Supreme Court holds forfeiture provision under 2016 amendment to Benami Transaction Prohibition Act is prospective

The Supreme Court on Tuesday struck down various provisions of the Benami Transactions (Prohibition) Act of 1988 and the 2016 amendments to the Act as unconstitutional. .A bench of Chief Justice of India (CJI) NV Ramana and Justices Krishna Murari and Hima Kohli held that the in rem forfeiture provision under Section 5 of the 2016 Amendment Act, being punitive in nature, can only be applied prospectively and not retroactively.The Court also held that the in rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, is unconstitutional for being manifestly arbitrary.As a consequence, the Court held that concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, i.e. October 25, 2016.Hence, the Court quashed all such prosecutions or confiscation proceedings initiated with respect to transactions prior to October 2016. The bench also held that Section 3(2) of the unamended 1988 Act is unconstitutional for being manifestly arbitrary. Consequently, Section 3(2) of the 2016 Act was also held to be unconstitutional for being violative of Article 20(1) of the Constitution.Section 3(2) criminalises benami transactions making it punishable with imprisonment upto 3 years. .The top court noted that the gaps left in the 1988 Act were not merely procedural, rather the same were essential and substantive" and that "in the absence of such substantive provisions, the omissions create a law which is fanciful and oppressive at the same time."Such an overbroad provision was manifestly arbitrary as the open texture of the law did not have sufficient safeguards to be proportionate," the Court said. .In December 2019, the Calcutta High Court had held that the 2016 amendment to the Benami Transactions (Prohibition) Act, 1988 is prospective in nature.This amendment to the Act, in addition to renaming the Act, contained provisions concerning the attachment, confiscation, and vesting of benami property, among other things. The amendment also provided for punishments under the new Act for the offences concerning benami property transactions..The Central government had moved the Supreme Court in appeal against the ruling. The Centre, in its plea, had argued that the 1988 Act provides for retrospective effect to the Act under Section 1(3), except for the amendments made to Sections 3, 5, and 8. The Calcutta High Court's decision does not appreciate this provision, the Centre had contended.Further it was argued by the Centre that the 2016 amendments were "clarificatory" in nature and merely provided for a procedural machinery to the original Act. .Advocates Parmatma Singh and Mayank Jain assisted in the case..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.