The Supreme Court struck down section 3(2) of the Benami Transactions (Prohibition) Act 1988 which prescribes punishment for entering into Benami transactions on the ground of being manifestly arbitrary.
The bench declared that Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution and held that Benami Transactions (Prohibition) Amendment Act 2016 cannot be applied retrospectively as it cannot be held as merely procedural.
The petitioner challenged the impugned judgment dated 12.12.2019 passed by the High Court of Judicature at Calcutta in APO No. 8 of 2019 along with Writ Petition No.687 of 2017 which held that the amendment made in the 1988 Act in 2016 would be applicable with prospective effect.
Section 3(2) of the Benami Act prescribes that whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with a fine or both.
It was observed that the unamended 1988 Act tried to create a strict liability offence and allowed the separate acquisition of Benami property. The main question was whether such a criminal provisionto confiscate properties after 28 years of dormancy, could have existed in the books of law.
When confiscation was enforced retroactively, the logical reason for this would be that the continuation of such property or instrument would be dangerous for the community, it said, and held that “any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution”.
The continuation of only the civil provisions would mean the legislative intent was to ensure that the ostensible owner would continue to have full ownership of the property without allowing the real owner to interfere with the rights of the benamidar.Further observed that the criminal provision under Section 3(1) of the 1988 Act had lacunae that could not have been cured by judicial forums even through some form of harmonious interpretation.
A bench comprising Chief Justice of India NV Ramana, Justice Krishna Murari and Justice Hima Kohli all the actions taken before the amended act set aside and held that there was only a prospective effect of the 2016 act.
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