2023 (8) TMI 1598 - AT - Benami Property

Prohibition of Benami Property Transactions - Scope of Amendment Act 2016 - alleged benami transaction involved in this case is of the period prior to amendment - HELD THAT - In the light of the facts available on record we find that the appeal is covered by the Judgment of the Apex Court in the case of Union of India Anr. v/s M/s. Ganpati Dealcom Pvt. Ltd. 2022 (8) TMI 1047 - SUPREME COURT Therefore the order of the Adjudicating Authority confirming the action of Initiating Officer needs to be interfered and accordingly the impugned order and the proceedings initiated by the respondent in reference to the alleged benami transaction of a period prior to the Amendment Act of 2016 are set aside. The appeal is allowed in view of the aforesaid.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Amendment Act of 2016 under the Prohibition of Benami Property Transactions Act, 1988, can be applied retroactively to transactions that occurred before the amendment came into force.
• The constitutionality of certain provisions of the unamended and amended Acts, specifically Section 3(2) and the forfeiture provisions under Section 5.
• The implications of the Supreme Court's decision in "Union of India & Anr. v/s M/s. Ganpati Dealcom Pvt. Ltd." on the current case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Retroactive Application of the Amendment Act of 2016

• Relevant Legal Framework and Precedents: The primary legal framework involves the Prohibition of Benami Property Transactions Act, 1988, and its Amendment Act of 2016. The precedent set by the Supreme Court in "Union of India & Anr. v/s M/s. Ganpati Dealcom Pvt. Ltd." is crucial, where it was held that the 2016 Amendment Act cannot be applied retroactively.
• Court's Interpretation and Reasoning: The Tribunal noted that the Supreme Court declared Section 3(2) of the unamended Act and the amended provision unconstitutional. The forfeiture provision under Section 5 was also deemed unconstitutional for transactions prior to the amendment.
• Key Evidence and Findings: The Tribunal found that the alleged benami transaction in question occurred before the 2016 Amendment Act came into effect, thus falling under the purview of the Supreme Court's judgment.
• Application of Law to Facts: The Tribunal applied the Supreme Court's ruling, which prohibits retroactive application of the 2016 Amendment Act, to the facts of the case.
• Treatment of Competing Arguments: The respondents argued for the potential review of the Supreme Court's decision and the prospective application of the Amendment Act. However, these arguments did not alter the Tribunal's decision based on the current legal standing.
• Conclusions: The Tribunal concluded that the proceedings initiated under the Amendment Act of 2016 for transactions prior to its enforcement were not valid.

Issue 2: Constitutionality of Provisions

• Relevant Legal Framework and Precedents: The analysis centered on the constitutionality of Section 3(2) and Section 5 of both the unamended and amended Acts as previously adjudicated by the Supreme Court.
• Court's Interpretation and Reasoning: The Tribunal reiterated the Supreme Court's finding that these sections were unconstitutional, with Section 5's forfeiture provision being punitive and only applicable prospectively.
• Key Evidence and Findings: The Tribunal relied on the Supreme Court's judgment which declared these provisions unconstitutional for being manifestly arbitrary.
• Application of Law to Facts: The Tribunal applied the Supreme Court's interpretation to invalidate the proceedings based on these unconstitutional provisions.
• Treatment of Competing Arguments: The respondents' submission regarding a potential review of the Supreme Court's decision was acknowledged but did not impact the current judgment.
• Conclusions: The Tribunal set aside the proceedings based on the unconstitutional nature of the provisions as applied retroactively.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal quoted the Supreme Court: "Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary... The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions... In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively."
• Core Principles Established: The Tribunal reinforced the principle that punitive legal provisions cannot be applied retroactively unless expressly stated by law. It also upheld the constitutional analysis of the Supreme Court regarding the arbitrariness of certain legislative provisions.
• Final Determinations on Each Issue: The Tribunal allowed the appeal, setting aside the order of the Adjudicating Authority and the proceedings initiated under the Amendment Act of 2016 for transactions prior to its enforcement. It also clarified that future actions by the Department could proceed if aligned with the prospective application of the Amendment Act, pending any review of the Supreme Court's decision.

The judgment concludes by stating that the appeal is allowed, with the impugned order and proceedings set aside, while providing the Department the liberty to seek remedies if the Supreme Court reviews its judgment.