the plaintiff or such a defence has already got allowed
by the concerned defendant. [734-G]
3. The Act cannot be treated to be declaratory in nature. Declaratory
enactment declares and clarifies the real intention of the legislature in
connection with an earlier existing transaction or enactment, it does not
create new rights or obligations. On the express language of Section 3, the
E
F
Act cannot be said to be declaratory but in substance it is prohibitory in G
nature and seeks to destroy the rights of the real owner qua properties
held benami and in this connection it has taken away the right of the real
owner both for filing a suit or for taking such a defence in a suit by
benamidar. Such an Act which prohibits benami transactions and destroys
rights flowing from such transactions as existing earlier is really not a
declaratory enactment. [734-H, 735-A-B]
H
A
720
SUPREME COURT REPORTS
(1995) 1 S.C.R.
Mithilesh Kwnwi v. Prem Behwi Khare, [1989] 1 SCR 621, overruled.
G.P. Singh,
Plinciples of Statut01y Intel]Hetation 5th Ed. 1992,
referred to.
B
Section 4 or for the matter the Act as a whole is not a .piece of
declaratory or curative legislation. It creates substantive rights in favour
of benamidars and destroys subtantive rights of real owners who are
parties to such transactions and for whom new liabiltties are created by
the Act. [736-E]
C
4. The words 'no suit shall lie' as found in Section 4(1) and 'no
defence based on rights in respect of property shall be allowed' as found
in Section 4(2) have limited scope and operation and consequently this
consideration also cannot have any effect on the conclusion which can be
reached in this case. Future defences of real owners against benamidars
D holders have been nullified as are covered by the sweep of Section 4(2) and
not others. 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
akeady allowed earlier. [736-F, 737-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5653 of
E 1990 etc. etc.
From the Judgment and Order dated 7.11.89 of the Madras High
Court in O.Side A. No. 27 of 1980.
P. Chidambaram, M.L. Verma, V. Balachandran, V.
F Ramasubramaniam, T. Harish Kumar, K.K. Mani, Raju Ramachandran, V.
Krishnamurthy, E.M.S. Anam, M.K.D. Namboodri, P.K. Pillai, R.C. Misra,
R.D. Upadhyay, Ms. V~jay Lakshmi Menon, S.B. Upadhyay, B. Mohan,
Vineet Kumar, P. Mahale, Ms. Kiran Suri, Mr. A Mariarputham, Mr. R.
Mohan, Joseph Pokkatt, R.A. Perumal and Kamal Kumar Bhatia for the
G appearing parties.
The Judgment of the Court was delivered by
MAJMUDAR, J. In this group of matters a common question arises
for our consideration. It is to the following effect 'whether Section 4(1) of
/
H the Benamj Transactions (Prohibition) Act, 1988 (hereinafter referred to
,.V<...'
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR,J.)
721
'Act') can be applied to suit, claim or action to enforce any right in
property held benami against person in whose name such property is held
or any other person, if such proceeding is initiated by or on behalf of a
person claiming to be real owner thereof, prior to the coming into force of
Section 4(1) of the Act'. Section 4 with its relevant sub-sections reads as
under :-
"Prohibition of the right to recover property held benami - (1) No
suit, claim or action to enforce any right in respect of arry property
held benami against the person in whose name the property is held
or against any other person shall lie by or on behalf oi a person
claiming to be the real owner of such property.
(2) No defence based on any right in respect of any property held
benami, whether against the person in whose name the property
is held or against any other person, shall be allowed in any suit,
claim or action by or on behalf of a person claiming be the real
owner of such property.
(3) Nothing in this section shall apply, -
(a)
Where the person in whose name the property is held
is a coparcener in a Hindu undivided family and the
property is held for the benefit of the coparceners in
the family; or
(b)
where the person in whose name the property is held
is a trustee or or other person standing in a fiduciary
capacity, and the property is held for the benefit of
another person for whom he is a trustee or towards
_whom he stands in such capacity."
A
B
c
D
E
F
In fact the question is answered in the affirmative by a Division
Bench of this Court in Mithilesh Kum01i & Anr. v. Prem Beha1i Khare, G
[1989] 1 S.C.R. 621. In that case two learned Judges of this Court constituting the Division Bench have taken the aforesaid affirmative view. The
correctness of that view came up for consideration before another Division
Bench of this Court. That Division Bench by its order dated 10th March,
1992 dir~cted that these matters be placed for hearing at the bottom of the
miscellaneous list for final hearing on 22nd March, 1992 before a three H
722
SUPREME COURT REPORTS
(1995] 1 S.C.R.
