June 2015

BENAMI TRANSACTIONS’ SUITS AND ITS METHODOLOGY

By:
ABDUL ZAKIR TAREEN
Advocate High Court, Peshawar

AN INTRODUCTION TO BENAMI TRANSACTION

The word transaction means the act or an instance of conducting business or other dealings (Black's Law Dictionary).

Transaction is a process carried out by two or more persons for the purpose of benefit and reciprocal concession to each other. The word transaction is not a new term; the people of ancient times were also carrying out various types of transactions/dealings/businesses with each other by buying and selling-out different commodities and properties. In ancient time there was no concept of coins or money/cash etc, one kind of goods was exchange for other, in the book of history this sort of business/transaction is remembered in the name of Barter System. But with the passage of time and advancement of Societies the people adopted using some special thing bearing special mark/sign of renowned personality or thing for the purpose of business and other matters related to buying and selling. In this way the process of transaction commenced slowly and gradually and the people started businesses. As there are various kinds of business transactions, one of them is Benami Transaction. Keeping in view the technicalities, importance of this unique type of Transaction (Benami); it's History and the law relating to Benami Transaction is discussed here-in-below, as a short survey on this topic with reference of newly reported dictum of Superior Courts of Pakistan and a little description in respect of methodology of suits relating to Benami Transaction.

EXPLANATION, MEANING AND ORIGIN OF BENAMI TRANSACTION

In the case titled S. Iqbal Ahmad versus Jawaid Iqbal reported in 2011 CLC 29 Karachi, the meaning of the word Benami is described and translated as such:

“The word Benami is derived from two Persian words, i.e. “Bay” means “without” and “Nami” means “name” hence Benami means the transaction carried out or undertaken by someone else in the name of other Person.”

Benami means, a transaction where a person buys a property with his own money but in the name of another person.

Literally benami means without name viz; a transaction affected by a person without using his own name.

As to the origin to the practice of Benami transaction is concerned it is difficult and controversial question and aspect of Benami transaction. It always remains an unsolved part to predict the time at which arose the system of acquiring and holding property or carrying on business in the names of others. So in the present circumstances it is a matter of conjectures and surmises and no exact conclusion can be drawn as to origin and practice of benami transaction.

BENAMI TRANSACTION

Benami transaction is a kind of transaction in which the purchased property is in the name of “Benamidar” but the actual owner is someone else who had been actually paid the consideration called the real owner. In other words, where a person purchases property with his own money but in the name of another person without any intention to benefit such other person.

In Benami Transaction there are always three persons, in certain circumstances more than three persons.

1. Benamindar:

The Ostensible owner on whose name only the property is purchased is called Benamidar. Or the Nominal owner is called benamidar.

2. Seller:

The person who sell-out the property.

3. The Real Owner:

The Person who actually have paid the consideration amount to purchase the property in the name of other person (Benamidar) without intending to give any benefit to him.

SCOPE AND OBJECT

Benami transaction has wider scope. This sort of transaction not only witnessed in Hindu community but was in practice in Muhammadan also and still benami transaction is not barred and it is in practice in Pakistan also.

The object of Benami Transaction is to purchase property in the name of a person, and the actual owner/purchaser did not bring his name on screen and on the title deeds. Sometimes it so happen that an abroad settled person wants to purchase property for business purposes and he has a compulsion that at the time of re-selling on profitable price he will not be present in the country where the property is situated, and whenever, the good payer/customer wants a bargain, due to his absence the bargain cannot be completed, so with this back-drop and object the purchaser makes a contract in the shape of Benami. That at the time of re-selling the same he can issue direction to the local person/benamidar to re-sell it and send its outcome/money through online banking etc.

Benami Transaction creates trust by implication, not a trust in real sense and the position of benamidar is that of a trustee for the real owner and such transaction is treated as perfectly genuine one which is legally enforceable having same affects as resulting trust.

The law imposes an obligation in the nature of trust on the Benamidar. He is a constructive trustee. He holds the property for the benefit of the person who has the real title to it. When a transaction of purchase is proved to be Benami, Courts give effect to the real title and not to the nominal title.

