‘Property in wife’s name not benami if valid funds used’

NEW DELHI: The Delhi high court has said that a property purchased by the husband in the name of his wife from known sources can’t be treated as benami property. Setting aside a trial court order that treated one such property as benami, HC said it was to be proved during trial whether the property was purchased through known or unknown sources of income and it couldn’t be automatically dubbed benami if the husband bought it in his wife’s name.

Justice Valmiki J Mehta noted that “in the present case, the existence of the properties in the name of the wife will fall as an exception to the prohibited benami transaction as it is legally permissible for a person to purchase an immovable property in the name of his spouse from his known sources”.

Citing a particular clause of Section 2 of the amended Prohibition of Benami Property Transactions Act, 1988, the court noted that such a property purchased would “not be a benami property but the property will be of the de-jure owner (the husband) and not of the de facto owner (in whose name title deeds exist), which is the wife in the present case”.

The court was hearing a challenge filed by the husband, Manoj, against the decision of the trial court to outrightly reject his suit where he had sought injunctions and certain other relief with respect to two properties in Moti Nagar and Gurgaon. Appearing on his behalf, advocate Sufian Siddiqui argued that despite the new benami law providing an exception, the trial court went ahead and discarded the plea treating these properties as benami even though these were purchased by his client from his own sources.

HC termed the trial court’s decision “unfortunate”, adding that it had “committed a grave and fundamental error in rejecting the suit” by relying upon repealed clauses of the Benami Transactions (Prohibition) Act where as when the judgment was passed in 2016 the Act applicable remained the Prohibition of Benami Property Transactions Act, 1988.

Siddiqui welcomed the verdict, pointing out that “this would restore some confience against the least favoured spouses as, in this case, the properties were purchased by the husband from known sources and didn’t fall under definition of benami property”.