Pleading Benami Can Cost You the Property: Supreme Court’s Important Ruling in Manjula v. D.A. Srinivas
When both the alleged real owner and the person in whose name the property stands can lose their rights
What happens when a person goes to court claiming that a property legally standing in someone else’s name actually belongs to him because he had provided the money for its purchase? A recent judgment of the Supreme Court provides a powerful answer: a person cannot seek to enforce rights arising from a benami arrangement, and the person in whose name the property stands may also be unable to retain it if the transaction is judicially found to be benami. In Manjula and Others v. D.A. Srinivas, Civil Appeal No. 7370 of 2026, decided on 8 May 2026, the Supreme Court examined the scope of the Prohibition of Benami Property Transactions Act, 1988, including the effect of the 2016 amendments and the consequences of a judicial finding that a transaction is benami. The judgment carries an important message for taxpayers, property owners and professionals: a plea that was intended to establish ownership can sometimes destroy the claim altogether.
The factual background
The dispute concerned agricultural properties which stood in the name of K. Raghunath. The plaintiff, D.A. Srinivas, claimed ownership of the properties on the strength of a Will executed by Raghunath. However, the substance of the plaintiff’s case was that the properties had actually been acquired with his funds, while they were purchased in the name of Raghunath. In other words, the plaintiff claimed to be the real or beneficial owner, while Raghunath was alleged to have been merely the person in whose name the properties were held. The defendants, being the legal heirs of Raghunath, challenged the suit and contended that the plaintiff’s own pleadings disclosed a prohibited benami arrangement. The Supreme Court ultimately agreed with this fundamental objection.
Substance of the transaction matters
One of the important principles emerging from the judgment is that the Court will not necessarily be guided by the label given to the transaction. A plaintiff may frame his case as one relating to a Will, inheritance, declaration of title or succession. But if the substance of the pleadings shows that the plaintiff’s claim is actually founded upon the proposition that:
he provided the consideration;
the property was purchased in another person’s name; and
the other person was merely holding the property for his benefit, the Court can examine the transaction from the perspective of the Benami Act. The Supreme Court emphasised the need to look at the real nature and substance of the transaction, rather than merely the terminology used in the plaint. Thus, changing the language of the pleading does not necessarily change the legal character of the transaction.
Section 4 creates a serious bar
Section 4 of the Benami Act is particularly significant. It prevents a person claiming to be the real owner of benami property from instituting a suit, claim or action to enforce such ownership against the person in whose name the property is held. The provision also prevents a person from taking a defence based upon such beneficial ownership. Therefore, a person cannot ordinarily approach a civil court and say:
> “The property is registered in his name, but I paid the purchase consideration, so I am actually the owner.” The very assertion of such beneficial ownership may bring the claim within the statutory prohibition.
But the benamidar does not automatically win
This is perhaps the most striking aspect of the judgment. Rejecting the plaintiff’s claim does not automatically mean that the defendants become the undisputed owners. The Supreme Court made it clear that once the transaction is judicially found to be benami, the legal consequences do not stop merely with rejection of the plaintiff’s claim. The defendants, who claimed through the person in whose name the property stood, also had to establish an independent legal basis for their claim to the property. In the case before the Supreme Court, the defendants failed to establish that the properties had been acquired from the independent funds of the deceased. Consequently, they could not simply retain the properties on the basis that the plaintiff’s claim had failed.
The Government may ultimately take the property
This is where the decision becomes particularly significant. Section 5 of the Benami Act provides that property which is the subject matter of a benami transaction is liable to confiscation by the Central Government. Therefore, a benami dispute does not necessarily end with one private party defeating another. There can be a third consequence: the property itself may be lost to both sides. The Supreme Court held that once the finding that the transactions were benami had attained finality, the properties became liable to confiscation in accordance with law. The Court further held that in the circumstances of the case, it was unnecessary to send the parties back to the Adjudicating Authority merely for another determination of the benami character of the property.
Death of the original holder does not cure the problem
Another important lesson is that the death of the person in whose name the property stands does not automatically regularise the transaction. The defendants in the case claimed the properties as legal heirs of the deceased. However, succession cannot provide a better title where the underlying acquisition itself is hit by the Benami Act. In simple terms: A prohibited benami transaction does not become legitimate merely because the benamidar subsequently dies and his heirs inherit the property. The statutory consequences continue to operate.
What about old transactions?
