The
Supreme Court‘s ruling on Tuesday that the amended 2016 law prohibiting benami property transactions cannot be applied retrospectively is legally sound. Rightly, it has quashed the jail terms in the original
Benami Transactions (Prohibition) Act, 1988, as unconstitutional and manifestly arbitrary. In fact, the original law – to unearth property held in the name of someone other than the actual owner – was not even enforced because rules had not been framed to an authority to acquire benami properties. The verdict, delivered by a bench of Chief Justice N V Ramana and Justices
Krishna Murari and
Hima Kohli, effectively upholds a Calcutta High Court order saying the Benami Transactions (Prohibition) Amendment Act of 2016 cannot be given retrospective effect.
GoI had challenged this order. Scrapping the retrospective bugbear will firewall benami properties – transacted between September 1988 when the original law was enacted, and December 2016 when the amended law came into force – from confiscation. This will provide relief to individuals facing action under the amended law.
The court has frowned upon GoI’s argument that the 1988 law had already created substantial law for criminalising the offence, and the 2016 amendments were merely clarificatory (to give effect to the 1988 Act). It ruled that the amendments were substantive (read: wider in scope and with harsher punishment). GoI can confiscate benami properties without any laid-down procedure. In general, the forfeiture provision (in the 2016 Act), being punitive in nature, can be applied only retrospectively, said the ruling.
To expect this law to be a serious threat to the black economy is foolhardy. Real estate is still the most widely used medium to hide unaccounted money – benami properties and under-reporting land transactions being the obvious instruments. Unclear land titles facilitate such frauds, underscoring the need for a central registry system. Reform to bring real estate under GST and make poll funding transparent must not be delayed.
