Pleading Benami Can Cost Everyone the Property: Supreme Court in Manjula v. D.A. Srinivas

A plaintiff claimed farm land under a Will. In the same plaint he said that the deceased had bought the land with the plaintiff’s money, to hold for him. On 8 May 2026 the Supreme Court held that this pleading made the suit a claim founded on a benami transaction.

The result was stark. The plaint was rejected. The deceased’s legal heirs did not get the land either. The Court directed the Central Government to appoint an Administrator and take over the properties.

The facts

The plaintiff sued for a declaration that he owned agricultural properties. He relied on a Will dated 20 April 2018, said to have been made by K. Raghunath, who died on 4 May 2019. He also sought an injunction.

His own case was this:

• The Karnataka Land Reforms Act, 1961 (Sections 79A and 79B) prevented him from buying agricultural land directly.
• So he funded purchases made in the name of K. Raghunath, under several MOUs. The properties were bought under sale deeds of 2006 and 2011.
• K. Raghunath, who worked in companies run by the plaintiff’s father, held the land for the plaintiff’s benefit.

The widow and children said the land was K. Raghunath’s self-acquired property. They relied on an earlier Will dated 28 January 2016 in the widow’s favour.

The case then went through three courts:

• Trial court. It rejected the plaint under Order VII Rule 11(a) and (d) CPC. The plaint disclosed no cause of action and was barred by Sections 4 and 6 of the Prohibition of Benami Property Transactions Act, 1988.
• Karnataka High Court. It restored the suit for trial.
• Supreme Court. The heirs appealed.

What the Supreme Court held

1. Substance over drafting

The plaint was framed as a claim under a Will. But “a meaningful and holistic reading shows that the real foundation of the claim is the assertion that the suit properties were purchased by the deceased with funds allegedly provided by the plaintiff and were thereafter held for his benefit”. Courts must curtail suits barred by law “by piercing the veil of clever drafting”, preferably at the earliest stage.

2. Nobody could rely on the benami transaction

The original purchases were benami transactions. They were not protected by any exception in Sections 3 or 4 of the Benami Act, “either before or after amendment”. The plaintiff could therefore assert no claim.

“Equally, the appellants / defendants, claiming as legal heirs, are not entitled to derive any advantage therefrom, having failed to establish that the suit properties were acquired from the independent funds of the deceased.”

3. Employment is not a fiduciary relationship

The plaintiff argued that the fiduciary exception applied. The Court rejected this. There is no fiduciary relationship between a director of a company and an employee of the company. Contractual relationships supported by consideration also stand outside the exception, being commercial transactions.

4. Contracts to get around the law are void

MOUs entered into to circumvent the Karnataka Land Reforms Act were illegal and void under Section 23 of the Contract Act. As the Court put it, “a contract entered into for the purpose of circumventing the law is illegal and cannot be enforced or relied upon in a court of law”.

5. The 2016 amendments reach earlier transactions

The Court held: “The amendments introduced in 2016 are retrospective in operation and the provisions can be invoked in respect of earlier benami transactions as well”. The scheme of the Act prescribes no timeline for initiating action. The retrospective reach covers the declaratory, procedural and machinery provisions: penal provisions creating new offences or enhancing punishment “can operate only prospectively” (para 22.15).

6. Confiscation is civil, and can follow a court’s finding

Confiscation is a civil consequence, distinct from prosecution, so Article 20(2) (double jeopardy) is not attracted. Once a court has declared a transaction benami and that finding is final, the property is liable to confiscation under Section 27. The procedure under Sections 24 to 26 need not be followed, since the Adjudicating Authority cannot sit in appeal over a judicial determination. Prosecution may follow under Chapter VII.

7. The direction

The High Court’s judgment was set aside. The Central Government was directed to appoint an Administrator and take over the suit properties, in accordance with law, within eight weeks. No court is to entertain any claim to the properties “arising out of or founded upon such benami transaction”.

What this means for property holders

• Your pleading can be the evidence against you.A claim that “I paid, but the property is in their name” is a benami claim. It can lose the property for everyone, not just the claimant.
• Heirs must be able to show the source of funds. Holding title is not enough if the purchase money cannot be traced to the deceased.
• Old arrangements are not safe. The Court applied the 2016 amendments to purchases made in 2006 and 2011.
• Employer or business arrangements do not create a trust. Property held by an employee, or under a commercial contract, falls outside the fiduciary exception.
• Regularise early, with advice.If property is held in another person’s name, take advice on the facts before any dispute or litigation begins.

How RDA can help

RDA Tax Advisory Services advises on property ownership structures, the tax treatment of family and business property arrangements, and documenting the source of funds. See our property strategy and litigation support services.

General information only. Whether a transaction is benami, and its consequences, depend on the facts and the law applicable to the transaction. This is not a case-specific legal opinion.