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Report No. 57

6.27. Second alternative-refusal to recognise benami preferred.-

In our opinion, the simplest alternative would be the second alternative. The law should refuse to recognise the benami character of transactions, without making them an offence. The law should, in effect, provide that where property is transferred benami, the benamidar will become the real owner. The result of such a provision will be that the fact that the benamidar did not provide. consideration, or that the consideration was provided by a third person, will not be a ground for recognising a person other than the benamidar as owner. To put the matter in broad terms, the doctrine of benami will, under the proposed amendment, cease to be a part of the Indian law.

It may be observed that in enacting the proposed provision, the legislature will carry, to its logical conclusion, the trend illustrated by provisions, such as, section 66 of the Code of Civil Procedure. The section in the Code is applicable to involuntary alienations, while the proposed provision, will extend the same principle to voluntary transfers as well. We think that this will be the simplest and most effective course, and is, therefore, preferable to others. The amendment will bring out a change in the legal position in some of the situations1 where, at present, the benami character is recognised.

1. Para. 5.11, categories (a) and (b) if there is no intent to transfer title, and categories (d)(ii) and (d)(iv).

6.27. We are also of the view that it is not necessary to enact a prohibition attracting criminal penalties-which is the course suggested in the first alternative. Such a prohibition will have to be accompanied by a requirement of mens rea, thus narrowing down its scope and limiting its practical utility.

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