A: Judge_ Bench. Ultimately this group of matters came to be placed for _final
hearing before this Bench.
B
We have heard learned counsel for the respective parties on this
question. Learned advocates were aggreeable that though the order of the
Division Bench dated 10th March, 1992 has resulted in placing these
matters before three-Judge Bench for final hearing, we may after answering
the question canvassed before us, sent back the matters to the Bench of
two learned Judges who can dispose of the same on merits in accordance
with law, in the light of answer given by us on the aforesaid question.
C
In order to appreciate the nature of the controversy posed for our
cons~deration, we may note a few relevant facts leading to these proceedings. In most of the proceedings various suits were filed years back before
coming into operation of Section 4(1) of the Act. These proceedings were
pending either at the First Appeal stage or Second Appeal stage or in
D revision before the High Court or in civil appeals before this Court when
Section 4(1) came into operation. The question is whether these pending
proceedings at various stages in the hierarchy can get encompassed by the
sweep. of Section 4(1) and such suits would be liable to be dismissed as
laid down by that section.
E
Learned counsel appearing for the concerned plaintiffs submitted
before us that Sections 3, 5 and 8 of the Act came into force on 5th
September, 1988 when the Act received the President's assent and the
remaining Sections ~ere deemed to have come into force on 19th May,
1988 and that prior to the coming into force of the Act and the relevant
~ p
provisions thereof, litigations were already filed by the parties and they had
to be governed by the then existing law which held the field at the time of
initiation of these proceedings and that there is nothing in the . Act to
indicate that any of the provisions of the Act including Section 4(1) has
any retrospective effect. They further contended that even the Division
Bench of this Court in Mithilesh Kumari's case (supra) has taken the view
G that Section 3(1) of the Act is prospective in operation. Under these
circumstances, they submitted that it would be inconsistent to hold that .
though the Act is not retrospective it would apply to all pending proceedings at whatever stage they might be and such proceedings would incur
dismissal under Section 4(1). They submitted that there was a substantive
H right in the plaintiff under the existing laws which had sanction of more
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.)
723
than a century, under which. consistently such benami transactions were A
recognised and could be enforced by courts of law. That this substantive
right is sought to be taken away by Section 4(1) and unless there is anything
to suggest that it is retrospective in operation, it could not be treated to be
retrospective.
Learned counsel appearing for the respondents/defendants on the
other hand submitted that even though the Act may not be retrospective;
at least to the extent it is roping in all past transactions CJ_f benami purchases
of properties and when rights arising therefrom are sought to be put to an
end by Section 4(1) which covers any or every property held benami, there
B
is no reason why the said Section cannot apply to such proceedings at any C
stage till they get finally decided by the highest court in the hierarchy. If
there is any change in law by which any pending litigation becomes incompetent, such change in law can be applied to such pending proceedings at
whatever stage they might be pending before higher Courts. In short they
submitted that the decision rendered by Saikia J. in Mithlesh Kumali's case
(supra) lays down correct law and requires no reconsideration.
D
Having given our anxious consideration to these rival contentions, we
have reached the conclusion that the question has to be answered in the
negative and it must be held that the decision of the Division Bench taking
a contrary view does not lay down correct law.
E
The reasons are these. Under various legal provisions holding the
field, prior to the coming into operation of this Act, benami transactions
~ere a recognised specie of legal transactions pertaining to immovable
properties. Under the Indian Trusts Act, 1882 almost 113 years back the
then legislature enacting the law laid down in Section 82 as under :-
F
"Transfer to one for consideration paid by another - where
property is transferred to one person for a considerption paid or
provided by another person, and it appears that sucli other person
did not intend to pay or provide such consideration;for tlie benefit
of the transferee, the transferee must hold the property. for the
benefit of the person paying or providing the consideration.
Nothing in this section shall be deemed to affect the Code of
Civil Procedure, Section 317, or the Act No. XI of 1859 (to improve
G
the law relating to sales of land for arrears of revenue in the Lower H
A
724
SUPREME COURT REPORTS
[1995] 1 S.C.R.
Provinces under the Bengal Presidency), Section 36."
