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Understanding Benami Property, Benami Transaction, and Benamidar
In India, the term “Benami” refers to a property purchased by an individual not under their name. It could be purchased under the name of a spouse, child, or even under a fictitious name. The main person on whose name the property is purchased is known as “Benamidar”. These transactions often involve ‘black money’ and are therefore a common method for money laundering.
Supreme Court’s Verdict on the Benami Transactions (Prohibition) Act 1988
Recently in news, the Supreme Court of India termed the Section 3(2) of the Benami Transactions (Prohibition) Act 1988 as unconstitutional. This section deals with punishments related to entering into benami transactions. The court further clarified that the Act which was amended in 2016 can only be applied prospectively. As a result, all prosecutions and confiscation proceedings prior to the force of the amended Act were quashed.
The Amendment Act 2016: Section 3(3) and the Supreme Court Ruling
According to the amendment Act passed in 2016, the three-year imprisonment sentence was extended to seven years along with a fine of 25% of the fair market value of the property if a person indulges in any benami transactions. However, the Supreme Court stated that authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered before the 2016 Act came into force on 25th October 2016.
Forfeiture of Benami Properties and Supreme Court Interpretation
The Supreme Court also declared the provision in the 1988 Act concerning forfeiture of benami properties as unconstitutional. The provision in the 2016 amended Act, however, can be applied prospectively as per the Supreme Court. The constitutionality of independent forfeiture proceedings under the 2016 Amendment Act will be decided in appropriate cases.
Prevention of Money Laundering Act (PMLA), 2002
The Supreme Court upheld the provision of PMLA which authorizes authorities to possess property before trial in exceptional cases. The Court also stated that such provision leaves scope for arbitrary application.
Understanding the Benami Transactions (Prohibition) Amendment Act 2016
The Amendment Act 2016 defined a benami transaction as one where:
– a property is held or transferred to a person but paid by another person,
– the transaction is made under a fictitious name,
– the owner is unaware or denies ownership of the property,
– the contributor to the property is not traceable.
Authorities as Per the Amended Act
The Act established four authorities for conducting inquiries or investigations regarding benami transactions: Initiating Officer, Approving Authority, Administrator, and Adjudicating Authority. If an Initiating Officer believes a person is a benamidar, they may issue a notice to that person and potentially hold the property for 90 days from the notice, subject to permission from the Approving Authority.
Penalties as Per the Amendment Act
Any guilty individual can face imprisonment up to seven years and a fine up to 25% of the fair market value of the property.
Important Terms under the Act
– Property: All types of assets, movable or immovable, tangible or intangible.
– Benami Property: Any property involved in a Benami Transaction.
– Benamidar: A person in whose name the Benami Property is transferred or held.
– Beneficial Owner: An undisclosed person for whose benefit the Benami Property is held.
The Relevance of the Act in Civil Services Examination
The topic of prohibition of benami property transactions has been a part of the Civil Services Examination. Puzzles pertaining to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’ have featured in the test earlier.
