Qatar World Cup 2022Brazil 1-0 Switzerland, FIFA World Cup 2022: Casemiro sends Brazil to last 16

Supreme Court strikes down provision of 1988 Benami law

Supreme Court terms the provision ‘unconstitutional’ on the ground of being ‘manifestly arbitrary’

August 23, 2022 05:01 pm | Updated 09:51 pm IST - New Delhi

A view of Supreme Court of India. File

A view of Supreme Court of India. File | Photo Credit: Sushil Kumar Verma

In a decision much-awaited by businesses, a three-judge Bench led by Chief Justice N.V. Ramana, declared as unconstitutional Sections 3(2) and 5 introduced through the Benami Transactions (Prohibition) Amendment Act of 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.

Justice Ramana, who wrote the 96-page judgment, held that the provision violated Article 20(1) of the Constitution.

Article 20(1) mandates that no person should be convicted of an offence, which was not in force “at the time of the commission of the act charged as an offence”.

Section 5 of the 2016 Amendment Act said that “any property, which is subject matter of benami transaction, shall be liable to be confiscated by the Central Government”. The court held that this provision cannot be applied retrospectively.

The CJI dismissed the government’s version that forfeiture, acquisition and confiscation of property under the 2016 Act was not in the nature of prosecution and cannot be restricted under Article 20.

The court observed that the 2016 Act condemned not only transactions that were traditionally denominated as benami but rather a “new class of fictitious and sham transactions”. The court said the intention of the Parliament was to condemn property acquired from ill-gotten wealth. “These proceedings cannot be equated as enforcing civil obligations,” the CJI noted.

The court explained that the 2016 Act contemplated an “in­ rem forfeiture”, by which the taint of entering into a benami transaction is transposed to the asset itself”.

“When such a taint is being created not on the individual, but on the property itself, a retroactive law would characterise itself as punitive for condemning the proceeds of sale which may also involve legitimate means of addition of wealth,” the judgment said.

Steep powers

The court also noted that the Act also granted extensive powers of discovery, inspection, compelling attendance, compelling production of documents to officials. It also empowered authorities to take the assistance of police officers, custom officers, income tax officers etc., for furnishing information.

“It is also necessary to note that a person who supplies false information before any authority, is subjected to rigorous imprisonment of up to five years under Section 54 of the 2016 Act,” the court highlighted.

The court dismissed the government’s contentions that the 2016 Act was merely procedural in nature. It said the provisions were substantive on the other hand.

“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, viz., October 25, 2016. As a consequence, all such prosecutions or confiscation proceedings shall stand quashed,” the Supreme Court directed.

Top News Today

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.