Benami property legislation 2016 cannot be retroactively applied: SC

On August 23, 2022, the Supreme Court ruled that the new benami property statute is progressive in character and that the 2016 modification to the 1988 act cannot extend retrospectively to activities between September 5, 1988, and October 25, 2016.

The Supreme Court’s decision indicates that the punitive confiscation clause in Section 5 of the 2016 Act can only be enforced retrospectively, not retrospectively. Section 5 of the statute allows the government to seize benami properties even if the transaction has not been found illegal via criminal prosecution.

“There is little question that the unamended 1988 Act attempted to create a mandatory reporting violation while yet allowing independent acquisitions of benami property.” This raises the question of whether such a criminal clause, which even the State now plans to employ to seize properties after 28 years of inactivity, may have existed in the books of law. Aside from the misuse and injustice that such an exercise is intended to cause, there is a greater constitutional challenge regarding the establishment of such harsh laws without proper protections,” a Bench comprising Chief Justice NV Ramana and Justices CT Ravikumar and Hima Kohli stated.

The Supreme Court stated in its 96-page decision that “authorities concerned cannot begin or prolong criminal prosecution or confiscation procedures for transactions engaged previously before the entry into effect of the 2016 Act on October 25, 2016.”

The Supreme Court issued its decision in response to the Centre’s appeal, which disputed a Calcutta High Court decision saying that amendments made to the 1988 Act in 2016 are enforceable with prospective effect.

The Supreme Court also ruled that Section 3(2) of the Benami Transactions (Prohibition) Amendment Act, 2016, was “unconstitutional” and “manifestly arbitrary.” Section 3 of the statute addresses the “Prohibition of Benami Transactions.”

Its subsection (2) states that “anyone engages in any benami transaction shall be penalised with imprisonment for a time which may extend to three years, with fine, or with both.” The Bench declared, “We hold Section 3(2) of the Benami Transactions (Prohibition) Act, 1988, to be invalid.”

The Benami Transactions (Prohibition) Amendment Act went into force on November 1, 2016, after the 28-year-old legislation was amended. The Act of 1988 was enacted to ban benami transactions and to provide the government with the authority to reclaim such properties. The 2016 law clarified the scope of benami transactions under the prior statute and imposed harsher penalties.

“Section 3 (criminal provision) of the 1988 Act, along with Sections 2(a) and 5 (confiscation procedures), are excessively wide, unduly punitive, and function lacking proper protections.” Such clauses were stillborn legislation that was never used in the first place. In light of this, this court concludes that Sections 3 and 5 of the 1988 Act were invalid from the start,” the judgement stated.

Moreover, it noted, “we make it apparent that the foregoing debate has no bearing on the civil consequences anticipated by Section 4 of the 1988 Act, or any other provision.”

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.