TMI Blog2022 (8) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... not a fundamental right, rather it is a constitutional right that can be abridged by law. However, this Court is not concerned with the constitutionality of such a measure, wherein such considerations have to be balanced. Rather, the focus is only on the characterization of retroactive confiscation, which in these facts and circumstances, are punitive. 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 05.09.1988 to 25.10.2016 as the same would tantamount to punitive punishment, in the absence of any other form of punishment. It is in this unique circumstance that confiscation contemplated under the period between 05.09.1988 and 25.10.2016 would characterise itself as punitive, if such confiscation is allowed retroactively. Usually, when confiscation is enforced retroactively, the logical reason for accepting such an action would be that the continuation of such a property or instrument, would be dangerous for the community to be left free in circulation. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings. - CIVIL APPEAL No. 5783 of 2022 [@ SPECIAL LEAVE PETITION (C) NO. 2784/2020] - - - Dated:- 23-8-2022 - CJI. ( N. V. RAMANA ) , ( JUSTICE KRISHNA MURARI ) And ( JUSTICE HIMA KOHLI ) JUDGMENT N.V. RAMANA , CJI 1. Leave granted. 2. This case involves a tussle between the normative and positivist positions regarding the nature of a crime and punishment. Treating the Constitution as a flag post, a result of this tussle is sought in the following deliberation. 3. This appeal is filed against the impugned judgment dated 12.12.2019 passed by the High Court of Judicature at Calcutta in APO No. 8 of 2019 along with Writ Petition No. 687 of 2017. 4. The short legal question which arises for this Court s consideration is whether the Prohibition of Benami Property Transactions Act, 1988 [for short the 1988 Act ], as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 [for short the 2016 Act ] has a prospective effect. Although a purely legal question arises in this appeal, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding under the said Act; in the absence of any express provision to that effect, simply by virtue of the provisions contained in subsection (3) of Section 1 of the 1988 Act [which remained unaltered by the 2016 Amendment Act, and have consequently been retained under the Benami Act], the provisions of the 2016 Amendment Act cannot be impliedly construed as retrospective; (ii) Reference was made to and reliance was placed on the unreported ruling of the learned Single Judge of the Rajasthan High Court dated 12.07.2019 in the case of Niharika Jain v. Union of India [S.B.C.W.P. No. 2915/2019], wherein, following the ruling of the Single Judge of the Hon ble Bombay High Court in the case of Joseph Isharat v. Mrs. Rozy Nishikant Gaikwad [S.A. No. 749/2015; decided on 01.03.2017/30.03.2017], it was held that in terms of the protection enshrined under clause (1) of Article 20 of the Constitution of India, the 2016 Amendment Act, amending, inter alia, the definition of benami transaction , could not be given retrospective effect, and the amendments brought about vide the said (amendment) Act would be enforceable only with effect from the date of the enactment / coming into force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a new law, was to ensure that no immunity is granted to persons who engaged in benami transactions while the preamendment Act was in operation. v. It was further submitted that Section 5 and Section 27 of the Act are to be read together as the latter provides the mechanism through which the Benami property may be confiscated by the Adjudicating Authority. As per Section 27(3), once the confiscation order is passed by the Authority, the rights in the property are vested in the Central Government. It was reiterated that confiscation is not a penal provision, as the same has civil consequences. Both, acquisition and confiscation are civil in nature, and therefore, they can be used interchangeably. Therefore, any amendment act which is consolidating in nature, can have provisions which are confiscatory in nature and the same can be applied retrospectively. For this, the learned ASG referred to Yogendra Kumar Jaiswal v. State of Bihar, (2016) 3 SCC 183, para 149, and submitted that in this judgment, this Court has held that confiscation is not a punishment, and that Article 20(1) is not attracted. The Court also held that confiscation as imposed by the Adjudicating Authority would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmini Chandrasekharan, (1995) 2 SCC 630 and Mangathai Ammal v. Rajeswari, (2020) 17 SCC 496, in the context of Sections 4(1), 4(2) and 3(2) of the parent Act, to contend that the abovementioned provisions are prospective in nature. v. It is also argued that insertion of Section 2(9) by an amendment to the parent Act provides a new definition to benami transactions and has substantially changed the scope of the offence by enlarging its ambit. In the unamended Act, only transfer of property was an offence. However, the 2016 Act has added multiple other actions as offences under the category of benami