The case also examined the temporal operation of the 2016 amendments to the Benami Act. The Supreme Court held that the amended framework, including the provisions relating to confiscation and procedure, could operate in relation to earlier benami transactions in the circumstances considered by the Court. The Court treated the confiscatory provisions as remedial and preventive rather than purely punitive. This distinction is important. The Court also recognised that the consequences relating to confiscation are different from criminal prosecution. Criminal punishment and confiscation operate in separate fields and have different purposes. Therefore, one should not assume that because an underlying transaction is old, every consequence under the amended Benami Act automatically disappears.
Confiscation and prosecution are different
The judgment makes an important distinction between: Confiscation: A civil/remedial consequence whereby the property can vest in the Central Government. Prosecution: Criminal proceedings for violation of the Benami Act, carrying penal consequences subject to the applicable statutory provisions. The Supreme Court observed that confiscation is intended to prevent a person from enjoying the fruits of a prohibited transaction. It is therefore conceptually distinct from criminal prosecution. This distinction is particularly important when analysing old transactions because the temporal operation of confiscatory provisions and penal provisions cannot simply be treated as identical.
The Income-tax angle: Be careful with your explanation
The judgment has an important lesson for income-tax proceedings as well. Consider a situation where the Income Tax Department finds that a taxpayer has purchased a property but the Department questions the source of investment. Suppose the taxpayer responds:
> “Yes, I paid for the property, but it was purchased in the name of my wife/relative/friend.” Such an explanation may solve one problem only to create another. If the facts disclose that the property was held by another person for the benefit of the person who actually provided the consideration, the Benami Act may have to be examined. Therefore, a taxpayer should not casually make a statement regarding “real ownership” or “beneficial ownership” merely to explain the source of funds. The income-tax explanation and the property-law position must be considered together.
Section 69 and the Income-tax Act, 2025
Under the Income-tax Act, 1961, Section 69 dealt with unexplained investments. Under the Income-tax Act, 2025, the corresponding provision is Section 103, dealing with unexplained investment. Where the Department questions an investment, the taxpayer may be required to explain the nature and source of the investment. However, an explanation concerning the source of funds should be carefully worded and factually consistent. A statement such as:
> “I paid for the property, although it was purchased in somebody else’s name and I am the real owner” may have consequences extending beyond the income-tax assessment. It may potentially provide material for examination under the Benami law.
Are all properties purchased in another person’s name benami?
No. This is an extremely important qualification. The Benami Act itself recognises certain exceptions. The definition of a benami transaction excludes specified situations, subject to the statutory conditions. For example, arrangements involving:
property held by a Karta or member of an HUF for the benefit of the HUF, where consideration comes from known sources;
property held in the name of a spouse or child, where consideration is paid from known sources;
property held jointly with certain specified relatives where the consideration is paid from known sources; and
property held in certain fiduciary capacities, such as by a trustee, executor, partner or director, subject to the statutory requirements, may fall outside the definition of a benami transaction. However, these are statutory exceptions with conditions. Merely describing a relationship as that of spouse, relative, partner or fiduciary does not automatically protect every transaction.
A major warning for taxpayers
The biggest lesson from Manjula is that one cannot take inconsistent positions depending upon the forum. If the income-tax authority asks:
> “Who actually invested the money?” and the answer is: “I invested it and the property is actually mine, although registered in another person’s name,” the taxpayer should understand the wider legal consequences of that statement. The same factual assertion may have significance under the Benami law. Therefore, before making a statement concerning the ownership of a property, taxpayers should examine: Who paid the consideration?
In whose name was the property purchased?
For whose benefit was it held?
Was the arrangement covered by a statutory exception?
Were the funds from known sources?
What has been stated in the sale deed, income-tax return, books and other documents
The larger lesson
The Manjula judgment demonstrates the unusual consequences that can arise from a benami arrangement. The alleged real owner may be prevented from enforcing his claim. The person in whose name the property stands may also fail to establish an independent title. And the property itself may ultimately become liable to confiscation. Therefore, winning the argument that “the other person is only a benamidar” may not necessarily mean winning the property. It can mean losing the property altogether.
Conclusion
The Supreme Court’s decision in Manjula v. D.A. Srinivas is an important reminder that property disputes must be approached with extreme caution where the source of consideration and the registered ownership do not match. A person cannot ordinarily claim the benefits of beneficial ownership while simultaneously avoiding the consequences of the Benami Act. For tax professionals, the ruling carries an additional practical message: an explanation given during an income-tax proceeding should be factually accurate, legally considered and consistent with the taxpayer’s position regarding ownership of the underlying asset. Sometimes, in trying to explain “whose money it was,” a taxpayer may inadvertently explain “whose property it really was.” And under the Benami law, that distinction can be extremely costly.
CIVIL APPEAL NO. 7370 OF 2026
