Holding

Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 does not apply to suits, claims or actions initiated before its commencement, and the earlier decision in Mithilesh Kumari v. Prem Behari Khare is overruled.

Summary

The Supreme Court examined whether Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 could be applied to suits, claims or actions that were filed before the Act came into force, seeking to enforce rights over benami‑held property. The petitioners argued that the proceedings, initiated under the law then in force, should not be affected by a statute that was not expressly retrospective, while the respondents contended that the provision should apply to all pending matters. The Court held that Section 4(1) cannot be applied to suits filed prior to its commencement and overruled the earlier Division Bench decision in Mithilesh Kumari v. Prem Behari Khare. It further clarified that Section 4(2) has a limited, non‑retrospective operation and does not invalidate defences already allowed before the Act’s effective date. The judgment emphasized the presumption against retrospective operation of statutes affecting vested rights and applied the General Clauses Act to interpret the effect of repealing Section 82 of the Indian Trusts Act. Consequently, the matters were ordered to be placed before a Division Bench for disposal on merits.

Issues considered

Whether Section 4(1) of the Benami Transactions (Prohibition) Act, 1988 applies to suits, claims or actions filed before the Act came into force.
Whether Section 4(2) of the same Act has retrospective effect on defences already permitted in pending suits.
Whether the earlier Division Bench decision in Mithilesh Kumari v. Prem Behari Khare should be upheld or overruled.
How the repeal of Section 82 of the Indian Trusts Act by the Benami Act affects pending proceedings under the repealed provision.

Legislation cited

Benami Transactions (Prohibition) Act, 1988s. 3, s. 4(1), s. 4(2), s. 7
Code of Civil Procedure, 1908s. 66
General Clauses Act, 1897s. 6(b), s. 6(d), s. 6(e)
Income Tax Act, 1961s. 281-A
Indian Trusts Act, 1882s. 82

Subjects

Benami transactionRetrospective legislationSection 4(1) applicabilityPending suitStatutory interpretationGeneral Clauses ActIndian Trusts ActOverruled precedent

Judgment

R. RAJAGOPAL REDDY (DEAD) BY LRS. AND ORS. A
v.
PADMINI CHANDRASEKHARAN (DEAD) BY LRS.

JANUARY 31, 1995
B
[KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.]

Benami Transactions (Prohibition) Act, 1988-Sections 4(1) and
4(2)-Effect of Section 4( 1) on pending proceedings-Claim to prope1ty on
account of it being held benami-Proceedings not finally disposed of when
sec. 4( 1) came into operation-Whether Section 4(1) can be applied to such c
proceedings--Held, No.

Various suits were filed years back before coming into operation of
Section 4(1) of the Benami Transactions (Prohibition) Act, 1988, to enforce
right in property held benami against person in whose name such property D
l was held or any other person by or on behalf of persons claiming to be
real owner thereof. These proceedings were pending either at the first
appeal stage or Second Appeal stage or in revision before the High Court
or in civil appeals before this court when Section 4(1) came into operation.
The question raised was whether Section 4(1) of the Act could be applied .
to such pending proceedings. The Division Bench of this Court in Mithilesh E
Kumari v. Prem Behari Khare, [1989] 1 SCR 621, had taken an affirmative
view. The correctness of that view came up for consideration before
another Bench of this court. Ultimately the matters were placed for final
hearing before a three Judge Bench.
F
The appellants submitted that litigations were already filed by the
parties prior to the coming into force of the Act arid the relevant provisions
thereof and therefore, they had to be governed by the then existing law
which held the field at the time of intiation of these proceedings; that there
is nothing in the Act to indicate that any of the provisions of the Act
including Section 4(1) had any retrospective effect; that even the Division G
Bench of this Court in Mithilesh Kuma1i's case had taken the view that
Section 3(1) of the Act is prospective in operation; that it would be
inconsistent to hold that though the Act is not retrospective it would apply
to all pending proceedings at whatever stage they might be and such
proceedings would incur dismissal u/s 4(1); that there was a substantive H
715
716 SUPREME COURT REPORTS (1995] 1 S.C.R.

A ~ight in the plaintiff under the existing laws under which consistently such
benami transactions were recognized and could be enforced by courts of
law and that this substantive right was sought to be taken away by Section
4(1) and unle~s there was anything to suggest that it is retrospective in
operation, it could not be treated to be retrospective.

B The respondents/defendants submitted that even though the Act may
be perspective,° at least to the extent it is roping in all past transactions of
benami purchases of properties and when rights arising therefrom are
sought to be put to an end by Section 4(1) which covers any or every
property held benami, there was no reason why that Section could not
C apply to such proceedings at any stage till they got finally decided by the
highest court and that if there is any change in law by which any pending
litigation becomes incompetent, such change in law can be applied !o such
pending proceedings at whatever stage they might be pending before higher
Courts.

D Disposing of the matter, this Court

HELD : 1.1 Section 4(1) of the Benami Transactions (Prohibition)
Act, 1988, cannot be applied to suit, claim or action to enforce any right
in property held benami against person in whose name such property is
E held or any other person, if such proceeding is initiated by or on behalf of
a person claiming to be real owner thereof, prior to the coming into force
of Section 4(1) of the Act. [720-H, 721-A]

Mithilesh Kumari v. Prem Behari Khare, [1989] 1 SCR 621 (DB),
overruled.
F
1.2. The preamble of the Act itself states that it is an Act to prohibit
benami transactions and the right to recover property held benami, for
matters connected therewith or incidental thereto. Thus it was enacted to
efface the then existing rights of the real owners of properties held by
others benami. Such an act was not given any retrospective effect by the
G legislature. Sub-section (1) of Section 4 states that no suit, claim or action
to enforce any right in respect of any property held benami against the .
person in whose name the property is held or against any other shall lie
by or on behalf of a person claiming to be the real owner of such property.
As per Section 4(1) no such suit shall thenceforth lie to recover the
H possession of the property held benami by the defendant. Plaintiff's right
R.R. REDDYv. P. CHANDRASEKHARAN 717

to that effect is sought to be taken away and any suit to enforce such a A
right after coming into operation of Section 4(1) that is 19th May, 1988,
shall not lie. The legislature in its wisdom has nowhere provided in Section
4(1) that no such suit, claim or action pending on the date when Section
4 came into force shall not be proceeded with and shall stand abated. On
the contrary, clear legislative intention is seen from the words "no such
B
claim, suit or action shall lie", meaning thereby no such suit, claim or
action shall be permitted to be filed or entertained or admitted to the
portals of any Court for seeking such a relief after coming into force of
Se~tion 4(1). [728-C-Fl

