Benami Property Cannot Be Claimed By Real Owner Through Will Executed By Proxy Buyer, Says Supreme Court

Summary of this article

Supreme Court rejects benami property claims based on wills
Court says business relationships are not automatic fiduciary arrangements
Government can confiscate properties declared benami under the law

The Supreme Court has ruled that a person cannot claim ownership of a property bought through a benami transaction simply because the person, in whose name the property was purchased, later wrote a Will in their favour.

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BY Outlook Money

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The case involved a dispute over properties bought in another person’s name. One party argued that although the property was officially registered in someone else’s name, the money for the purchase had been provided by him. He also relied on a registered Will written in his favour.

However, the Supreme Court said such a Will cannot override the Benami law.

A Bench of Justice J B Pardiwala and Justice R Mahadevan observed that the original nature of the transaction matters more than later documents such as Wills. The court said if a property is found to be benami, later arrangements cannot make it legal.

What Is A Benami Property

A benami property refers to a property where it is purchased in the name of one person, but the funds are contributed by another who is the actual beneficiary of the property.

For instance, if a person purchases the property with his own funds and registers the land in the name of another person to conceal ownership, it could be considered as a ‘benami transaction’.

In most cases, the Prohibition of Benami Property Transactions Act, 1988, prohibits such transactions. The government has the authority to take away a property if it is established to be benami.

Why Was The Claim Rejected

The claimant contended that the property was held in trust due to a business and work relationship. He also said that his claim was based on the Will and not the original transaction.

The Supreme Court rejected this argument. It said commercial or work relationships cannot automatically be treated as relationships of trust under the Benami law.

The court also noted that the property purchase was linked to business agreements between the parties.

Apex Court's Decision

The Supreme Court ordered that the disputed properties are to be confiscated under the Benami law. It also ordered the Centre to appoint an administrator and take control of the properties within eight weeks.