Dhruv Chaudhry | Fairfield Institute of Management and Technology(GGSIPU) | 15th March 2020
INTRODUCTION
Despite the truth, the Benami Transactions (Prohibition) Act, 1988 got here into pressure on 19.05.1988 (hereinafter referred as “1988 Act”) in India, even at that time the concept of benami transaction turned into not alien in India. There are lots of judgments in which the Hon’ble Supreme Court and numerous High Courts of India have dealt with the idea of benami transaction, and benami transactions have been an integral part of Indian psyche even previous to the appearance of 1988 Act.
The Hon’ble Supreme Court inside the yr 1980 while dealing with the case of Thakur Bhim Singh v. Thakur Kan Singh [1980] 3 SCC 72, had elaborated the concept of “Benami Transaction” and included commonly 2 forms of transactions broadly underneath its purview. Firstly, when a person buys a belongings with his very own money inside the name of every other character without any purpose to benefit such other individual and secondly, when someone who’s proprietor of the assets executes a conveyance in favour of some other with out the goal of moving the title to the belongings. The applicable extract from the judgment reads as beneath:
“Two sorts of benami transactions are commonly identified in India.
Where someone buys a assets with his personal money however inside the call of every other man or woman without any goal to gain such other man or woman, the transaction is called benami. In that case, the transferee holds the property for the benefit of the individual that has contributed the acquisition cash, and he is the real proprietor.
The 2nd case that’s loosely termed as a benami transaction is a case where a person who is the owner of the property executes a conveyance in favour of another with out the purpose of shifting the identify to the property thereunder. In this case, the transferor continues to be the real owner.
The distinction among the two types of benami transactions noted above lies inside the fact that whereas inside the former case, there’s an operative transfer from the transferor to the transferee though the transferee holds the assets for the benefit of the person that has contributed the purchase money, inside the latter case, there may be no operative switch at all and the name rests with the transferor notwithstanding the execution of the conveyance. One not unusual feature, however, in both these instances is that the actual title is divorced from the ostensible title and they may be vested in distinct persons.”
ISSUES
Furthermore, in the above case the Supreme Court has additionally laid down the parameters for determining, whether or not a transaction is Benami or now not, as beneath:
“The principle governing the determination of the question whether a switch is a benami transaction or now not may be summed up thus:
(1) The burden of displaying that a transfer is a benami transaction lies on the person that asserts that it’s far this sort of transaction;
(2) if it’s far proved that the purchase money came from a person other than the man or woman in whose favour the belongings is transferred, the purchase is prima facie assumed to be for the benefit of the person that supplied the purchase cash, unless there is evidence to the contrary;
(3) the true character of the transaction is governed with the aid of the aim of the person that has contributed the acquisition cash, and
(4) the query as to what his purpose become has to be determined on the basis of the surrounding circumstances, the connection of the parties, the reasons governing their action in bringing approximately the transaction and their subsequent behavior etc.”
(Emphasis supplied)
JUDGEMENT
Before coming of the 1988 Act, benami transactions have been not unlawful in India, and there has been no bar or punishment below any regulation for getting into any benami transaction and the said residences which were the challenge rely of the benami transaction had been also now not accountable for confiscation via the government. However, the simplest component which become now not permitted beneath the law became recuperation of the benami property by the actual proprietor from the benamidar (in whose call the assets became held), if the benami transaction was entered to keep away from a statute or to dedicate a fraud and the parties succeeded in such evasion or fraud. The Supreme Court in Smt. Surasaibalini Debi v. Phanindra Mohan Majumdar[1], relied upon the selection of the Privy Council inside the case of Petherpermal Chetty v. Muniandi Servai [1908] L.R. 35 IndAp ninety eight and elaborated the aforesaid idea of restoration of assets via the actual owner as beneath:
“No doubt, for the purpose of deciding whether assets could be recovered through the declaration of a actual name there may be a clear difference among cases wherein handiest an try and prevent a statute or to commit a fraud has taken place and instances in which the evasion or the fraud has succeeded and the impermissible object has been achieved. The leading choice upon this point is that of the Privy Council in Petherpermal Chetty v. Muniandi Servai [1908] L.R. 35 IndAp ninety eight in which Lord Atkinson handling the impact of benami conveyances which are motivated by means of the layout to gain an illegal or fraudulent cause, quoted from Mayne’s Hindu Law (7th ed. P. 595, para 466) the following as correctly starting up the regulation:
“Where a transaction is once made out to be an insignificant benami it’s miles obtrusive that the benamidar sincerely disappears from the name. His name is certainly an alias for that of the man or woman beneficially interested. The fact that A has assumed the call of B to be able to cheat X may be no motive something why a Court must help or permit B to cheat A. But if A calls for the help of the Court to get the estate returned into his very own possession, or to get the name into his very own name, it may be very cloth to recollect whether A has actually cheated X or now not. If he has finished so by using his alias, then it has ceased to be a mere mask, and has come to be a reality. It can be very proper for a Court to say that it will not allow him to resume the uniqueness which he has as soon as cast off so that you can defraud others. If, however, he has not defrauded any one, there can be no reasons why the Court have to punish his intention by giving his estate away to B, whose roguery is even greater complicated than his personal …… For instance, persons have been allowed to recover belongings which they’d assigned away …. where that they had intended to defraud creditors, who, in reality, have been by no means injured …… But where the fraudulent or illegal cause has simply been affected via the colourable grant, then the maxim applies, ‘In pari delicto potior est conditio possidentis’. The Court will help neither party. ‘Let the estate liewhere it falls’.”
