Published on 05th June 2025
Authored By: Vedha Hiren Daga
Symbiosis law school, Nagpur
ABSTRACT
This article assesses the complex and significant problems of benami transactions in India by examines the historical development of the issues, examining the current issues and bearing in mind some potential policies significance. In the past the public mastered the art of tax evasion and started undertaking property transactions in the real estate was held under false pretences and black and unaccounted money to avoid and save tax money. The benami transactions (prohibition) act was passed to response and curb the benami property transaction in the real estate market in India but failed to do so. It reinforces the importance of effective implementation, ongoing vigilance, and public cooperation in curbing and reducing these illegal and illicit practices and maintaining the integrity of property transaction in the present scenario. The government is trying to curb and reduce benami transactions is assessed in this article. The authors think that by examining and assessing these subjects one can understand and comprehend and analyse the need to curb and stop benami property transactions in India in order to safeguard the integrity of India’s financial system.
INTRODUCTION
There was a significant increase in illegal activities like tax evasion and money laundering in India in the late 18th and the early 19th centuries, the main reason being there was no proper legal frame work governing illegal activities involving the fraudulent transfer of property without an actual owner. The real estate market in India was into a dark phase after the colonial rule when India had just got Independence where there were several properties that were being controlled and governed or also owned by people other that the ones who paid for them. To curb and reduce such practices of holding and owning the property in the name of a third party or otherwise well knows as ‘BENAMIDAR’. later these transactions of property who did not have a true owner or had an owner in the form of third party were coined as Benami Transactions by the Indian Government. In 1988 the Indian Government bought into force the Benami Transactions (prohibition) Act in India to curb and eradicate the transfer and transactions of benami property in India.
No law is perfect, if the laws would be perfect many of the crime rates and civil wrongs would have drastically reduced. So even after the Benami laws were enforced into the society the public began to take advantage of the system for their own benefits, they figured out legal gaps, weak enforcement tactic due to which they began to find loopholes in the complex legal transactions. Moreover, this problem began to become a major issue in India by the lack of effective supervision and severe penalties, which promoted a culture full of financial irregularities and opacity. The legislature began to take steady steps and began to amend the laws to keep it updated extensively revised in recent years to address these issues. These amendments and revised plans introduced harsher laws and heavier fines. In the recent internet era, the government heavily utilise the technology to monitor and enforce protocols. In addition, task groups and specialised agencies were formed to handle matters relating to benami transactions like the Financial Intelligence Unit (FIU-IND), 24 benami Prohibition Units(BPUs), Adjudicating Authority and many such agencies that together work to enforce the laws against benami transactions. To achieve fair and equitable system, public awareness campaigns were launched to educate people about the unfair trades that took place with them and the rights that the law has established for the people that face such injustice. The intention of such initiatives is to promote transparency accountability and integrity in property transactions. The Benami Transactions (Prohibition) Act, 1988 prohibits certain types of financial transactions. It prohibits all the benami transactions and empowers the government to recover property held benami without compensation and considerations for the contract of transfer of property. The act came into force on 5 September 1988. The 1988 Act made any benami transaction a punishable offense, along with any suit, claim, or action to enforce any right in respect of any property held benami against the person in whose name the property was held. “It defines a benami transaction as any transaction in which property is transferred to one person for consideration paid by another person”. Despite these efforts, benami transactions continue to pose challenges. However, the amendments to the Benami Transactions Act and the coordinated efforts of the authorities demonstrate a commitment to addressing this issue. Effective implementation, ongoing vigilance, and public cooperation are essential to ensure the success of these initiatives and to preserve the integrity of property transactions in India
ANALYSIS
Benami transactions are those type of transactions where the property is transferred to one person but the considerations to which is paid by the third party. The Benami Transaction (prohibition) Act 1988 recognises four types of Benami transactions they are, Quintessential Benami Transaction, Transactions under a fictitious name, Transaction with denial of ownership knowledge and Transaction with untraceable or fictitious consideration provider. In the land mark case of the Supreme court, Bhim Singh & Anr Vs Kan Singh (1980), it was held that the burden of proof that whether the said transaction if Benami transaction or not lies on the person who claims it to be Benami property. The case also discussed different aspects of the Benami transactions like, If the consideration is paid by a third party who is not intending to own a land but merely doing it for another person then the purchase so made is assumed to be for the benefit of the third party who actually paid for it under the law. Here the intention of the third party involved is more important and the intention is decided on current basis and the relationship between the parties.
