Analysis of Retroactive Confiscation in Benami Transactions

Explore the in-depth legal analysis conducted by the court regarding retroactive confiscation in benami transactions. The case delves into the nuances of applying confiscatory provisions retrospectively and examines the punitive nature of such actions. Discover the judicial insights into the retrospective application of laws in confiscation proceedings and the constitutional considerations surrounding them.

Facts

• The respondent-company denied that the scheduled property is a Benami property.
• On 31.03.2012, 99.9% of the respondent-company shareholdings were acquired by M/s PLD Properties Pvt. Ltd. and M/s Ginger Marketing Pvt. Ltd. at a discounted price of Rs.5/- per share for a total amount of Rs.19,10,000/-.
• On 02.05.2011, the respondent-company purchased a property in its name from various sellers for a total consideration of Rs.9,44,00,000/-.
• An appeal was filed against the High Court’s judgment in APO No 8 of 2019.
• The case involves a dispute between normative and positivist positions regarding the nature of a crime and punishment.
• The Adjudicating Authority provisionally attached the property under Section 24(4)(b)(i) of the 2016 Act.
• The respondent-company filed a writ petition (W.P. No. 687 of 2017) challenging the attachment order.
• The 2016 Act was said to not have retrospective application.
• The High Court quashed the show-cause notice dated 29.08.2017.
• The impugned order was dated 12.12.2019.

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Issue

• The main legal question for consideration is whether the retroactive confiscation under the 2016 Amendment Act is punitive or not.
• The issue pertains to whether the provisions of the 2016 Act can be applied retrospectively.
• The specific focus is on whether the confiscatory provisions of the 2016 Act are meant to punish or not.

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Arguments

• The Union of India appealed against an impugned order related to the implementation of the Benami Transactions (Prohibition) Act, 1988.
• The Act of 1988 remained non-operational due to the absence of necessary rules and procedures for its enforcement.
• Transactions and properties deemed ‘benami’ between 19.05.1988 and 01.11.2016 were considered valid due to the inaction on implementing the 1988 Act.
• The 2016 Amendment Act aimed to prevent immunity for individuals involved in benami transactions under the pre-amendment Act.
• The 2016 Amendment Act amendments were enforceable from 01.11.2016 and could not have retrospective effect.
• The pre-amendment Act recognized benami transactions as illegal, leading to the Amendment Act consolidating procedures for enforcement.
• Confiscation under the Benami Transactions Act was not seen as a punishment and the 2016 Act was left to be enforced from a specified date.
• Procedural laws can be applied retrospectively, while the bar on retrospective application is for substantive laws according to settled legal principles.
• Adjudication proceedings are not in the nature of prosecution and hence not restricted by Article 20.
• Distinct penalties for benami transactions pre and post amendment indicate prospective nature of the amended Act.
• Citing cases R. Rajagopal Reddy v. Padmini Chandrasekharan and Mangathai Ammal v. Rajeswari in support of the prospective nature of certain provisions of the Act.
• The 1988 Act did not have retrospective application.
• Amendment to the parent Act with new definition of benami transactions substantially changed the scope of the offence by enlarging its ambit.
• Property acquisition without compensation amounts to confiscation, which involves civil liability.

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Analysis

• Sections 3 and 5 of the 1988 Act were found to be unconstitutional.
• The 2016 amendments were creating new provisions and new offences.
• The 2016 Act contemplated in-rem forfeitures transposing the taint of benami transactions to the property itself.
• The law under the 1988 Act was envisaged on the touchstone of strict liability.
• The criminal provisions of the Benami Act were not enforced or utilized.
• The Law Commission recommended prohibition against benami transactions to have had force only prospectively.
• The 2016 Act is viewed as a gap filling exercise for the 1988 Act.
• The substantive due process in Indian jurisprudence has matured over the years.
• Retroactive application of laws mandating punitive provisions is not permissible under Article 20(1) of the Constitution.
• The Law Commission reports played a significant role in shaping the understanding of the legality and constitutionality of benami transactions and related laws.
• Confiscation provisions were discussed in relation to different acts and their application in criminal cases.
• Judicial interpretations of various acts and their implications on confiscation proceedings were highlighted.
• The importance of fair, just, and reasonable procedure for confiscation was emphasized.
• The distinction between civil and criminal confiscation proceedings was examined.
• The role of judiciary in upholding constitutional guarantees against arbitrary laws was underscored.
• Historical background and legal evolution of benami transactions in India were explored.
• The significance of substantive due process in challenging the validity of laws was discussed.
• Various tests and considerations for determining benami transactions and forfeiture laws were detailed.
• Case examples and legal precedents were cited to support the analysis of confiscation proceedings.
• Retrospective vs. prospective application of laws in relation to confiscation provisions was evaluated.
• Section 27(4) states that any amount payable in respect of confiscation need to be analyzed further.
• Section 53 discusses the penalty for Benami Transactions, including imprisonment and fines.
• The Code of Criminal Procedure, 1976 provides for interim custody and forfeiture at the conclusion of the trial under Section 451.
• The 1988 Act modified the approach to Benami transactions, including criminal liability depending on the nature of the transaction.
• Possible alternatives for regulating Benami transactions were discussed, including making it an offense and prohibiting enforcement of rights in civil suits related to Benami properties.
• Various sections and definitions provide clarity on Benami transactions, the types of transfers, penalties, and forfeiture of properties.
• Section 3(2) of the unamended 1988 Act and the 2016 Act is declared unconstitutional as manifestly arbitrary.
• Section 5 of the 2016 Act, being punitive, can only be applied prospectively and not retroactively to protect rights established since 1988.
• Continuation of civil provisions under Section 4 indicates legislative intention to prioritize the ostensible owner’s rights over the real owner in benami transactions.
• The in rem forfeiture provision under the unamended Act of 1988 was also held unconstitutional for being arbitrary.
• The 2016 Amendment Act introduced substantive provisions beyond mere procedural changes.

Decision

• Criminal prosecution or confiscation proceedings for transactions prior to 1.11.2016 are dismissed.
• All such prosecutions or confiscation proceedings are quashed.
• The constitutionality of independent forfeiture proceedings under the 2016 Amendment Act remains open for future adjudication.
• Authorities are barred from initiating or continuing certain proceedings.

Case Title: UNION OF INDIA Vs. M/S. GANPATI DEALCOM PVT. LTD. TTHROUGH MANAGING DIRECTOR (2022 INSC 853)

Case Number: C.A. No.-005783-005783 / 2022

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