2019 (7) TMI 1001 - HC - Benami Property

Benami transaction - Proceedings u/s 24 of the Prohibition of Benami Property Transactions Act, 1988 - retrospective applicability of the Benami Amendment Act, 2016 - provisional attachment of the benami properties - scope of amendment to act - Whether substitution of the term acquisition by another term i.e. confiscation, cannot be termed as penal, in the backdrop of the object sought to be achieved through the Benami Amendment Act of 2016 - Whether the provisions of Benami Amendment Act, 2016, shall be applicable retrospectively or not? - Power of High Court to exercise writ jurisdiction - HELD THAT - High Court could interfere in exercise of writ jurisdiction, if, the conditions precedent to the exercise of jurisdiction under the statutory provisions did not exist even at the stage of notice issued. Thus, the High Courts have power in appropriate cases to prohibit executive authority from acting without jurisdiction. Moreover, if executive authority exercised the power without jurisdiction that would subject an individual to lengthy proceedings and unnecessary harassment. Hence, to prevent such lengthy proceedings and unnecessary harassment, recourse to jurisdiction under Article 226 and/or227 of the Constitution is not prohibited. Further, the legislative drafting is more than an ordinary prose which differs in provenance, features and its import as to the meaning attached thereto and presumptions as to intendment of the legislation. By now, it is well settled law that unless a contrary intention is reflected, a legislation is presumed and intended to be prospective. For in the normal course of human behavior, one is entitled to arrange his affairs keeping in view the laws for the time being in force and such arrangement of affairs should not be dislodged by retrospective application of law. The principle of law known as lex prospicit non prospicit (law looks forward not backward), is a well known and accepted principle. The retrospective legislation is contrary to general principle for legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried out in the faith of the then existing law (vide Phillips Vs. Eyre (1870)LR 6 QB 1). Thus, the principle against retrospectivity is the principle of fairplay and unless there is a clear and unambiguous intendment for retrospective effect to the legislation which affects accrued rights or imposes obligations or castes new duties or attaches a new disability is to be treated as prospective. It is trite law that an explanatory or declaratory Act is intended to supply an obvious omission or is enacted to clear doubts as to the meaning of the previous Act. While retrospective operation is generally intended as to declaratory or curative provisions, which is supplied with the language shall be deemed always to have meant . Therefore, in absence of clarity amendment being declaratory or curative in the face of unambiguous or confusion in the pre-amended provisions; the same is not required to be treated as curative or declaratory amendment. Viewed in the light of the settled legal proposition, as aforesaid, Benami Amendment Act, 2016, neither appears to be clarificatory nor curative. Moreover, by way of amendment penal consequences have been introduced providing for confiscation of the benami property and enhanced punishment. By now, it is well settled law that a substantive provision unless specifically made retrospective or otherwise intended by the Parliament should always be held to be prospective. The power to confiscate and consequent forfeiture of rights or interests are drastic being penal in nature, and therefore, such statutes are to be read very strictly. However, there can be no exercise of powers under such statutes by way of extension or implication (vide O.Konavalov 2006 (3) TMI 145 - SUPREME COURT In view of the settled legal proposition that no authority, much less, a quasi judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly; is a question that is always open for scrutiny by the High Court in an application under Article 226/227 of the Constitution of India. The very question of correctness and legality of the issuance of notice can be examined in exercise of writ jurisdiction. Article 20 of the Constitution of India is fundamental right guaranteed under Part-III of the Constitution and the penal consequences emanating from the Benami Amendment Act, 2016, in infraction to the mandate of fundamental rights guaranteed under Article 20 of the Constitution; cannot be given retrospective effect in absence of a clear stipulation by the Parliament on retrospectivity. This Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect. This Court has neither examined nor commented upon merits of the writ applications but has considered only the larger question of retrospective applicability of the Benami Amendment Act, 2016 amending the original Benami Act of 1988. Thus, the authority concerned would examine each case on its own merits keeping in view the fact that amended provisions introduced and the amendments enacted and made enforceable w.e.f. 1st November, 2016; would be prospective and not retrospective. The batch of writ applications stands disposed off, as indicated above.

Summary

Issues Involved:
1. Jurisdiction of income tax authorities under the Benami Transactions (Prohibition) Amendment Act, 2016.
2. Retrospective applicability of the Benami Transactions (Prohibition) Amendment Act, 2016.
3. Maintainability of writ petitions in light of pending adjudication.
4. Procedural fairness and compliance with natural justice principles.
5. Interpretation and application of penal provisions under the amended Benami Act.

Issue-Wise Detailed Analysis:

1. Jurisdiction of Income Tax Authorities Under the Benami Transactions (Prohibition) Amendment Act, 2016:
The petitioners challenged the initiation of proceedings under Section 24 of the amended Benami Act, arguing that the income tax authorities acted without jurisdiction since the alleged benami transactions occurred before the Act's amendment came into effect on 1st November 2016. The court noted that the show cause notices and provisional attachment orders were issued based on documents found during search and seizure operations, indicating benami transactions. The petitioners contended that the Benami Amendment Act of 2016 should not apply retrospectively to transactions that occurred before its enactment.

2. Retrospective Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016:
The court examined whether the amended provisions of the Benami Act could be applied retrospectively. It was argued that the Benami Amendment Act of 2016, which introduced penal provisions and enhanced punishments, should not apply to transactions that took place before its commencement. The court referred to several judgments, including the Supreme Court's decision in R. Rajagopal Reddy vs. Padmini Chandrasekharan, which held that the Benami Act creates substantive rights and liabilities and cannot be applied retrospectively. The court concluded that the Benami Amendment Act of 2016 is not declaratory or curative and should be applied prospectively.

3. Maintainability of Writ Petitions in Light of Pending Adjudication:
The respondents argued that the writ petitions were premature and not maintainable since the matters were still pending before the Adjudicating Authority. The court, however, held that the High Court has the jurisdiction to entertain writ petitions under Article 226 of the Constitution, even when alternative remedies are available, especially when fundamental rights are at stake or when the authority acts without jurisdiction. The court emphasized that the petitioners' challenge to the jurisdiction of the income tax authorities to initiate proceedings under the amended Act was a pure question of law, making the writ petitions maintainable.

4. Procedural Fairness and Compliance with Natural Justice Principles:
The petitioners alleged that the income tax authorities acted arbitrarily and without following due process, as the notices for provisional attachment were issued without thorough inquiries. The court noted that procedural fairness and compliance with natural justice principles are essential, and any action taken without jurisdiction or in violation of these principles could be challenged in a writ petition. The court directed that the Adjudicating Authority should provide a fair opportunity to the petitioners to present their case and decide the matters on merits.

5. Interpretation and Application of Penal Provisions Under the Amended Benami Act:
The court examined the penal provisions introduced by the Benami Amendment Act of 2016, which included confiscation of benami properties and enhanced punishments. It was argued that these provisions should not be applied retrospectively, as doing so would violate Article 20 of the Constitution, which prohibits retrospective application of penal laws. The court referred to various judgments, including the Supreme Court's decision in Mangathai Ammal vs. Rajeswari, which held that the Benami Act's penal provisions cannot be applied retrospectively. The court concluded that the penal provisions of the Benami Amendment Act of 2016 should be applied prospectively.

Conclusion:
The court held that the Benami Transactions (Prohibition) Amendment Act, 2016, cannot be applied retrospectively. The writ petitions were found to be maintainable, and the income tax authorities' actions were subject to judicial review to ensure compliance with jurisdictional limits and procedural fairness. The court directed the Adjudicating Authority to decide the matters on merits, keeping in view that the amended provisions are prospective.