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No set formula to adjudge benami property ownership

When a property is transferred to a person for a consideration paid or provided by another person, then such a transaction is known as benami transaction

I had bought a flat, and added my wife as a joint holder, but she did not make any payment towards the purchase. In my Will, can I bequeath 100% of the property, or since my wife is the joint holder, only 50%?

—Shirsath R.

When a property is transferred to a person for a consideration paid or provided by another person, then such a transaction is known as benami transaction and the person in whose name the property is recorded, becomes the real owner and the person who actually paid the consideration is prohibited from bringing any kind of action to recover such property.

Moreover, he is also punished under the Benami Transactions (Prohibition) Act, 1988 (“Act"). However, under section 3(2) of the Act, an exception has been carved out for any transaction where the property is purchased by any person in the name of his wife or unmarried daughter and if property is not for their benefit.

Therefore, if the husband is able to prove that the property he purchased in his wife’s name is for his sole benefit, then he can claim the benami property completely as his own and can dispose of the whole of it as per his wish.

One may refer to the following judgements in this regard: Nand Kishore Mehra v. Sushila Mehra (AIR 1995 SC 2145) and Nand Kishore Mehra v. Smt. Sushila Mehra (80 (1999) DLT 670).

In such a situation, everything depends on facts and circumstances and no absolute formula or acid test can be used to determine the real ownership.

The husband will need to prove: (1) Source of purchase money;

(2) Nature and possession of the property, after the purchase;

(3) Motive, if any, for giving the transaction a benami colour;

(4) Position of parties and relationship, if any, between claimant and alleged benamidar;

(5) Custody of title deeds after the sale, and,

(6) Conduct of parties concerned in dealing with the property after the sale, including whether the husband accounted for the property in his own tax returns and not that of his wife.

Thus, if you are able to prove these facts, it could be said that the real ownership lies with you and you have the right to bequeath the entire property in your Will, and yes, you can write in your Will that your immovable property is being bequeathed as per your wishes and that your wife was a joint holder only for the purposes of convenience.

But if your Will is challenged, these facts will have to be proved.

One can be guided by the principles laid down in the following judgement: Jayadayal Poddar (Deceased) through LRs and Anr. v. Mst. Bibi Hazra [1974] 2 SCR 90.

The fact that the wife did not have any independent source of income to purchase the property will also be relevant to prove the real ownership of the property. With respect to movable assets, this may not be the case. The manner in which you will be able to deal with the movable assets will depend on several factors.

(1) the nature of the assets (shares, monies lying in bank accounts/fixed deposits, mutual fund units), among others,

(2) if shares, whether the same are in physical or dematerialised form,

(3) the depository with which the demat accounts are held,

(4) instructions in respect of the bank accounts and,

(5) whether nominees have been appointed. It is advisable to seek specific counsel depending on the nature of the movable assets and the manner in which they are held.

Queries and views at mintmoney@livemint.com

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