Enactment of the Benami Transactions (Prohibition) Act, 1988
As, there has been no regulation to curb the flourishing benami transactions in India and punish the offenders, the 1988 Act became enacted with an goal to prohibit the benami transactions. The 1988 Act described benami transactions as a transaction in which property is transferred to one man or woman for a consideration paid or supplied with the aid of some other person, prohibited them and provided punishment for stepping into any benami transaction with imprisonment for a time period which can also extend to a few years or with satisfactory or with both. The 1988 Act similarly prohibited healing of the assets held benami from benamidar by means of the real proprietor and homes held benami have been additionally answerable for confiscation. However, for the duration of the procedure of formulating the guidelines for imposing sure provisions of the 1988 Act, it changed into determined that attributable to infirmities within the legislation it could now not be possible to formulate the guidelines with out bringing the complete law and repealing the present 1988 Act. Due to the infirmities within the 1988 Act, relevant guidelines for enforcing the positive provisions of the 1988 Act could not see the mild of the day. The 1988 Act similarly failed to provide any mechanism or technique of confiscation/acquisition of the benami property and hence, no such powerful action for confiscation of benami belongings might be taken.
On perusal of the 28th report of the Standing Committee on Finance, dated April 2016, at the Benami Transactions Prohibition (Amendment) Bill, 2015, it may be seen that the reason at the back of amending the 1988 Act rather than repealing the stated Act, was to encompass all the benami transactions under its ambit on which no movement turned into taken below the 1988 Act, so that consequential motion should follow. The Ministry of Law was of the opinion that in case, 1988 Act receives repealed through new act then no movement would be feasible on any such transaction which passed off among 1988 and the date of repealing the 1988 Act, because the benami transactions at some point of the intervening duration of twenty six years, might have in truth led to immunity given that no movement might be initiated in the absence of a selected provision in the Repeals and Savings clause. It turned into therefore recommended by the Ministry of Law, that it’d be recommended to comprehensively amend the present Benami Transactions (Prohibition) Act, 1988, so that the offences committed during the last twenty six years also are covered.
Advent of the Benami transactions (Prohibition) Amendment Act, 2016
The Benami Transactions (Prohibition) Amendment Act, 2016 which is also be known as as Prohibition of Benami Property Transactions Act, 1988 (hereinafter also referred as “2016 Act”) subsequently came into force with impact from 1st November 2016.
The 1988 Act has been substantially amended by the 2016 Act, and diverse provisions and government had been set up to shrink benami transactions and confiscate benami Properties. Under the 2016 Act, the scope of benami transaction has been widened, and the punishment and penalties were made more stringent.
Concept of Benami Property and Benami Transaction beneath the 2016 Act
Under the 2016 Act, the term “Benami Property” under section 1(8) has been defined as under:
A Benami Property manner any belongings which is the situation be counted of a benami transaction and additionally consists of the proceeds from such property.
From the above definition, it is clear that even the proceeds acquired from a property which is a part of a Benami Transaction, could be covered beneath the definition of Benami Property. The definition of belongings below 2016 Act include property of any kind, whether or not movable or immovable, tangible or intangible, corporeal or incorporeal.
[1] AIR 1965 SC 1364
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