A HISTRORICAL ANALYSIS OF BENAMI TRANSACTIONS AND CONNECTION TO THE TRANSFER OF PROPERTY ACT, 1882
Benami transaction dates back to pre-independence era of Indian history, presently they are governed by Benami Transactions (prohibition) Act, 1988. Benami transactions often rotate and involve the legal requirements and obligations that are mentioned and framed under The Transfer of property Act, 1882. In the landmark case Gopeekrist Gosain Vs Gungapersuad Gosain, the privy council held that the practice of Benami Transaction of property in India was a customary practice in India and warranted Judicial recognition unless the special laws provided otherwise. Benami transactions are any property whether in the nature of movable or immovable, tangible or intangible that has no name or the owner’s name is not disclosed or not used in the transfer of the particular property but the name of another person or a fictitious person is used instead for the property transaction. These transactions involve transaction of property where the property is in possession of one person but the purchase or maintenance consideration is paid by a third party altogether. The Transfer of Property Act (TPA) 1982, plays a very important role in the area of Benami Transactions in India. The Act controls and regulates the transfer of property from person to person and institutes the legal framework and legislation for different types of transactions of property which also includes sales, leases, mortgages, and gift. The Transfer of Property Act (TPA), 1982 governs and regulates with legal property transfers. The concept of Benami transactions in India dates back to the ancient times. The Benami transactions were used to evade taxes, avoid creditors, conceal the true ownership of assets, avoid legal restrictions. The Benami transactions of property still continue to happen in India despite strict legal framework and restrictions that was brought in by The Benami Transactions (prohibition) Act, 1988, which intern the benami transactions are creating challenges for the tax authorities and other law enforcements agencies to track down tax evasions in India and also track down the benami transactions in India. 1915 recognised Benami Transaction of property was a very common practice in India and had adversely become a part of Indian Law. Later however the Indian Government declared that the Benami transitions of property was prohibited through The Benami Transactions (prohibition) Act 1988.
BENAMI TRANSACTIONS OF PROPERTY AFFECTING THE INTEGRITY OF INDIA
The Benami transactions of property which is immovable in nature is prohibited by law in India under The Benami Transactions (prohibition) Act, 1988. Benami transactions affect the integrity of India in many ways as it allows the illegal and unauthorised possession and selling of unauthorised property or unregistered property which is immovable in mature. People involving in these transactions of property which is immovable in nature for many various reasons, to save themselves from legal complication and tax raids. People involve in Benami transactions to evade tax; this is done by transferring the property to a third party who has no intention of actual ownership. The consequences of this act are the notable difference in revenue loss for the government and it results in undermining the tax slabs and affects public finances and tax. Money laundering is another illegal activity that is done by people who indulge in benami transactions of property that are immovable in nature. The Benami transactions of immovable property help open doors for laundering of illicit and unaccounted funds by allowing the offenders hide the origin of unaccounted money and money derived from illegal source and activities pertaining the illegal transfer of property that is immovable in nature. Individuals holding assets and immovable property in the name of a third party can make the source of their unaccounted and illicit wealth and money into legitimate and accounted economy unclear and not illegally acquired money. Corruption and accumulation of black money is punishable under law in India, benami transactions are often used in corruption and accumulation of black money. There are a lot of individuals who are defaulters in such activities of benami transactions of immovable property, they try to hide and conceal the revenue of corruption, bribery and other illegal activities that are barred by law. These activities depilate the integrity of financial system and increases the culture of corruption in India. Distortion of property markets in India, benami transactions deform property markets by falsely disturbing the economy in the property markets by artificially inflating or deflating the prices. By engaging in these illicit and illegal activities the defaulters can manipulate the working of the market and creates instability and reducing market transparency.
