2022 (8) TMI 1047 - SC - Benami Property

Constitutional validity - Amendment to Prohibition of Benami Property Transactions Act 1988 as amended by the Benami Transactions (Prohibition) Amendment Act 2016 - retrospective or prospective effect - Attachment of property - Punishment of impresonment for offence - HELD THAT - In the case at hand the authority that initiates such confiscation is granted extensive powers of discovery inspection compelling attendance compelling production of documents. They are further empowered to take the assistance of police officers custom officers income tax officers and other relevant officers for furnishing information. It is also pertinent to note that any person who fails to furnish information is subjected to a penalty of Rs.25, 000/( Rupees TwentyFive Thousand) under Section 54(A). It is also necessary to note that a person who supplies false information before any authority is subjected to rigorous imprisonment of upto 5 years under Section 54 of the 2016 Act. This Court is aware of the fact that the Right to Property is not a fundamental right rather it is a constitutional right that can be abridged by law. However this Court is not concerned with the constitutionality of such a measure wherein such considerations have to be balanced. Rather the focus is only on the characterization of retroactive confiscation which in these facts and circumstances are punitive. In view of the fact that this Court has already held that the criminal provisions under the 1988 Act were arbitrary and incapable of application the law through the 2016 amendment could not retroactively apply for confiscation of those transactions entered into between 05.09.1988 to 25.10.2016 as the same would tantamount to punitive punishment in the absence of any other form of punishment. It is in this unique circumstance that confiscation contemplated under the period between 05.09.1988 and 25.10.2016 would characterise itself as punitive if such confiscation is allowed retroactively. Usually when confiscation is enforced retroactively the logical reason for accepting such an action would be that the continuation of such a property or instrument would be dangerous for the community to be left free in circulation. When we come to the present enactment history points to a different story wherein benami transactions were an accepted form of holding in our country. In fact the Privy Council had at one point of time praised the sui generis evolution of the doctrine of trust in the Indian law. The response by the Government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this Court that Sections 3 and 5 of the 1988 Act in reality dehors the legality remained only on paper and were never implemented on ground. Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution. Looked at from a different angle continuation of only the civil provisions under Section 4 etc. would mean that the legislative intention was to ensure that the ostensible owner would continue to have full ownership over the property without allowing the real owner to interfere with the rights of benamidar. If that be the case then without effective any enforcement proceedings for a long span of time the rights that have crystallized since 1988 would be in jeopardy. Such implied intrusion into the right to property cannot be permitted to operate retroactively as that would be unduly harsh and arbitrary. We hold as under a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. b) In rem forfeiture provision under Section 5 of the unamended Act of 1988 prior to the 2016 Amendment Act was unconstitutional for being manifestly arbitrary. c) The 2016 Amendment Act was not merely procedural rather prescribed substantive provisions. d) In rem forfeiture provision under Section 5 of the 2016 Act being punitive in nature can only be applied prospectively and not retroactively. e) 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. f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds the aforesaid questions are left open to be adjudicated in appropriate proceedings.

Summary

Issues Involved:
1. Whether the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, has a prospective effect.
2. Constitutionality of Sections 3 and 5 of the 1988 Act.
3. Nature and effect of confiscation provisions under the 2016 Act.
4. Application of Article 20(1) of the Constitution to the 2016 Act.

Detailed Analysis:

1. Prospective Effect of the 2016 Act:
The primary legal question was whether the 2016 Amendment Act has a prospective effect. The Court noted that the 2016 Act introduced new and substantive changes, including a widened definition of 'benami property' and 'benami transaction'. The High Court had held that the 2016 Act does not have retrospective application, referencing the protection under Article 20(1) of the Constitution, which prohibits retrospective criminal legislation.

2. Constitutionality of Sections 3 and 5 of the 1988 Act:
The Court examined the 1988 Act's provisions in detail, noting that Section 3 criminalized benami transactions without expressly including mens rea, making it a strict liability offense. The Court found this approach unduly harsh and contrary to established legal principles, rendering Section 3(1) vague and arbitrary. Similarly, Section 5, which provided for the acquisition of benami property, was deemed manifestly arbitrary due to its lack of procedural safeguards and clarity. Consequently, both Sections 3 and 5 of the 1988 Act were declared unconstitutional from their inception.

3. Nature and Effect of Confiscation Provisions under the 2016 Act:
The 2016 Act expanded the definition of benami transactions and introduced detailed procedures for attachment, adjudication, and confiscation of benami property. The Court analyzed whether these provisions were punitive or civil in nature. It concluded that the confiscation provisions under the 2016 Act, being in rem and attaching a taint to the property itself, were punitive. The Court emphasized that punitive provisions could not be applied retroactively, as this would violate Article 20(1) of the Constitution.

4. Application of Article 20(1) of the Constitution to the 2016 Act:
The Court reiterated that Article 20(1) prohibits retroactive criminal legislation. Since the 1988 Act's criminal provisions were declared unconstitutional, the 2016 Act's amendments could not retroactively apply to transactions entered into before the amendment came into force on 25.10.2016. The Court held that the 2016 Act's criminal and confiscation provisions could only apply prospectively.

Conclusion:
The Supreme Court held that:
a) Section 3(2) of the unamended 1988 Act is unconstitutional for being manifestly arbitrary, and Section 3(2) of the 2016 Act is also unconstitutional as it violates Article 20(1).
b) The in rem forfeiture provision under Section 5 of the unamended 1988 Act was unconstitutional for being manifestly arbitrary.
c) The 2016 Amendment Act prescribed substantive provisions and was not merely procedural.
d) The in rem forfeiture provision under Section 5 of the 2016 Act, being punitive, can only be applied prospectively.
e) Authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into before the 2016 Act came into force on 25.10.2016. All such prosecutions or confiscation proceedings are quashed.
f) The constitutionality of independent forfeiture proceedings under the 2016 Amendment Act on other grounds is left open for future adjudication.