Transfer of Benami property to a third person

Meaning of Benami Transaction:

The following situations/ transcations fall under the definition of Benami transactions as per the provisions of Prohibition of Benami Property Transactions Act, 1988 (PBPT Act):

1. Where a property is transferred to or is held by a person, and the consideration for such property has been provided, or paid by, another person

2. Where a property related transaction is carried out under a fictitious name.

3. Where the owner of the property has no knowledge / denies having any knowledge of the ownership of such property.

4. Where the person providing the consideration is untraceable or fictitious – the identity of the beneficial owner may also be unknown.

Some definitions:
1. Benamidar means a person in whose name the benami property is held. Benamidar is only an alias for the actual owner, the ‘Beneficial Owner’.

2. A Beneficial owner means a person, whether his identity is known or not, for whose benefit the benami property is held by a Benamidar.

3. Property means assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal.

Some pertinent queries on transfer of Benami Property:
1. Can a Benamidar re-transfer the Benami property to the beneficial owner or any other person?
Ans: No. Re-transfer of the Benami property by the Benamidar to the beneficial owner or any other person acting on his behalf is prohibited, and such a re-transfer is deemed to be null and void.

2. Can a Benamidar sell away Benami property to avoid confiscation?
Ans: Section 27(2) of the PBPT Act protects the interests of a genuine purchaser/holder of property by providing that Adjudi­cating Authority shall not confiscate property adjudicated to be benami property if such property was held or acquired by a person from the Benamidar for adequate consideration prior to the issue of notice by Initiating Officer and without his having knowledge of the Benami transaction.

However, Section 57 of the PBPT Act provides that where, after the issue of a notice under Section 24, any property referred to in the said notice is transferred by any mode whatsoever, such transfer shall, for the purposes of the proceedings under this Act, be ignored. If such property is subsequently confiscated by the Central Government then the transfer of such property shall be deemed to be null and void