Senior Partner, Hardeep Sachdeva, Partner, Parag Maini and Partner, Shahrukh Khan, AZB & Partners, analyze the Supreme Court of India’s landmark ruling examining the Prohibition of Benami Property Transactions Act, 1988, the retrospective operation of the 2016 amendments, fiduciary relationships under the Act, and the interplay between Order VII Rule 11 CPC and the statutory bar against benami transactions.

A. Introduction:

The Hon’ble Supreme Court of India’s (“SC”) judgment in Manjula and Others v. D.A. Srinivas (Civil Appeal No. 7370 of 2026, arising out of SLP (C) No. 7924 of 2024) dated May 8, 2026 (“Civil Appeal”), delivers authoritative guidance on critical questions at the intersection of civil procedure and benami law: when a plaint, on a meaningful reading, reveals a claim founded upon a benami transaction, can be rejected at the threshold under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“CPC”). The judgment extensively examines the Prohibition of Benami Property Transactions Act, 1988 (“Benami Act”), the retrospective operation of the 2016 amendments, the fiduciary relationship exception, and the independent nature of confiscation and prosecution under the statutory scheme.

B.  Factual Background and Procedural History:

1. The Respondent, Mr. D.A. Srinivas (“Plaintiff”), filed the Original Suit No. 246 of 2020 before the Principal Senior Civil Judge, Bengaluru Rural District (“Trial Court”), seeking a declaration of ownership over suit schedule properties basis a Will dated April 20, 2018 (“Will”), allegedly executed by Late Mr. K. Raghunath, the husband of Appellant No. 1 and father of Appellant Nos. 2 and 3 (collectively, the “Appellants”).The said Late Mr. K. Raghunath died on May 4, 2019; and the Appellants contended that he had earlier executed a registered Will dated January 28, 2016, bequeathing the self-acquired suit properties in favour of his wife, and that the mutation had been affected and possession was also obtained accordingly.
2. The Appellants filed an application under Order VII Rule 11(a) and (d) of the CPC, seeking rejection of the plaint on ground that the Plaintiff’s own pleadings revealed a benami transaction, and he had funded the purchase of agricultural lands in the name of Mr. K. Raghunath to circumvent the restrictions under Sections 79A and 79B of the Karnataka Land Reforms Act, 1961, making Mr. K. Raghunath merely an ostensible owner. The Trial Court allowed the application and rejected the plaint vide its order dated October 30, 2023. The High Court of Karnataka (“High Court”), vide its judgment dated February 22, 2024, reversed the Trial Court order, holding that the pleadings did not attract the Benami Act. The Appellants then filed the present Civil Appeal.
3. Critically, the Appellants also alleged that the Plaintiff was involved in the murder of Mr. K. Raghunath (with FIRs registered and a CBI investigation pending), and that the Will was forged using fabricated stamp papers purportedly printed after the testator’s death. The Plaintiff was also alleged to have caused mutation of revenue records in his favour and executed sale deeds on the strength of the disputed Will during the pendency of proceedings.

C. Issues Before the SC:

The Civil Appeal consisted of  the following key issues for the SC’s determination:

• Whether the plaint, on a meaningful reading, disclosed a cause of action or was barred by the Benami Act, warranting rejection under Order VII Rule 11(a) and (d) of the CPC;
• Whether the relationship between the Plaintiff and Mr. K. Raghunath constituted a “fiduciary relationship” within the meaning of the Benami Act so as to attract the statutory exception;
• Whether the 2016 amendments to the Benami Act operated retrospectively or prospectively; and
• Whether, once a judicial determination declares a transaction benami, confiscation may follow directly or whether recourse to the statutory procedure under Sections 24 to 26 of the Benami Act is necessary.

D. Key Legal Provisions Examined:

The SC examined several statutory provisions. Order VII Rule 11 of CPC empowers the court to reject a plaint where it does not disclose a cause of action (clause (a)) or where the suit is barred by law (clause (d)), described by the SC as a “crucial filter” to terminate hopeless proceedings at the threshold. Sections 3 and 4 of the Benami Act prohibit benami transactions and bar enforcement of rights in respect of benami property, respectively. Section 2(9) defines “benami transaction” to include arrangements where property is transferred to or held by a person and the consideration has been provided by another, with exceptions, including, for property held by a Karta of a HUF, persons in a fiduciary capacity (trustees, executors, partners, directors, depository participants), property purchased in the name of a spouse or child from known sources, and property held jointly with siblings or lineal ascendants or descendants. Section 5 renders benami property liable to confiscation by the Central Government, while Section 45 bars civil court jurisdiction over matters within the purview of the Adjudicating Authority or Appellate Tribunal.

The SC while traced the legislative history of the benami law: Prior to 1988, there was no comprehensive statute dealt with benami transactions in India. Following the 57th Law Commission Report (1973), the Benami Transactions (Prohibition) Act, 1988 was enacted, containing two distinct prohibitions under Sections 3 and 4. However, it remained largely unimplementable for want of procedural rules, necessitating the 2016 amendments that introduced Chapters IV (attachment, adjudication, and confiscation) and Chapter VII (offences and penalties), and established an administrative hierarchy including Initiating Officers, Approving Authorities, Adjudicating Authorities, and an Appellate Tribunal.

