[ecis2016.org] The Benami Transactions (Prohibition) Amendment Act came into effect on November 1, 2016, following the amendment of a 28-year-old law.
The Supreme Court on August 23, 2022, said the new benami property law is prospective in nature, and the 2016 amendment to the 1988 act cannot retroactively apply to the transactions between September 5, 1988, and October 25, 2016.
You are reading: Benami property law 2016 can’t be applied retrospectively: SC
The ruling by the top court means that the forfeiture provision under Section 5 of the 2016 Act, which is punitive in nature, can only be applied prospectively and not retroactively. Section 5 of the law empowers the government to confiscate benami properties even in the absence of the transaction being declared illegal through a criminal trial.
“There is no doubt that the unamended 1988 Act tried to create a strict liability offence and allowed separate acquisition of benami property. This begs the question whether such a criminal provision, which the State now intends to make use of, in order to confiscate properties after 28 years of dormancy, could have existed in the books of law. Other than the abuse and unfairness such exercise intends to bring about, there is a larger constitutional question about existence of such strict provisions without adequate safeguards,” a Bench, comprising Chief Justice NV Ramana and Justices CT Ravikumar and Hima Kohli said.
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In its 96-page judgement, the SC said “authorities concerned cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act that is October 25, 2016”.
The SC ruling came on an appeal of the Centre, which challenged the Calcutta High Court judgment stating that amendment made in the 1988 Act in 2016 are applicable with prospective effect.
The apex court also declared Section 3(2) the Benami Transactions (Prohibition) Amendment Act, 2016, as “unconstitutional”, branding it “manifestly arbitrary”. Section 3 of the law deals with “Prohibition of benami transactions”. Its sub-section (2) says that “whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both”.
“We hold Section 3(2) of the Benami Transactions (Prohibition) Act, 1988, as unconstitutional,” the Bench ruled.
The Benami Transactions (Prohibition) Amendment Act came into effect on November 1, 2016, following the amendment of a 28-year-old law. The Act of 1988 was made to prohibit benami transactions and empower the government with the right to recover such properties. The 2016 law expanded the definition of transactions classified as benami under the old law, and imposed more stiff penalties.
“Section 3 (criminal provision) read with Section 2(a) and 5 (confiscation proceedings) of the 1988 Act are overly broad, disproportionately harsh, and operate without adequate safeguards in place. Such provisions were stillborn law and never utilised in the first place. In this light, this court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception,” the order said.
It, however, added that “we make it abundantly clear that the aforesaid discussion does not affect the civil consequences contemplated under Section 4 of the 1988 Act, or any other provision”.
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