TMI Blog1995 (1) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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's case [1989 (2) TMI 111 - SUPREME Court] does not lay down the 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. The registry will now place all these matters before an appropriate Division Bench for disposing of them on the merits in the light of the answer given by us. - - - - - Dated:- 31-1-1995 - S. B. MAJMUDAR., KULDIP SINGH., B. L. HANSARIA, JJ. JUDGMENT S. B. 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 the Benami Transactions (Prohibition) Act, 1988 (hereinafter referred to "the Act"), can be applied to a suit, claim or action to enforce any right in property held benami against a person in whose name such property is held or any other person, if such proceeding is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of answer given by us on the aforesaid question. In order to appreciate the nature of the controversy posed for our consideration, we may note a few relevant facts leading to these proceedings. In most of the proceedings various suits were filed years back before the 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 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. Learned counsel appearing for the concerned plaintiffs submitted before us that sections 3, 5 and 8 of the Act came into force on September 5, 1988, when the Act received the President's assent and the remaining sections were deemed to have come into force on May 19, 1988, and that prior to the coming into force of the Act and the relevant provisions thereof litigations were already filed by the parties and they had to be governed by the then existing law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were 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: " Transfer to one for consideration paid by another.--Where property is transferred to one person for a consideration paid or provided by another person, and it appears that such other person did not intend to pay or provide such consideration for the 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 the law relating to sales of land for arrears of revenue in the Lower 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 the defendant benamidar for the plaintiff from whom the consideration had moved the plaintiff was the real owner and, therefore, the defendant was bound to restore such property to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate legislation and accordingly the Benami Transactions (Prohibition) Bill, 1988, drafted after getting the Report, was introduced in the Rajya Sabha on August 31, 1988, and the Bill was passed. In paragraph 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 in the past. They had notice of one and a half decades to set their house in order. No more indulgence is called for. " It is thereafter that the Act came to be passed by both 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, Parliament did not make the Act or any of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 4(1) on pending proceedings wherein there is a claim to any property on account of it being held benami by 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 May 19, 1988. Saikia J., speaking for the Division Bench in the case of Mithilesh Kumari [1989] 177 ITR 97 gave the following 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 retrospective and would apply to all pending proceedings wherein the 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 hierarchy of the proceedings: (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 the real owner of such property. This naturally relates to past transactions as well. The expression "any prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ah v. Samundri Devi [1987] 4 SCC 382; AIR 1987 SC 2284, it was observed that the aforesaid case was for eviction where the rights of the parties on the date of suit were material unlike in this case where subsequent legislation has nullified the defences against benami holders. 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 up to this court, when section 4 came into operation, it would be apposite to recapitulate the salient features 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 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by necessary implication that section 4 would have retrospective effect and would cover pending litigations filed prior to the 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 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 retroactive. To highlight this aspect, we may take an illustration. If a benami transaction has taken place in 1980 and a suit is filed in June, 1988, by the plaintiff claiming that he is the real owner of the property and the defendant is merely a benamidar and that the consideration has flown from him then such a suit would not lie on account of the provisions of section 4(1). The bar against the filing, entertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions entered into prior to 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 defence shall be allowed for the first time after the 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 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 the picture. Section 4(2) nowhere uses the words "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 to be raised or continued to be raised in any suit". With respect, it was wrongly assumed by the Division Bench that such an already allowed defence in a pending suit would also get destroyed after the coming into operation of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent real owners of property, as tried to be pointed out in the written objections. In fact, those cases in which suits are filed by real owners or defences are allowed prior to the coming into operation of section 4(2), would form a separate class as compared to those cases where the stage for filing such suits or defences has still not reached by the time section 4(1) and (2) starts operating. Consequently, the 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 a defence on that ground prior to the 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 in the meantime he is hit by the prohibition of section 4(2). Equally there cannot be any comparison between a real owner who has filed such a suit earlier and one who does not file such a 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 has effected a repeal of section 82 of the Indian Trusts Act and while repealing this provision no different intention appears from the Act to affect any right, privilege or liability acquired under section 82 by either side or any pending proceedings regarding such obligation or liability. Therefore, such pending proceedings will have to be continued or enforced as if the repealing Act had not been passed. A conjoint reading 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 plaintiffs have put forward claims under the then existing section 82 of the Indian Trusts Act such proceedings are to be continued by assuming that the repealing of section 82 of the Indian Trusts Act has not been effected in connection with such pending proceedings. Unfortunately, this aspect was not pressed for consideration before the Division Bench and, therefore, the view taken by the Division Bench is likely to result in an incongruous situation. If a view is to be taken that a pending suit wherein plaintiff might have contended that the real consideration flowed from him and the defendant was not the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show that section 4(1) and 4(2) have 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 to the concerned defendant. As a result of the aforesaid discussion, it must be held that reasons Nos. 1 and 2 which weighed with the Division Bench are not well sustained. As regards reason No. 3, we are of the considered view that the Act cannot be treated to be declaratory in nature. A 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 Act cannot be said to be declaratory but in substance it is prohibitory in 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 of filing a suit or of 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. With respect, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 4 of the Benami Transactions (Prohibition) Act, 1988, was, it is submitted, wrongly held to be an Act declaratory in nature for it was not passed to clear any doubt existing as to the common law or the meaning or effect of any statute. The conclusion, however, that section 4 applied also to past benami transactions may be supportable on the language used in the section. " No exception can be taken to the aforesaid observations of the learned author which in our view can certainly be pressed in service for judging whether the impugned section is declaratory in nature or not. Accordingly, it must be held that section 4 or for that 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 substantive rights of real owners who are parties to such transactions and for whom new liabilities are created by the Act. Qua reason No. 4, we may refer to our discussion earlier that 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 consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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