transactions. It is a well settled principle of law that any enactment which substantially affects the rights of people cannot be applied retrospectively, and therefore, the amended 2016 Act can only be prospective in nature. For this, the judgment of this Court in the case of Commissioner of Income Tax (Central)I, New Delhi v. Vatika Township Pvt. Ltd, (2015) 1 SCC 1 was relied on. 13. INTRODUCTION TO PRACTICE OF PROPERTIES HELD BENAMI IN INDIA 13.1Having heard the parties, it is necessary for this Court to trace the history of benami transactions in India. The term benam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a practice in India. Some of them are as follows: (i) Secret provisions for families within Hindu Joint family system; West and Buhler, Hindu Law , (Fourth Edition), Pg. 157, 563 (ii) Mitigation of political and social risk; Pollock, The Law of fraud, Misrepresentation and Mistake in British India (1894), page 8384 (iii) Defrauding creditors; K. K. Bhattacharya, Joint Hindu Family, (Tagore Law Lectures) (188485) Pg. 469470 (iv) Evasion of taxes. 13.5 Judicial recognition of such transactions came about in the early 19th century under the colonial courts. In Mt. Bilas Kunwar v. Desraj Ranjit Singh, AIR 1915 PC 96, the Privy Council observed as under: Down to the taluqdar s death the natural inference is that the purchase was a benami transaction; a dealing common to Hindus and Muhammadans alike, and much in use in India; it is quite unobjectionable and has a curious resemblance to the doctrine of our English law that the trust of the legal estate results to the man who pays the purchase money, and this again follows the analogy of our common law, that where a feoffment is made without consideration the use results to the feoffer. In Punjab Provinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of taxation. Such provision, while disincentivizing transactions beyond the taxation net, had also inevitably accepted the positive factors in recognizing the same. Further, it is a matter of fact that the Indian Trusts Act has recognized and accepted the principle behind benami transactions. 13.8 The 57th Report of the Law Commission (1973) succinctly captures the general principles prevailing as on that date, in the following manner: 5.2 Summary of present positionin general A few basic points concerning benami transactions may be stated, as follows: (a)Benami transfer or transaction means the transfer by or to a person who acts only as the ostensible owner in place of real owner whose name is not disclosed; (b)The question whether such transfer or transaction was real or benami depends upon the intention of the beneficiary; (c) The real owner in such cases may be called the beneficiary, and the ostensible owner the benamidar. 5.3. Effect of benami transfer. The effect of a benami transfer is as follows: ( a)A person does not acquire any interest in property by merely leading his name; (b)The benamidar has no beneficial intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Transfer in favour of a person other than wife or child without consideration, without intent to transfer title and for fraudulent purpose. Governed by Section 281A of Income Tax Act, 1961 (See point G in table). Also section 6(h)(2) and Section 59, Transfer of Property Act. (Criminal liability if case falls within Section 415 to 424 of Indian Penal Code or Section 206207 of that Code) E Transfer in favour of person other than wife or child for consideration, with intent to transfer title, but for a fraudulent purpose and not in good faith. Governed by Section 6(h)(g) and Section 53, Transfer of Property Act. (criminal liability if case falls within Section 415 to 424 of Indian penal Code or Section 206207 of that Code F Transfer in favour of person other than wife or child with consideration, but with genuine object of transferring ownership and with no fraudulent intent Not covered by any provision. G Transfer in favour of any person benami (i.e., witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backed by criminal sanctions would not, moreover, be desirable, unless the mens rea is also included in the provision to be enacted. If this alternative is to be adopted, a provision could be enacted on the following lines: Where property is transferred to one person for a consideration paid or provided by another person, and it appears that such person did not intend to pay or provide such consideration for the benefit of the transferee, the person paying or providing the consideration shall be guilty of an offence punishable with imprisonment upto three years, or with fine, or both. Provided that this section shall not apply where the transferee is a coparcener in a Hindu undivided family in which such other person is also a coparcener, and it is proved that such other person intended to pay or provide such consideration for the benefit of the coparceners in the family. ExceptionNothing in this section shall be deemed to affect section 66 of the Code of Civil Procedure, 1908 or any provision similar thereto. Yet another device for giving effect to the first alternative, with a requirement of mens rea, would be to have a law on the following