The word 'lie' in connection with the suit, claim or action is not C
defined by the Act. If one goes by the dictionary meaning it would mean
that such suit, claim or action to get any property declared benami will
not be admitted on behalf of such plaintiff or applicant against the
concerned defendant in whose name the property is held on and from the
date on which this prohibition against entertaining of such sµits comes
into force. [728-H, 729-A] D
The legislature in its wisdom has not expressly made Section 4
retrospective. Then to imply by necessary implication that Section 4 would
have retrospective effect and would cover pending litigation filed prior to
coming into force of the Section would amount to taking a view which run E
counter to the legislative scheme and intent projected by various provisions
of the Act. On the express language of Section 4(1) any right inhering in the
real owner in respect of any property held benami would get effaced once
Section 4(1) operated, even if such transaction had been entered into prior
-4.- to the coming into operation of Section 4(1), and hence-after Section 4(1)
applied no suit can lie in respect to such a past benami transaction. To that · F
extent the Section may be retroactive. [729-C-D]

Mithilesh Kumari v. Prem Bihari Khare, [1989] 1 SCR 621, approved.

1.3. Section 4(2) provided that if a suit is filed by a plaintiff who
claims to be the owner of the property under the document in his favour G
and holds the property in his name, once Section 4(2) applies, no defence
will be permitted or allowed in any such suit, claim or action by or on
behalf of a person claiming to be the real owner of such property held
benami. The disallowing of such a defence which earlier was available,
itself suggests that a new liability or restriction is imposed by Section 4(2) H
718 SUPREME COURT REPORTS [1995] 1 S.C.R.

A on a pre-existing right of the defendant. Such a provision also cannot be
said to be retrospective or retroactive by necessary implication. Section
4(2) does not expressly seek to apply retrospectively. So far as such a suit
which is covered by the sweep of Section 4(2) is concerned, the prohibition
of Section 4(1) cannot apply to it as it is not a claim or action filed by the
B plaintiff to enforce right in respect of any property held benami. On the
contrary, it is a suit, claim or action flowing from the sale deed or title
deed in the name of the plaintiff. Even though such a. suit might have been
filed prior to 19-5-1938, if before the stage of filing of defence by the real
owner is reached, Section 4(2) becomes operative from 19th May, 1988,
then such a defence, as laid down by Section 4(2) will not be allowed to
C such a defendent. However, that would not mean that Section 4(1) and 4(2)
only on that score can be treated to be impliedly retrospective so as to
cover all the pending litigations in connection with enforcement of such
rights of real owners who are parties to benami transactions entered into
prior to the coming into operation of the Act and specially Section 4
D thereof. It is also pertin~nt to note that Section 4(2) enjoins that no such
defence 'shall be allowed' in any claim, suit or action by or on behalf of
person claiming to be the real owner of such property. That is to say no
i
such defence shall be allowed for the first time after coming into operation
of Section 4(2). If such a defence is already allowed in a pending suit prior
to the coming into operation of Section 4(2), enabling an issue to be raised
E on such a defence, then the Court is bound to decide the issue arising from
such an~lready allowed defence as at the relevant time when such defence
was allowed Section 4(2) was out of picture. [729-H, 730-A-F]
I
i
1.4. In the operation of Sections 4(1) and (2), no discrimination can +
F be said to have been made amongst different real owners of property. In
fact, those cases in which suits are filed by real owners or defences are
allowed prior to coming into operation of Section 4(2), would form a
seprate class as compared to those cases where a stage for filing such suits
or defences has still n!'t reached by the time Section 4(1) and (2) start
operating. Consequently, latter type of cases would form a distinct category
G of cases. There is no question of discrimination being meted out while
dealing with these two classes of cases differently. A real owner who has -;-. '
already been allowed defence on that ground prior to coming into opera-
tion of Section 4(2) cannot be said to have been given a better treatment
as compared to the real owner who has still to take up such a defence and
H in the meantime he is hit by the prohibition of Section 4(2). Equally there
R.R. REDDYv. P. CHANDRASEKHARAN 719

ca~not be any comparison between a real owner who has filed such suit A
earlier and one who does not file such suit till Section 4(1) comes into
operation. All real owners who stake their claims regarding benami trans-
actions after Section 4(1) and (2) came into operation are given uniform
treatment by these provisions, whether they come as plaintiffs or as
defendants. [731-H, 732-A-C]
B
1.5. A conjoint rel\ding of Section 82 of the Indian Trusts Act and
Section 6(b), (d) and (e) of the General Clauses Act clearly enjoins that if
suits are pending wherein the plaintiff have put forward claims under the
then existing Section 82 of the Indian Trusts Act, such proceedings are to
be continued by assuming that the repealing of Section 82 has not been C
effected in connection with such pending proceedings. [733-E]

2. Where a statutory provision which is riot expressly made
retrospective by the legislature seeks to affect vested rights and cor-
responding obligation of parties, such provision cannot be said to have
any retrospective effect by necessary implication. [734-A] D

Maxwell on Interpretation of Statutes, 12th Edn. (1969), referred to.

In Re Athlumney [1898] 2 QB 551; Garikapati v. N. Subbiah Chaud-
hary, AIR (1957) SC 540, relied on.
E
There is nothing in the Act to show that Section 4{1) has to apply
retrospectively to all pending proceedings wherein such a right is sought
to be exercised by the plaintiff or such a defence has already got allowed
by the concerned defendant. [734-G]
F
3. The Act cannot be treated to be declaratory in nature. Declaratory
enactment declares and clarifies the real intention of the legislature in
connection with an earlier existing transaction or enactment, it does not
create new rights or obligations. On the express language of Section 3, the
Act cannot be said to be declaratory but in substance it is prohibitory in G
nature and seeks to destroy the rights of the real owner qua properties
held benami and in this connection it has taken away the right of the real
owner both for filing a suit or for taking such a defence in a suit by
benamidar. Such an Act which prohibits benami transactions and destroys
rights flowing from such transactions as existing earlier is really not a
declaratory enactment. [734-H, 735-A-B] H
720 SUPREME COURT REPORTS (1995) 1 S.C.R.

