Benami Law of 1988

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.