No Benami Without Ownership: Tribunal Rejects Attachment Based on Mere Agreement to Sell

Introduction

In the case of Rachakonda Srinivas Rao v. Initiating Officer[i], the Appellate Tribunal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (‘SAFEMA’), New Delhi (‘Tribunal’) examined the legality of a provisional attachment order issued under the Prohibition of Benami Property Transaction Act, 1988 (‘Benami Act’). The Tribunal scrutinized whether the transaction met the criteria of a benami transaction under s. 2(9) of the Benami Act and reaffirmed the legal principle that an agreement to sell, without actual transfer of title or possession, does not confer ownership.

Brief Facts

• The Information Wing received intelligence regarding the purchase of a commercial property where an ‘agreement of sale’ was entered into on 27.10.2016 between Smt. Sharda Devi (‘Alleged Benamidar’) and M/s ICON Construction (‘Interested Party’)

• It was alleged that Shri Rachakonda Srinivas Rao (‘Appellant’) (also, the alleged beneficial owner) had deposited cash into the Alleged Benamidar’s bank account, which was later transferred to the Interested Party via two cheques.

• On this basis, the Initiating Officer (‘IO’) identified the property as benami and issued a provisional attachment order. The Adjudicating Authority (AA) confirmed the attachment.

• However, the Tribunal noted that only Rs. 9 lakhs out of Rs. 70.77 lakhs had been paid by the Alleged Benamidar, and the title to the property was never transferred. The Interested Party remained the legal owner in possession.

• The Tribunal questioned the applicability of s. 2(9)(A) of the Benami Act, given that the Alleged Benamidar did not hold or control the property.

Held

The Tribunal ruled in favour of the Appellant and set aside the provisional attachment order, making the following observations:

• The Tribunal relied on the Supreme Court’s ruling in Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra[ii], which held that an agreement to sell does not create ownership rights in the absence of a registered sale deed as required under s. 54 of the Transfer of Property Act, 1882 (‘TOPA’)

• Similarly, in the case of Namdeo v. Collector[iii], the Supreme Court ruled that an agreement of sale alone does not transfer title or ownership rights in property.

• Applying these precedents, the Tribunal held that the agreement between the Alleged Benamidar and the Interested Party did not amount to a benami transaction, as no legal ownership or possession was transferred to the Alleged Benamidar.

• The Tribunal further observed that out of Rs. 70.77 lakhs, only Rs. 9 lakhs were paid by the Alleged Benamidar, making it clear that the Interested Party remained the legal owner in possession.

• Additionally, the Tribunal noted that even though cash deposits were made into the Alleged Benamidar’s bank account, there was no conclusive evidence that these funds were provided by the Appellant. It was also held that mere cash transfers do not automatically establish a benami transaction under s. 2(9)(A) of the Benami Act, particularly in the absence of clear ownership of the property.

• The Tribunal concluded that neither the property nor the transaction met the criteria of a benami transaction under the Benami Act, and hence, the Adjudicating Authority’s order confirming the provisional attachment order was set aside.

Our Analysis

The Tribunal’s decision in this case provides valuable clarity on the application of the Benami Act by emphasising that an agreement to sell does not transfer title or create beneficial ownership unless a registered sale deed is executed. This aligns well with established principles under the TOPA and Supreme Court rulings, ensuring that only genuine benami transactions involving clear evidence of transfer of control fall within the ambit of the Benami Act. By noting that only a partial payment was made and that ownership remained with the Interested Party, the decision protects bona fide property transactions from arbitrary provisional attachments. It reinforces that mere cash infusions or informal agreements, in the absence of a formal transfer of title, cannot justify action under the Benami Act, thereby providing greater legal certainty for investors and property owners. The ruling’s emphasis on clear ownership and possession as prerequisites for benami classification ultimately strengthens the framework for equitable taxation and property law, ensuring that enforcement of the Benami Act is both precise and justified.

End Notes

[i] [2025] 170 taxmann.com 718 (SAFEMA - New Delhi).

[ii] (2004) 8 SCC 614.

[iii] (1995) 5 SCC 598.

Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.