THE CONCEPT OF LAW RELATING TO BENAMI TRANSACTION

Although there is no special Statue or Act relating to Benami Transaction but it is widely accepted, practiced in all societies of the world. Because the law/guideline/principles in respect of benami transactions is introduced by the superior Courts in their plethora of verdicts which by the passage of time has taken the place of law for benami disputes, as such precedents is one of the source of law and always regarded as law.

In a Case Major (Retd) MAZHAR MAHMOOD KHAN VERSUS KHUSHAL KHAN JADOON Reported in 1996 MLD 316 Karachi citation (C) it is held that; “'Benami Transaction being custom of country was recognized as-such; and such transaction could not be deemed to be a sham transaction. In benami transaction, one person purchases property in the name of another but for his own benefit. Nominal owner deemed to be a benamidar”.

POINTS FOR DETERMINATION IN CASES OF BENAMI TRANSACTION

As discussed above Benami transaction is quite different from all other kinds of transactions carried in one way or other. As a matter of fact in all other kinds of transactions there are two parties the seller and buyer, one become the owner of the property by paying some consideration to other party. But in case of Benami Transaction the ostensible owner is only Benamidar and the actual owner is someone-else who has actually paid the consideration to seller, the Benamidar just play a role of bridge between the ex-owner and the subsequent real owner. In case of judicial proceedings the real owner must prove the Benami transaction by all means, reliable, cogent and unimpeachable evidence. The circumstances and the eventualities whereof he purchased the property in the name of other person (ostensible owner).

In case titled Saif ur Rehman Vs Mst. Robina Kamal, reported in 2013 CLC 1810 Lahore citation a, it is held that, “for determination of benami transaction, it is the duty of the party who raises such plea to produce legal, relevant and unimpeachable evidence”'.

In case titled: Mst. Asia Bibi Vs Dr. Asif Ali Khan and others, reported in PLD 2011 Supreme Court 829, it is held that, “relevant factors for determination of benami transaction are source of consideration; who exercised custody over the original title deed and other relevant documents at the time they were introduced as evidence in Court; who undertook the consideration of property in question; who was in point of fact enjoying qua possession over the suit property and motive for benami transaction”.

Following are the few points for determination of Benami character of transaction, that either the transaction is Benami or not:

(i) Essence of Benami, i.e. Motive/intention for Benami transaction,

(ii) Possession of suit property with whom lies,

(iii) Source of consideration or Source of income (that how a person paid the consideration to another person),

(iv) Custody of all relevant documents/title deeds.

The above mentioned points are referred by august Karachi High Court in case tilted: Qurib Ali Vs Dr. Shah Nawaz, reported in 2001 CLC 1599 and then by the Hon'ble Supreme Court of Pakistan in case titled Abdul Majeed Versus Amir Muhammad and others Reported in 2005 SCMR 577 citation (a).

It is held that “For determination the question, whether a transaction is a Benami transaction or not, inter alia the following factors are to be taken into consideration:--

a. Source of consideration;

b. From whose custody the original title deed and other documents came in evidence ;

c. Who is in possession of the suit property; and

d. Motive for the Benami Transaction.

In case titled: Major General Dr. Asif Ali Khan, reported in 2010 YLR 3214 Peshawar citation b, it is held that, “benami being neither a law nor a rule, extreme caution was to be observed; it simply would amount to challenging a genuine transaction made in good faith. To arrive at a just conclusion as to whether a transaction was benami or not, factors to be taken into consideration were the source of consideration; from whose custody the original title deed and other documents come in evidence; who was in possession of the suit property; and motive for benami transaction”.

In case Ghulam Murtaza, reported in PLD 2010 Supreme Court 569, it is held that, “motive in benami transactions was the most important one and a transaction could not be dubbed as benami simply because one person happened to make payment for or on behalf of the other. There were innumerable transactions where a father had purchased property with his own sources for his minor son or daughter keeping in mind that the property vest in minor. Such transaction, subsequently could not be challenged by father as benami, simply because amount was paid by him. There were people who, with positive application of mind purchased properties in the name of others with intention that title should vest in that other. If such principle was denied and that of benami attracted simply because sources of consideration could not be proved in favour of named vendee, it would shatter the most honest and bonafide transactions thereby bringing no end to litigation. At one time husband came out with reason that name of his wife entered merely to please her, there came principle of bonafides. good will and sanctities attached to a transactions. Once having done so, when husband and wife were amicably living, no one could turn around subsequently to claim exclusive title, when relations had become strained and spouses fell apart. Even if the amount had been paid by the husband, yet he could not have turned around to claim that wife was a benami beneficiary”.