E. SC’s Reasoning:

1. On Order VII Rule 11 of the CPC, the SC held that the power to reject a plaint is “not merely procedural but substantive, aimed at preventing abuse of the judicial process”. Courts are duty-bound to discern fictitious suits which, “on the face of it would be barred, but for the clever pleadings disclosing a cause of action, that is surreal”. The SC clarified that Order VII Rule 11 can be invoked at any stage, that admission of a plaint is not automatic, and that suppression of a material fact that eclipses a legal bar and creates an illusory cause of action renders the plaint liable to summary rejection.
2. On the Benami Act’s applicability, the SC undertook a meaningful and holistic reading of the plaint and accompanying documents, including the Will and four Memorandum of Understanding (“MOUs”). The Plaintiff’s own pleadings disclosed that he had funded purchase of agricultural lands in Mr. K. Raghunath’s name to circumvent the Karnataka Land Reforms Act. Although the plaint did not use the word “benami”, the SC held that a substantive reading “unmistakably discloses such an arrangement,” emphasizing that “courts are not bound by mere labels in pleadings and must read between the lines to ascertain the true nature of the transaction”. The transactions squarely fell within Section 2(9) of the Benami Act and were barred by the statutory prohibition.
3. On the question of retrospective operation of the 2016 amendments, the SC held that insofar as the 2016 amendments are “declaratory, procedural, curative and machinery-oriented,” they operate retrospectively, while penal provisions creating new offences operate only prospectively. The prohibition against benami transactions existed since 1988 with no limitation period prescribed; the 2016 amendment merely supplied the procedural framework. The SC distinguished confiscation (a civil consequence directed against property) from prosecution (a criminal action against individuals), holding that these operate in “distinct spheres” and may proceed simultaneously without attracting the prohibition against double jeopardy under Article 20(2). The Court also noted that Union of India v. Ganpati Dealcom Private Limited, which had earlier declared certain provisions unconstitutional, had been recalled in Review Petition (Civil) No 359 of 2023 in Civil Appeal No. 5783 of 2022 vide order dated 18.10.2024, on the ground that the constitutional validity of those provisions had never been specifically challenged.
4. On the fiduciary relationship exception, the SC rejected the Plaintiff’s contention, holding that an employer-employee relationship does not fall within the recognized categories of fiduciary relationships under the Benami Act. The fiduciary duty recognized in law runs from a director towards the company, not from a company towards an employee. The MOUs evidenced a commercial arrangement supported by consideration, which “cannot be equated with property being held in trust for the benefit of another so as to constitute a fiduciary holding”. The SC concluded that no exception under Sections 3 or 4 applies in the present case, making the transaction a prohibited benami transaction. Accordingly, the SC set aside the High Court’s judgment, restored the Trial Court’s order rejecting the plaint, and directed the Central Government to appoint an Administrator and take over the suit properties within eight weeks. The SC held that once a transaction is judicially declared benami, recourse to Sections 24 to 26 need not be separately followed, since the Adjudicating Authority cannot sit in appeal over a judicial determination.

F. Implications and Conclusion:

1. The ruling establishes and reinforces the jurisprudence on rejection of plaint, several important principles regarding the Benami Act which are as under:

• The Courts under Order VII Rule 11 CPC must undertake a meaningful reading of the plaint, the substance of the pleadings, not the form, is determinative, and clever drafting cannot salvage a plaint disclosing a transaction prohibited by law;
• The Benami Act’s statutory bar on enforcement operates regardless of whether the plaint expressly uses the term “benami”;
• The 2016 amendments operate retrospectively insofar as they relate to attachment, adjudication, confiscation, and procedural framework (the prohibition having existed since 1988), while penal provisions operate prospectively;
• The “fiduciary capacity” under the Benami Act is circumscribed. It does not extend to ordinary employer-employee relationships, and the Central Government’s notification power underscores that the legislature intended the exception to be expanded only through executive action. Persons expressly enumerated would undoubtedly fall within the exception, and any additional category would ordinarily require notification by the Central Government. In the absence thereof, the scope of the exception cannot be widened merely on equitable considerations;
• Once a judicial determination of benami attains finality, confiscation follows without requiring separate recourse to Sections 24 to 26 of the Benami Act;
• Confiscation is a civil consequence directed against the property, operating independently of criminal prosecution without attracting double jeopardy under Article 20(2). Upon confiscation, all rights vest absolutely in the Central Government free from encumbrances, and no compensation is payable.

2. The judgment delivered by SC reinforces the judiciary’s continuing resolution to curtail frivolous litigation designed to obtain recognition of transactions prohibited by law. As the SC observed, “what cannot be done directly cannot be permitted to be achieved indirectly through the medium of legal proceedings”. For the legal practitioners, the ruling underscores the importance of caution while drafting plaints in property disputes bearing indicia of benami arrangements, courts will look beyond form to substance, and statutory prohibitions cannot be circumvented through artful pleading. The decision also provides valuable guidance to trial courts on the proactive use of Order VII Rule 11 of CPC to prevent abuse of judicial process at the earliest stage.
3. Watch out this space for more developments as it will be interesting to see the impact of the judgment passed by SC on the pending matters before different jurisdictional Court where such similar issues may be existing.