2024 (10) TMI 1120 - SCH - Benami Property

Constitutional validity of the Prohibition of Benami Property Transactions Act, 1988 - Scope of the unamended provisions - whether the Prohibition of Benami Property Transactions Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 has a prospective effect? - HELD THAT - The Court has declared Section 3(2) of the unamended provisions of the Prohibition of Benami Property Transactions Act 1988 as unconstitutional for being manifestly arbitrary and as violative of Article 20(1) of the Constitution. The provisions of Section 5 of the unamended Act, prior to the Amendment of 2016, have been declared to be unconstitutional on the ground that they are manifestly arbitrary. It is not disputed that there was no challenge to the constitutional validity of the unamended provisions. This is also clear from the formulation of the question which arose for consideration before the Bench which has been extracted above. In the submissions of parties which have been recorded in the judgment, the issue of constitutional validity was not squarely addressed. A challenge to the constitutional validity of a statutory provision cannot be adjudicated upon in the absence of a lis and contest between the parties. We accordingly allow the review petition and recall the judgment 2022 (8) TMI 1047 - SUPREME COURT dated 23 August 2022. Civil Appeal No 5783 of 2022 shall stand restored to file for fresh adjudication before a Bench to be nominated by the Chief Justice of India on the administrative side. Where any other proceedings have been disposed of by relying on the judgment of this Court in Ganpati Dealcom Private Ltd 2022 (8) TMI 1047 - SUPREME COURT liberty is granted to the aggrieved party to seek a review in view of the present judgment.

Summary

Issues:
1. Constitutional validity of the Prohibition of Benami Property Transactions Act, 1988.
2. Effect of the Benami Transactions (Prohibition) Amendment Act, 2016.
3. Retroactive application of in rem forfeiture provision under Section 5 of the 2016 Act.
4. Review of the judgment in Union of India and Another v Ganpati Dealcom Private Ltd (2023) 3 SCC 315.

Detailed Analysis:
1. The Supreme Court considered the constitutional validity of the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016. The Court declared Section 3(2) of the unamended 1988 Act and Section 3(2) of the 2016 Act unconstitutional for being manifestly arbitrary and violative of Article 20(1) of the Constitution. Additionally, the in rem forfeiture provision under Section 5 of the unamended 1988 Act, prior to the 2016 Amendment Act, was also declared unconstitutional for being manifestly arbitrary.

2. The Court emphasized that the 2016 Amendment Act was not merely procedural but prescribed substantive provisions. It held that the in rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, could only be applied prospectively and not retroactively. Consequently, the authorities concerned were barred from initiating or continuing criminal prosecution or confiscation proceedings for transactions entered into before the enforcement of the 2016 Act, i.e., before 25-10-2016. All such prosecutions or confiscation proceedings were ordered to be quashed.

3. The Court noted that there was no challenge to the constitutional validity of the unamended provisions in the case. As a challenge to the constitutional validity of a statutory provision cannot be adjudicated upon in the absence of a dispute between the parties, the Court allowed the review petition and recalled the judgment dated 23 August 2022. Civil Appeal No. 5783 of 2022 was restored for fresh adjudication before a Bench nominated by the Chief Justice of India. The judgment clarified that where any other proceedings were disposed of based on the earlier judgment, aggrieved parties were granted liberty to seek a review in light of the present decision.

4. In conclusion, the Supreme Court's judgment addressed the constitutional validity of key provisions of the Prohibition of Benami Property Transactions Act, 1988, and its amendment in 2016. It clarified the prospective application of punitive provisions and the need for a challenge to the constitutional validity of statutory provisions in a contested legal dispute. The Court's decision emphasized the importance of due process and the rule of law in matters concerning property transactions and confiscation proceedings.