Report No. 57

1.10. Benami transactions common in India.-

It is not disputed that benami transactions are common in India. As the Federal Court observed1-

"A practice has long been common in this country for intending alienees of land to take the document of transfer in the name of their friends or relatives, sometimes with a view to defeat the claims of creditors, sometimes with a view to avoid claims by other members of their own family, and sometimes to escape restrictions imposed upon them by Government Servants' Conduct Rules etc."

1. Punjab Province v. Daulat Singh, AIR 1942 FC 38 (40) (Varadachariar J.)

1.11. Sir George Farwell's observations in the Privy Council1 may also be quoted:-

"Down to the taluqdar's death the natural inference is that the purchase was a benami transaction-a dealing common to Hindus and Muhammadans alike, and much in use in India; it is quite unobjectionable and has a curious resemblance to the doctrine of our English law that the trust of the legal estate results to the man who pays the purchase money, and this again follows the analogy of our Common law, that where a feoffment is made without consideration the use results to the feoffer."

1. Bilas Kunwar v. Desraj Ranjit Singh, 1915 ILR 37 All 557 (564,565): AIR 1915 PC 96.

1.12. In the leading case of Gosain v. Gosain, (1854) 6 MIA 53 Lord Justice Knight Bruce, delivering the opinion of the Privy Council, took the view that the English doctrine of advancement did not apply in India. He said-

"If then the person in whose name the purchase was effected had been a stranger in blood, or only a distant relative, no question could have arisen; he would have been prima facie a trustee, and if he desired to contend that the prima facie character of the transaction was not its real character, the burthen would have rested on him; but the individual in whose name the present purchase was effected was the son, and at that time the only son, of the person who made the purchase, and whose money it was, and it has been contended that the circumstance changes the presumption, and that what would be the presumption in the case of a stranger does not exist between father and son; that the presumption is advancement, and that, therefore, the burthen of proof is shifted.

Now, on this, as far as their Lordships can learn, there is no authority in Indian law, no distinct case, or dictum, establishing or recognising such a principle, or such a rule. It is clear that in the case of a stranger the presumption is in favour of its being a benami transaction, that is a trust; but it is clear also that in this country, where the person in whose name the purchase is made is one for whom the party making the purchase was under an obligation to provide, the case is different; and it is said that that ought to be deemed the law of India also, not because it is the law of England, but because it is founded on reason and the fitness of things, if I may use the expression, or natural justice, that on such grounds it ought to be considered the law of India.

Now, their Lordships are not satisfied that this view of the rule is accurate, and that it is not one merely propri juris. Probable as it may be, that a man may wish to provide for his son to a certain extent, and though it may be his duty to do so, yet there are other considerations belonging to the subject; among others, a man may object to making his child independent of him in his life time, placing him in such a position as to enable him to leave his father's house and to die, leaving infant heirs, thus putting the property out of the control of the father. Various reasons may be urged against the abstract propriety of the English rule. It is merely one of positive law, and not required by any rule of natural justice to be incorporated in any system of laws, recognising a purchase by one man in the name of another, to be for the benefit of the real purchaser.

Their Lordships, therefore, are not prepared to act against the general rule, even in the absence of peculiar circumstances; but in India there is what would make it particularly objectionable, namely, the impropriety or immorality of making an unequal division of property among children. This might be more striking where there were more sons than one; but if the objection exists, it does not become less where there is only one son, for the father may have others, and in such a case the same objectionable consequences would follow as where several sons were in being."