2023 (2) TMI 1102 - HC - Benami Property

Prohibition of Benami Property Transactions - attachment and confiscation of properties which were admittedly acquired prior to the enforcement of the Benami Transactions (Prohibition) Amendment Act, 2016 - HELD THAT - These petitions would be liable to be allowed in light of the recent decision rendered in Union of India Anr. v. Ganpati Dealcom Pvt.Ltd. 2022 (8) TMI 1047 - SUPREME COURT Continuation of only the civil provisions u/s 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. As 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. In light of the aforesaid enunciation of the law on the subject, it is evident that the impugned proceedings cannot be sustained. Accordingly, and in view of the law as declared by the Supreme Court, the instant writ petitions are allowed.

Summary

Issues Involved:
1. Retrospective application of the Benami Transactions (Prohibition) Amendment Act, 2016.
2. Constitutionality of Sections 3 and 5 of the Benami Property Transactions Act, 1988.
3. Powers of attachment and confiscation of properties acquired prior to the 2016 Amendment.

Issue-Wise
Detailed Analysis:

1. Retrospective Application of the Benami Transactions (Prohibition) Amendment Act, 2016:
The court examined whether the 2016 Amendment Act is retroactive or prospective. The Supreme Court in Union of India & Anr. v. Ganpati Dealcom Pvt. Ltd. clarified that the 2016 Act could not be applied retroactively for transactions that occurred before its enforcement. The court highlighted that applying the 2016 Act retroactively would amount to punitive punishment, which is not permissible.

2. Constitutionality of Sections 3 and 5 of the Benami Property Transactions Act, 1988:
The Supreme Court found Sections 3 and 5 of the 1988 Act unconstitutional. The absence of mens rea and the lack of procedural safeguards made these provisions overly broad and harsh. The court noted that the 1988 Act was "merely a shell, lacking the substance that a criminal legislation requires for being sustained." The provisions were deemed "manifestly arbitrary" and "never utilized in the first place," thus unconstitutional from their inception.

3. Powers of Attachment and Confiscation of Properties Acquired Prior to the 2016 Amendment:
The Supreme Court ruled that the powers of attachment and confiscation under the 2016 Amendment could not be applied to properties acquired before the amendment came into force. The court emphasized that such retroactive application would be punitive and violate Article 20(1) of the Constitution. The court stated that the taint of benami transactions attaches to the property perpetually, making retroactive confiscation punitive.

Conclusion:
The High Court allowed the writ petitions in light of the Supreme Court's decision. The impugned proceedings, including summons, show cause notices, and provisional attachment orders, were quashed. The court held that the provisions of the 2016 Amendment Act could not be applied retroactively for transactions prior to its enforcement on 25.10.2016. Consequently, all criminal prosecutions or confiscation proceedings initiated under the 1988 Act for transactions before the 2016 Amendment were quashed.