New Delhi, Aug 23 The Supreme Court on Tuesday said the Section 3(2) of the Benami Transactions (Prohibition) Act 1988 was unconstitutional on the ground of being manifestly arbitrary, and the stringent 2016 amendment to the law cannot be applied retrospectively.
A bench, headed by Chief Justice N.V. Ramana and comprising Justices Krishna Murari and Hima Kohli, said: "Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20 (1) of the Constitution. In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary."
The top court struck down the provisions of the Benami Transactions (Prohibition) Act of 1988. The Act provided for imprisonment, which may extend to three years or with fine or with both for those indulging in 'benami' transactions.
The top court made it clear that the amendment Act will be applicable on transactions that took place after the changes were introduced. "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," it said.
It said the response by the government and the Law Commission to curb benami transactions was also not sufficient as it was conceded before this court that Sections 3 and 5 of the 1988 Act in reality, dehors the legality, remained only on paper and were never implemented on ground.
"Any attempt by the legislature to impose such restrictions retroactively would no doubt be susceptible to prohibitions under Article 20(1) of the Constitution," said the bench.
According to Article 20(1), no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the Act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
In a 96-page judgment, the top court said: "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, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed."
It said Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively. The 2016 amendment included many transactions like cash transfers, property deals, and share issuances.
The top court verdict came on an appeal filed by Centre challenging the Calcutta High Court judgment, which held that the new law could not be applied retrospectively.
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