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Report No. 130

2.6. By removing the protection of fundamental right on private property, first important step was taken towards removing a road block in developmental programmes. The next step was to curb unlawful and nefarious uses of property.

2.7. In modem times, the word 'property' has acquired an extensive connotation. Land and anything attached to earth is described as immovable property. Movable property comprehends cash, shares in joint stock companies, debentures, fixed deposit receipts, bank accounts, jewellery and such intangible assets as patents and copyright, the last being described as intellectual property. Power of wealth may manifest itself in myriad types of property. Acquisition of shares would enable a person to control the company of which shares have been acquired by him. Deposits and other methods of financing industrial activity also allows wide control of the activity financed.

2.8. Right to property never belonged to the category of what are called 'natural rights'. It is a creation of law and the manner in which it is created, to the same extent it can be extinguished by law. Where, therefore, a legal system or a legal formulation or a statutory measure has extended all deserved protection to property, on the ugly and evil features of property becoming manifest, the statute can withdraw the umbrella of protection, With the developing notions of social justice, a protection to a kind of property once considered valid and just may be withdrawn on the ground that the protection itself has become counter-productive.

2.9. Benami property is not the creation of a statute. It acquired legal respectability by judicial law-making. The earliest case to which reference was made in the earlier report of the Law Commission was of the year 1915. Quoting Sir George Farwell's observation that a benami transaction, a dealing common to Hindus and Mohammedans alike, is much in use in India. According to him, it was quite unobjectionable and has a curious resemblance to the doctrine of the English law and tracing the history down to the later cases, the Law Commission concluded that benami has become part of Indian law.1

The Law Commission recommended that it is time that benami ceases to be a part of Indian law because it was resorted to usually (but not always) with the object of concealing the real owner, fraud on creditors, desire to evade taxes as also to avoid certain political and social risks.2 It was in 1973, that is, nearly a decade and a half back, that the Law Commission recommended to the Government of India that benami should cease to be a part of the Indian law.

This report was published and it was a notice to all benamidars as well as the so-called real owners that Government may contemplate enacting a legislation to put an end to benami as part of Indian law As the present trend of thinking is that the proposed legislation replacing the Ordinance should be retroactive, a grievance may be made that the Government should not have acted abruptly without giving locus penitentio to those who entered into benami transactions when they were valid and would have no chance to set right their house. In the opinion of the Law Commission a notice of a decade and a half is more than adequate for this purpose and, therefore, it is not necessary to grant any such indulgence.

1. Anyone interested in the history of development of law about benami transactions may see 57th Report of the Law Commission of India where most of the cases have been extensively quoted.

2. LCI, 57th Report, para. 1.7.

2.10. The assumption that benami transactions only relate to immovable property does not bear scrutiny. Benami holders of shares of joint stock companies, benami or fictitious bank account holders, benami holders of fixed deposits in companies, name lenders for bearer bonds issuance of which was legitimated by a decision of the Supreme Court1 and encouragement to benami in no uncertain measure, all these have contributed today to defeating of tax laws, violation of social morality and concentration of property standing in the way of development programmes of the nation.

The approach of the Law Commission accordingly is that benami transactions in respect of any property, including intangible property like the patents and the copyright, should be covered in the proposed legislation. The legislation must have extensive application as not to permit a single loophole for providing an escape route to any kind of property which can be held benami. And the entire gamut of umbrella of protection to benami must be completely, fully and effectively folded up. This is our approach and the various aspects are dealt with in the light of this approach.

1. R.K. Garg v. Union of India, (1981) 4 SCC 675.

2.11. This approach ensures that a withdrawal of the protection on fundamental right to property, coupled with total denial of any protection of any legal formulation to benami property, when put in juxtaposition, would at least go a long way in eliminating power of wealth as represented by property to the common detriment.

Benami Transactions - A Continuum Back

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