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Report No. 57

6.6. Views as to first alternative.-

The first alternative has received the support of one High Court,1 two Judges of another High Court,2 two Judges of one more High Court,3 some Judges of another High Court4 and one State Government.5

1. S. No. 47.

2. S. No. 42.

3. S .No. 43.

4. S. No. 48.

5. S. No. 34 (No other lesser provision will have any effect, it is stated).

6.7. Those who favour the first alternative-i.e., the imposition of a prohibition (in the sense of making the entering into benami transactions an offence)-, regard benami transactions as outmoded, or state that there is no place in modern times for such transactions, or state that there can hardly be a legitimate motive for such transactions. This group is, in number, smaller than the group which favours the second alternative or the third alternative.

6.8. The first alternative has, however, been opposed by the majority of the comments on various grounds. It has been stated that benami transactions are entered into for honest motives also, and not necessarily with the intention of evading taxes or defeating the claims of third parties. Secondly, it is stated that this is a deep rooted habit, and ought not to be prohibited by law, but restrictions may be imposed, wherever necessary. Thirdly, it has been emphasised that the prohibition may be difficult to enforce, as a benami transaction will not ordinarily come to light. Lastly, the view has been expressed that the provisions so far enacted are adequate to check the evasion of taxes or defeating the claims of third parties.

6.9. Thus, a retired High Court Judge1 has stated as follows:-

"However strongly one may disparage benami transactions from the above two points of view, there will be always need to provide for situations where one person advances money for a transaction taken in the name of another with a genuine intention to benefit the latter2." After noting that a fresh look is necessary from the point of view of (i) vexatious litigations, (ii) tax-evasions, he suggests. "Such transactions should be allowed to prevail, and not barred in toto. If the operating motive is tainted by fraud, only then should legislation ban them."

1. S. No. 13.

2. Emphasis supplied.

6.10. A High Court Judge1 has emphasised that benami transactions "have been prevalent in the country for a very long period, and it will be difficult to check these by legislation, so long "as one person will enjoy the confidence of another". In spite of legislation benami transactions may continue, and the benamidar may execute a deed in favour of the real owner subsequently at an opportune time."

1. S. No. 30.

6.11. Another High Court Judge,1 while noting that it is desirable to prohibit such transactions completely, has added it may not be possible to do so through legislation, "and more so where the real and the ostensible owner would combine against the law." He, therefore, thinks that "the law should go only that far where it would be effective. Only such legislation be made as may regulate the transaction and make it unremunerative for the ostensible owner to agree to act as the shield. The provisions should be such as may bring all benami transactions on the surface."

1. S. No. 30.



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