SC: No Criminal Proceedings can be initiated against any Benami transaction prior to October, 2016

[CA Bimal Jain]

The Hon’ble Supreme Court, India in the matter of UNION OF INDIA & ANR. VERSUS M/S. GANPATI DEALCOM PVT. LTD. - 2022 (8) TMI 1047 - SUPREME COURT has held that the revenue department cannot initiate criminal proceedings for transactions entered into prior to the Benami Transaction (Prohibition) Amendment Act, 2016 (“the Benami Amended Act”) and hence all such prosecutions or confiscation proceedings shall stand quashed.

Facts:

M/s Ganpati Dealcom (P.) Ltd (“the Respondent”) has purchased a property in its   name from various sellers for a total consideration of INR 9,44,00,000 and the consideration for the aforesaid purchase was paid from the capital of the company. Shareholding of 99.99% of the Respondent were acquired by M/s PLD Properties Pvt. Ltd. and M/s Ginger Marketing Pvt. Ltd. 

Accordingly, on August 29, 2017 the Adjudicating Authority (“the Appellant”) issued a Show Cause Notice (“SCN”) to the Respondent to show cause as to why the aforesaid property should not be considered as Benami property and the Respondent as Benamidar within the meaning of the Benami Amended Act and accordingly, the Respondent replied to the aforesaid SCN denying that the scheduled property is a Benami property and an order was passed under Section 24(4)(b)(i) of the Benami Amended Act, provisionally attaching the said property.

Aggrieved by the aforesaid attachment order, the Respondent­ filed a Writ Petition - M/S. GANPATI DEALCOM PVT. LTD. VERSUS UNION OF INDIA & ANR.  - 2019 (12) TMI 840 - CALCUTTA HIGH COURT before the Hon’ble High Court, Calcutta, which was disposed of by stating that the Benami Amended Act is a new legislature and cannot have a retrospective effect and hence the Appellant could not on basis of the Benami Amended Act, allege contravention and start prosecution against the Respondent.

Appellant’s Contention:

• The Benami Amended Act was brought in order to solve the mischief of lack of procedure in the pre-amended act i.e. Prohibition of Benami Property Transaction Act, 1988 (“the Benami Property Act”) and accordingly it sought to implement retrospectively and there is no bar against retrospective application.
• Section 5 of the Benami Property Act provided mechanism for confiscation and forfeiture of benami property, therefore any amended act which is consolidating in nature can be applied retrospectively.

Respondent’s contention

• The Benami Amended Act was not intended to be retrospectively applicable.
• The Benami Amended Act provide a new definition to Benami transaction and has substantially changed the scope of the offences enlarging its ambit, as in the pre-amended act only transfer of property was an offence. However, the Benami Amended Act has added multiple other actions as offence and it is a well settled principle that any enactment which substantially affect the rights of people cannot be applied retrospectively and hence, the Amended Act can only be prospectively in nature.
• The Appellant cannot initiate criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the Benami Amended Act, viz., October 25, 2016 and similarly all such prosecutions or confiscation proceedings should be quashed.

Issue:

• Whether the Benami Amended Act can be applied retrospectively in respect of confiscation or prosecution of Benami property transaction entered prior to October 25, 2016?

Held:

The Hon’ble Supreme Court, India in UNION OF INDIA & ANR. VERSUS M/S. GANPATI DEALCOM PVT. LTD. - 2022 (8) TMI 1047 - SUPREME COURThas held as under:

• The criminal provisions under the Benami Property Act prior to Benami Amended Act were arbitrary and incapable of application, the law through which the amendment could not retrospectively apply for confiscation of those transactions as the same would amount to punitive punishment.
• Usually, when confiscation is enforced retrospectively, 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.
•  Section 3(2) and Section 5 of the Benami Property Act is declared as unconstitutional as it is violative of Article 20(1) of the Indian Constitution and manifestly arbitrary.
• The Appellant cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the Benami Amended Act, viz., October 25, 2016 and hence all such prosecutions or confiscation proceedings shall stand quashed.

(Author can be reached at [email protected])