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Report No. 57

1.13.Legality of benami transactions.-

In itself, a benami transaction is not illegal, because "transfer of property", by its definition,1 does not require that the transfer in favour of one person may not be in the name of another person.

1.14. Propriety of benami transactions,-As to the propriety of benami transactions, the Federal Court observed1:-

"A notion has sometimes prevailed in this country that all benami transactions must be regarded as reprehensible and improper, if not illegal; but, as late as in 1915, Sir George Farwell, delivering the judgment of the Judicial Committee in 37 All 5572 spoke of them as 'quite unobjectionable' and as having their analogues in the English law; and Mr. Ameer Ali, delivering the judgment of the Committee in 46 Cal 5663, observed that 'there is nothing inherently wrong in it, and it accords, within its legitimate scope, with the ideas and habits of the people'. As indicated by the qualifying words 'within its legitimate scope', their Lordships' observations were clearly not meant to countenance transactions entered into for fraudulent or illegal purposes."

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

2. Bilas Kunwar v. Desraj Ranjit Singh, AIR 1915 PC 96: 37 All 557: 42 IA 202 (PC).

3. Gur Narayan v. Sheo Lal Singh, AIR 1918 PC 140: 46 Cal 566: 46 IA 1 (PC).

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