Misfeasance, Asset Declaration and Benami Transactions

1.1 What does the term mean?

Misfeasance in public office is the misuse of power by a public official. The power is real. The wrong lies in how it is used.

This is our plain reading of the Court’s words in the case below. We read a published summary of the judgment, not the judgment itself.

1.2 Which case shows it?

The Supreme Court decided Shivsagar Tiwari v. Union of India on 11 October 1996. The case was about shops and stalls handed out by a Minister without a tender.

The CBI found that she allotted six shops to her own relatives, employees, domestic servants and family friends. The Court held the allotments wholly arbitrary and a misuse of power.

1.3 Must someone be hurt for the wrong to count?

No. The Court held that misuse of power by a public official is actionable in tort even without injury to a third party. The injury is to the high principle of public law and a loss to the State Exchequer.

1.4 What did the Court order?

It recognised that exemplary damages are possible. But its actual orders were to cancel the arbitrary allotments and to allot afresh under a lawful policy.

1.5 What is the usual mistake?

Students think only a person who was harmed can complain. The Court said no third-party injury is needed.

2.1 What does the law require?

Section 44 of the Lokpal and Lokayuktas Act, 2013 says every public servant shall declare his assets and liabilities. The form and manner are set by rules.

An amending Act of 2016 substituted this section. It is deemed to have come into force on 16 January 2014.

2.2 Who counts as a public servant here?

The Department of Personnel and Training (DoPT) says it covers all categories under section 2(o) read with section 14(1)(a) to (h) of the Act.

2.3 When must the return be filed?

Source: DoPT Office Memorandum of 2 April 2016. The memo also lists a return as on 31 March 2015, due 15 April 2016.

2.4 Why ask for it at all?

This is our own reasoning, not a source claim. A filed return gives a baseline. A later jump in wealth is easier to question when there is a starting point.

2.5 What is the usual mistake?

Students say section 44 itself names the 31 July date. The substituted section leaves form and manner to rules. The dates come from the DoPT memorandum.

3.1 How does the Act define it?

Section 2(9) gives four tests. A transaction is benami if it meets any of them.

Source: the Act, section 2(9). Test A has exceptions, listed below.

3.2 Who is the benamidar?

The benamidar is the person in whose name the property is held. The term also covers a person who lends his name. The beneficial owner is the person for whose benefit it is held.

Here is our own example. Ravi pays for a flat but registers it in his driver Sunil’s name. Sunil is the benamidar. Ravi is the beneficial owner.

3.3 What is not benami?

Test A has exceptions. Four of them are below.

• A Karta or member of a Hindu undivided family, holding for the family.
• A fiduciary, such as a trustee, executor, partner or company director.
• An individual’s property in the name of a spouse or child, paid from known sources.
• Other exceptions are listed in the Act.

3.4 What changed in 2016?

The Act is now called the Prohibition of Benami Property Transactions Act, 1988. The 2016 amendment took effect on 1 November 2016. It also built the authorities and the Tribunal that the next card covers.

4.1 Who enforces it?

Section 18 names four authorities. Three of them are income tax officers.

Source: the Act, sections 2, 7 and 18.

4.2 What are the steps?

• The Initiating Officer records reasons and issues a show-cause notice (section 24).
• With the Approving Authority’s previous approval, the officer may attach the property provisionally. The limit is 90 days, counted from the last day of the month in which the notice is issued.
• The Adjudicating Authority hears the person and decides. If the property is benami, it orders confiscation (section 27).
• The Administrator receives and manages the confiscated property (section 28).

4.3 Can the person appeal?

Yes. A person can appeal to the Appellate Tribunal within 45 days of the order (section 46). The Supreme Court notes a further appeal to the High Court on questions of law.

4.4 Is compensation paid?

No. On confiscation, all rights and title vest in the Central Government free of encumbrances. No compensation is payable (section 27).

There is one safeguard. A person who bought from the benamidar for adequate consideration, without knowing of the benami deal, is not hit.

4.5 What is the punishment?

Section 53 covers a deal made to defeat the law, avoid statutory dues or avoid paying creditors. The term is rigorous imprisonment of one to seven years. The fine can go up to 25 per cent of the property’s fair market value.

Section 54 punishes false information with six months to five years.

5.1 What was the dispute?

Companies were in insolvency, and their liquidators challenged benami attachment orders before the National Company Law Tribunal (NCLT). The NCLAT refused to hear the challenge.

One attachment in the batch was a provisional order of 1 November 2019 under section 24(3).

5.2 What did the Court decide?

On 24 February 2026, in S. Rajendran v. Deputy Commissioner of Income Tax (Benami Prohibition) (2026 INSC 187), the Court dismissed the appeals. It held that orders under the Benami Act cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016.

5.3 What was the reasoning?

The Court accepted the NCLT’s and NCLAT’s findings. The tribunals had drawn a line between creditors recovering dues and the State confiscating tainted property.

5.4 Why does it matter for the Act?

This is our own reading. The Benami Act has its own appeal route, set out in the last card. A challenge belongs there, not before the NCLT.

6.1 What did UPSC ask?

6.2 How do you solve it?

Test each statement alone. Then pick the option.

So only statement 2 is right. The answer is (b).

6.3 Which numbers should you keep?

• 1 November 2016: the 2016 amendment took effect.
• 90 days: the limit on provisional attachment, counted from the end of the notice month.
• 45 days: the time to appeal to the Tribunal.
• 1 to 7 years and 25 per cent: section 53 punishment and fine cap.
• 31 March and 31 July: the as-on date and the filing date for annual asset returns.