A Mithilesh Kwnwi v. Prem Behwi Khare, [1989] 1 SCR 621, overruled. ,.V<...'

G.P. Singh, Plinciples of Statut01y Intel]Hetation 5th Ed. 1992,
referred to.

B Section 4 or for the matter the Act as a whole is not a .piece of
declaratory or curative legislation. It creates substantive rights in favour
of benamidars and destroys subtantive rights of real owners who are
parties to such transactions and for whom new liabiltties are created by
the Act. [736-E]

C 4. The words 'no suit shall lie' as found in Section 4(1) and 'no
defence based on rights in respect of property shall be allowed' as found
in Section 4(2) have limited scope and operation and consequently this
consideration also cannot have any effect on the conclusion which can be
reached in this case. Future defences of real owners against benamidars
D holders have been nullified as are covered by the sweep of Section 4(2) and
not others. Section 4(2) will have a limited operation even in cases of
pending suits after Section 4(2) came into force if such defences are not
akeady allowed earlier. [736-F, 737-B]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5653 of
E 1990 etc. etc.

From the Judgment and Order dated 7.11.89 of the Madras High
Court in O.Side A. No. 27 of 1980.

P. Chidambaram, M.L. Verma, V. Balachandran, V.
F Ramasubramaniam, T. Harish Kumar, K.K. Mani, Raju Ramachandran, V.
Krishnamurthy, E.M.S. Anam, M.K.D. Namboodri, P.K. Pillai, R.C. Misra,
R.D. Upadhyay, Ms. V~jay Lakshmi Menon, S.B. Upadhyay, B. Mohan,
Vineet Kumar, P. Mahale, Ms. Kiran Suri, Mr. A Mariarputham, Mr. R.
Mohan, Joseph Pokkatt, R.A. Perumal and Kamal Kumar Bhatia for the
G appearing parties.

The Judgment of the Court was delivered by

MAJMUDAR, J. In this group of matters a common question arises
for our consideration. It is to the following effect 'whether Section
/
4(1) of
H the Benamj Transactions (Prohibition) Act, 1988 (hereinafter referred to
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR,J.) 721

'Act') can be applied to suit, claim or action to enforce any right in A
property held benami against person in whose name such property is held
or any other person, if such proceeding is initiated by or on behalf of a
person claiming to be real owner thereof, prior to the coming into force of
Section 4(1) of the Act'. Section 4 with its relevant sub-sections reads as
under :-
B
"Prohibition of the right to recover property held benami - (1) No
suit, claim or action to enforce any right in respect of arry property
held benami against the person in whose name the property is held
or against any other person shall lie by or on behalf oi a person
claiming to be the real owner of such property. c
(2) No defence based on any right in respect of any property held
benami, whether against the person in whose name the property
is held or against any other person, shall be allowed in any suit,
claim or action by or on behalf of a person claiming be the real
owner of such property. D

(3) Nothing in this section shall apply, -

(a) Where the person in whose name the property is held
is a coparcener in a Hindu undivided family and the
E
property is held for the benefit of the coparceners in
the family; or

(b) where the person in whose name the property is held
is a trustee or or other person standing in a fiduciary
capacity, and the property is held for the benefit of F
another person for whom he is a trustee or towards
_whom he stands in such capacity."

In fact the question is answered in the affirmative by a Division
Bench of this Court in Mithilesh Kum01i & Anr. v. Prem Beha1i Khare, G
[1989] 1 S.C.R. 621. In that case two learned Judges of this Court constitut-
ing the Division Bench have taken the aforesaid affirmative view. The
correctness of that view came up for consideration before another Division
Bench of this Court. That Division Bench by its order dated 10th March,
1992 dir~cted that these matters be placed for hearing at the bottom of the
miscellaneous list for final hearing on 22nd March, 1992 before a three H
722 SUPREME COURT REPORTS (1995] 1 S.C.R.

A: Judge_ Bench. Ultimately this group of matters came to be placed for _final
hearing before this Bench.

We have heard learned counsel for the respective parties on this
question. Learned advocates were aggreeable that though the order of the
Division Bench dated 10th March, 1992 has resulted in placing these
B matters before three-Judge Bench for final hearing, we may after answering
the question canvassed before us, sent back the matters to the Bench of
two learned Judges who can dispose of the same on merits in accordance
with law, in the light of answer given by us on the aforesaid question.

C In order to appreciate the nature of the controversy posed for our
cons~deration, we may note a few relevant facts leading to these proceed-
ings. In most of the proceedings various suits were filed years back before
coming into operation of Section 4(1) of the Act. These proceedings were
pending either at the First Appeal stage or Second Appeal stage or in
D revision before the High Court or in civil appeals before this Court when
Section 4(1) came into operation. The question is whether these pending
proceedings at various stages in the hierarchy can get encompassed by the
sweep. of Section 4(1) and such suits would be liable to be dismissed as
laid down by that section.

E Learned counsel appearing for the concerned plaintiffs submitted
before us that Sections 3, 5 and 8 of the Act came into force on 5th
September, 1988 when the Act received the President's assent and the
remaining Sections ~ere deemed to have come into force on 19th May,
1988 and that prior to the coming into force of the Act and the relevant
~ p provisions thereof, litigations were already filed by the parties and they had
to be governed by the then existing law which held the field at the time of
initiation of these proceedings and that there is nothing in the .Act to
indicate that any of the provisions of the Act including Section 4(1) has
any retrospective effect. They further contended that even the Division
Bench of this Court in Mithilesh Kumari's case (supra) has taken the view
G that Section 3(1) of the Act is prospective in operation. Under these
circumstances, they submitted that it would be inconsistent to hold that .
though the Act is not retrospective it would apply to all pending proceed-
ings at whatever stage they might be and such proceedings would incur
dismissal under Section 4(1). They submitted that there was a substantive
H right in the plaintiff under the existing laws which had sanction of more
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.) 723

than a century, under which. consistently such benami transactions were A
recognised and could be enforced by courts of law. That this substantive
right is sought to be taken away by Section 4(1) and unless there is anything
to suggest that it is retrospective in operation, it could not be treated to be
retrospective.

