Source Of Purchase Money By Itself Not Sufficient To Determine Whether A Transaction Is Benami: Delhi High Court
The suit was also held barred under Order IX Rule 9 CPC as earlier suit on same cause of action had been dismissed for non-prosecution.
Justice Neena Bansal Krishna, Delhi High Court
The Delhi High Court observed that the source of the purchase money, though relevant, is not by itself sufficient to determine whether a transaction is benami.
The Court upheld a Trial Court's finding that the statutory exception under the Benami Transactions (Prohibition) Act, 1988 for property purchased by an individual in the name of his spouse does not extend to a transaction where the property is also jointly registered in the name of a mother-in-law, dismissing a husband's 16-year-old challenge to a 2007 sale deed executed in the names of his wife and mother-in-law.
A Single Judge Bench of Justice Neena Bansal Krishna first noted the trial court’s observation, “It was observed that while the Benami law provided an exception in respect of property purchased in the name of the wife or unmarried daughter, no such exception was available where the property was also purchased in the name of the mother-in-law. Section 82 of the Indian Trusts Act was also observed to have been repealed by the Benami Transaction (Prohibition) Act, 1988. The Suit was consequently held to be patently barred under Section 4 of the Benami Transaction (Prohibition) Act, 1988, and it was held that the Appellant could not seek a Declaration of ownership in respect of the suit property.”.
Accordingly, it held, “…the source of the purchase money, though relevant, is not by itself sufficient to determine whether a transaction is benami. The intention of the parties has to be gathered from the surrounding circumstances, including the motive for the transaction, possession of the property, relationship between the parties, custody of the title documents. and subsequent conduct. 106. The learned District Judge, therefore, rightly held that the challenge of the Appellant to the Sale Deed of 2007 is barred by the Benami Transaction (Prohibition) Act”.
Advocate S.S. Panwar appeared for the appellant while none appeared for the respondents.
The appellant's case was that he had purchased a series of properties over the course of his marriage using his own funds, but registered them in the name of his wife, and eventually in the joint names of his wife and mother-in-law, out of love and affection and for tax or loan-related convenience.
The suit property in question, purchased in 2007 for Rs. 27 lakh, was registered in the names of the wife and mother-in-law, the latter having secured a portion of the financing through a government-employee loan facility. Matrimonial discord developed from 2008 onward, multiple criminal and matrimonial proceedings ensued between the parties, and the wife and mother-in-law eventually sold the property to third parties in 2018.
The appellant filed the present suit in 2023 seeking a declaration that the 2007 sale deed was benami, that the 2018 sale deed was void, and for possession and injunction.
The Trial Court had rejected the plaint under Order VII Rule 11 CPC, holding it barred under the Benami Act (since the exception for property purchased in a spouse's name did not extend to property also registered in a mother-in-law's name), barred by limitation (the appellant having had knowledge of the 2007 transaction from its inception, with limitation expiring by 2012-13), and barred by the effect of an earlier suit on the same cause of action having been dismissed in default.
On appeal, the appellant argued that the source and intent behind the 2007 purchase required a trial and could not be decided on demurrer, that the 2018 sale deed gave rise to an independent and fresh cause of action running from his date of knowledge in 2022, and that the claim against his wife alone, as distinct from his mother-in-law, should survive to the extent of her half share, relying on the Supreme Court's ruling in Kum Geetha D/o Late Krishna vs. Nanjundaswamy.
Applying the Supreme Court's ruling in Ganesh Prasad v. Rajeshwar Prasad & Ors. (Civil Appeal arising out of SLP (C) No.28377/2018), the Court rejected each contention and held that the identity of a cause of action must be examined in substance rather than form, and since the challenge to the 2018 sale deed necessarily depended on first invalidating the 2007 sale deed, the very subject of the earlier, defaulted suit, the present suit was founded on the same cause of action and was barred under Order IX Rule 9 CPC.
The appeal was dismissed, with the Court holding that once the challenge to the 2007 sale deed failed, the wife and mother-in-law had an absolute right to deal with the property, and the subsequent 2018 sale to third parties could not be challenged by the appellant.
Cause Title: Surya Deep Garg @ Suraj Garg v. Neha Garg & Ors. (Neutral Citation: 2026:DHC:8248)
Appearances:
Appellant: S.S. Panwar, Nividita Panwar, Nawal Kishor, Praveen Singh and Durgesh Nandini, Advocates.
Respondents: None.