INCOME GROUPS IN INDIA THAT RELY ON INFORMAL OWNERSHIP AGREEMENTS
Benami transactions of immovable property that involves buying and selling of property which is immovable in nature in the name of a third party is an area of concern in India and affects the richer sections of the society but also the low-income sections of the society. The benami transactions of immovable property agreements leads to tearing down of assets of defaulters and individuals who belong to the low-income sections of the society. Informal property arrangements in lower income sections of India mostly lack legal protection and recognition. This leads to the residents being evicted from that place and get displaced into other home and lack shelter stability. Benami transaction of property immovable in nature aggravate the insecurity by allowing the offenders and defaulters to manipulate the property ownership without the consent against whom it’s going to be affected, this leads to forceful evictions and loss of homes. Benami transactions also contribute to the accumulation of wealth and resources in the hands of the richer section of the society, aggravating socioeconomic disparities and cycles of poverty and also increases a sense of vulnerability among the poor section of the society. These communities face difficulties to afford housing, land and other basic services and needs that further increases marginalisation and hampers their ability to eradicate and come out of poverty. Lack of transparency and the harsh reality of the illegal activities in the market of property of immovable in nature is of concerning nature, this leads to a never-ending cycle of development as lack of basic needs and economic down fall of the poor sections of the society. The Benami transactions of property of immovable in nature has had a very noteworthy impact on India’s money laundering activities based on temporary and time bound assets. These deals affect in determining the property rights to increasing people from being homeless and increase in corruption which in terns hinder the economic development of the country.
WAYS AND POSSIBILITIES TO CURB AND ERADICATE BENAMI OWNERSHIP OF IMMOVABLLE PROPERTY IN INDIA
Despite the Indian government putting a ban on the benami transactions of property of immovable in nature still persists in India due to lack of awareness and other illegal reasons that the defaulters and citizens what to resort to save themselves from taxes. Limiting and reducing Benami Properties in India requires a multi-dimensional and prolonged approach that addresses all forms of benami transactions of immovable property. A number of measures can be taken to solve this challenging problem and protect the interests of property owners and specifically those from the low-income communities in India. Enhancing the existing laws and regulations to make benami transactions less accessible for people and involve stricter and grave penalties that can be imposed on the defaulters and offenders and there can be a sense of clarity in defining benami transaction of property immovable in nature. The government can increase resources and the capacity for law enforcement agencies to investigate the benami transactions of immovable property cases, this may also include the training and collaborating with other agencies. Promoting transparency enhances transparency in the transfers related to property which is also governed by two major laws, The transfer of Property Act and The Benami transactions (prohibition) Act. Increase in transparency can allow the individuals from involving in Benami transactions of immovable property. Empowering communities that have low-income levels about the legality of benami transactions of immovable property and help them to ascertain their rights to land. It is very important to raise public awareness and inform the public the consequences of the benami transactions of immovable property.
CONCLUSION
This article provides a larger scope of assessment of potential ways to curb and reduce benami transactions of immovable property in India. It also shows and explains the various impacts and consequences of benami transactions of immovable property on socially weaker and stronger communities in India and helps the readers to understand the situation and the bridge between the same. The possible ways to curb the Benami transactions of immovable property is tighten the legal framework, spread awareness and help people understand the consequences of the same. The Benami transactions of immovable property also affects the integrity of India and intern reduces and disturbs the economic balance of the economy of India, to curb this the relevant authorities have identified the benami transaction of immovable property and have to take stricter actions on the defaulter for doing such illegal acts which also affects the public policies in India. The Transfer of property Act 1882 and the Benami Transaction (prohibition) act 1982 are inter connected with each other, both of the said act govern the transfer of properties in India. From the above article we can tell that the Transfer of Property Act 1882 governs the transfer of immovable legal property with necessary conditions that have to be fulfilled and while The Benami Transaction (prohibition) Act 1982 governs the transfer of Benami Transaction of immovable property with rules and regulations governing them. The article also throws light on the impacts on the socio lower sections of the society and how the benami transaction of immovable property has affected them, which intern has made legal complications harder for them who cannot afford to hir lawyers. This article gives all possible solution for the problems discussed above regarding Benami Transactions of immovable property.
