2022 (10) TMI 19 - HC - Benami Property

Constitutional validity - Amendment to Prohibition of Benami Property Transactions Act 1988 as amended by the Benami Transactions (Prohibition) Amendment Act 2016 - Benami property transaction - Scope of Amendment Act of 2016 Punishment of imprisonment for offence - HELD THAT - Supreme Court in M/S. GANPATI DEALCOM PVT. LTD. 2022 (8) TMI 1047 - SUPREME COURT observed that once Sections 3 and 5 of the Benami Property Act were declared as unconstitutional it would mean that the Amendment Act of 2016 would in effect create new provisions and new offences as the offences under Section 3(1) for the transactions entered into between 05.09.1988 (when the original Act received the presidential assent) and 25.10.2016 (when the Amendment Act of 2016 was notified) the law cannot retroactively invigorate a still-born criminal offence. Thereafter it was categorically held that the Amendment Act of 2016 containing criminal provisions would be applicable only prospectively. Criminal provisions under the Benami Property 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 amount to punitive punishment. It has declared that the Amendment Act of 2016 is not merely procedural but prescribes substantive provisions. Therefore concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to coming into force of the 2016 Amendment Act i.e. 25.10.2016. As a consequence all such transactions or confiscation proceedings shall stand quashed. Supreme Court has also clarified that in rem forfeiture provision under Section 5 of the Amendment Act of 2016 being punitive in nature can only be applied prospectively and not retroactively. In view of above impugned order dated 27.04.2022 passed by respondent No.1 is hereby set aside.

Summary

Issues:
1. Quashing of order under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988.
2. Retroactive or prospective effect of the Benami Property Act as amended by the Amendment Act of 2016.

Analysis:
Issue 1: The petitioner sought the quashing of an order dated 27.04.2022 passed by the adjudicating authority under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988. The alleged benami property transaction occurred before the 2016 amendment came into force. The High Court referred to a recent decision in a similar matter where it was held that the provisions of the Benami Property Act were unconstitutional from their inception due to being overly broad and lacking adequate safeguards. Consequently, the High Court set aside the impugned order dated 27.04.2022.

Issue 2: The High Court discussed the retroactive or prospective effect of the Benami Property Act as amended by the Amendment Act of 2016. The Supreme Court's decision clarified that the Amendment Act of 2016 was not merely procedural but contained substantive provisions. It was held that concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into before the 2016 Amendment Act came into force. The in rem forfeiture provision under Section 5 of the Amendment Act of 2016, being punitive in nature, can only be applied prospectively and not retroactively. As a result, all such prosecutions or confiscation proceedings for transactions entered into before 25.10.2016 were to be quashed. The High Court, in line with the Supreme Court's ruling, allowed the writ petition to the extent of setting aside the impugned order and closed any pending miscellaneous petitions.

In summary, the High Court's judgment addressed the quashing of the order under the Benami Property Transactions Act, 1988, and the application of the Amendment Act of 2016, following the Supreme Court's decision on the retroactive or prospective effect of the amended provisions.