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Benami Transactions Act

Benami Transactions Act:

The Supreme Court of India held that Section 3(2) of the Benami Transactions (Prohibition) Act 1988 as unconstitutional on the grounds of being manifestly arbitrary.

  • Section 3(2) prescribes the punishment for entering into benami transaction.
  • The judges held that the Act which was amended in 2016 can only be applied prospectively and quashed all prosecutions or confiscation proceedings before the amended Act came into force.
  • Section 3(3) of 2016 Act:
    • It extended the three-year imprisonment to seven years and fine of up to 25% of the fair market value of the property, if a person enters into any benami transactions.
    • The Supreme Court ruled that “Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act (25th October 2016).
    • As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed”.
  • Forfeiture of Benami Properties:
    • The Supreme Court also held the provision in the 1988 Act regarding forfeiture of benami properties as unconstitutional, and added that the provision in the 2016 amended Act on the same can only be applied prospectively.
    • As it is not concerned with the constitutionality of independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, it was leaving open the question to be decided in appropriate cases.

Prevention of Money Laundering Act (PMLA), 2002:

  • A recent judgement of the Supreme Court upheld the provision of PMLA which allows authorities to take possession of property before trial in exceptional cases.
  • The Supreme Court has said that such provision leaves the scope for arbitrary application.