In Ch. Abdul Rahim case, reported in 2009 YLR 605 Karachi, the essential ingredients for benami transactions are highlighted.

Further, the Worthy Supreme Court while adjudicating upon a case titled Ch. Ghulam Rasool vs Mrs. Nusrat Rasool etc reported in PLD 2008 S.C 146 citation (d) held that, “Two essential elements must exist to establish the benami status of the transaction. The first element is that there must be an agreement, express or implied, between the ostensible owner and the purchaser for purchase of the property in the name of ostensible owner for the benefit of the person who has to make payment and second element required to be proved is that transaction was actually entered between the real purchaser and seller to which the ostensible owner was not party”.

In case Titled IQBAL AHMAD TURABI and others versus The State, reported in PLD 2004 S.C 830 while discussing Benami Transaction it is observed in citation (b) that:

“From whom the consideration money came and from whom the documents of sale was produced in the Court play a dominant role when the dispute was between the real owner and the benamidar” but in the other para of the same judgment it is held that “if the dispute is between the third party on the one hand and the real owner and the benamidar on the other hand then the said consideration would lose its importance and in such a situation the conduct of the parties and the surrounding circumstances were to be taken into view to determine, whether the transaction was a benami one or not”

PLAINT IN SUITS RELATING TO BENAMI TRANSACTIONS

The plaint in suits relating to benami transactions must contain, statements of facts constituting a cause of action. It must have an explanation that the original title deeds regarding the property subject of benami transaction are in possession of the plaintiff. It must contain facts showing why the plaintiff deemed it expedient to purchase the property in the name of the defendant. The Plaintiff must highlight the circumstances under which the purchase money was paid by the plaintiff. The plaint must also show the motive for purchasing the property in the name of the defendant/benamidar. It must also show that the plaintiff is in possession of the property and enjoying usufruct of the property. If the defendant/benamidar is in possession of property in dispute, the plaint must show that the rent and profit had been enjoyed by the plaintiff and that the defendant was in possession as a trustee for plaintiff. The plaint must also show that the defendant has endangered the title of the plaintiff to the property by setting up an adverse title in him.

In Ghulam Qadir case, reported in 2008 CLC 887 Lahore, it is held that, “plaintiff had failed to mention in the plaint any reason or motive for the purchase of land in open auction in the name of defendant. Order of dismissal of suit maintained”.

WRITTEN STATEMENT

The defendant may contest the suit by filing written statement and he may raised an objection regarding the non maintainability of the suit or that the transaction is either is void or voidable. He can allege that the title deeds are in his name. If he is in possession of the title deeds subject of the benami transaction, he can show the facts in this respect. If he is in occupation of the property he can show this position. He can encounter and challenge the motive forwarded by the plaintiff.

In other cases if the defendant is not the Benamidar/ostensible owner and if he is real purchaser, he can allege facts in this respect by showing that he is the certified owner/purchaser by giving particulars of the sale.

In some cases limitation, estoppel and other legal applicable pleas may also be forwarded in written statement in order to contest the claim of the plaintiff.

ONUS TO PROVE BENAMI TRANSACTION

Naturally in almost all sort of cases/suits, the Burden to prove assertions/ allegations/claim always lies on the shoulder of the person (plaintiff/claimant) who claim or assert something in the Court of Law. While discharging his onus to prove his case, the plaintiff will first of all establish on record his motive for making a benami transaction, that why he has not made a normal sale transaction and what were the compelling circumstances/reasons that he made the transaction in the shape of benami. Secondly he must bring the original title deeds from his own custody on the record of the Court and thirdly he must have produce evidentiary material regarding the payment of consideration of the property which is the subject of benami transaction. Fourthly he must have produce a proof before the Court of law that the property subject of benami transaction is actually in his direct or indirect occupation.

