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Prohibition of Benami Transactions Act – Applies Prospectively – SC in Ganpati Dealcom Private Limited
History:
Prior to introduction of Benami Transactions (Prohibition) Act in 1988, the benami transactions were recognised as a specie of legal transactions pertaining to immovable properties. The nature of a benami transaction has been described by the Judicial Committee of Privy Council in Gurnarayan v Shoelal Singh[1], thus –
The system of acquiring and holding property and even of carrying on business in names other than those of the real owners, usually called the benami system, is and has been a common practice in the country ….. The rule applicable to benami transactions was stated with considerable distinctness in a judgment of this Board delivered by Sir George Farewell. Referring to a benami dealing, their Lordships say: It is quite objectionable and has a curious resemblance to the doctrine of our English law that the trust of the legal estate results to the man who pays the purchase money, and this again follows the analogy of the common law that where a feoffment is made without consideration the use results to feoffer.