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Report No. 57

6.3. Possible alternative for regulating benami transaction.-

Several possible alternatives could be thought of, with reference to prohibiting or regulating benami transactions for avoiding prejudice to private individuals or minimising litigation:-

(i) Entering into a Benami transactions could be made an offence;

(ii) A provision may be enacted to the effect that in a civil suit a right shall not be enforced against the benamidar or against a third person, by or on behalf of the person claiming to be the real owner of the property on the ground of benami; a similar provision could be made to bar defences on the ground of benami.

(This provision would be based on the principle on which the existing provisions in the Civil Procedure Code and the new provision in the Income-tax Act are based, but could be wider in scope and more radical).

(iii) The present presumption of a resulting trust1 in favour of the person who provided the consideration may be displaced (as in England) by the presumption of advancement, in cases where the person to whom property is transferred is a near relative2 of the person who provided the consideration. (This would bring in the doctrine of advancement, so as to rebut the presumption of resulting trust under section 82 of the Trusts Act). Whichever alternative is adopted, it may be desirable to make an exception for an acquisition made by the manager of a joint Hindu family in the name of one of the co-parceners, and similar cases.

1. Section 82, Trusts Act.

2. The expression 'near relative' could be suitably defined.

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