Colourful Transactions: A Legal Analysis of Section 96 of the State Acquisition and Tenancy Act, 1950.

 

Colourful Transactions: A Legal Analysis of Section 96 of the State Acquisition and Tenancy Act, 1950.

*Nazmul Hasan,

Judge at Bangladesh Judicial Service.

A “colourful transaction” in the context of Section 96 of the State Acquisition and Tenancy Act, 1950 of Bangladesh, refers to a transfer of land that is disguised as something other than a sale in order to defeat the right of pre-emption. This term is a judicial creation, not explicitly defined in the law itself, but it's a concept that has been widely recognized and applied by the courts to ensure the integrity of the pre-emption right.

The Legal Framework: Section 96 SAT Act, 1950

Section 96 provides a right of pre-emption to co-sharers of a property. This right allows a co-sharer to purchase a portion or share of a holding that has been sold to a third party (a stranger). The primary purpose of this law is to prevent strangers from intruding into a co-owned property, thereby maintaining peace and harmony among the co-sharers.

The right arises when a “portion or share of a holding of a raiyat is sold to a person who is not a co-sharer tenant.”

The Deception: Understanding “Colourful Transactions”

The term “colourful” or “colourable” implies that the transaction is not what it appears to be on the surface. It's a legal sham where the parties to the transaction use a different form of transfer, such as a gift, exchange, or mortgage, to hide the true nature of the deal—which is a sale for monetary consideration. The objective is to prevent the co-sharer from exercising their right of pre-emption, as the law only provides for this right in cases of a “sale.”

Key Indicators of a Colourful Transaction

Courts scrutinize the circumstances of the transaction to determine its true nature. The following are common indicators that a transaction may be “colourful”:

• The transaction is disguised as a gift: A property owner may execute a gift deed in favor of a third party, but in reality, money has exchanged hands, making it a sale. The courts will look at whether any consideration, direct or indirect, was paid.
• The transaction is disguised as an exchange: While an exchange is a legitimate form of transfer, if the value of the properties being exchanged is grossly unequal and the difference is settled with a cash payment, a court may deem it a sale.
• The transaction is a hidden sale with a buy-back clause: A property might be transferred through a deed that looks like a mortgage with a condition to reconvey the property to the original owner. If the true intent is not a loan but a sale, the court can expose the fraudulent nature of the transaction.
• The transaction is made to close the right of pre-emption: The timing and circumstances of the transfer, such as immediate post-transfer improvements by the new owner or a secret payment arrangement, can signal that the primary intent was to circumvent the law.

Judicial Intervention and Consequences

When a co-sharer files an application for pre-emption and argues that the transaction was “colourful,” the court will determine the actual nature of the transfer by taking evidence. The court is not bound by the name of the deed (e.g., gift deed, exchange deed) but will look at the substance and intention behind the transaction. If the court is convinced that the transaction was indeed a disguised sale, it will:

1. Treat the transaction as a sale.
2. Allow the pre-emptor (the co-sharer) to exercise their right.
3. Order the new owner (the stranger) to transfer the property to the pre-emptor upon payment of the original consideration and other specified costs.

The concept of “colourful transaction” is a crucial aspect of property law in Bangladesh, serving as a powerful tool to protect the rights of co-sharers and uphold the spirit of the State Acquisition and Tenancy Act.

*Nazmul Hasan

Senior Judicial Magistrate.

Professional Highlights

• Senior Judicial Magistrate, 11^th  Bangladesh Judicial Service (BJS)
• Merit Position: 7^th  in the 11^th BJS

Academic Qualifications

• LL.B. (Hons.) – First Class First, University of Rajshahi
• LL.M. – First Class, University of Rajshahi

Honors & Achievements                                                                                             

• Prime Minister Gold Medalist – 2017
• Agrani Bank Gold Medalist for Academic Excellence – 2023

Publications:

1.       Nazmul Hasan is the author of the e-book “Comprehensive Strategy for Excelling in the 18th Bangladesh Judicial Service Examination”. This pioneering work is the first-ever e-book in Bangladesh dedicated to BJS exam preparation. The book has been widely praised and attracted a large number of candidates, providing them with effective strategies, valuable insights, and a structured approach to excel in the challenging BJS examination.

 

2.      Nazmul Hasan is the author of the e-book, “Essential Acts for Civil Judges in Bangladesh.” This pioneering work is the first e-book in Bangladesh dedicated to newly appointed Civil Judges. The book has been widely praised and has attracted a large number of judges, providing them with a collection of all necessary civil laws in one place.