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:
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.
No double jeopardy: No person shall be prosecuted and punished for the same offense more than once.
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.