lines: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the real owner. The result of such a provision will be that the fact that the benamidar did not provide the consideration, or that the consideration was provided by a third person, will not be a ground for recognising a person other than the benamidar as owner. To put the matter in broad terms, the doctrine of benami will, under the proposed amendment, cease to be a part of the Indian law. It may be observed that in enacting the proposed provision, the legislature will carry, to its logical conclusion, the trend illustrated by provisions, such as, section 66 of the Code of Civil Procedure. The section in the Code is applicable to involuntary alienations, while the proposed provision will extend the same principle to voluntary transactions as Well. We think that this will be the simplest and most effective course, and is, therefore, preferable to others. The amendment will bring out a change in the legal position in some of the situations where, at present, the benami character is recognised. 6.27A. We are also of the view that it is not necessary to enact a prohibition attracting criminal penaltieswhich is the course suggested in the first alternative. Such a prohibitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ordinance should also be retroactive in operation and that no locus penitentia need be given to the persons who had entered into benami transactions in the past. They had notice of one and half decades to set their house in order. No more indulgence is called for. 4.5Before we conclude on this chapter, it is necessary to point out that certain tax laws have confirmed legitimacy on the benami transactions and derived benefit in the form of revenue collection from it. It was, therefore, said that if now all benami transactions are invalidated and an allenveloping prohibition is imposed, the revenue laws would suffer loss of revenue. Reference in this connection was made to section 27 of the Incometax Act, 1962 dealing with income from house property. The various subsections of section 27 deal with transfer of property by husband to wife and viceversa. It also involves the case of impartable estate. The law commission is unable to appreciate how a total prohibition of benami transaction and the holder being made the real owner would defeat revenue laws. If one escapes, the other pays, and if it is suggested that the other may not be within the dragnet of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain types of legitimate transactions as well. The transferee/property holder s lack of beneficial interest in the property was a vital ingredient, as settled by years of judicial pronouncements and common parlance, and found to be completely absent in the definition given in the Act. On literal application of the aforesaid Section 2(a), the following transactions could have been caught in the web of the Act: (a) A purchases property in name of his son s wife B , for the benefit of the son s family from person Y , treats the consideration as a gift to the son, and pays gift tax on it. (b) A who is old and infirm, purchases a property in the name of B , intending that B will hold the property in trust of the son of A , who is mentally retarded. (c)A firm X purchases property in the name of the working partner B for the benefit of the firm X , making the payment out of the firm s funds. 14.3 Section 2(c) of the 1988 Act defines property to be property of any kind, whether movable or immovable, tangible, or intangible, and includes any right or interest in such property. This definition appears to be broad and inclusive of all kinds of property and includes va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity. 14.6 Section 5 states: 5. Property of benami liable to acquisition( 1) All properties held benami shall be subject to acquisition by such authority, in such manner and after following such procedure as may be prescribed. (2) For the removal of doubts, it is hereby declared that no amount shall be payable for the acquisition of any property under subsection (1). It may be noted that Section 5 was never utilized as it was felt that there was requirement of additional statutory backing to make the law effective. Standing Committee on Finance 2015-2016, 16th Lok Sabha, Ministry of Finance (Deptt. of Revenue), The Benami Transactions Prohibition (Amendment) Bill, 2015, 28th Report, Part I 14.7 Section 6 provided that nothing in the 1988 Act will affect Section 53 of the Transfer of Property Act or any law relating to transfers for an illegal purpose. The object of Section 6 was to vest ownership rights in benamidars as opposed to the real owner. It was not the intention of the 1988 Act to protect such persons from creditors who allege diversion of funds in a fraudulent manner and allow them to escape their liability to the creditors. Therefore, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is to attempt to interpret the law to imply mens rea. However, the language of Section 2(a) coupled with Section 3, completely ignores the aspect of mens rea, as it intends to criminalize the very act of one person paying consideration for acquisition of property for another person. The mens rea aspect was specifically considered by the 57th Law Commission Report, and the same was not integrated into the unamended 1988 Act. The observations made in the 130th Law Commission Report indicate that benami transactions are abhorrent when it comes to public wealth and impedes the government from achieving its social goals. This clearly allows us to infer that the 1988 law was envisaged on the touchstone of strict liability. 