The august Lahore High Court while deciding the case of Karam Hussain Khan, reported in 2013 MLD 713 Lahore citation d, held that, “onus to prove. Principle. Party that alleges a particular fact is bound to prove the same”.

In case titled: Muhammad Nawaz Minhas Vs Mst. Suriya Sabir Minhas, reported in 2009 SCMR 124 citation a, it is held that, “onus of the particular sale/purchase if benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so”.

Similar opinion is made by the august Lahore High Court in Syed Nisar Hussain Case, reported in 2006 CLC 732 citation a, wherein it is held that, “onus in benami transaction is heavily upon the shoulders of the person who asserts to be the real owner”.

In case titled: S. Abid Ali Vs Syed Inayat Ali, reported in 2010 CLC 1633 Karachi citation a, it is held that, “initial burden of proof to prove transaction as benami, is on the party who alleges that ostensible owner is benamidar. Weakness of defendant's evidence does not relieve plaintiff from discharging the burden of proof”.

In Haji Nawab Khan case, reported in 2009 YLR 2249 Peshawar, it is held that, “whenever a person alleged a transaction to be a benami in nature, the essential onus lay on him to prove the same, but the said onus could shift during the evidence, if he proved the ingredients of said benami transaction, then the burden would be on defendant to disprove the allegation. Plaintiff had produced overwhelming evidence on record to substantiate his case and had proved on record that possession since its inception was with the plaintiff. Case remanded for decision”.

EVIDENCE IN DEFENSE

In Mst. Nasira Ansari Case, reported in 2007 CLC 92 Karachi Citation f, it is held that, “admission of wife that her husband was a man of resources and acquired property in dispute in her name; that she with his funds constructed the same, which her husband desired to gift to his sons. Validity. Such admission was sufficient to establish that wife was only benamidar and husband was real owner of property”.

If the claimant establish his case in line of above four points and iota of evidence then the burden shifts to the defendant/benamidar to rebut the claim of the plaintiff on one side and to prove that the transaction is not the benami one and that the consideration regarding the property was paid from his own pocket and he must produce relevant, cogent oral and documentary proof regarding source of income utilized in the purchase of property which is subject of the benami transaction.

If the plaintiff on the first part prove the afore-referred four points and discharged the burden lies on his shoulders then the Court will see the evidence in rebuttal i.e. the evidence of defendant/ benamidar and if he is found not a person of means/ sources to have purchase the property from his pocket, then the Court will definitely agree with the claim of plaintiff/actual owner.

In case titled: Muhammad Siddiqui Vs Messrs T.J. Ibrahim, reported in 2001 SCMR 1443 citation a, it is held that, “initial burden of proof is on the party who alleges that an ostensible owner is benamidar”. In citation (b) of the same judgment it is held that, “if the claimant failed to prove the source of money and if he did not appear to prove the source. Claim was rightly dismissed”.

In a case Titled S.Iqbal Ahmad vs Jawaid Iqbal reported in 2011 CLC 29 Karachi it was held that “initial burden is on plaintiff to prove with cogent material that he is ostensible owner and defendant is only his benamidar, once such evidence is produced by plaintiff, the burden shifts from plaintiff to defendant to prove his ownership”.

In case titled: Mst. Sara Bai Vs Iqbal, reported in 2006 MLD 1429 Karachi citation b, it is held that, “defendant failed to prove that at the time of purchase of the suit properties, he had sufficient funds to purchase the same. It is further held that defendant failed to prove his exclusive possession of the suit properties, suit decreed”.

In the judgment referred above it is further held that the “question whether transaction is Benami in character or not depends upon facts and circumstances of each case and no absolute formula or acid test can be laid down in such regard”.

In Dicta Titled Abdul Majeed vs Amir Muahmmad reported in 2005 SCMR 577 it was that;

1. It is the duty of the party who raises such plea to prove such plea by adducing cogent legal, relevant and unimpeachable evidence of definitiveness. The Court is not required to decide this plea on the basis of suspicions, however, strong they may be.

