Law:

Section:

Section 3 of Benami Transactions (Prohibition) Act, 1988 - Prohibition of benami transactions - Whether Act is retrospective in nature and will apply to pending cases - Held, yes - Whether after enforcement of Act, no plea of benami transaction can be taken - Held, yes FACTS S and N were partners in a firm and had equal shares. The building and power connection fell to the share of S. Whereas machinery, goodwill, assets and liabilities except one item fell to the shares of N. The exception of liabilities was specifically mentioned to be meet by S. In the accounts of the partnership firm, certain amounts of money stood invested in the names of the plaintiffs. These amounts were also shown in the balance sheets and in the returns filed before the Income-tax authorities. The plaintiff filed separate suits for the recovery of those amounts against the firm. All these suits were contested by the firm represented by N whereas S did not contest. N contended that it was S who had invested such amounts in the names of his wife and children, the plaintiffs. At the time of dissolution of the firm, such accounts were also settled with S. In fact, those amounts belonged to S and were shown benami in the accounts of the firm. The trial court decreed these suits whereas the lower appellate court, while accepting the appeals, dismissed the same. On second appeal : HELD The Act is retrospective in nature. It will also apply to pending cases. After enforcement of the Act, no plea of benami transaction could be taken either by the plaintiff or by the defendant. In view of the settled position of law, there was no scope for raising an argument by the defendant-firm in the instant case that though the amounts were shown in the account books of the firm in the hands of the plaintiffs, in fact it was benami and the true owner of these amounts was the partner of the firm. Since the amount was shown in the names of the plaintiffs, they were held entitled to receive the same as the same was not paid to them by the firm. The lower appellate court, after relying upon the statements of N and S held that the amount standing in the names of the plaintiff was taken into consideration and…

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