Learned counsel appearing for the respondents/defendants on the B
other hand submitted that even though the Act may not be retrospective;
at least to the extent it is roping in all past transactions CJ_f benami purchases
of properties and when rights arising therefrom are sought to be put to an
end by Section 4(1) which covers any or every property held benami, there
is no reason why the said Section cannot apply to such proceedings at any C
stage till they get finally decided by the highest court in the hierarchy. If
there is any change in law by which any pending litigation becomes incom-
petent, such change in law can be applied to such pending proceedings at
whatever stage they might be pending before higher Courts. In short they
submitted that the decision rendered by Saikia J. in Mithlesh Kumali's case
(supra) lays down correct law and requires no reconsideration. D
Having given our anxious consideration to these rival contentions, we
have reached the conclusion that the question has to be answered in the
negative and it must be held that the decision of the Division Bench taking
a contrary view does not lay down correct law. E
The reasons are these. Under various legal provisions holding the
field, prior to the coming into operation of this Act, benami transactions
~ere a recognised specie of legal transactions pertaining to immovable
properties. Under the Indian Trusts Act, 1882 almost 113 years back the
then legislature enacting the law laid down in Section 82 as under :- F
"Transfer to one for consideration paid by another - where
property is transferred to one person for a considerption paid or
provided by another person, and it appears that sucli other person
did not intend to pay or provide such consideration;for tlie benefit
of the transferee, the transferee must hold the property. for the
G
benefit of the person paying or providing the consideration.

Nothing in this section shall be deemed to affect the Code of
Civil Procedure, Section 317, or the Act No. XI of 1859 (to improve
the law relating to sales of land for arrears of revenue in the Lower H
724 SUPREME COURT REPORTS [1995] 1 S.C.R.

A Provinces under the Bengal Presidency), Section 36."

Therefore, it was a legal right of the plaintiff to contend in those days
·that even though the transfer of the property had been effected in the name
· of. &'fondant benamidar for the plaintiff from whom the consideration had
B moved the plaintiff was the real owner and, therefore, the defodant was
bound to restore such property to the real owner. If the benamidar took
up a defiant attitude then the law provided a substantive right to the
plaintiff to come to the Court for getting appropriate declaration and relief
of possession on that ground. Various Courts in India over a century used
to entertain such suits and such suits on proof of relevant facts used to be
C decreed. The legislature, however, in its wisdom considered the question
of enacting an appropriate legislation for prohibiting such benami transac-
tions. For that purpose earlier Benami Transactions (Prohibition of the
Right to Recover Property) Ordinance, 1988, was promulgated by the
President and it was followed by the Act, the different sections of which
D came into force on the ttspective dates as mentioned hereinabove: It may
also be kept in view that these exercises were undertaken in the light of
India Law Commission's 57th Report on benami transation. This Report
w~s submitted on 7th August, 1973 by the Law Commission after studying
bdrj.ami system as operating in India and England. The Law Commission
also examined implications of the provisions of the Indian Trusts Act-, 1882
E and other statutory modifications of the benami law as contained in the
Code of Civil Procedure, the Transfer of Property Act, the Indian Penal
Code and the Income Tax Act. In that Report, the Law Commission
suggested retrospective effect to be accorded to the proposed legislation.
15 years, however, passed by and the Parliament did not take any steps in
p this connection. In the meantime, many more suits concerning benami
transactions not only saw the light of day but also got successfully disposed
of. Some of them, however, were pending in first appeals or second appeals
or revisions. Then, as noted earlier, on 19th May, 1988 the President of
India promulgated the Ordinance to prohibit the right to recover property
· held benami and for matters connected therewith and incidental thereto
G based on the suggestion of the Law Commission of India. Thereafter the
Law Commission was requested to takr up the question of benami trans-
actions for detailed examination and to give its considered views as early
as possible so that a Bill to replace the Ordinance could be drafted on the
basis of its recommendations and got passed by the Parliament. Indian Law
H Commission by its 130th Report on August 14, 1988 recommencfed passing
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.] 725

of appropriate legislation' and accordingly the Benami Transactions_ A
(Prohibition) Bill 1988, drafted after getting the Report, was introduced
in the Rajya Sabha on 31st August, 1988 and the Bill was passed. In para
3.18 of its Report, the Law Commission made the following recommenda-
tion in connection with the retrospective operation of the proposed legis-
lation:-
B
"3.18. Therefore viewed from either angle, the Law Commission
is of the firm opinion that the legislation replacing the ordinance
should be retroactive in operation and that no locus penitentia need
be given to the persons who had entered into benami transactions
in the past. They had notice of one and a half decades to set their C
house in order. No more indulgence is called for."

It is thereafter that the Act came to be passed by both the Houses
of Parliament and came into force as stated above. It might be appreciated
that though the Law "Commission recommended retrospective applicability
of the proposed legislation, the Parliament did not make the Act or any of D
its Sections expressly retrospective in its wisdom. A bird's eye view of the
Act clearly establishes this position. The Act being Act No. 45 of 1988 in
its preamble states that it is an act to prohibit benami transactions and the
right to recover property held benami, for matters connected therewith or
incidental thereto. Section 3 which is the heart of the Act imposes the E
required prohibition of benami transactions. It reads as under :-

"3. Prohibition of benami transactions. -

(1) No person shall enter into any benami transaction.

(2) Nothing in sub-section (1) shall apply to the purchase of F
property by any person in the name of his wife or unmarried
daughter and it shall be presumed, unless the contrary is proved,
that the said property had been purchased for the benefit of the
wife or th unmarried daughter.
G
(3) Whoever enters into any benami transaction shall be punishable
with imprisonment for a term which may extend to three years or
with fine or with both.

