Benami Transaction Amendment Act (2016)

In News: The Supreme Court has ruled that Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 is unconstitutional as it is manifestly arbitrary.

• It further said that the Benami Transactions (Prohibition) Amendment Act, 2016 can be applied only prospectively and not retrospectively.

Judgment

• A three-judge Bench, declared as unconstitutional Sections 3(2) and 5 introduced through the Benami Transactions (Prohibition) Amendment Act, 2016.
• The 2016 law amended the original Benami Act of 1988, expanding it to 72 Sections from a mere nine.
• Section 3(2) mandates three years of imprisonment for those who had entered into benami transactions between September 5, 1988 and October 25, 2016.
• That is, a person can be sent behind bars for a benami transaction entered into 28 years before the Section even came into existence.
• The bench held that the provision violated Article 20(1) of the Constitution.

Article 20: Protection in Respect of Conviction for Offences

• Article 20 grants protection against arbitrary and excessive punishment to an accused person, whether citizen or foreigner or legal person like a company or a corporation.
• It contains three provisions in that direction:

1. No ex-post-facto law: No person shall be (i) convicted of any offense except for violation of a law in force at the time of the commission of the act, nor (ii) subjected to a penalty greater than that prescribed by the law in force at the time of the commission of the act.
2. No double jeopardy: No person shall be prosecuted and punished for the same offense more than once.
3. No self-incrimination: No person accused of any offense shall be compelled to be a witness against himself.

What is Benami Transaction?

• Benami literally means ‘without a name’. Therefore, an asset without a legal owner or a fictitious owner is called benami.
• It can be a property of any kind, whether movable or immovable, acquired by way of benami transaction.

Benami Transaction (Prohibition) Act, 1988:

• Benami transactions were first prohibited in India under Section 2(a) of the Benami Transactions (Prohibition) Act, 1988.
• The legislative intent behind the prohibition on benami transactions was to deter people from engaging in such transactions for dishonourable purposes, such as money laundering, tax evasion, etc.
• However, no rules were enacted to govern the procedural execution of the legislation.
• As a result, until the changes made by the Benami Transactions (Prohibition) Amendment Act 2016, the original Act’s practical application was ineffective.

Benami Transactions (Prohibition) Amendment Act 2016:

• In July 2016, “The Benami Transactions (Prohibition) Amendment Act, 2016″ was enacted.

Defined Benami Transactions

• Where a property is transferred to or is held by a person and the consideration for such property has been provided by another person.
• Transaction or arrangement in respect of a property carried out or made in a fictitious name.
• Transaction or arrangement in respect of a property where the owner of the property is not aware of or denies knowledge of such ownership.
• Transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious.

Defined the Benamidar –

• ‘Benamidar’ implies a person or a fictitious person, in whose name a benami property is transferred or held.
• Law provides that a Benamidar cannot re-transfer the benami property held by him to the beneficial owner.

Scope of the term ‘Property’ –

• It may be movable or immovable, tangible or intangible, and corporeal or incorporeal.

Power of Authorities –

• Provides for an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority.
• Appeals against orders of the Appellate Tribunal will lie to the high court.
• The special court should conclude the trial within six months from the date of filing of the complaint.

The prescribed authorities under the Act have very wide powers –

• Discovery and inspection.
• Enforcing the attendance of any person, including officers of banking, financial institution, any other intermediary or reporting entity.
• Authority to instruct to produce the books of accounts.
• Receiving evidence on affidavits.
• Confiscation of benami property – The Act empowers the authorities to provisionally attach properties.
• Once it is adjudicated that a property is benami, it can be confiscated by the Central government.

Penal consequences –

• A person found guilty of the offence of benami transaction can face rigorous imprisonment from one to seven years.
• Fine is also levied up to 25% of the fair market value of the property.

Source: Indian Express