Supreme Court strikes down criminal provision of 'benami' law

New Delhi, August 23

The Supreme Court on Tuesday struck down a key provision of the Benami Transactions (Prohibition) Act of 1988, which prescribed a three-year jail term or a fine or both for those indulging in “benami” transactions, terming it “manifestly arbitrary”. “Section 3(2) of the un-amended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution,” a three-judge Bench led by Chief Justice of India NV Ramana said.

The verdict came on the appeal filed by the Centre challenging the December 12, 2019 verdict of the Calcutta High Court, which held that the 2016 Act did not have retrospective application. It had to decide if the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, had a prospective effect.

The top court said the forfeiture provision under Section 5 of the 2016 Act — being punitive in nature — could only be applied prospectively and not retroactively.

The 1988 Act was enacted to prohibit “benami” transactions and the right to recover property held to be “benami”.