(4) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), an offence under this section shall be H
726 SUPREME COURT REPORTS (1995] 1 S.C.R.
I

A non-cognizable and baila~le." _,,,,,_

-
• I
A mere look at the above provisions shows ·that the prohibition under
Section 3(1) is against persons who are t~ enter into benami transactions
and it has lai~ down that no person shall enter into any benami transaction
which obviously means from the date on which this prohibition comes into
B operation i.e. with effect from September 5, 1988. That takes care of future
benarni transactions. We are not concerned with sub-section (2) but sub-
section (3) of Section 3 also throws light on. this as~ect. As see11 above, it
states that whoever enters into any benami transaction shall be punishable
with iniprisonment for a term which may extend to' tbree years or\ with fine
C or with both. Therefore, the provision creates a ne\vI offence of entering
into such benami transactions. It is made non-cognii_able and bailable as
laid down under sub-section (4). It is obvious that when a statutory
provision creates new liability and new offence, it would naturally have
prospective operation and would cover only those offences which take
D place after section 3(1) comes into operation. In fact Saikia J. speaking for
the Court in Mithilesh Kumari's case (supra) ha,s in ter~s observed at page
635 of the report that Section 3 obviously cannot have retrospective opera-
tion. We respectfully concur with this part of the learned Judge's view. The
real problem centres round the effect of Section 4(1) on pending proceed-
ings wherein clal.m to any property on account of it being held benami by
E other side is on the anvil and such proceeding had not been finally disposed
of by the time Section 4(1) came into operation, namely, on 19th May, 1988.
Saikia J. speaking for the Division Bench in the case of Mithilesh Kumari
(supra) gave the fo~owing reasons for taking the view that though Section
3 is prospective and though Section 4(1) is also not expressly made
retrospective, by the legislature, by necessary implication, it appears to be
R retrospective and would apply to all pending proceedings wherein right to
property allegedly held benami is in dispute between parties and that
Section 4(1) will apply at whatever stage the litigation might be pending in
the hierarcy of the proceedings :-

G (1) Section 4 clearly provides that no suit, claim or action to enforce any

H
right in respect of any property held benami against the person in whose
name the property is held or against any other person shall lie by or on
behalf of a person claiming to be real owner of such property. This
naturally relates to past transaction as well. The exp_ression 'any property
held benanii' is not limited to. any particular time, date or duration. Once
-
R.R. REDDYv. P. CHANDRASEKHARAN [MAJMUDAR, J.) 727

the property is found.to have been held benami, no su.it, claim, or actjon A
to enforce any right in respect thereof shall lie.

(2) Similarly sub-sectiqn (2) of Section 4 nullifies the defences based on
any right in respect of a'ny,..groP,erty held benami \\lhether against the person
in whose name the property is held or against any other person in any suit,
claim or action by or on behalf of a person claiming to be the real owner B
of such property. It means that once a property is found to have been held
benami the real owner is deprived of such a defence against the person in
'-~ whose name the property is held or any other person.' In other words, in
its sweep Section 4(2) engulfs past benami transactions_also.

(3) When an Act is . declaratory in nature, the pr~surnption against
c
retrospectivity is not applicable. A statute declaring th~ benami transac-
tions to be unenforceable belongs to this type. The presumption against
taking away vested right will not apply in this case in as much as under law
it is the benamidar in whose name the property stands, and law only
enabled the real oW:ner to recover the property from him which right has D
l now been ceased by the Act. In one sense there was a right to recover or
resist in the real owner against the benamidar. Ubi jus ibi remidium. Where
the remedy is barred, the right is rendered unenforceable.

(4) When the law nullifies the defences available to the real owners in E
recovering the benami property from the benamidar, the law must apply
irrespective of the time of the benami transactions. The expression "shall
lie" under Section 4(1) and "shall be allowed" in Section 4(2) are prospec-
tive and shall apply to present (future stages) and future suits, claims or
......_ action only.
F
(5) The word "suits" would include appeals and further appeals as appeals
are in continuation of the suits. This is an aspect of procedural law and,
therefore, when procedure is changed for deciding any such proceedings
between the parties the provisior,s of such procedureal law can be applied
to such pending proceedings by necessary implication.
G
(6) Repelling the contention that rights of the parties to a suit would be
determined on the basis of rights available to them on the date of filing of
the suit and distinguishing the judgment of this Court in Nand Kishore
Ma1wah v. Samundri Devi, [1987] 4 S.C.C. 382, it was observed that the
aforesaid case was for eviction where the rights of the parties on the date H
728 SUPREME COURT REPORTS [1995J 1 S.C.R.

A of suit were material unlike in this case where subsequent legislation has
nullified the defences of benarni holders.

Before we deal with these six considerations which weighed with the
Division Bench for taking the view that Section 4 will apply retrospectively
in the sense that it will get telescoped into all pending proceedings,
B howsoever earlier they might have been filed, if they were pending at
different stages in the hierarchy of the proceedings even upLO this Court,
when Section 4 came into operation, it would be apposite to recapitulate
the salient feature of the Act. As seen earlier, the preamble of the Act itself
states that it is an act to prohibit benami transactions and the right to
C recover property held benami, for matters connected therewith or inciden-
tal thereto. Thus it was enacted to efface the then existing rights of the real
owners of properties held by others benami. Such an act was not given any
retrospective effect by the legislature. Even when we come to Section 4, it
is easy to visualise that sub-section (1) of Section 4 states that no suit, claim
D or action to enforce any right in respect of any property held benami
against the person in whose name the property is held or against any other
shall lie by or on behalf of a person claiming to be the real owner of such
property. As per Section 4(1) no such suit shall thenceforth lie to recover
the possession of the property held benami by the defendant. Plaintiffs
right to that effect is sought to be taken away and any suit to enforce such
E a right after coming into operation of Section 4(1) that is 19th May, 1988,
shall not lie. The legislature in its wisdom has nowhere provided in Section
4(1) that no such suit, claim or action pending on the date when Section 4
came into force shall not be proceeded with and shall stand abated. On
the contrary, clear legislative intention is seen from the words "no such
claim, suit or action shall lie", meaning thereby no such suit, claim or action
F shall be permitted to be filed or entertained or admitted to the portals of
any Court for seeking such a relief after coming into_ force of Section 4(1).
In Collins English Dic~ioitary, 1979 Edition as reprinted subsequently, the
word 'lie' has been defined in connection with suits and proceedings. At
page 848 of the Dictionary while dealing with topic No. 9 under the
.G definition of term 'lie' it is stated as under :-

"For an action, claim appeal ect. to subsist; be maintainable or
admissible."

