What is 1988 Benami Property Act and Benami Transaction Amendment Act 2016

Supreme Court termed 'The Benami Act' unconstitutional. What is the 1988 Benami property act? What is the Benami Transaction Amendment Act 2016? Why is it unconstitutional? Read to know everything

The Supreme Court of India stated the provision of the Benami Transaction Amendment Act "unconstitutional" on the grounds of being "manifestly arbitrary". Some of the provisions dealt with a three-year jail term and a penalty.

Also read | Value of benami properties decreased by 54% in the past three years

Chief Justice N.V Ramana stated that the Benami Transactions Amendment Act of 2016 should not be applied retrospectively. Section 3(2) suggests that whoever enters in a benami transaction is punishable with imprisonment for a term which might get extended upto three years with a fine, without a fine or both.

“We hold Section 3(2) of 1988 unamended act as unconstitutional", and added that such a coercive provision can’t have a retrospective effect." said the Judge bench.

Also read | Supreme Court rules that benami law cannot be applied retrospectively

The bench further remarked that the amendment of 2016 is not procedural.

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'.

What is Benami Transaction Amendment Act 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 amendment came into effect in November 2016. This new law amended the Benami Transactions Act, 1988 and renamed the same as Prohibition of Benami Property Act (PBPT), 1988.

What was the motive behind Benami Transaction Act 2016?

Apart from curbing the black money, the motive of the Amendment Act was to strengthen the Benami Act, of 1988. Here are some points that you should know:

- Many transactions in real estate involve unaccounted investments, making it difficult to track.

- Benami Act can help the government stop black money from circulating in the system.

- Government can increase tax revenue by bringing down corruption and false trade practices.

- It can increase transparency and honesty in Indian businesses.

Who is benamidar?

Benamidar is a person who helps another person to enter benami transactions. This person may also get liable to pay a fine of up to 25 per cent of the fair market value of such benami property or get jailed for 1 to 7 years.

Why is Benami Property Act unconstitutional?

Chief Justice of India, N.V Ramana wrote a 96-page judgment where he stated that this provision violated Article 20(1) of the Indian Constitution.

According to Article 20(1), no person should be convicted of an offence or violation which was not in force "at the time of the commission of the act charged as an offence".

Benami Provisions Act 2016 has section 5 which states that "any property which is a subject matter of a benami transaction shall be liable to be confiscated by the central government.” The Supreme court announced that this provision cannot be applied retrospectively.

Chief Justice Ramana dismissed the government's version that acquisition, confiscation of property, and forfeiture were not like prosecution and can not be restricted under Article 20.

(Written by Zuhair Zaidi)