Dr Ajay Kummar Pandey, Advocate, Supreme Court
The Benami Property Act, is nothing new, it existed since 1988 but with just with 8 Sections. Its scope was enlarged with Benami Transactions (Prohibition) Amendment Act of 2016 with the addition of multiple sections as a result of which the total sections went up to 72. However, the Supreme Court has struck many of its controversial sections.
The new law expanded the definition of a “Benami transaction” and added stringent punishments, which brought a lot of companies and individuals under the government lens and there it ran into conflict, with the constitution, freedom, right of natural justice and probity etc.Finally, the Supreme Court has not only struck down its few controversial amendments termed as ‘ arbitrary and vague’ .but has also called it, “unconstitutional” and manifestly arbitrary and vague, which is going to bring big relief to individuals and companies.
The literal meaning of Benami, is ‘without name’, a property related transaction carried out under a fictitious name, or one where the owner of the property denies having knowledge of the ownership. Also if the identity of the real or beneficial owner is unknown, it is known as a ‘Benami Transaction’.
The new amended law came into force in 2016 but the income tax authorities started confiscating the properties with the retrospective clause of the new law. This clause was struck down by the Supreme Court, which has made income tax authorities’ moves invalid now, benefiting hundreds of individuals and companies.
The SC held that Benami Transactions (Prohibition) Amendment Act, 2016 does not have retrospective application and the authorities cannot initiate or continue criminal prosecution of confiscation proceedings for transactions entered into prior to the coming into force of the legislation.
The Hon’ble Supreme Court elaborated the concept of Benami Transaction in the leading case law Thakur Bhim Singh v. Thakur Kan Singh. The case includes two types of benami transactions. First when the property is bought by the person with his own money but in the name of another person without any intention to benefit that other person.
According to the second case, benami transactions are, where a person who is the owner of the property executes a conveyance in favour of another without the intention of transferring the title to the property there under. In the following case the transferor continues to be the real owner. Benami transactions were not illegal in India before the 1988 Act and there was no punishment or bar for entering into benami transactions.
The Supreme Court in the case Smt. Surasaibalini Debi v. Phanindra Mohan Majumdar relied on the previous case law Petherpermal Chetty v. Muniandi Servai and explained the concept of recovery property by the real owners of the property.
Thus, harsh laws and over enthusiasts’ officers are not the solution to this problem. The best way to deal with this is to link the property with an Aadhar card number, enabling the tax authorities to get all the information about ‘legal owner’ of the property and take necessary legal action if required.
In cases where the price has not been certain the party shall have to pay fair Market Value price that the property would ordinarily fetch if sold in an open market.
In its new avatar, the Amended Benami Transactions(Prohibition ) Act is clearer as it establishes adjudicating authorities and an Appellate Tribunal to deal with benami transactions. Going forward , the officers need to act with due prudence.