Page 18 - Banking Finance August 2023

LEGAL UPDATE

Legal

Buying property in wife's buys a property with his own money the RBI's decision was against the prin-
but in the name of another ciple of natural justice.
name can't always be
personwithout any intention to benefit
The said circulars allowed banks to
called benami: HC the other person; and the second type, make full use of the Central Fraud Reg-
"loosely as a benami transaction",
A transaction where a man buys prop- istry for timely identification, control,
where the owner of the property ex-
erty in his wife's name cannot neces- reporting and mitigation of risks asso-
ecutes a conveyance in favour of an-
sarily be called a benami transaction, ciated with the fraud.
other without the intention of transfer-
the Calcutta High Court has said.
As per the circular, once the bank clas-
ring the title to the property. "In the
"In Indian society, if a husband supplies sifies an account as fraud, it has to
latter case, the transferor continues to
the money for acquiring property in report the same to the Central Reposi-
be the real owner," the court said.
the name of his wife, such fact does tory of Information on Large Credits
not necessarily imply benami transac- platform to alert other banks.
Bombay High Court stays
tion," the division bench of Justice
Moreover, if a bank decides to classify
Tapabrata Chakraborty and Justice RBI's master circular till
the account as fraud straightaway, it
Partha Sarthi Chatterjee said. "Source has to report the fraud to RBI within
September 11
of money is, no doubt, an important 21 days and report the matter to any
The Bombay High Court stayed till Sep-
factor but not a decisive one," the
investigation agency.
tember 11 action by banks under the
bench held.
Reserve Bank of India (RBI) master cir-
The court was hearing a case in which Gift can't be revoked un-
cular that permitted banks to declare
a son had charged his father with giv- any account as a fraud account with- less right reserved in the
ing a benami property to his mother.
out giving a hearing. In September, the
The court ruled that the litigant had deed, says HC
HC will hear the petitions against the
failed to prove his charge that the Unless the right is reserved, the
RBI decision under Reserve Bank of
property in question was benami. executant cannot unilaterally revoke a
India (Frauds Classification and Report-
gift deed, the high court said. Dismiss-
"The burden of showing that a trans- ing by Commercial Banks and Select
ing two regular second appeals filed by
fer is a benami transaction always lies FIs) Directions of 2016.
people who claim to be owners of a
on the person who asserts it," the court
A division bench of Justice Gautam S land at Chikkajajur village of Holalkere
said, terming it a "well-settled prin-
Patel and Justice Neela K Gokhale was taluk in Chitradurga district, Justice HP
ciple".
hearing a batch of petitions, including Sandesh pointed out that only by way
The court said that two kinds of those filed by Jet Airways founder of suit, a person can seek for cancella-
benami transactions are generally Naresh Goyal and his wife Anita Goyal, tion of the gift, and the same has not
recognised: in the first type, a person challenging the circulars stating that been done in this case.
18 | 2023 | AUGUST | BANKING FINANCE