A purchase by one person in the name of another person is called a benami purchase. Where A under a secret understanding with B, purchases property with his own money, but in B’s name, the purchase is said to be benami. In such a case B is merely a benamidar or ostensible owner.
No suit shall be maintained against any person claiming title under a purchase certified by the court in such manner as may be prescribed on the ground that the purchase was made on behalf of the plaintiff or on behalf of someone through whom the plaintiff claims and in any suit by a person claiming title under a purchase so certified, the defendant shall not be allowed to plead that the purchase was made on his behalf or on behalf of someone through whom the defendant claims.
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ADVERTISEMENTS:
(2) Nothing in this section shall bar a suit to obtain a declaration that the name of any purchaser certified as aforesaid was inserted in the certificate fraudulently or without the consent of the real purchaser, or interfere with the right of a third person to proceed against that property, though ostensibly sold to the certified purchaser, on the ground that it is liable to satisfy a claim of such third person against the real owner.
The section provides that no suit shall be maintained against the certified auction purchaser on the ground that the purchase was made on behalf of the plaintiff unless he can prove that the name of the said purchaser was inserted in the sale certificate fraudulently or without his consent.
If A purchases property in B’s name at a court sale, and a certificate of sale is issued to B, B will be conclusively deemed to be the real purchaser as against A, and no suit will lie under this section by A against B for possession of the property, unless A can prove that B’s name was inserted in the certificate fraudulently or without his consent. The object of the said section is to put a stop to benami purchases at execution sales.
The section bars a suit by a person claiming to be the real and beneficial purchaser but not defence, for it only says that no suit shall lie against the certified purchaser on the ground that the purchase was made on behalf of the plaintiff. Thus if the real purchaser is in possession of the property purchased and the certified purchaser brings a suit against him for possession, the real owner is not debarred from setting up as defence that the plaintiff was only a benamidar for him.
ADVERTISEMENTS:
The prohibition under section 66 should not be extended or widened. The section only applies where a plaintiff claims or asserts a title in himself and challenges the title of the defendant as being merely benami, it does not apply to cases where the plaintiff does not claim a title in himself, but admitting the title of the defendant he claims possession under an agreement by which the defendant was bound to transfer the property to him.
The fact that such agreement was antecedent to the auction sale cannot bring it within the mischief of section 66. Nor does section 66 lay down that every agreement entered into by the judgment-debtor is necessarily bad.
Suryanarayana v. Venkata Subba Rao:
Where the plaintiff claims title to property on the ground that the auction purchase was made by the defendant on behalf of the plaintiff, that the sale price was wholly furnished by the plaintiff and that there was no intention of conferring any title on the defendant, section 66(1), C.P.C., will be a bar to the suit, though framed as one for specific performance of an agreement to convey.
ADVERTISEMENTS:
The suit is this: If the plaintiff’s title depends ultimately on the benami nature of the transaction, then section 66 would be a bar; but if the plaintiff’s title is dependent upon other facts, like e.g., the application of the general law or the carrying out of a separate contract, then section 60 would be no bar.
Girijanan Devi v. Brijendra Narain Choudhary:
Transactions which are called benami are lawful and are not prohibited. But section 66(1) seeks to oust the jurisdiction of the court to give effect to real as against benami title. The object of the clause is to prevent claims before the civil court that the certified purchaser purchased the property benami for another person.
Thereby jurisdiction of the civil court to give effect to the real as against the nominal title is restricted and the section must be strictly construed. But where the claim is that the properties belonged to the joint family because they were purchased with the aid of joint family funds in the name of the benamidar, such a claim does not fall within the terms of section 66(1).
Private Sales:
At private sales the law is that he who pays the purchase money is the real purchaser. There is no law in India to prevent such benami transaction in private sales, unless it be in fraud of creditors and the object of the fraud is carried out. In fact, the practice of purchasing property benami is very common in our country.
Thus where A, under a secret understanding with B, purchases property, with his own money, in B’ name, B holds the property in trust for A and A may compel B to transfer the property to him (A). If, however, A’s object in purchasing the property in B’s name was to defraud his creditors and the object of the fraud is carried out, the court will not help A in recovering possession of the property from B. But if the object of the fraud is not carried out, the court will help A in recovering possession of the property from B, notwithstanding A’s primary intention to effect a fraud.
Sheoshankar Prasad v. Mahabir Prasad:
It follows from a review of case law on section 66 that:
(i) Section 66 must be construed strictly as it encroaches upon the rights of the true owner remembering that benami transactions are only being discouraged by the Legislature but are not being made illegal;
(ii) Where a true owner recovers possession or has always been in possession and he bases his relief in the suit (other than that of possession or confirmation of possession) upon a title obtained by the purchase, the provisions of section 66 have no application;
(iii) The real owner, if he is in possession, can always resist a suit by the certificated auction-purchaser as a plaintiff;
(iv) The real owner is entitled to maintain a suit for specific performance of an agreement by the ostensible owner to transfer the property to him provided such an agreement is made after the auction-purchase;
(v) Where the true owner has dispossessed the certificate-holder and is adversely in possession for over 12 years, he can maintain a suit for recovery of possession even against the certified purchaser because his claim is now based upon different title and it is immaterial for him to allege or prove that he was the real owner at the date of the auction sale.