Shashwati Chowdhury
Published on: August 23, 2022 at 19:26 IST
On Tuesday, the Supreme Court declared several sections of the Benami Transactions (Prohibition) Act, 1988 and its 2016 amendments to be unconstitutional.
Since the in rem forfeiture provision under Section 5 of the 2016 Amendment Act is punitive in character, a Bench consisting of Chief Justice of India (CJI) NV Ramana, Justices Krishna Murari, and Hima Kohli decided that it can only be used prospectively and not retroactively.
Prior to the 2016 Amendment Act, the Court further determined that the in rem forfeiture clause under Section 5 of the unamended Act of 1988 was unconstitutional because it was clearly arbitrary.
The Court held as a result that the concerned authorities cannot begin or continue criminal prosecution or confiscation procedures for transactions made before the coming into force of the 2016 Act, i.e., October 25, 2016.
The Court therefore quashed all prosecutions or confiscation proceedings brought in connection with transactions that occurred before October 2016.
The Bench further held that the 1988 Act’s Section 3(2), which is obviously arbitrary, violates the Constitution.
As a result of violating Article 20(1) of the Constitution, Section 3(2) of the 2016 Act was also held unconstitutional.
Section 3(2) makes benami transactions criminal and makes them punishable by up to three years in prison.
In addition to changing the Act’s name, this amendment included provisions governing the confiscation, vesting, and attachment of benami property, among other things. Additionally, the modification called for punishments under the new Act for offences involving Benami property transactions.
The Central government filed an appeal with the Supreme Court challenging the ruling.
The Centre contended in its appeal that Section 1(3) of the 1988 Act, with the exception of the amendments made to Sections 3, 5, and 8, allows the Act to take force retrospectively. The Centre has argued that the ruling of the Calcutta High Court did not appreciate this provision.
The Centre also claimed that the 2016 amendments were purely “clarificatory” in nature and provided a procedural machinery for the original Act.