2. The Court is to examine as to who has supplied the funds for the purchase of properly in dispute. It is proved that purchase money from some person other than the person in whose favour the sale is made, that circumstances, prima facie, would be strong evidence for the Benami nature of the Transaction.

3. The character of a transaction is to be ascertained by determining the intention of the parties at the relevant time which are to be gathered from all the surrounding circumstances i.e. the relationship of parties, the motives underlying the transactions and any other subsequent conduct.

4. The possession of the property and custody of title deed.

One thing is also noteworthy that civil cases are always adjudicated on the basis of preponderance of evidence.

TEST/CRITERION FOR BENAMI TRANSACTION

In the cases of benami transaction it is seen, who actually paid for property and who received benefits of usufruct is a criterion for benami transaction and also actual possession is most important in this regard. A benami transaction is a transaction in which the true owner never intends such property to be vested in ostensible owner (Apparent owner/not real owner).

It is a transaction which consists of two transactions. One is agreement, express or implied, between the true owner and the ostensible owner, in which the true owner agrees to purchase property in the name of ostensible owner/benamidar for his own benefit, the other is transaction between the ostensible owner and the purchaser.

EVIDENCE BEYOND PLEADINGS

As like other civil cases, evidence beyond pleadings is not considerable. In case titled: Wasi ud Din Vs Fakhira Akhter, reported in 2011 SCMR 1550, it is held that, “plaintiff attempted to show that some property belonging to their family was sold and proceeds thereof together with gold and silver belonging to their sister had been utilized for the purpose of purchasing property in question. Such pleas were neither taken in pleadings of plaintiffs nor there was any credible proof of such assertions. Bald statements could not be relied upon”.

LIMITATION FOR BENAMI SUITS

In the Limitation Act, 1908 there is no specific Provision/Article in its first schedule providing limitation for suits relating benami transaction. In case titled: Mst. Sara Bai Vs lqbal, reported in 2006 MLD 1429 Karachi citation a, it is held that, “suit for which no period of limitation is provided elsewhere in the schedule can be filed under Article 120 of the Limitation Act, 1908. within Six years when the right to sue accrue”.

In the case of Karam Hussain Khan, reported in 2013 MLD 713 Lahore citation b, it was held that, “limitation for challenging mutation as benami is six years, suit beyond period is rightly held as time-barred”.

In Mst. Sharifa Bibi case, reported in PLD 2012 Lahore 141 citation b, it is held that, “maximum six years was available to plaintiff for filing suit for benami transaction but he kept silent for more than 24 years, thus, suit was time-barred”.

In case titled: Kaleem Haider Zaidi, reported in 2006 YLR 599 Karachi, it is held that, “for benami transaction suit. Article 120 of Limitation Act, 1908 would be applicable which provided six years, suit having been filed beyond the period of limitation, was dismissed”.

Shortly speaking the suit for declaration by a real owner against the benamidar is covered by Article 120 of Limitation Act, which provides a period of 6 years from the accrual of cause of action. The cause of action will arise when the benamidar refuses to acknowledge title of the real owner.

RECKONING OF LIMITATION FOR BENAMI SUITS

In case titled: Nizam ud Din Ahmad Vs Ainud Din Ahmad, reported in PLD 2010 Karachi 148, it is held that, “right to sue accrued to real owner against benamidar, when hostile claim of ownership by benamidar/ostensible owner had come to the knowledge of real owner”.

In case titled: Chuttal Khan Chachar VS Mst. Shahida Rani, reported in 2009 CLC 324 Karachi Citation a, it is held that, “Limitation of three years was provided under Article 91 of Limitation Act, 1908, for filing of suit to cancel or set aside the instrument not otherwise provided for. Limitation was to run, when the fact entitling the plaintiff to have instrument cancelled or set aside had become known to him”.

QUESTION OF COURT-FEE IN BENAMI CASES

In a judgment reported in 1995 MLD 316, it has been held by the august Court that in a suit for declaration on the basis of Benami transaction factum of sale by itself being not disputed in controversy relating to Benami transaction. The dispute virtually remaining confined to determining the normal and real owner of property provision of Section 7(iv-a) Court Fees Act was not attracted. The plaintiff would be at liberty to state in “terms of Section 7(iv)(c) Court Fees Act, 1870, the amount at which the values of the relief was sought”.

