STATE TIMES NEWS
New Delhi: The Supreme Court Tuesday held that Benami Transactions (Prohibition) Amendment Act, 2016 does not have retrospective application and the authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the legislation.
The apex court also said section 3(2) and section 5 of the Benami Transactions (Prohibition) Act, 1988 are vague and arbitrary. The top court said the continued presence of an unconstitutional law on the statute book does not prevent it from holding that such unconstitutional laws cannot enure to the benefit of or be utilised to retroactively amend laws to cure existing constitutional defects.
“In view of the fact that this Court has already held that the criminal provisions under the 1988 Act were arbitrary and incapable of application, the law through the 2016 amendment could not retroactively apply for confiscation of those transactions entered into between September 5, 1988, to October 25, 2016, as the same would tantamount to punitive punishment, in the absence of any other form of punishment,” a bench headed by Chief Justice N V Ramana said.
The verdict came on the appeal of the Centre challenging the Calcutta High Court judgement in which it was held that the amendment made in the 1988 Act in 2016 would be applicable with prospective effect.
The centre had contended that the 2016 Act would be applicable retrospectively.
The 1988 Act was made to prohibit Benami transactions and the right to recover property that is held to be ‘benami’.
“It is in this unique circumstance that confiscation contemplated under the period between September 5, 1988, and October 25, 2016, would characterise itself as punitive if such confiscation is allowed retroactively,” the bench, also comprising Justices Krishna Murari and Hima Kohli, said in its 96-page judgement.
The apex court said that the legislature has the power to enact retroactive/retrospective civil legislation under the Constitution.
However, Article 20(1) mandates that no law mandating a punitive provision can be enacted retrospectively, it said.
“Section 3 (criminal provision) read with Section 2(a) and Section 5 (confiscation proceedings) of the 1988 Act are overly broad, disproportionately harsh, and operate without adequate safeguards in place.
Such provisions were stillborn law and never utilized in the first place. In this light, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from their inception,” the bench said.
The top court said that the taint of Benami transactions is not restricted to the person who is entering into the aforesaid transaction, rather, it attaches itself to the property perpetually and extends itself to all proceeds arising from such a property, unless the defence of innocent ownership is established.
“When such a taint is being created not on the individual, but on the property itself, a retroactive law would characterise itself as punitive for condemning the proceeds of sale which may also involve legitimate means of the addition of wealth,” it said.
Concerning the provision of forfeiture under Section 5 of the 2016 Act, the top court said being punitive in nature, can only be applied prospectively and not retroactively.
“As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings,” the bench said.