News Highlights:
Benami Transactions (Prohibition) Act 2016: The central government has sought a review of a last August Supreme Court judgment that struck down certain provisions of the Benami Transactions (Prohibition) Act, 1988, and the 2016 amendments to it.
Key Takeaway:
- The Supreme Court struck down one of the provisions of the Benami Transactions (Prohibition) Act of 1988 which provides for the punishment of a maximum jail term of three years or a fine or both for those indulging in benami transactions.
- 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 existed.
- The bench held that the provision violated Article 20(1) of the Constitution.
Benami Transactions (Prohibition) Act, 1988:
- About:
- Benami Transactions (Prohibition) Act, 1988 is an Act of the Parliament of India prohibiting certain types of financial transactions.
- The act defines a ‘benami’ transaction as any transaction in which property is transferred to one person for a consideration paid by another.
- Such transactions were a feature of the Indian economy, usually relating to purchasing property (real estate), and were thought to contribute to the Indian black money problem.
- The act bans all benami transactions and gives the government the right to recover property held benami without compensation.
- Background:
- In 1973, the Law Commission of India, after studying various Acts and the prevailing benami system, recommended formulating an Act to tackle the issue.
- Accordingly, the Benami Transactions (Prohibition) Act 1988 was enacted by the Parliament and came into force.
- Commenced date:
- The act came into force on 5 September 1988. Although benami transactions are now illegal, the act had limited success in curbing them.
- Updated versions were passed in 2011 and 2016, seeking to enforce the prohibitions comprehensively.
- Definition of benami:
- Benami is an Urdu word that means “without a name” or “no name”.
- In this Act, the word is used to define a transaction in which the real beneficiary is not the one in whose name the property is purchased.
- As a result, the person in whose name the property is purchased is just a mask of the actual beneficiary.
Amendments:
- Background:
- In an attempt to curb black money, in July 2016, The Government decided to amend the original act, which the Parliament of India subsequently passed as “The Benami Transactions (Prohibition) Amendment Act, 2016.
- The new law amended the Benami Transactions Act 1988 and renamed the same Prohibition of Benami Property Transactions (PBPT) Act 1988.
- A benami transaction, as defined under Section 2(9):
- 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 for a property carried out or made in a fictitious name.
- Transaction or arrangement in respect of a property where the owner is unaware 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.
- Penalties under this Act
- The Act prescribes that whoever is found guilty of the offence of a benami transaction shall be punishable with rigorous imprisonment for a term which shall not be less than 1 year, but which may extend to 7 years and shall also be liable to fine which may extend to 25 % of the fair market value of the property.
Pic Courtesy: Freepik
Content Source: Economic Times