Benami Transactions: Section 82, Its Repeal and the Benami Act

For most of its history, Indian law accepted the practice of benami: buying property in another person's name while remaining its real owner. Section 82 of the Trusts Act gave the real owner a remedy by treating the name-lender as holding for him. In 1988 Parliament reversed course: the Benami Transactions (Prohibition) Act, 1988 prohibited benami transactions and repealed Section 82. A major amendment in 2016 turned the law into a comprehensive regime of confiscation and penalties. This note traces the change and its effect on trust law.

1. Benami Before 1988

"Benami" literally means "without a name". In a benami transaction, A pays for property but has it conveyed to B (the benamidar), intending that A shall remain the real owner. Motives ranged from the innocent (family custom, convenience, providing security for a spouse) to the improper (defeating creditors, evading taxes or land ceilings). Courts long recognised the real owner's title.

Section 82 (repealed)

Section 82 provided that where property was transferred to one person for a consideration paid or provided by another, and it appeared that the other did not intend to pay or provide it for the benefit of the transferee, the transferee held the property for the person who paid. It was the statutory basis of the resulting trust in favour of the real owner.

📖 Jaydayal Poddar v Bibi Hazra (Supreme Court, 1974)

Held: The burden of proving that a transaction is benami lies on the person who asserts it. The court identified the usual tests: (1) the source of the purchase money, the most important; (2) the nature and possession of the property after purchase; (3) the motive for giving the transaction a benami colour; (4) the relationship between the parties; (5) the custody of the title deeds; and (6) the parties' conduct in dealing with the property.

2. The 1988 Act

Concerned that benami holdings were widely used to hide wealth and evade laws, Parliament enacted the Benami Transactions (Prohibition) Act, 1988. Its key provisions:

Prohibition: no person shall enter into a benami transaction.
Bar on recovery: no suit, claim or action to enforce any right in property held benami may be brought by the person claiming to be the real owner against the benamidar, and no such defence is allowed.
Repeal: Section 7 of the Act repealed Sections 81, 82 and 94 of the Indian Trusts Act, along with related provisions of the Code of Civil Procedure and the Income-tax Act.
Exceptions: purchases in the name of a wife or unmarried daughter were presumed to be for her benefit unless proved otherwise, and property held by a coparcener for the family or by a trustee or other fiduciary for a beneficiary was excluded.

📖 R. Rajagopal Reddy v Padmini Chandrasekharan (Supreme Court, 1995)

Held: The bar on suits and defences in the 1988 Act is not retrospective. It does not affect suits or proceedings already pending when the Act came into force, though it applies to claims made afterwards, even about earlier transactions.

3. The 2016 Amendment

The 1988 Act remained largely unenforced because rules were never framed. The Benami Transactions (Prohibition) Amendment Act, 2016, in force from 1 November 2016, renamed it the Prohibition of Benami Property Transactions Act, 1988 and created a full enforcement regime: a detailed definition of benami transaction, Initiating Officers, an Adjudicating Authority and an Appellate Tribunal, confiscation of benami property to the Central Government, and criminal penalties.

Excluded from "benami transaction"	Comment
Property held by a karta or member of a Hindu undivided family for the family, from known sources	Joint family holdings are not benami
Property held by a person in a fiduciary capacity for another, including a trustee, executor, partner, company director, depository or depository participant	Genuine trusts are outside the benami law
Property in the name of a spouse or child, paid for from known sources	Family provision is protected
Property in the joint names of the individual and a brother, sister, lineal ascendant or descendant, paid from known sources	Family joint holdings are protected

The exclusion of fiduciary holdings is central for trust law: a properly constituted trust, in which the trustee holds for identified beneficiaries, is not a benami transaction. A sham trust used to hide the real owner, however, may be.

Retrospectivity

In Union of India v Ganpati Dealcom (2022) the Supreme Court held that the 2016 amendment's penal and confiscation provisions could not apply to transactions before 1 November 2016, and that certain provisions of the original Act were unconstitutional. In October 2024, on a review petition, the Court recalled that judgment, holding that the constitutional validity of provisions not challenged by the parties should not have been decided. The questions are therefore open to fresh determination.

4. Effect on Trust Law

No resulting trust for the benami purchaser: the Section 82 route is closed, and the benami law bars the real owner's claim.
Express trusts unaffected: trusts declared under Sections 5 and 6, and other fiduciary holdings, are excluded from the definition of benami transaction.
Section 96 reinforced: Chapter IX cannot create an obligation in evasion of any law, which now includes the benami law.
Evidence: where a person claims that property in another's name is held on trust for him, he must bring the arrangement within an exception, such as a genuine express trust or fiduciary holding, or his claim will be barred.

⚠ Key point

Section 82 treated a person in whose name property was bought with another's money as holding it for the payer, the statutory basis of benami; the tests for benami were stated in Jaydayal Poddar (1974), the source of money being the most important. The Benami Transactions (Prohibition) Act, 1988 prohibited benami transactions, barred the real owner's suits and defences (not retrospectively, Rajagopal Reddy, 1995) and repealed Sections 81, 82 and 94. The 2016 amendment (in force 1 November 2016) added confiscation and penalties and expressly excluded property held by a trustee or other fiduciary; the Supreme Court's Ganpati Dealcom ruling (2022) was recalled in 2024.

5. Related Topics and Provisions

Resulting trusts (Topic 33): Sections 81 and 83 to 85
Obligations in the nature of trusts (Topic 32): Section 96 and the repeal of Section 94
Judgments on benami and constructive trusts (Topic 58)
Lawful purpose (Topic 7): trusts that defeat a law