14.12 Such strict statutory formulation under Section 2(a) read with Section 3 had left loose ends in the 1988 Act. In this light, the prosecution would only have to prove only that consideration was paid or consideration was provided by one person for another person and nothing more. In all the judicial precedents, this Court has had the occasion to examine this legislation on the civil side and never on the criminal side, which would bear a higher standards. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t age at the moment of the law coming into force. When an Act is declaratory in nature the presumption against retrospectivity is not applicable. Acts of this kind only declare. A statute in effect declaring the benami transactions to be unenforceable belongs to this type. The presumption against taking away vested right will not apply in this case inasmuch as under law it is the benamidar in whose name the property stands, and law only enabled the real owner to recover the property from him which right has now been ceased by the Act. In one sense there was a right to recover or resist in the real owner against the benamidar. Ubi jus ibi remedium. Where there is a right, there is a remedy. Where the remedy is barred, the right is rendered unenforceable. In this sense it is a disabling statute. All the real owners are equally affected by the disability provision irrespective of the time of creation of the right. A right is a legally protected interest. The real owner's right was hitherto protected and the Act has resulted in removal of that protection. 23. When the law nullifies the defences available to the real owner in recovering the benami property from the benamidar t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would mean that such suit, claim or action to get any property declared benami will not be admitted on behalf of such plaintiff or applicant against the defendant concerned in whose name the property is held on and from the date on which this prohibition against entertaining of such suits comes into force. With respect, the view taken that Section 4(1) would apply even to such pending suits which were already filed and entertained prior to the date when the section came into force and which has the effect of destroying the then existing right of plaintiff in connection with the suit property cannot be sustained in the face of the clear language of Section 4(1). It has to be visualised that the legislature in its wisdom has not expressly made Section 4 retrospective. Then to imply by necessary implication that Section 4 would have retrospective effect and would cover pending litigations filed prior to coming into force of the section would amount to taking a view which would run counter to the legislative scheme and intent projected by various provisions of the Act to which we have referred earlier. It is, however, true as held by the Division Bench that on the express language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is not a claim or action filed by the plaintiff to enforce right in respect of any property held benami. On the contrary, it is a suit, claim or action flowing from the sale deed or title deed in the name of the plaintiff. Even though such a suit might have been filed prior to 1951988, if before the stage of filing of defence by the real owner is reached, Section 4(2) becomes operative from 1951988, then such a defence, as laid down by Section 4(2) will not be allowed to such a defendant. However, that would not mean that Section 4(1) and Section 4(2) only on that score can be treated to be impliedly retrospective so as to cover all the pending litigations in connection with enforcement of such rights of real owners who are parties to benami transactions entered into prior to the coming into operation of the Act and specially Section 4 thereof. It is also pertinent to note that Section 4(2) enjoins that no such defence shall be allowed in any claim, suit or action by or on behalf of a person claiming to be the real owner of such property. That is to say no such defence shall be allowed for the first time after coming into operation of Section 4(2). If such a defence is alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit earlier and one who does not file such suit till Section 4(1) comes into operation. All real owners who stake their claims regarding benami transactions after Section 4(1) and (2) came into operation are given uniform treatment by these provisions, whether they come as plaintiffs or as defendants. Consequently, the grievances raised in this connection cannot be sustained. 