Property Purchased In Name Of Child For Family Benefit Is Not A 'Benami Transaction' Under Section 2(9) Of The 1988 Act: Madhya Pradesh High Court

"The essence of a benami transaction is the intention of the party or parties concerned and often, such intention is shrouded in a thick veil which cannot be easily pierced through." Madhya Pradesh High Court, in a significant ruling dated September 24, 2026, held that a property purchased by a father in the name of his minor child, intended for the collective benefit of the family, does not constitute a 'benami transaction' under the Prohibition of Benami Property Transactions Act, 1988.

A bench presided over by Justice Deepak Khot observed that the exception carved out in Section 2(9)(iii) of the Act specifically excludes transactions where property is held by an individual in the name of their spouse or child using known sources of income.

The dispute arose from a civil suit filed by a father seeking a declaration of his share in a property purchased in 1977 in the name of his minor son. The plaintiff contended that despite the title being in the son's name, the consideration was paid by the father and the property was held for the benefit of the entire family, as evidenced by a 1989 family arrangement. Following the son's death in 2023, the defendants (the son's legal heirs) denied the father's claim, prompting the suit. The defendants moved for rejection of the plaint under Order VII Rule 11 of the CPC, alleging that the suit was barred by the Prohibition of Benami Transactions Act, 1988 and the Law of Limitation.

The primary legal issue before the court was whether a suit claiming ownership of property purchased in the name of a minor child is barred by Section 4 of the 1988 Act. Additionally, the court examined whether the plea of limitation could be adjudicated summarily under Order VII Rule 11 of the CPC without full-scale evidence.

Defining Benami Transactions Under The 1988 Act

The court analyzed the statutory framework of Section 2(9) of the Act, which defines 'benami transaction'. The court highlighted that Section 2(9)(iii) provides a clear exemption for properties held by an individual in the name of their spouse or child, provided the consideration is paid out of known sources. Since the plaintiff averred that the funds originated from his own known income, the court concluded that the transaction fell squarely within the protected category rather than the prohibited one.

Court Clarifies Scope Of Benami Exemption

The court reasoned that because the plaint asserted the property was purchased for the interest and welfare of the family, and was subsequently subject to a family arrangement, it effectively rebuts the presumption of it being a benami transaction. Consequently, the bar under Section 4 of the 1988 Act, which prohibits suits to enforce rights in benami property, does not apply to this specific set of facts.

"The source from where the purchase money came and the motive why the property was purchased benami are by far the most important tests for determining whether the sale standing in the name of one person, is in reality for the benefit of another."

Limitations On Summary Adjudication Of Limitation

Addressing the defendants' plea of limitation, the High Court held that the question of when a cause of action arises is a mixed question of fact and law. Drawing upon the Apex Court's ruling in P. Kumarakurubaran v. P. Narayanan, the bench emphasized that courts must avoid summarily rejecting a plaint under Order VII Rule 11 based on a prima facie assumption regarding limitation.

Limitation As A Mixed Question Of Fact And Law

The judge observed that the plaintiff’s assertion regarding the date of knowledge of the denial of his rights by the legal heirs necessitates trial and evidence. The court concluded that such factual disputes cannot be resolved without a full trial and therefore upheld the trial court’s decision to reject the defendants' application for dismissal of the suit.

"The question of limitation is a mixed question of fact and law, as the parties have made averment indicating the period of limitation which is to be decided by leading evidence."

The High Court ultimately dismissed the revision petition, finding no jurisdictional error in the lower court's decision. By affirming that family arrangements and purchases for the benefit of children fall outside the rigors of the 1988 Act, the ruling provides essential guidance for practitioners dealing with long-standing family property disputes where technical bars like 'benami' are frequently invoked.

Date of Decision: 24 September 2026