Benami Act Section 4 Does Not Apply to Suits Filed Before It Came Into Force: Supreme Court

The matters raised a common question: whether Section 4(1) of the Benami Transactions (Prohibition) Act, 1988, which bars any suit, claim or action by a person claiming to be the real owner of benami property, applies to proceedings begun before it came into force (para 1). A two-Judge Bench in Mithilesh Kumari had said it did; another Division Bench referred the question to three Judges (para 2). The suits had been filed years earlier and were pending in first appeal, second appeal, revision or civil appeal when Section 4(1) came into force (para 4).

For over a century benami transactions were recognised, and Section 82 of the Indian Trusts Act gave the real owner an enforceable right (paras 8, 9). Though the Law Commission recommended retrospective operation, Parliament did not make the Act or any section expressly retrospective, and Section 3 is plainly prospective (paras 9, 10). The words that no suit "shall lie" bar suits filed or entertained after 19 May 1988; Parliament nowhere said pending suits would abate, and the Section is retrospective only in that past benami transactions cannot be sued upon afterwards (para 11). Section 4(2) only bars a benami defence raised for the first time after it came into force (para 12). Section 7 repealed Section 82 of the Trusts Act without any different intention, so Section 6 of the General Clauses Act preserves pending proceedings; a provision not expressly retrospective cannot by implication affect vested rights (paras 14, 15). The Act is prohibitory, not declaratory or curative (paras 17, 18).