AN ANALYSIS OF THE PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT, 1988- WITH RECENT AMENDMENTS

INTRODUCTION

The Benami Transaction (Prohibition) Act, 1988 was

enacted in order to prohibit all benami transactions

and also for prevention of black money. But due to some inherent limitations of the Act, it could not be

implemented with full force and therefore, an amendment was introduced in the year, 2016 to ensure the successful enforcement of the Act. The main purpose behind this act is to nab those people with undisclosed income by prohibiting the benami transactions and to prevent tax evasion in the country. Later, the Benami Transactions Prohibition Amendment act was introduced in the year 2016. The New Amendment act has widened the scope of the original act Benami Transaction (Prohibition) Act, 1988 and has been made strict. It has clearly defined the meaning of benami transaction,and its exceptions and it has established the authorities to enquire into such matter. It has amended the penalty for entering Benami transaction and it has established an appellate tribunal for hearing appeals regarding benami transaction. In the previous act there was section for confiscating the benami property but not the procedure. In the new amended act, the procedure is given. 

WHAT DOES THE TERM "BENAMI" MEANS?

The term “Benami” has its origin from the Persian

language which implies “without a name”. According to Merriam Webster Dictionary the term “benami” implies “made, held, done, or transacted in the name of (another person). In simple terminology, benami transactions are transactions where property is purchased in the name of one person but the consideration for the said purchase is paid by other person therefore the former will be the nominal owner and the latter will the real owner of the property. In the case of Pether Perumal v. Muniandy,(1908) I.L.R. 35 Cal. 551,the Privy Council held that the person who lends his name for the purchase of property and has ostensible title i.e. the benamidar is nothing but an alias for the real owner who is has beneficial ownership of the property.

WHAT IS A BENAMI TRANSACTION?

The Hon'ble Apex Court in the case of Thakur Bhim Singh (Dead) by Lrs and Anr. Vs. Thakur KanSingh (1980) 3 SCC 72, had explained the concept of "Benami Transaction" and included primarily 2 types

of transactions broadly under its purview. Firstly, when a person buys a property with his own money in the name of another person without any intention to benefit such other person and secondly, when a Person who is owner of the property executes a conveyance in favour of another without the intention of transferring the title to the property As stated in earlier slide, those are the two kinds of transaction recognized in India. Furthermore, the Hon'ble Apex Court in the earlier case has also laid down the parameters for determining, whether a transaction is Benami or not: The burden of showing that a transfer is a benami transaction lies on the person who asserts that it is such a transaction if it is proved that the purchase money came from a person other than the person in whose favour the property is transferred, the purchase is prima facie assumed to be for the benefit of the person who supplied the purchase money, unless there is evidence to the contrary, the true character of the transaction is

governed by the intention of the person who has contributed the purchase money, and the question as to what his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct etc.

WHAT IS A BENAMI PROPERTY?

The Hon’ble Supreme Court in Bhim Singh v. Kan Singh AIR 1980 SC 727, has explained the Benami Property Transaction as where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, such transaction is called benami and the Property is called Benami Property. In such cases the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner.

WHICH PROPERTY COMES INTO THE SCOPE OF BENAMI ACT?

Benami Act encompasses all kinds of properties whether movable or immovable. Section 2(16) of the Act defines "Property" means assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property. 
For Example : In case of de-monetisation, if a person deposits his old currency in the account of another person with an arrangement such that, that the account holder will return the money in new currency is also a benami transaction. The Act prohibits resale of the benami property from the benamidar to the real owner (or to any person acting on his behalf). Such transactions would be considered as null and void. The Act does not prohibit the sale of a benami property to a third person. However, if the property is sold to a third party and the transaction concluded by way of registry of the sale, the department can only attach the proceeds from the sale, not the property. A transaction is considered as benami transaction if any of the following holds true:

Deals are in a fictious name or, the owner is unaware of or denies knowledge of the ownership, or the person providing the consideration for the property is not traceable. A suspected benamidar will be served a notice on source of funds by an Initiating Officer. If the answer is not satisfactory, action will be initiated under Benami Transactions Prohibition Amendment Act, 2016. 

AUTHORITIES AND JURISDICTION

There are 4 authorities appointed by the central government to enquire into the matter of benami transactions. Section 18 of the Amendment Act, 2016 lay down the authorities.

They are:

The Initiating officer

The Approving authority

The Administrator

The adjudicating authority

OFFENCES AND PUNISHMENT

Section 53- Penalty for Benami Transaction

Anyone who enters into any benami transaction shall be punishable with imprisonment for a term which shall not be less than 1 year and shall not exceed 7 years. In addition to this, fine of 25% of the fair market value of the property shall be payable.

Section 54- Penalty for False Information

Any person who is a party to a benami transaction or has provided false information shall also be liable for prosecution for which the punishment shall not be less than 6 months up to 5 years and a fine which may extend up to 5 years and may include a fine up to 10% of the fair market value of the property. Properties that are held as benami are liable to be confiscated by the Government without payment of any compensation. Basically this amended act widened the scope of the primary act, 1988 so that it can stop people to utilise the black money and to make India, a corruption free and a better country to invest it.

ROLE OF THE AUTHORITIES IN INVESTIGATION- SECTION 24

First step of the investigation is taken by the Initiating Officer- if he has a reason to believe that any person is benamidar, he shall sent a show cause notice to him and if identity of the beneficiary is known, then notice shall also be send to him. If he believes that the person in possession of the property is held benami, he can hold the property for not more than 90 days from issuing the previous notice with the prior permission of the approving authority. The initiating officer after making all inquiries and taking all the evidence into account can within those 90 days issue notice to continue to hold the property with prior permission of the approving authority till the order is passed by the adjudicating authority If an order is passed by the approving authority to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority. The Adjudicating Authority will examine all documents and evidence relating to the matter and shall issue notice within 30 days from the date of reference received. If the property is owned jointly by one or more persons, then the adjudicating authority will serve notice to each of them. After making inquiries and taking into account all material facts and evidence, he provide opportunity to the person of being heard. After hearing the person, the adjudicating authority shall make an order confiscating the property held to be a benami property. After such order has been passed, the administrator receive and manage the property in the prescribed manner and condition. The amended act has also established and Appellate Tribunal Under Chapter 5 of Section 30 for hearing appeals against the order of adjudicating authority.

CONCLUSION

So far from the discussions it is clear that 1988 Act didn't have any mechanism or process of confiscation/acquisition of the benami property and therefore, no benami property could be acquired by the government. On the other hand, the 2016 Act is a comprehensive law which not only provides for the mechanism and process for attachment and confiscation of the benami property, but has also enacted the administrative structure for proper implementation of such provisions.The 2016 Act has not only widened the ambit of benami transaction, but the same also mandates for more stringent punishment.There is no doubt that 2016 Act has been enacted to bolster the efforts of the Government to curb the parallel economy and eradicate the black money, and this enactment has some teeth to deal with the menace of benami transaction.