Supreme Court sets aside Karnataka HC order, declares benami transactions barred and properties liable to confiscation

A bench of Justices J.B. Pardiwala and R. Mahadevan held that a suit founded on a disputed Will was, in substance, an attempt to enforce a benami transaction barred by statute, and directed the Central Government to take over the suit properties within eight weeks.

The Supreme Court on 8 May 2026 set aside a Karnataka High Court order that had restored a civil suit to trial, holding that the suit — though dressed as a testamentary succession claim — was in substance an attempt to enforce a benami transaction barred by the Prohibition of Benami Property Transactions Act, 1988. A bench of Justice J.B. Pardiwala and Justice R. Mahadevan not only rejected the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908, but went further: it declared the suit properties liable to confiscation and directed the Central Government to appoint an Administrator and take over the properties within eight weeks. The judgment in Manjula and Others v. D.A. Srinivas, reported as 2026 INSC 465, runs to 146 pages and settles several contested questions about the scope of the Benami Act, the retrospective operation of its 2016 amendment, and the interaction between Order VII Rule 11 and Order XIV Rule 2 of the CPC.

How the dispute reached the Supreme Court

The Respondent, D.A. Srinivas, filed a civil suit in 2020 before the Principal Senior Civil Judge, Bengaluru Rural District, seeking a declaration that he was the owner of agricultural lands on the strength of a Will dated 20 April 2018 allegedly executed by one K. Raghunath. Raghunath had died on 4 May 2019 — and criminal proceedings for his alleged murder were pending against the Respondent himself, who remained in custody since 22 December 2025 in connection with allegations of Will forgery, including the use of stamp papers fabricated after the testator's death.

The Appellants — Raghunath's widow and children — contended that the properties had been purchased by Raghunath with his own funds and bequeathed to his wife under a registered Will dated 28 January 2016. They applied under Order VII Rule 11(a) and (d) CPC seeking rejection of the plaint, arguing that the suit disclosed no cause of action and was barred by Sections 4 and 6 of the Benami Act. The trial court agreed and rejected the plaint in October 2023. The High Court of Karnataka reversed, holding that the plaint did not on its face attract the Benami Act's provisions. The Appellants came to the Supreme Court.

The substance beneath the form

The bench's central task was to look past the language of the plaint — which was framed as a testamentary succession claim — to its real foundation. The Respondent's own pleadings, read alongside the Will, showed that the suit properties had been purchased by K. Raghunath with funds provided by the Respondent, and held in Raghunath's name because the Respondent was barred from purchasing agricultural land under Sections 79A and 79B of the Karnataka Land Reforms Act. The Will, on this account, was the device by which title was to be reconveyed to the real beneficial owner.

The Court held that this arrangement fell squarely within the definition of a benami transaction under Section 2(9) of the Benami Act: property was held in one person's name while the consideration had been provided by another. The fact that the Respondent did not use the word “benami” in his plaint was irrelevant. The bench reiterated the principle from T. Arivandandam v. T.V. Satyapal — (1977) 4 SCC 467 — that clever drafting cannot obscure the true nature of a claim, and from K. Akbar Ali v. K. Umar Khan — (2021) 14 SCC 51 — that a plaint must be read meaningfully, not formally.

The Respondent's argument that the suit was based on a Will — an independent testamentary instrument — and not on the underlying purchase transaction was rejected. The bench found that the Will was inseparably linked to the benami arrangement: its very purpose was to restore to the Respondent what the statute prohibited him from acquiring directly.

The 2016 amendment and retrospective operation

A substantial portion of the judgment is devoted to the question of whether the Benami Transactions (Prohibition) Amendment Act, 2016 operates retrospectively, so as to apply to transactions that predated its commencement on 1 November 2016. The suit properties were purchased in 2006 and 2011.

The Respondent had relied on Union of India v. Ganpati Dealcom Private Limited — (2023) 3 SCC 315 — for the proposition that the 2016 Amendment is prospective. The bench noted, however, that Ganpati Dealcom had since been recalled by the Supreme Court in Union of India v. Ganpati Dealcom Private Limited — (2024) SCC OnLine SC 2981 — and no longer represented good law.

The Court held that the 2016 Amendment is retrospective in operation. A curative or declaratory amendment speaks to the past; the scheme of the Benami Act prescribes no timeline for initiating proceedings; and allowing benami transactions that predated the amendment to escape the statute's consequences would frustrate Parliament's express intention to dismantle such arrangements.

Fiduciary capacity and employer-employee relations

The Respondent argued alternatively that even if the transaction was benami, it fell within the statutory exception for transactions held “in a fiduciary capacity” under Section 2(9)(A)(ii) of the amended Act. The relationship between the Respondent and K. Raghunath — that of employer and employee — was, on this argument, fiduciary in nature.

The bench rejected this comprehensively. A fiduciary relationship, in law, is characterised by trust, confidence, and a duty of loyalty that goes beyond the terms of a commercial contract. The relationship between a company and its director is fiduciary; the relationship between an employer and an employee, governed by a contract of service and supported by valid consideration, is not. The Respondent had also not pleaded the existence of a fiduciary relationship in the plaint — a foundational fact that cannot be raised for the first time in argument.

Murder, succession, and Section 25 of the Hindu Succession Act

The judgment also decides whether the Respondent — who stands accused in criminal proceedings relating to the murder of K. Raghunath — is disentitled from claiming under the Will. Section 25 of the Hindu Succession Act, 1956 bars a person who has committed murder from inheriting the property of the person murdered, and applies, the Court held, to both intestate and testamentary succession.

The bench went further, holding that even where criminal proceedings are pending and there has been no conviction, a civil court applying the preponderance of probabilities standard may take into account whether the claimant committed the offence. Strict proof — the criminal standard — is not required in civil proceedings. The principles of justice, fair play, and equity independently reinforce the statutory bar in Section 25.

Order VII Rule 11 and its interaction with preliminary issues

The judgment devotes considerable attention to the procedural framework. It clarifies that an application under Order VII Rule 11 CPC can be taken up along with a preliminary issue under Order XIV Rule 2 and decided together — the two provisions are not mutually exclusive. Before issuing summons, a trial court must satisfy itself that the plaint meets the requirements of Order VII Rule 11.

The bench reinforced the court's duty to pierce the veil of clever drafting. Where the plaint, read as a whole and along with annexed documents, discloses a legal bar — even if the pleadings are artfully structured to conceal it — the court must exercise its power under Rule 11 without waiting for trial.

Confiscation: civil consequence, not prosecution

The bench held that confiscation under Section 27 of the Benami Act is a civil consequence, not a criminal punishment, and that Article 20(2) of the Constitution — which prohibits double jeopardy — is not attracted. Confiscation and prosecution operate in distinct spheres under the Act.

Once a judicial declaration that a transaction is benami has attained finality, the Adjudicating Authority's procedure under Sections 24 to 26 of the Act need not be followed. The Adjudicating Authority cannot sit in appeal over a judicial determination. Confiscation follows as a legal consequence of the declaration; prosecution under Chapter VII of the Act may proceed separately, if not already initiated.

Order

The Supreme Court set aside the High Court's judgment dated 22 February 2024 in R.F.A. No. 2216 of 2023. The Central Government was directed to appoint an Administrator and take over the suit properties within eight weeks of receiving the judgment. No court shall entertain any claim in respect of the properties arising from the benami transaction. The Civil Appeal was disposed of with no order as to costs.