MIS-USE OF BENAMI TRANSACTIONS

Benami transaction is sometimes mis-used by the people involved in monetary corruption and they in order to get white their black money (acquired through corruption) purchase properties in the names of others. For the purpose that on the day of accountability (if they are asked about it) they will be able to save their skin.

It is always seen that corrupt public servants never purchase property in their names to avoid charges of corruption, so, where the plaintiff is a public servant and cannot purchase property in his own name and source of income of defendant is not known of which he can purchase property subject of benami transaction, it can be easily determine that this is a case of benami transaction and that the public servant is the real owner.

Sometimes it is seen that the people enter into a benami transaction with dishonest motive in order to cheat their creditors, when they demand for repayment of their money, they are in position to say that they have no means to repay the loan.

Why does the real purchaser of property for the purchase of property, instead of getting the sale deed executed in his own favour, gets the same executed in the name of a person, whether that person be his child or wife or friend? In normal, circumstance he should get, the sale-deed executed in his own favour. When he gets the sale-deed executed in favour of another person there must be some reasons for doing so. There may be variety of reasons. But the obvious one are that either there is legal disability on his part to purchase the property or he finds a way out to invest his black money in another's name or he wants to avoid the burden of taxes, in the shape of income-tax, wealth tax, or property tax. In all these eventualities infringement of law is involved and the real purchaser derives some monetary benefit out of benami transaction. It is after a lapse of some time he seeks to get the property transferred in his own name. Normally fraud vitiates even the most solemn proceedings but, ironically, in the case of benami transaction, our legal systems feeds the fraud by lending help to the real owner in getting the property restored to him, which he himself at one time, had got transferred in the name of another person.

NEGATIVE AFFECTS OF BENAMI TRANSACTION:

Having regard to the nature of Benami transaction, its negative affects on society are too numerous to justify its retention in our legal system. Hereunder are detailed a few of them to give an idea of it:

(1) It avoids taxes in the shape of income-tax, wealth tax, property tax and land revenue.

(2) It motivates bribery and corruption by facilitating absorption of corrupt money in the Benami transactions.

(3) It encourages commission of fraud on innocent purchasers from Benamidars, having no knowledge of Benami Character of sale in favour of vendors.

(4) It supports the claver husbands to deceive innocent wives. Firstly a husband in order to win favour of his wife gets a property transferred in her name but when the passion of husband subsides or a dispute arises between the two, he turns round to reclaim the property on the plea of benami.

(5) It is a hurdle in the way of planning by deceiving the planners to believe the benamidars to be real owners of the property.

(6) It breeds bribery and corruption among the politicians and public servants in helping them to shield their illegal wealth in Benami transactions.

RISE IN NUMBER OF BENAMI CASES IN COURTS:

This act of purchasing property in the names of others is a risky job. It is often seen that in the cases of benami transactions, the benamidar (who is owner of the purchased property in title deeds) changes his intention and he starts claiming the ownership of property. Because apparently benamidar is shown as owner of the purchased property in the title documents so it is easy for him to claim ownership and to exploit the situation and to black-mail the actual owner/purchaser. This give rise to the number of benami cases in the Courts of law. Because in this eventuality the actual owner/purchaser is constrained to knock at the door of law declaring the transaction as benami and declaring himself to be the actual owner of the property subject of the controversy.

PRE-CAUTIONS IN THE CASES OF BENAMI TRANSACTIONS:

As the act of entering into benami transaction is a risky one for the real owner/purchaser, therefore, he must keep in mind the below mentioned five pre-cautions:

(i) He must have kept the original title deed/registered deed/mutation of the purchased property within his possession.

(ii) He must have kept the actual occupation of the property subject of benami in his hands,

(iii) Before entering into benami transaction, he must have reason/justification/motive, that in case of any controversy he can satisfy the conscience of the judge, that why he was compelled and made the sale transaction in the shape of benami.

(iv) He must have a proof in respect of source of income utilized on the benami transaction.