Therefore, it was a legal right of the plaintiff to contend in those days
·that even though the transfer of the property had been effected in the name
· of. &'fondant benamidar for the plaintiff from whom the consideration had
B moved the plaintiff was the real owner and, therefore, the defodant was
bound to restore such property to the real owner. If the benamidar took
up a defiant attitude then the law provided a substantive right to the
plaintiff to come to the Court for getting appropriate declaration and relief
of possession on that ground. Various Courts in India over a century used
to entertain such suits and such suits on proof of relevant facts used to be
C decreed. The legislature, however, in its wisdom considered the question
of enacting an appropriate legislation for prohibiting such benami transactions. For that purpose earlier Benami Transactions (Prohibition of the
Right to Recover Property) Ordinance, 1988, was promulgated by the
President and it was followed by the Act, the different sections of which
D came into force on the ttspective dates as mentioned hereinabove: It may
also be kept in view that these exercises were undertaken in the light of
India Law Commission's 57th Report on benami transation. This Report
w~s submitted on 7th August, 1973 by the Law Commission after studying
bdrj.ami system as operating in India and England. The Law Commission
also examined implications of the provisions of the Indian Trusts Act-, 1882
E and other statutory modifications of the benami law as contained in the
Code of Civil Procedure, the Transfer of Property Act, the Indian Penal
Code and the Income Tax Act. In that Report, the Law Commission
suggested retrospective effect to be accorded to the proposed legislation.
15 years, however, passed by and the Parliament did not take any steps in
p
this connection. In the meantime, many more suits concerning benami
transactions not only saw the light of day but also got successfully disposed
of. Some of them, however, were pending in first appeals or second appeals
or revisions. Then, as noted earlier, on 19th May, 1988 the President of
India promulgated the Ordinance to prohibit the right to recover property
· held benami and for matters connected therewith and incidental thereto
G based on the suggestion of the Law Commission of India. Thereafter the
Law Commission was requested to takr up the question of benami transactions for detailed examination and to give its considered views as early
as possible so that a Bill to replace the Ordinance could be drafted on the
basis of its recommendations and got passed by the Parliament. Indian Law
H Commission by its 130th Report on August 14, 1988 recommencfed passing
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.]
725
of appropriate legislation' and accordingly the Benami Transactions_ A
(Prohibition) Bill 1988, drafted after getting the Report, was introduced
in the Rajya Sabha on 31st August, 1988 and the Bill was passed. In para
3.18 of its Report, the Law Commission made the following recommendation in connection with the retrospective operation of the proposed legislation:-
"3.18. Therefore viewed from either angle, the Law Commission
is of the firm opinion that the legislation replacing the ordinance
should be retroactive in operation and that no locus penitentia need
be given to the persons who had entered into benami transactions
B
in the past. They had notice of one and a half decades to set their C
house in order. No more indulgence is called for."
It is thereafter that the Act came to be passed by both the Houses
of Parliament and came into force as stated above. It might be appreciated
that though the Law "Commission recommended retrospective applicability
of the proposed legislation, the Parliament did not make the Act or any of D
its Sections expressly retrospective in its wisdom. A bird's eye view of the
Act clearly establishes this position. The Act being Act No. 45 of 1988 in
its preamble states that it is an act to prohibit benami transactions and the
right to recover property held benami, for matters connected therewith or
incidental thereto. Section 3 which is the heart of the Act imposes the E
required prohibition of benami transactions. It reads as under :-
"3. Prohibition of benami transactions. -
(1) No person shall enter into any benami transaction.
(2) 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 or th unmarried daughter.
(3) 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.
F
G
( 4) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), an offence under this section shall be H
A
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I
non-cognizable and baila~le."
(1995] 1 S.C.R.
•
I
A mere look at the above provisions shows ·that the prohibition under
Section 3(1) is against persons who are t~ enter into benami transactions
and it has lai~ down that no person shall enter into any benami transaction
which obviously means from the date on which this prohibition comes into
B operation i.e. with effect from September 5, 1988. That takes care of future
benarni transactions. We are not concerned with sub-section (2) but subsection (3) of Section 3 also throws light on. this as~ect. As see11 above, it
states that whoever enters into any benami transaction shall be punishable
with iniprisonment for a term which may extend to' tbree years or\ with fine
C or with both. Therefore, the provision creates a ne\v offence of entering
I
into such benami transactions. It is made non-cognii_able and bailable as
laid down under sub-section ( 4). It is obvious that when a statutory
provision creates new liability and new offence, it would naturally have
prospective operation and would cover only those offences which take
D place after section 3(1) comes into operation. In fact Saikia J. speaking for
the Court in Mithilesh Kumari's case (supra) ha,s in ter~s observed at page
635 of the report that Section 3 obviously cannot have retrospective operation. We respectfully concur with this part of the learned Judge's view. The
real problem centres round the effect of Section 4(1) on pending proceedings wherein clal.m to any property on account of it being held benami by
E other side is on the anvil and such proceeding had not been finally disposed
of by the time Section 4(1) came into operation, namely, on 19th May, 1988.
