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Benami Law

Benami Law:

The Supreme Court declared as “unconstitutional and manifestly arbitrary” the amendments introduced to the Benami law in 2016, which apply retrospectively and can send a person to prison for three years even as it empowers the Centre to confiscate “any property” subject to a benami transaction.

  • In a decision much awaited by businesses, a three-judge Bench, led by Chief Justice of India N.V. Ramana, declared as unconstitutional Sections 3(2) and 5 introduced through the Benami Transactions (Prohibition) Amendment Act, 2016.
  • The 2016 law amended the original Benami Act of 1988, expanding it to 72 Sections from a mere nine.
  • Section 3(2) mandates three years of imprisonment for those who had entered into benami transactions between September 5, 1988 and October 25, 2016.
  • That is, a person can be sent behind bars for a benami transaction entered into 28 years before the Section even came into existence.
  • Justice Ramana, who wrote the 96-page judgment, held that the provision violated Article 20(1) of the Constitution.
  • Article 20(1) mandates that no person should be convicted of an offence, which was not in force “at the time of the commission of the act charged as an offence”.
  • Section 5 of the 2016 Amendment Act said that “any property, which is subject matter of benami transaction, shall be liable to be confiscated by the Central Government”.
  • The court held that this provision cannot be applied retrospectively.