• The Supreme Court held that Benami Transactions (Prohibition) Amendment Act, 2016 does not have retrospective application and the authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the legislation.

• The apex court said section 3(2) and section 5 of the Benami Transactions (Prohibition) Act, 1988 are vague and arbitrary.

• The verdict came on the appeal of the Centre challenging the Calcutta High Court judgment in which it was held that the amendment made in the 1988 Act in 2016 would be applicable with prospective effect.

Benami Transactions (Prohibition) Amendment Act, 2016

• The Benami Transactions (Prohibition) Amendment Act, 2016 came into effect on November 1, 2016. 

• The term ‘benami transaction’ generally implies that one purchases the property in the name of somebody else — a name lender, and the purchaser does not hold beneficial interest in the property. Literally, ‘benami’ means ‘without a name’. The simplest example is if person ‘A’  (real owner) purchases a property from ‘B’ in the name of ‘C’ (benamidar/ostensible owner), wherein ‘A’ exercises rights/interest over the property.

• Though the Benami Transactions (Prohibition) Act, 1988 had been on the statute book, the same could not be made operational because of certain inherent defects.

• With a view to providing an effective regime for prohibition of benami transactions, the said Act was amended through the Benami Transactions (Prohibition) Amended Act, 2016. The amended law empowers the specified authorities to provisionally attach benami properties which can eventually be confiscated.

• Besides, if a person is found guilty of offence of benami transaction by the competent court, he/she shall be punishable with rigorous imprisonment for a term not less than one year but which may extend to seven years and shall also be liable to fine which may extend to 25 per cent of the fair market value of the property.

Key points from SC judgment:

• The Centre had contended that the 2016 Act would be applicable retrospectively.

• The top court said the continued presence of an unconstitutional law on the statute book does not prevent it from holding that such unconstitutional laws cannot enure to the benefit of or be utilised to retroactively amend laws to cure existing constitutional defects.    

• It is in this unique circumstance that confiscation contemplated under the period between September 5, 1988, and October 25, 2016, would characterise itself as punitive if such confiscation is allowed retroactively, the bench said.  

• The apex court said that the legislature has the power to enact retroactive/retrospective civil legislation under the Constitution.

• However, Article 20(1) mandates that no law mandating a punitive provision can be enacted retrospectively, it said.

Manorama Yearbook app is now available on Google Play Store and iOS App Store