Introduction
The Central Government enacted the Benami Transactions (Prohibition) Act, 1988 which came into effect from 19.05.1988. Vide Notification No. 98/2016, dated 25.10.2016 the name of the act has been changed to ‘The Prohibition of Benami Transactions Act, 1988’ (‘Act’ for short) with effect from 25.10.2016.
Benami Transactions
Section 2(9) defines the expression ‘benami transactions’ as-
- a transaction or an arrangement-
- where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and
- the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by-
- a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;
- a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other person as may be notified by the Central Government for this purpose;
- any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;
- any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendent and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or
- a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or
- a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;
- a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious;
benami transaction shall not include any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force,-
- consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted possession thereof continues to hold ownership of such property;
- stamp duty on such transaction or arrangement has been paid; and
- the contract has been registered.
Prohibition of benami transactions
Section 3 provides that-
- No person shall enter into any benami transaction.
- Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.
- Whoever enters into any benami transaction on and after the date of commencement of the Benami Transactions (Prohibition) Amendment Act, 2016, shall, notwithstanding anything contained in sub-section (2), be punishable in accordance with the provisions contained in Chapter VII
Prohibition of the right to recover property held benami
No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.
No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action or by or on behalf of a person claiming to be the real owner of such property.
Confiscation of benami properties
Any property, which is subject matter of benami transaction, shall be liable to be confiscated by the Central Government.
Prohibition on re-transfer of property by benamidar
No person, being a benamidar shall re-transfer the benami property held by him to the beneficial owner or any other person acting on his behalf. Where any property is re-transferred in contravention of the provisions of sub-section (1), the transaction of such property shall be deemed to be null and void. The provisions of sub-section (1) and (2) shall not apply to a transfer made in accordance with the provisions of section 190 of the Finance Act, 2016.
Authorities
The following shall be the authorities for the purposes of this Act-
- the Initiating Officer;
- the Approving Authority;
- the Administrator; and
- the Adjudicating Authority.
Powers of Authorities
- shall have power to require any officer of the Central Government or State Government or a local body or any person or officer who is responsible for registering and maintaining books of account or other documents containing a record of any transaction relating to any property or any other person to furnish any information in relation to any person, point or matter as in his opinion shall be useful for or relevant for the purposes of this Act and every officer or person referred shall furnish such information to any authority under this Act .
- Where any books of account or other documents are produced before the authority in any proceedings under this Act and the authority in this behalf has reason to believe that any of the books of account or other documents are required to be impounded and retained for any inquiry under this Act, it may impound and retain the books of account or other documents for a period not exceeding three months from the date of order of attachment made by the Adjudicating Authority.
- The said period of retention may be extended where the authority records in writing the reasons for extending the same.
- The Authority shall obtain approval of the Approving Authority within a period of fifteen days from the date of initial impounding and seek further approval of the Approving Authority for extending the period of initial retention, before the expiry of the period of initial retention, if so required.
- The person whose documents are impounded is entitled to get copy of the documents.
- On expiry of the period the impounded documents shall be returned to the concerned person unless the Approving Authority or Adjudicating Authority permits the release of the documents to any other person.
- The Initiating Officer, after obtaining prior approval of the Approving Authority, shall have power to conduct or cause to be conducted any inquiry or investigation in respect of any person, place, property, assets, documents, books of account or other documents, in respect of any other relevant matters under this Act.
Attachment
- The initiator may issue show cause notice on the benamidar, with reasons recorded to be in writing, with directions to give reply to the notice within the time specified in the notice and why the property should not be treated as a benami property.
- The notice may also be issued to the beneficiary, if it is known.
- The initiating officer may attach the property, if he is in doubt that the said property may be alienated during the notice period, with the prior approval of the Approving Authority for a period of 90 days after the date of issue of notice.
- The initiating officer shall make required inquires he shall decide within 90 days of the issue of notice and-
- pass an order of continuing provisional attachment with the prior approval of the Approving Authority till the case is adjudicated by the Adjudicating Authority; or
- revoke the provisional attachment with the prior approval of the Approving Authority;
- pass an order attaching the properties provisional (if it has not been done earlier) with the prior permission of the Approving Authority; or
- decide not to attach the property provisionally.
- The initiating officer shall, within fifteen days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority.
Adjudication
- The Adjudicating Authority shall issue a notice to the benamidar and the concerned person to furnish such documents, particulars or evidence as is considered necessary for the case.
