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Benami Law of 1988

  • Posted By
    10Pointer
  • Categories
    Polity & Governance
  • Published
    25th Aug, 2022

Context

Recently, the Supreme Court struck down one of the provisions of the Benami Transactions (Prohibition) Act of 1988 which provides for the punishment of a maximum jail term of three years or a fine or both for those indulging in benami transactions.

 About the recent decision

  • The 1988 Act was made to prohibit Benami transactions and the right to recover property that is held to be Benami. 
  • Section 3(2) of the Benami Transactions (Prohibition) Act, 1988:
    • The apex court termed the provision unconstitutional on the ground of being manifestly arbitrary. 
    • It will not affect the civil consequences contemplated under the Act. 
    • Section 3 of the statute deals with the issue of Prohibition of benami transactions and its impugned sub-section (2) says:
      • Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. 
  • Section 3(3) of the 2016 amendment: It enhanced the three-year imprisonment to seven years and fine of up to 25% of the fair market value of the property, a provision that remains untouched.
  • No retrospective application:The forfeiture provision under Section 5 of the 2016 Act being punitive in nature could only be applied prospectively and not retroactively.
  • Major issue:Article 20(1): Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution. 
    • Article 20(1) means that the legislature cannot make a law which provides for punishment of acts which were committed prior to the date when it came into force. This means that a new law cannot punish an old act.

What is Benami Property?

  • Benami in Hindi means without name. So, a property bought by an individual not under his or her name is benami property.
  • It can include property held in the name of spouse or child for which the amount is paid out of known sources of income. 
  • A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income also falls under benami property.
  • The transaction involved in the same is called benami transaction.
  • The benami transactions include buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents.

What is the 1988 Benami Property Act?

  • Benami Transactions (Prohibition) Act, 1988 or 1988 Benami Property Act is an act of the Indian parliament that disallows certain financial transactions. 
  • This act labels a 'benami' transaction as any transaction in which property is transferred to one person for the amount paid by another person.
    • In legal terms, it means any transaction in which property is transferred to one person for a consideration paid or provided is called a 'benami transaction'.
  • To block all loopholes, the government in July 2016 decided to amend the original act.
    • So after further amendment, the Benami Transactions (Prohibition) Amendment Act, 2016 came into force on November 1, 2016.

About Benami Transaction Amendment Act 2016

  • This amendment came into effect in November 2016. 
  • In 2016, the government of India amended the Benami Transaction Amendment Act. 
  • The motive of this amendment was to curb black money in India. 
  • This new law amended the Benami Transactions Act, 1988 and renamed the same as Prohibition of Benami Property Act (PBPT), 1988.
  • The Act provides for 4 major Authorities as appointed by the Central Government.
    • The Initiating Officer
    • The Approving Authority
    • The Administrator
    • The Adjudicating Authority
  • The Act prescribes that whoever is found guilty of the offence of a benami transaction shall be punishable with rigorous imprisonment for a term which shall not be less than 1 year, but which may extend to 7 years and shall also be liable to fine which may extend to 25 % of the fair market value of the property. 

Verifying, please be patient.

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