14.15 Returning to the discussion at hand, there is no doubt that the unamended 1988 Act tried to create a strict liability offence and allowed separate acquisition of benami property. This begs the question whether such a criminal provision, which the State now intends to make use of, in order to confiscate properties after 28 years of dormancy, could have existed in the books of law. Other than the abuse and unfairness such exercise intends to bring about, there is a larger constitutional question about existence of such strict provisions without adequate safeguards. 15. SUBSTANTIVE DUE PROCESS, MANIFEST ARBITRARINESS AND PROVISIONS UNDER 1988 ACT . 15.1 The simple question addressed by the counsel appearing for both sides is whether the amended 2016 Act is retroactive or prospective. Answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1978) 1 SCC 248, wherein a combined reading of Articles 14, 19 and 21 would make it clear that the judiciary, so to say, always had the forensic power to examine reasonability of a law, both procedural as well as substantive. Later expositions have only given colour to expand what was implicit under the three golden Articles of Part III. In Sunil Batra v. Delhi Administration, (1978) 4 SCC 494, the word law as occurring under Article 21 was interpreted to mean jus and not merely lex. It may be necessary to quote the observation of the majority in the aforesaid case in the following manner: 228 The word law in the expression procedure established by law in Article 21 has been interpreted to mean in Maneka Gandhi case that the law must be right, just and fair and not arbitrary, fanciful or oppressive. (Emphasis supplied) 15.6 Without burdening this judgment with a series of precedents laid down by this Court, we may refer only to the majority opinion in K. Puttaswamy v. Union of India, (2017) 10 SCC 1, wherein the law has been settled by a NineJudge Bench of this Court in the following manner: 294. The Court, in the exercise of its power of judicial review, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which was consciously not accepted when the Constitution was framed. Moreover, even in the country of its origin, substantive due process has led to vagaries of judicial interpretation. Particularly having regard to the constitutional history surrounding the deletion of that phrase in our Constitution, it would be inappropriate to equate the jurisdiction of a constitutional court in India to entertain a substantive challenge to the validity of a law with the exercise of substantive due process under the US Constitution. Reference to substantive due process in some of the judgments is essentially a reference to a substantive challenge to the validity of a law on the ground that its substantive (as distinct from procedural) provisions violate the Constitution. 15.7 The law with respect to testing the unconstitutionality of a statutory instrument can be summarized as under: a. Constitutional Courts can test constitutionality of legislative instruments (statute and delegated legislations); b. The Courts are empowered to test both on procedure as well as substantive nature of these instruments. c. The test should be based on a combined reading of Articles 14, 19 and 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrariness, therefore, must be something done by the legislature capriciously, irrationally and/or without adequate determining principle. Also, when something is done which is excessive and disproportionate, such legislation would be manifestly arbitrary . We are, therefore, of the view that arbitrariness in the sense of manifest arbitrariness as pointed out by us above would apply to negate legislation as well Under Article 14. (emphasis supplied) 15.10 In Hindustan Construction Co. Ltd v. Union of India, (2020) 17 SCC 324, this Court struck down Section 87 of the Arbitration Act on the ground of manifest arbitrariness as the Parliament chose to ignore the judgment of this Court, without removing the basis of the same or identifying a principle for militating against the same. 15.11 Coming back to the 1988 Act, the two provisions with which we are concerned are Sections 3 and 5 of 1988 Act. They are required to be separately analysed herein. At the outset, we may notice that the enactment was merely a shell, lacking the substance that a criminal legislation requires for being sustained. The reasons for the same are enumerated in the following paragraphs. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.16 Fourth, reading Section 2(a) with Section 3(1) would have created overly broad laws susceptible to be challenged on the grounds of manifest arbitrariness. If this Court reads criminal provisions of the Benami Act to have had force since 1988, then the following deleterious consequences would ensue: (i.) Section 187C of the Companies Act, 1956 assured protection to nominal and beneficial holding of shares if the prescribed declaration duly made are at serious risk. (ii.) Benami cooking gas connections which have been regularized from time to time are at risk. (iii.) Housing colonies and benami allotments of DDA flats which have been regularised from time to time are at risk. 15.17 The criminal provision under Section 3(1) of the 1988 Act has serious lacunae which could not have been cured by judicial forums, even through some form of harmonious interpretation. A conclusion contrary to the above would make the aforesaid law suspect to being overly oppressive, fanciful and manifestly arbitrary, thereby violating the substantive due process requirement of the Constitution. 