H The word 'lie' in connection with the suit, claim or action is not defined by
R.R. REDDYv. P. CHANDRASEKHARAN (MATMUDAR,J.] 729

the Act. If we go by the aforesaid dictionary meaning it would mean that A
such suit, claim or action to get any property declared benami will not be
admitted on behalf of such plaintiff or appiicant against the concerned
defendant in whose name the property is hdd on and from the date on
which this prohibition against entertaining of such suits comes into force.
With respect, the view taken by that Section 4(1) would apply even to such
pending suits which were already filed and entertained prior to the date
B
when the Section came into force and which has the effect of destroying
the then existing right of plaintiff in connection with the suit property
cannot be sustained in the face of the clear language of Section 4(1). It has
to be visulised that the legislature in its wisdom has not expressly made
Section 4 retrospective. Then to imply by necessary implication that Section c
4 would have retrospective effect and would cover pending litigations filed
prior to coming into force of the Section would amount to taking a view
which would run counter to the legislative scheme and intent projected by
various provisions of the Act to which we have referred earlier. It is,
however, true as held by the Division Bench that on the express language D
of Section 4(1) any right inhering in the real owner in respect of any
property held benami would get effaced once Section 4(1) operated, even
if such transaction had been entered into prior to the coming into operation
of Section 4(1), and hence-after Section 4(1) applied no suit can lie in
respect to such a past benami transaction. To that extent the Section may
be retro-active. To highlight this aspect we may take an illustration. If a E
benami transaction has taken place in 1980 and suit is filed in June 1988
by the plaintiff claiming that he is the real owner of the property and
defendant is merely a benamidar and the consideyation has flown from him
then such a suit would not lie on account of the provisions of Section 4(1).
Bar against filing, entertaining and admission of such suits would have
F
become operative by June, 1988 and to that extent Section 4(1) would take
in its sweep even past benami transactions which are sought to be litigated
upon after coming into force of the prohibitory provision of Section 4(1);
but that is the only effect of the retroactivity of Section 4(1) and nothing
more than that. From the conclusion that Section 4(1) shall apply even to
past benami transactions to the aforesaid extent, the next step taken by the G
Division Bench that therefore, the then existing rights got destroyed and
even though suits by real owners were filed prior to coming into operation
of Section 4(1) they would not survive, does not logically follow.

So far as Section 4(2) is COJ!Cerned, all that is provided is that if a H
730 SUPREME COURT REPORTS (1995] 1 S.C.R.

A suit is filed by a plaintiff who claims in his favour and holds the property
in his name, once Section 4(2) applies, no defence will be permitted or
allowed in any such suit, claim or action by or on behalf of a person
claiming to be the real owner of such property held benami. The disallow-
ing of such a defence which earlier was available, itself, suggests that a new
B liability or restriction is imposed by Section 4(2) on a pre- existing right of
the defendant. Such a provision also cannot be said to be retrospecti~e or
retroactive by necessary implication. It is also pertinent to note that Section
4(2) does not expressly seek to apply retrospectively. So far as such a suit
which is covered by the sweep of Section 4(2) is concerned, the prohibition
of Section 4(1) cannot apply to it as it is not a claim or action filed by the
C plaintiff to enforce right in respect of any property held benami. On the
contrary, it is a suit, claim or action flowing from th~ sale deed or title deed
in the name of the plaintiff. Even though such a suit have been filed prior
to 19.5.1988, if before the stage of filing of defence by the real owner is
reached, Section 4(2) becomes operative from 19th May, 1988, then such
D a defence, as laid down by Section 4(2) will not be allowed to such a
defendant. However, that would not mean that Section 4(1) and 4(2) only
on that score can be treated. to be impliedly retrospective so as to cdver
all the pending litigations in connection with enforcement of such rights of
real owners who are parties to benami transactions entered into prior to
E the coming into operation of the Act and specially Section\4 thereof. It is
also pertinent to note that Section 4(2) enjoins that no such defence 'shall
be allowed' in any claim, suit or action by or on behalf of a person claiming
to be the real owner of such property. That is to say no such idefence shall
be allowed for the first time after coming into operation of Section 4(2). If
such a defence is already allowed in a pending suit prior to the coming into
-F operation of Section 4(2), enabling an issue to be raised on such a defence,
then the Court is bound to decide the issue arising from such an already
allowed defence as at the relevant time when such defence was allowed
Section 4(2) was out of picture. Section 4(2) nowhere uses the words ·"No
defence based on any right in respeft of any property held benami whether
G against the person in whose name the property is held or against any other
. person, shall be allowed to be raised or continued to be raiseq in any suit."
With respect, it was .wrongly assumed by the Division Bench that such an
-
already allowed defence in a pending suit would also get destroyed after
coming into operation of Section 4(2). We may at this stage refer to one
H difficulty projected by learned advocate for the respondents in his written
R.R. REDDYv. P. CHANDRASEKHARAN [MATMUDAR, J.] 731

•---..... submissions, on t~e applicability of Section 4(2). These submissions read
as under :-
A

"Section 4(1) plates a bar on a plaintiff pleading 'benami', while
Section 4(2) places a bar on a defendant pleading 'benami', after !
the comi~g into force of the Act. In this context, it would be '
.B
anam9lous'if the bar in Section 4 is not applicable if\a suit pleading
'bcnam~ already filed P'io' to the prescribed date, and it is
treated applicable only to suit which he filed thereafter. It would
........- have the ffect of classifying the so-called 'real' owners into two
classes - those who stand in the position of plaintiffs and those
who stand 1n the position of defendants. This may be clarified by c
means of an i4ustration. A and B are 'real' owners who have both
purchased properties in say 1970, in the names of C and D
respectively who are ostensible owners viz. benamidars. A files a
suit in February 1988 i.e. before the coming into force of the Act
against C, for a declaration of his title saying that C is actually
D
l holding it as his benamidar. According to the petitioner's argu-
ment, such a plea would be open to A even after coming into force
of the Act, since the suit has already been laid. On the other hand,
if D files a suit against B at the same for declaration and injunction,
claiming himself to be the owner but B's opportunity to file a
written statement comes in say November 1988 when the Act has E
already come into f~rce, he in his written statement cannot plead
that D is a benami~ar and that he, B is the real owner. Thus A
and B, both 'real' owners, would stand on a different footing,
....... depending upon whether they would stand in the position of
plaintiff or defendant. It is respectfully submitted that such a
F
differential treatment would not be rational or logical."