Saikia J. speaking for the Division Bench in the case of Mithilesh Kumari
(supra) gave the fo~owing reasons for taking the view that though Section
3 is prospective and though Section 4(1) is also not expressly made
retrospective, by the legislature, by necessary implication, it appears to be
R retrospective and would apply to all pending proceedings wherein right to
property allegedly held benami is in dispute between parties and that
Section 4(1) will apply at whatever stage the litigation might be pending in
the hierarcy of the proceedings :-
G (1) Section 4 clearly provides 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 real owner of such property. This
naturally relates to past transaction as well. The exp_ression 'any property
H held benanii' is not limited to. any particular time, date or duration. Once
_,,,,,_
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-
'-~
l
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.)
727
the property is found.to have been held benami, no su.it, claim, or actjon A
to enforce any right in respect thereof shall lie.
(2) Similarly sub-sectiqn (2) of Section 4 nullifies the defences based on
any right in respect of a'ny,..groP,erty held benami \\lhether against the person
in whose name the property is held or against any other person in any suit,
claim or action by or on behalf of a person claiming to be the real owner
of such property. It means that once a property is found to have been held
benami the real owner is deprived of such a defence against the person in
whose name the property is held or any other person.' In other words, in
its sweep Section 4(2) engulfs past benami transactions_also.
(3) When an Act is . declaratory in nature, the pr~surnption against
retrospectivity is not applicable. A statute declaring th~ benami transactions to be unenforceable belongs to this type. The presumption against
taking away vested right will not apply in this case in as much as under law
B
c
it is the benamidar in whose name the property stands, and law only
enabled the real oW:ner to recover the property from him which right has D
now been ceased by the Act. In one sense there was a right to recover or
resist in the real owner against the benamidar. Ubi jus ibi remidium. Where
the remedy is barred, the right is rendered unenforceable.
( 4) When the law nullifies the defences available to the real owners in E
recovering the benami property from the benamidar, the law must apply
irrespective of the time of the benami transactions. The expression "shall
lie" under Section 4(1) and "shall be allowed" in Section 4(2) are prospective and shall apply to present (future stages) and future suits, claims or
......_
action only.
(5) The word "suits" would include appeals and further appeals as appeals
are in continuation of the suits. This is an aspect of procedural law and,
therefore, when procedure is changed for deciding any such proceedings
between the parties the provisior,s of such procedureal law can be applied
to such pending proceedings by necessary implication.
( 6) Repelling the contention that rights of the parties to a suit would be
determined on the basis of rights available to them on the date of filing of
F
G
the suit and distinguishing the judgment of this Court in Nand Kishore
Ma1wah v. Samundri Devi, [1987] 4 S.C.C. 382, it was observed that the
aforesaid case was for eviction where the rights of the parties on the date H
728
SUPREME COURT REPORTS
[1995J 1 S.C.R.
A of suit were material unlike in this case where subsequent legislation has
nullified the defences of benarni holders.
B
Before we deal with these six considerations which weighed with the
Division Bench for taking the view that Section 4 will apply retrospectively
in the sense that it will get telescoped into all pending proceedings,
howsoever earlier they might have been filed, if they were pending at
different stages in the hierarchy of the proceedings even upLO this Court,
when Section 4 came into operation, it would be apposite to recapitulate
the salient feature of the Act. As seen earlier, the preamble of the Act itself
states that it is an act to prohibit benami transactions and the right to
C recover property held benami, for matters connected therewith or incidental thereto. Thus it was enacted to efface the then existing rights of the real
owners of properties held by others benami. Such an act was not given any
retrospective effect by the legislature. Even when we come to Section 4, it
is easy to visualise that sub-section (1) of Section 4 states that no suit, claim
D 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
shall lie by or on behalf of a person claiming to be the real owner of such
property. As per Section 4(1) no such suit shall thenceforth lie to recover
the possession of the property held benami by the defendant. Plaintiffs
right to that effect is sought to be taken away and any suit to enforce such
E a right after coming into operation of Section 4(1) that is 19th May, 1988,
shall not lie. The legislature in its wisdom has nowhere provided in Section
4(1) that no such suit, claim or action pending on the date when Section 4
came into force shall not be proceeded with and shall stand abated. On
the contrary, clear legislative intention is seen from the words "no such
F claim, suit or action shall lie", meaning thereby no such suit, claim or action
shall be permitted to be filed or entertained or admitted to the portals of
any Court for seeking such a relief after coming into_ force of Section 4(1).
In Collins English Dic~ioitary, 1979 Edition as reprinted subsequently, the
word 'lie' has been defined in connection with suits and proceedings. At
page 848 of the Dictionary while dealing with topic No. 9 under the
.G definition of term 'lie' it is stated as under :-
"For an action, claim appeal ect. to subsist; be maintainable or
admissible."
