2022 (11) TMI 1438 - HC - Benami Property

Notice u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 - c onstitutionality of Sections 3 and 5 of the 1988 Act - HELD THAT - The issue involved in these writ petitions are covered in favour of the petitioners by a recent judgment in the case of Union of India Anr. Vs. M/s. Ganpati Dealcom Pvt. Ltd 2022 (8) TMI 1047 - SUPREME COURT as held that Section 3(criminal provision) read with Section 2(a) and Section 5(confiscation proceedings) of the 1988 Act are overly broad, disproportionately harsh, and operate without adequate safeguards in place. Such provisions were still-born law and never utilized in the first place. In this light, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception. Thus WP are disposed of by setting aside the impugned notices under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 and all subsequent proceedings on the basis of the aforesaid notices are quashed and all legal consequences will automatically follow.

Summary

Issues:
1. Interpretation of Sections 2(a), 3(1), and 5 of the Prohibition of Benami Property Transactions Act, 1988.
2. Constitutionality of Sections 3 and 5 of the 1988 Act.
3. Validity of notices issued under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988.

Analysis:
1. The primary issue in this case revolved around the interpretation of Sections 2(a), 3(1), and 5 of the Prohibition of Benami Property Transactions Act, 1988. The petitioners relied on a recent judgment of the Supreme Court to support their contention. The judgment highlighted the broad and potentially arbitrary nature of the criminal provisions under the Act. It emphasized the risks posed to various legal protections and regularized transactions if the Act was interpreted in a certain way. The Court found that Sections 3(1) and 5 of the 1988 Act were overly broad, disproportionately harsh, and lacked adequate safeguards, rendering them unconstitutional from their inception.

2. The constitutionality of Sections 3 and 5 of the 1988 Act was a crucial aspect addressed in the judgment. The Court analyzed the implications of these sections, particularly in relation to criminal provisions and confiscation proceedings. It noted that the Act's provisions were deemed unconstitutional due to their oppressive and arbitrary nature, violating the substantive due process requirement of the Constitution. The judgment highlighted the inherent flaws in Sections 3 and 5, emphasizing their lack of practical utilization and the absence of adequate safeguards, leading to their unconstitutionality from the beginning.

3. Lastly, the validity of notices issued under Section 24(1) of the Prohibition of Benami Property Transactions Act, 1988 was a key issue resolved in the judgment. The respondent, representing the Income Tax Authority, did not dispute the petitioners' contentions regarding the invalidity of the notices. Considering the facts, submissions of the parties, and the Supreme Court's judgment, the High Court disposed of the writ petitions and related proceedings. The impugned notices under Section 24(1) were set aside, and all subsequent proceedings based on those notices were quashed, with legal consequences automatically following the Court's decision.

In conclusion, the judgment provided a detailed analysis of the interpretation, constitutionality, and validity of key provisions under the Prohibition of Benami Property Transactions Act, 1988. It underscored the need for clarity, safeguards, and adherence to constitutional principles in enacting and implementing laws related to benami transactions, ultimately leading to the disposal of the writ petitions in favor of the petitioners.