According to us this difficulty is inbuilt in Section 4(2) and does not
provide the rationale to hold that this Section applies retrospectively. The
legislature itself thought it fit to do so and there is no challenge to the vires
on the ground of violation of Article 14 of the Con#titution. It'is not open G
-+
to us to re-write the section also. Even otherwise, 4i' the operation of
· Section 4(1) and (2), no discrimination can be said to have been made
amongst different real owners of property, as tried to be pointed out in the
written objectiop.s. In fact, those cases in which suits are filed by real
owners or defences are allowed prior to coming into operation of Section H
~. \.
732 SUPREME COURT REPORTS [1995) 1 S.C.R.
t
A 4(2), would form a separate class as compared to those cases where a stage
for filing such suits or defences has still not reached by the time Section __,,,,,._
4(1) and (2) starts operating. Consequently, latter type of cases would form
a distinct category of cases. There is no question of discrimination being
meted out while dealing with these two classes of cases differently: A real
owner who has already been allowed defence on that ground prior to
B coming into operation of Section 4(2) cannot be said to have been given a
better treatment as compared to the real owner who has still to take up
such a defence and in the meantime he is hit by the prohibition of Sectien
4(2). Equally there cannot be any comparison between a real o\vner who r ,.
has filed such suit earlier and one who does not file such suit till Section
c 4(1) comes int.o operation. All real owners who stake their claims regarding
benami transactions after Section 4(1) and (2) came into operation are
given uniform treatment by these provisions, whether they come as plain-
tiffs or as defendants. Consequently, the grievances raised in this connec-
tion cannot be sustained.
>--
D At this stage, we may also usefully refer to Section 7(1) of the Act ,l r
~
which lays down that Section~ 81, 82 and 94 of the Indian Trusts Act, 1882
(2 of 1882), Section 66 of the Code of Civil Procedure, 1908 (5 of 1908),
and Section 281-A of the Income Tax Act 19pl (43 of 1961), are thereby
repealed. We have already seen Section 82 of the Indian Trusts Act which
E gave almost for a period of a century or more a legal right to the real owner
to claim against the purported owner that tll:i:: consideration paid was by
the real owner and the transferee held the property for the benefitof the
· pe~son paying consideration ~or supporting the ~ransactfon.\It is this r~ght
which got destroyed by Section 7 of the Act With effect from 19tli May,
,i...
1988. If any suits or proceedings were pending prior to that date,-4iivolQ.ng
,_
F 'Section 82 of the Indian Trusts Act, what is to happen to kuch suits is not
answered by Section 4(1) of the Act or by any other provisions of the Act.
We have, therefore, to turn the General Clauses Act, 1897 ~or finding out
an answer. Section 6 of the General Clauses Act lays downee y;here this
Act, or any (Central Act) or Regµlation made after the commencement of
this Act, repeals any enactment hitherto made or hereafter to be made,
G then, unless a different intention appears the repeal shall not - ,
-
(a) revive anything not in force or existmg at the time.at which the repeal
takes effect; or

H (~) affect the previous operation of any enactment so repealed or' anything
R.R. REDDYv. P. CHANDRASEKHARAN (MAJMUDAR, J.] 733

duly done or suffered thereunder; or A
(c) affect any right, privilege, obligation or liability acquired, accrued or
incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any
offence committed against any enactment so repealed; or B

(e) affect any investigation, legal proceeding or remedy in respoect of any
"---f such right, privilege, obligation, liability, penalty, forfeiture or punishment
as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, C
continued or enforced, and any such penalty, forfeiture or punishment may
be imposed as if the repealing Act or Regulation had not been passed". It
becomes, therefore, obvious that the Act by Section 7 has effected a repeal
of Section 82 of the Indian Trusts Act and while repealing this provision
no different intention appears from the Act to affect any right, privilege or D
liability acquired under Section 82 by either side or any pending proceed-
ings regarding such obligation or liability. Therefore, such pending_
proceedings will have to be continued or enforced as if the repealing Act
had not been passed. A conjoint reading of Section 82 of the Indian Trusts
Act and Section 6(b), (d) and (e) of the General Clauses Act clearly
enjoins that if suits are pending wherein the plaintiffs have put forward E
claims under the then existing Section 82 of the Indian Trusts Act such
proceedings are to be continued by assuming that the repealing of Section
82 of the Indian Trusts Act has not been effected in connection with such
pending proceedings. Unfortunately, this aspect was not pressed for con-
sideration before the Division Bench and, therefore, the view taken by the F
Division Bench is likely ~() result in an incongruous situation. If a view is
to be taken that a pending suit wherein plaintiff might have contended that
the real consideration flowed from him and the defendant was not the real
owner and held the property benami as per Section 82 of the Indian Trusts
Act, 1882, has to be continued by ignoring the present Act, it will be
inconsistent with the conclusion reached by the Division Bench. As per the G
Division Bench, such suits must necessarily be dismissed at whatever stage
they might be pending between the parties. Therefore, interpretation of
Section 4(1) by the Division Bench would.directly conflict with the legisla-
tive scheme emanating from Section 82 of the Indian Trusts Act, 1882 read.
with Section 6 of the General Clauses Act 4iscussed above. Even otherWise/ · H
734 SUPREME COURT REPORTS
.[1995] 1 S.C.R.
)'

A it is now well-settled that where a statutory provision which is not expressly
--~
made retrospective by the legislature seeks to affect vested rights and
corresponding obligations of parties, such provision cannot be said to have
any retrospective effect by necessary implication. In Maxwell on the
Interpretation of Statutes, 12th Editi0n (1969), the learnecl author has
made the following observations based on various decisions of different
B Court, specially in Re Athlumney (1898) 2 Q.B. 551, at pp. 551, 552 :-

"Perhaps no rule of construction is more firmly established than
--r-"
this - that a retrospective operation is not to be given to a statute
so as to impair an existing right or obligation, otherwise than as
c regards matters of procedure, unless that effect cannot be avoided
without doing violence to the language of the enactment. If the
enactment is expressed in language which is fairly capable of either
interpretation, it ought to be construed as prospective only." The
rule has, infact, two aspects, for it "involves another and subor- ~·
dinate rule, to the effect that a statute is not to be construed so as
.~
D to have a greater retrospective operation than its language renders ..).(
necessary."