- The Adjudicating Authority shall, after-
- considering the reply, if any, to the notice ;
- making or causing to be made such inquiries and calling for such reports or evidence as it deems fit; and
- taking into account all relevant materials, provide an opportunity of being heard to the person specified as a benamidar therein, the Initiating Officer, and any other person who claims to be the owner of the property, and, thereafter, pass an order-
- holding the property not to be a benami property and revoking the attachment order; or
- holding the property to be a benami property and confirming the attachment order, in all other cases.
- Where the Adjudicating Authority is satisfied that some part of the properties is benami property, but is not able to specifically identify such part, he shall record a finding to the best of his judgment as to which part of the properties is held benami.
- No order shall be passed after the expiry of one year from the end of the month in which the reference was received.
Confiscation
- On deciding the property is a benami property, the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a benami property.
- Where an order of confiscation has been made, all the rights and title in such property shall vest absolutely in the Central Government free of all encumbrances and no compensation shall be payable in respect of such confiscation.
- Any right of any third person created in such property with a view to defeat the purposes of this Act shall be null and void.
Appeals to Appellate Tribunal
- Any person, including the Initiating Officer, aggrieved by an order of the Adjudicating Authority may prefer an appeal to the Appellate Tribunal against the order passed by the Adjudicating Authority within a period of forty five days from the date of the order.
- The appeal shall be filed in Form 3;
- A fee of ₹ 10,000/-is to be paid;
- Where the appeal is preferred after the expiry of the period of forty-five days referred to in sub-section (1) of section 46, it shall be accompanied by a petition, in quadruplicate, duly verified and supported by the documents, if any, relied upon by the appellant, showing cause as to how the appellant had been prevented from preferring the appeal within the period of forty-five days.
- The Appellate Tribunal may entertain any appeal after the said period of forty-five days, if it is satisfied that the appellant was prevented, by sufficient cause, from filing the appeal in time.
- The appeal shall set forth concisely and under distinct head the grounds of objection to the order appealed against and such grounds shall be numbered consecutively; and shall specify the address of service at which notice or other processes of the Appellate Tribunal may be served on the appellant and the date on which the order appealed against was served on the appellant.
- the Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.
- An Appellate Tribunal while deciding the appeal shall have the power-
- to determine a case finally, where the evidence on record is sufficient;
- to take additional evidence or to require any evidence to be taken by the Adjudicating Authority, where the Adjudicating Authority has refused to admit evidence, which ought to have been admitted;
- to require any document to be produced or any witness to be examined for the purposes of proceeding before it;
- to frame issues which appear to the Appellate Tribunal essential for adjudication of the case and refer them to the Adjudicating Authority for determination;
- to pass final order and affirm, vary or reverse an order of adjudication passed by the Adjudicating Authority and pass such other order or orders as may be necessary to meet the ends of justice.
- The Appellate Tribunal, as far as possible, may hear and finally decide the appeal within a period of one year from the last date of the month in which the appeal is filed.
- If the Members of a Bench consisting of two Members differ in opinion on any point, they shall state the point or points on which they differ, and make a reference to the Chairperson of the Appellate Tribunal who shall either hear the point or points himself or refer the case for hearing on the point or points by one or more of the other Members and the point or points shall be decided according to the opinion of the majority of the Members of the Appellate Tribunal who have heard the case, including those who first heard it.
- An order made by the Appellate Tribunal under this Act shall be executable by it as a decree of civil court and, for this purpose, the Appellate Tribunal shall have all the powers of a civil court.
Special Courts
The Central Government, in consultation with the Chief Justice of the High Court, shall, for trial of an offence punishable under this Act, by notification, designate one or more Courts of Session as Special Court or Special Courts for such area or areas or for such case or class or group of cases as may be specified in the notification.
The Special Court shall not take cognizance of any offence punishable under this Act except upon a complaint in writing made by-
- the authority; or
- any officer of the Central Government or State Government authorized in writing by that Government by a general or special order made in this behalf.
Every trial under this section shall be conducted as expeditiously as possible and every endeavor shall be made by the Special Court to conclude the trial within six months from the date of filing of the complaint.
Appeal and revision
The High Court may exercise, so far as may be applicable, all the powers conferred by Chapter XXIX or Chapter XXX of the Code of Criminal Procedure, 1973, (2 of 1974.) on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court.
Penalty for Benami transaction
Where any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into the benami transaction, shall be guilty of the offence of Benami transaction.
Whoever is found guilty of the offence of benami shall be punishable with rigorous imprisonment for a term which shall not be less than one year, but which may extend to 7 years and shall also be liable to fine which may extend to 25% of the fair market value of the property.
Penalty for false information
Any person who is required to furnish information under this Act knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with rigorous imprisonment for a term which shall not be less than six months but which may extend to five years and shall also be liable to fine which may extend to 10% of the fair market value of the property