15.18 Coming to Section 5 of the 1988 Act, it must be noted that the acquisition proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial actions have been undertaken under such unconstitutional laws that going back to the original position would be next to impossible. In those cases alone, would this Court take recourse to the concept of prospective overruling . 15.22 From the above, 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. 15.23 Having said so, we make it abundantly clear that the aforesaid discussion does not affect the civil consequences contemplated under Section 4 of the 1988 Act, or any other provisions. 16. 2016 ACT AND ITS ANALYSIS 16.1 The next subject of examination is the 2016 Act, which amends the 1988 Act, and expanded the 1988 Act to 72 sections (from 9 sections), divided into 8 chapters. At the outset, we need to understand the general scheme of the law. The definition of benami transactions, which is the heart of the entire 1988 Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Transfer of Property Act, 1882, if, under any law for the time being in force, ( i) consideration for such property has been provided by the person to whom possession of property has been allowed but the person who has granted 60 possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered. 16.2 Major changes envisaged under the definition are as under: (i) Expansion of the definition from arm s length transactions contemplated under the 1988 Act, to arrangements and schemes. (ii) Additional ingredient of benefits flowing to the real owner, a lacuna pointed in the earlier part, under 1988 Act, is included in terms of Section 2(9)(A)(b). (iii) Expansion of the ambit through Section 2(9)(C), to those properties where benamidar denies knowledge of such ownership. (iv) Expansion of the ambit through Section 2(9)(D), wherein the person providing the consideration is not traceable or is fictitious. (v) Expansion from recognition of only tripartite transactions under 1988 Act, to also include bipartite transactions. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 Act to the beneficial owner (if identified) as well as to the ostensible owner (if any) seeking an explanation as to why the property should not be treated as Benami. 16.9 The 2016 Act provides for provisional attachment of the property where the concerned officer has genuine reason to believe, based on the material gathered, that the person in possession of the property held in benami may alienate the property. Such provisional attachment cannot be taken recourse to every time. Recourse under Section 24(3) of the 2016 Act should be exercised in exceptional circumstance after previous approval of Approving Authority. Such interim provisional attachment is strictly limited by time. 16.10 Adjudication under Section 24(4) is mandatory and requires the authority to examine the same on a prima facie basis. Such adjudication must take place after providing collected material to the accused, along with the show cause notice. A reasoned order is mandated under the aforesaid provision. The Officer is mandated to present a statement of case to the adjudicating officer, in terms of Section 24(5) of the 2016 Act. 16.11 Adjudication under Section 26 mandates notice and disclosure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mens rea aspect in terms of the recommendations of the 57th and 130th Law Commission Reports. 16.16 It may be necessary to note that no prosecution can be initiated without previous sanction of the competent authority as provided under Section 55, which reads as under: 55. No prosecution shall be instituted against any person in respect of any offence under sections 3, 53 or section 54 without the previous sanction of the Board. 16.17 Perusal of the remaining provisions is not required for the purpose at hand. 17.WHETHER SECTION 3(1) AND CHAPTER IV READ WITH SECTION 5 OF THE 2016 ACT HAVE RETROACTIVE EFFECT? 17.1 The thrust of the arguments advanced by the Union of India can be crystallized as under: (i.) That the 1988 Act was a valid enactment with procedural gaps that were filled retrospectively by the 2016 amendment. (ii.) That the provision of confiscation (civil forfeiture) under the 1988 Act, being in the domain of civil law, is not punitive and therefore, the prohibition under Article 20(1) of the Constitution is not attracted in this case. 17.2With respect to the first line of argument, our discussion above can be summarized as under: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x post facto law nor can the enhanced punishment prescribed by the amendment be applicable. But insofar as the Central Amendment Act reduces the punishment for an offence punishable under Section 16(1)(a) of the Act, there is no reason why the accused should not have the benefit of such reduced punishment. The rule of beneficial construction requires that even ex post facto law of such a type should be applied to mitigate the rigour of the law. The principle is based both on sound reason and common sense. This finds support in the following passage from Craies on Statute Law, 7th Edn., at pp. 38889: A retrospective statute is different from an ex post facto statute. Every ex post facto law said Chase, J., in the American case of Calder v. Bull [3 US (3 Dall) 386: 1 L Ed 648 (1798)] must necessarily be retrospective, but every retrospective law is not an ex post facto law. Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive; it is a good general rule that a law should have no retrospect, but in cases in which the laws may justly and for the benefit of the community and also of indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... civil legislations under the Constitution. However, Article 20(1) mandates that no law mandating a punitive provision can be enacted retrospectively. Further, a punitive provision cannot be couched as a civil provision to bypass the mandate under Article 20(1) of the Constitution which follows the settled legal principle that what cannot be done directly, cannot be done indirectly . 17.11 Therefore, the immediate question which arises for consideration is whether the retroactive confiscation provided under Section 5 read with Chapter IV of 2016 Act is punitive or not? 17.12 At the outset, we may note that Shri S. V. Raju, learned ASG, has submitted that acquisition provided under Section 5 of the 1988 Act is same as confiscation provided under Section 5 read with Chapter IV of the 2016 Act. He states that both concepts are related to civil law and is not concerned with punitive punishments as provided under the Indian Penal Code, 1860. 17.13 Acquisition under the earlier 1988 Act as well as confiscation under the 2016 Act are said to have been enacted on the reasoning that the property emanating from the benami transaction also gets tainted. The substantive difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiture proceedings . Leonard v. Texas, 137 S. Ct. 847, 847-48 (2017) 17.17 In the case at hand, although expansion of forfeiture laws originates from the Parliament s concern for decriminalizing property holdings, however, we are reminded of Justice Oliver Wendell Holmes, who has stated as under: The customs beliefs or needs of a primitive time establish a rule or a formula. In the course of centuries, the custom, belief, or necessity disappears, but the rule remains. The reason which gave rise to the rule has been forgotten, and ingenious minds set themselves to enquire how it is to be accounted for. Some ground of policy is thought of, which seems to explain it and to reconcile it with the present state of things; and then the rule adapts itself to the new reasons which have been found for it, and enters on a new career. The old form receives a new content and in time even the form modifies itself to for the meaning which it has received. Oliver Wendell Holmes in The Common Law 5 (1881) 17.18 While categorizing the forfeiture proceedings as civil or criminal, the test laid down by the European Court of Human Rights in Engel v The Netherlands (No.1), [1976] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Criminal Law Amendment Ordinance 38 of 1944, wherein the law provided only for attachment of the property, after conviction is given effect to. Unlike the present law, the taint on the property is squarely determined by the Criminal Court deciding the criminal conviction. Confiscation contemplated under Section 13 of the Criminal Law Amendment Ordinance 38 of 1944 could only be given effect to after the verdict of guilty by Criminal Court. In the light of such unique provisions, the Court characterized such forfeiture laws as civil in nature. We may note that such a law did not contemplate an independent confiscation proceeding as created under this law, rather, a mechanism was devised to confiscate a property after criminal conviction. 17.21 This Court, while noting that forfeiture is no doubt punitive under Article 20(1) of the Constitution as it is one of the punishments prescribed under Section 53 of IPC, held that Section 13(3) of the Criminal Law Amendment Ordinance 38 of 1944 was not punitive as the same was dependent on prior criminal prosecution and determination of amount which was to be forfeited in the following manner: 12. Further what s. 13(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a method of recovering money belonging to the Government which had been embezzled. It is urged that the Government could file a suit to recover the money embezzled and s. 13(3) only provides a speedier remedy for that purpose and the forfeiture provided therein is not a penalty within the meaning of Art. 20(1). 17.22 In Divisional Forest Officer v. G. V. Sudhakar Rao, (1985) 4 SCC 573, this Court was concerned with the power of forfeiture under Section 44(2)(A) of Andhra Pradesh Forest Act, 1967. Noting that Section 45 of the Forest Act prior to the amendment had a provision for civil forfeiture only after the conviction of an accused under the Forest Act, it was felt that such a provision was insufficient to prevent the growing menace of ruthless exploitation of government forests and illicit smuggling of teak, red sandalwood, etc. It was in this context that a separate mechanism was formulated to ensure that there was no unreasonable delay in confiscation of property. 