In the case of Galikapati v. N. Subbiah Choudhary, A.l.R. (1957) SC
540, P. 553 in para 25 of the report Chief Justice S.R. Das speaking for this
E Court has made the following pertinent observations in this connection;-

"The golden rule of construction is that, in the absence of
/,
anything in the enactment to show that it is to have retrospective
operation, it cannot be so construed as to have the effect of altering
the law applicable to a claim in litigation at the time when the Act
F was passed."

We have already discussed earlier that there is nothing in the Act to
show that Section 4(1) and 4(2) have to apply retrospectively to all pending
proceedings wherein such a right is sought to be exercised by the plaintiff
or such u defence has already "- got allowed to the concerned defendant. As
G ....._.
a result of the aforesaid discussion, it must be held that reasons nos. 1 and
2 which weighed with the Division Bench are not well sustained.

As regards, reason no. 3, we are of the considered view that the Act
cannot be treated to be declaratory in nature. Declaratory enactment
H declares and clarifies the real intention of the legislature in ~onnection with
R.R. REDDYv. P. CHANDRASEKHARAN [MATMUDAR, J.] 735

an earlier existing transaction or enactment, it does not create new rights A
or obligations. On the express language of Section 3, the Act cannot be
said to be declaratory but in substance it is prohibitory in nature and seeks
to destroy the rights of the real owner qua properties held benami and in
this connection it has taken away the right of the real owner both for filing
a suit or for taking such a defence in a suit by benamidar. Such an Act
B
which prohibits ·benami transactions and destroys rights flowing from such
transactions as existing earlier is really not a declaratory. enactment. With
respect, we disagree with the line of reasoning which commanded to the
Divison Bench. In this connection, we may refer to the following obser-
vatons in 'Principles of Statutory Interpretation', 5th Edition 1992, by Shri
G.P. Singh, at page 315 under the caption 'Declaratory statutes' :- c
"The presumption against retrospective operation is not ap-
plicable to declaratory statutes. As states in CRAIES and ap-
proved by the Supreme Court : "For modern purposes a
declaratory Act may be defined as an Act to remove doubts D
existing as to the common law, or the meaning or effect of any
statute. Such Acts are usually held to be retrospective. The usual .
reason for passing a declaratory Act is to set aside what Parliament
deems to have been a judicial error whether in the statement of
the common law or in the interpretation of statutes. Usually, if not
invariably, such an Act contains a preamble, and also the word E
'declared' as well as the word enacted". But the use of the words
'it is declared' is not conclusive that the Act is declaratory for these
words may, at times be used to intoduce new rules of law and the
Act in the latter case will only be amending the law and will not
necessarily be retrospective. In determining, therefore, the nature p
of the Act, regard must be had to the substance rather than to the
form. If a new Act is to explain an earlier Act, it would be without
object unless construed retrospective. An explanatory Act is
generally passed to supply an obvious omission or to clear up
doubts as to the meaning of th<?-previous Act. It is well settled that
if a statute is curative or merely declaratory of the previous law G
retrospective operation is generally intended. The language 'shall
be deemed always to have meant' is _declaratory, and is in plain
- terms retrospective. In the absence of clear words indicating that
the amending Act is declaratory, it would not be so construed when
the pre-amended provision was clear and unambiguous. An H
736 SUPREME COURT REPORTS ""'
[1995] 1 S.C.R.

A a~ending Act may be purely clarificatory to clear a meaning of a_
provision of the principal Act which was already implicit. A
clarificatory amendment of this nature will have retrospective
effect and, therefore, if the principal Act was existing law when
the constitution came into force the amending Act also will be part
of the existing law.
B
In Mithilesh Kumari v. Prem Bihari Khare, Section 4 of the .
Benami Transactions (Prohibition) Act, 1988 was, it is submitted,
wrongly held to be an Act declaratory in nature for it was not
passed to clear any doubt existing as to the common law ~r the
C meaning or effect of any statute. The conclusion however, that
section 4 applied also to past benami transactions may be support-
able on the language used in the section."

No exception can be taken to the. aforesaid observations 6f learned
D author which in our view can cartainly be pressed in service for judging
whether the impugned section is declaratory in nature or not. Accordingly
it must be held that Section 4 or for that matter the Act as a whole is not
a piece of declaratory or curative legislation. It creates substantive; rights'\
in favour of benamidars and destroys substantive rights of real owners who
are parties to such transactions and for whom new liabilities are created
E by the Act.

Qua reason No. 4, we may refer to our discussion earlier that the
words 'no suit shall lie' as found in Section 4(1) and 'no defence based on
rights in respect of property shall be allowed' as found in Section 4(2) have
F limite·d scope and operation arid consequently this consid~ration also can-
not have any effect on the conclusion which can be reached in this case.
As to reason No. 5, it is observed that even though suit may include appeal
and further appeals in the hierarchy, at different stages of the litigation,
Section 4(1) and 4(2) cannot be made applicable to these subsequent.
stages as already seen by us earlier. Otherwise, they would cut across. the
G very scheme of the Act.

As .to reason No. 6 relating to nullification of all the. defences of
benami holders, we say with respect that according to us, as already
discussed future defenees of real owne~s against benamidars holders hav~
H been nullified as are covered-by-the sweep ofSection4(2) and not .others.
R.R. REDDYv. P. CHANDRASEKHARAN [MATMUDAR, J.) 737.
\

As a result of the aforesaid discussion it must be held, with respect, A
- that the Division Bench erred in taking the view that Section 4(1) of the
Act could be pressed in service in connection with suits filed prior to
coming into operation of that Section. Similarly the view that under Section
4(2) in all suits filed by persons in whose names properties are held no
defence can be allowed at any future stage of the proceedings that the
properties are held benami, cannot be sustained. As discussed earlier B
Section 4(2) will have a limited operation even in cases of pending suits
after Section 4(2) came into force if such defences are not already allowed
earlier. It must, therefore, be held, with respect, that the decision of this
Court in Mithilesh Kumari's case does not lay down correct law so far as
the applicability of Section 4(1) and Section 4(4) to the extent hereinabove C
indicated, to pending proceedings when these Sections came into force, is
concerned. Accordingly, the question for consideration is answered in the
negative. Registry will now place all these matters before an appropriate
Division Bench for disposing them of on merits in the light of the answer
given by us.
D
R.A. Appeals and Petitions disposed of.