H The word 'lie' in connection with the suit, claim or action is not defined by
R.R. REDDYv. P. CHANDRASEKHARAN (MATMUDAR,J.]
729
the Act. If we go by the aforesaid dictionary meaning it would mean that A
such suit, claim or action to get any property declared benami will not be
admitted on behalf of such plaintiff or appiicant against the concerned
defendant in whose name the property is hdd on and from the date on
which this prohibition against entertaining of such suits comes into force.
With respect, the view taken by that Section 4(1) would apply even to such
pending suits which were already filed and entertained prior to the date
when the Section came into force and which has the effect of destroying
B
the then existing right of plaintiff in connection with the suit property
cannot be sustained in the face of the clear language of Section 4(1). It has
to be visulised that the legislature in its wisdom has not expressly made
Section 4 retrospective. Then to imply by necessary implication that Section c
4 would have retrospective effect and would cover pending litigations filed
prior to coming into force of the Section would amount to taking a view
which would run counter to the legislative scheme and intent projected by
various provisions of the Act to which we have referred earlier. It is,
however, true as held by the Division Bench that on the express language D
of Section 4(1) any right inhering in the real owner in respect of any
property held benami would get effaced once Section 4(1) operated, even
if such transaction had been entered into prior to the coming into operation
of Section 4(1), and hence-after Section 4(1) applied no suit can lie in
respect to such a past benami transaction. To that extent the Section may
be retro-active. To highlight this aspect we may take an illustration. If a
benami transaction has taken place in 1980 and suit is filed in June 1988
by the plaintiff claiming that he is the real owner of the property and
defendant is merely a benamidar and the consideyation has flown from him
then such a suit would not lie on account of the provisions of Section 4(1).
Bar against filing, entertaining and admission of such suits would have
become operative by June, 1988 and to that extent Section 4(1) would take
in its sweep even past benami transactions which are sought to be litigated
upon after coming into force of the prohibitory provision of Section 4(1);
E
F
but that is the only effect of the retroactivity of Section 4(1) and nothing
more than that. From the conclusion that Section 4(1) shall apply even to
past benami transactions to the aforesaid extent, the next step taken by the G
Division Bench that therefore, the then existing rights got destroyed and
even though suits by real owners were filed prior to coming into operation
of Section 4(1) they would not survive, does not logically follow.
So far as Section 4(2) is COJ!Cerned, all that is provided is that if a H
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SUPREME COURT REPORTS
(1995] 1 S.C.R.
A suit is filed by a plaintiff who claims in his favour and holds the property
in his name, once Section 4(2) applies, no defence will be permitted or
allowed in any such suit, claim or action by or on behalf of a person
claiming to be the real owner of such property held benami. The disallowing of such a defence which earlier was available, itself, suggests that a new
B liability or restriction is imposed by Section 4(2) on a pre- existing right of
the defendant. Such a provision also cannot be said to be retrospecti~e or
retroactive by necessary implication. It is also pertinent to note that Section
4(2) does not expressly seek to apply retrospectively. So far as such a suit
which is covered by the sweep of Section 4(2) is concerned, the prohibition
of Section 4(1) cannot apply to it as it is not a claim or action filed by the
C plaintiff to enforce right in respect of any property held benami. On the
contrary, it is a suit, claim or action flowing from th~ sale deed or title deed
in the name of the plaintiff. Even though such a suit have been filed prior
to 19.5.1988, if before the stage of filing of defence by the real owner is
reached, Section 4(2) becomes operative from 19th May, 1988, then such
D a defence, as laid down by Section 4(2) will not be allowed to such a
defendant. However, that would not mean that Section 4(1) and 4(2) only
on that score can be treated. to be impliedly retrospective so as to cdver
all the pending litigations in connection with enforcement of such rights of
real owners who are parties to benami transactions entered into prior to
E the coming into operation of the Act and specially Section\4 thereof. It is
also pertinent to note that Section 4(2) enjoins that no such defence 'shall
be allowed' in any claim, suit or action by or on behalf of a person claiming
to be the real owner of such property. That is to say no such idefence shall
be allowed for the first time after coming into operation of Section 4(2). If
such a defence is already allowed in a pending suit prior to the coming into
-F operation of Section 4(2), enabling an issue to be raised on such a defence,
then the Court is bound to decide the issue arising from such an already
allowed defence as at the relevant time when such defence was allowed
Section 4(2) was out of picture. Section 4(2) nowhere uses the words ·"No
defence based on any right in respeft of any property held benami whether
G against the person in whose name the property is held or against any other
.