Supreme Court : Civil and Criminal Actions Barred in Benami Property Disputes
In a recent landmark ruling concerning Benami transactions, the Supreme Court of India has clarified that individuals claiming ownership of Benami properties cannot initiate civil suits or criminal proceedings against those in whose name the properties are held.
Key Highlights:
Civil Suit Prohibition: The Court emphasized that under Sections 4(1) and 4(2) of the Benami Transactions (Prohibition) Act, 1988, individuals investing in Benami properties are barred from filing civil suits to recover such properties from the legal owners.
Criminal Proceedings Invalidated: Similarly, the Supreme Court ruled that criminal proceedings cannot be pursued on the same grounds that are prohibited in civil suits under the Benami Act. This decision was applied to a case involving allegations under Sections 406 and 420 of the Indian Penal Code (IPC).
Legal Framework: The Benami Transactions Act defines Benami transactions as those where property is held by one person for the benefit of another, who has provided the consideration for it. Sections 4(1) and 4(2) explicitly restrict the right of the person who paid the consideration to claim the property.
Case Background:
In the case at hand, the respondent, working in the government sector, invested in a property held in the name of the appellant. A dispute arose regarding the division of profits, leading the respondent to file a criminal complaint against the appellant under IPC Sections 406 and 420.
Court’s Observations:
Justice Sandeep Mehta, authoring the judgment, reiterated that initiating both civil and criminal actions based on the same facts of a Benami transaction constitutes an abuse of legal process. The Court, therefore, quashed the criminal proceedings against the appellant.
Conclusion:
Supreme Court reinforces the strict provisions of the Benami Transactions Act, maintaining a clear distinction against multiple legal actions arising from Benami transactions.
Case Title: C. Subbiah @ Kadambur Jayaraj and Others v. The Superintendent of Police and Others
For a detailed review of the judgment, click here.
