SC: Provision of jail term in 1988 benami law unconstitutional
The Supreme Court on Tuesday held as unconstitutional a provision in the Benami Transactions (Prohibition) Act, 1988, that prescribed jail term for entering into benami transactions.
A bench of Chief Justice of India N V Ramana and Justices Krishna Murari and Hima Kohli also held that the Act which was amended in 2016 can only be applied prospectively and quashed all prosecutions or confiscation proceedings before the amended Act came into force.
Section 3(3) of the 2016 amendment enhanced the three-year imprisonment to seven years and fine of up to 25% of the fair market value of the property, a provision that remains untouched.
“Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed,” it said.
The bench also expressed concern on certain findings in the SC’s recent judgement upholding the Prevention of Money Laundering Act, 2002, allowing authorities to take possession of property before trial in exceptional cases saying it leaves the scope for arbitrary application. It said “having perused the said judgement, we are of the opinion that the aforesaid ratio requires further expounding in an appropriate case, without which, much scope is left for arbitrary application”.
The ruling came on an appeal by the Centre challenging a December 2019 decision by the Calcutta High Court which held that the 2016 Act does not have any express provision allowing its retrospective application.
The Centre had argued that under the 1988 Act, there was no machinery or procedure in place to effectuate proceedings against benami transactions and that the Amendment Act was only brought in to remedy this procedural deficiency.
Rejecting the argument, the SC said “the 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions”.
Though it held the punitive provision in the 1988 Act unconstitutional, the court said that this will not affect the civil consequences contemplated under the Act.
It also held as unconstitutional, the provision in the 1988 Act regarding forfeiture of benami properties, and added that the provision in the 2016 amended Act on the same can only be applied prospectively. The court turned down the Centre’s argument that such confiscation under the 1988 Act was civil in nature and hence will not attract any violation of fundamental rights under Article 20(1).
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The court said that as it is not concerned with the constitutionality of independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, it was leaving open the question to be decided in appropriate cases.
The bench added “at this stage, we can only recommend that the utility of independent provisions of forfeiture, distinct from criminal prosecution, needs to be utilised in a proportional manner, looking at the gravity of the offence. Few examples which may pass the muster of proportionality for having such stringent civil forfeiture, may relate to crimes involving terrorist activities, drug cartels or organised criminal activities”.