17.23 It may be noted that this case did not involve a constitutional challenge under Article 20(1) to the aforesaid rules. In any case, this Court has held that the new mechanism formulated under the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confiscation may be directed unless the person referred to in clause (b) of subsection (5) is able to satisfy that the articles were used without his knowledge or connivance or, as the case may be, without the knowledge or connivance of his servant or agent and that all reasonable and necessary precautions had been taken against the use of such objects for commission of forest offence. 17.25 In Yogendra Kumar Jaiswal v. State of Bihar, (2016) 3 SCC 183, a Division Bench of this Court was concerned with the constitutional challenge to various enactments such as the Orissa Special Courts Act, 2006 and the Bihar Special Courts Act, 2009. Both the enactments had provisions for confiscation. While interpreting the confiscation provisions, this Court read down the same to only mean interim attachment. In other words, confiscation was interpreted as akin to attachment proceedings. The Court mandated that any confiscation would be contingent on the final outcome of the criminal proceedings and the logical corollary to the same was that confiscation proceedings were not completely independent and ultimately had to be adjudicated along with the trial of the main criminal case. 17.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, if procedures independent of criminal prosecution are prescribed. We may note that the proportionality of separate confiscation procedure prescribed under the 2016 Act, has not been argued herein. Accordingly, we leave the aforesaid question of law open. 17.29 Under the IPC, forfeiture is recommended to be a form of punishment under Section 53. Accordingly, the Code of Criminal Procedure, 1976 provides for a mechanism for interim custody and forfeiture at the conclusion of trial under Section 451 of the Cr.P.C. (in personam forfeiture), which reads as under: 451. Order for custody and disposal of property pending trial in certain cases. When any property is produced before any Criminal Court during any inquiry or trial, the Court may make such order as it thinks fit for the proper custody of such property pending the conclusion of the inquiry or trial, and, if the property is subject to speedy and natural decay, or if it is otherwise expedient so to do, the Court may, after recording such evidence as it thinks necessary, order it to be sold or otherwise disposed of. Explanation. For the purposes of this section, property includes (a) property of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard, we may notice that the intention of the legislature is to condemn such property and there is an implicit effort by the Parliament to take into consideration the fact that such transactions are often acquired from illgotten wealth. These proceedings cannot be equated as enforcing civil obligations as, for example, correcting deficiencies in the title. It goes further and the taint attaches to the proceeds as well. 17.33 In view of the above discussion, it is manifest that the 2016 Act contemplates an inrem forfeiture, wherein the taint of entering into such a benami transaction is transposed to the asset itself and the same becomes liable to confiscation. At the cost of repetition, we may note 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 under Section 27(2) of the 2016 Act. When such a taint is being created not on the individual, but on the property itself, a retroactive law would characterize itself as punitive for condemning th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for confiscation of those transactions entered into between 05.09.1988 to 25.10.2016 as the same would tantamount to punitive punishment, in the absence of any other form of punishment. It is in this unique circumstance that confiscation contemplated under the period between 05.09.1988 and 25.10.2016 would characterise itself as punitive, if such confiscation is allowed retroactively. Usually, when confiscation is enforced retroactively, the logical reason for accepting such an action would be that the continuation of such a property or instrument, would be dangerous for the community to be left free in circulation. In R (on the appln of the Director of the Assets Recovery Agency) v Jia Jin He and Dan Dan Chen, [2004] EWHC Admin 3021, where Collins, J. had stated thus: 52. In Mudie, at page 1254, in the judgment of Laws LJ, who gave the only reasoned judgment, there is set out the citation from Butler which reads, so far as material, as follows: It is the applicant's contention that the forfeiture of his money in reality represented a severe criminal sanction, handed down in the absence of the procedural guarantees afforded to him under article 6 of the Conventio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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