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Report No. 57

1.7. Factors accounting for the origin of benami.-

The practice of benami might have come into existence by reason of a number of factors:-

(a) The Joint Hindu Family system and a desire to make secret provisions is one factor1 which might have led to the practice of benami.

(b) Fraud on creditors might be another such factor. As Bhattacharya2 has observed:-

"Since its first establishment, the British Government, in the exercise of its legislative functions, have from time to time made attempts to check the inveterate practice obtaining in India of holding property by one person in the name of another. This practice, having its origin in the dishonest motive of defrauding creditors of their just and lawful dues, has had so large and widespread prevalence here that the legislature cannot altogether put an end to it by a drastic enactment declaring the practice absolutely illegal in all cases."

"Such a step would be attended with immense mischief. But, as the British Government by its revenue laws has retained in its hands the supreme control over the vast majority of landed property, there have been enactments3 to discourage benami purchases at a revenue sale."

(c) Desire to evade taxes may be another motive of persons entering into benami transactions. The victim here is not individual, but the State. Nevertheless, it is a species of fraud.

(d) Benami transactions might also have originated in a desire to avoid certain political and social risks.

According to Pollock,1 "Practices of this kind (benami practices) naturally grow up in a state of society where there is an appreciable risk, from one generation to another, of hostile conquest or confiscations. And, having regard to the political state of India before and after the short-lived prosperity of the Mogul Empire, I do not see the necessity of explaining the frequency of these transactions by some supposed innate love of secrecy in the minds of oriental owners of property. Neither is there anything surprising in the persistence of the habits of the kind after the reasons for them disappear. Our modern life is full of these survivals in things great and small. Again, it is quite natural for ingenious persons to discover that the means of concealment which formerly were a shelter from the strong hand of princes and adventurers can be turned in peaceful times to the less ambitious but not less lucrative end of baffling creditors."

1. West and Buhler Hindu Law, (4th Edn.), pp. 157, 563.

2. K.K. Bhattacharya Joint Hindu Family, (Tagore Law Lectures) (1884-85), pp. 469, 470.

3. The author cites several enactments to illustrate this proposition.

4. Pollock Law of Fraud, misrepresentation & mistake, (1894), pp. 83, 84.

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