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The Benami law of 2016 has no retrospective effect: Sc


By PTI IST (Released)

mini

The Supreme Court said that the continued presence of an unconstitutional law on the statute book does not prevent it from concluding that such unconstitutional laws cannot operate for the benefit of or be used to retroactively change laws to remedy to existing constitutional defects.

The Supreme Court said on Tuesday that the Benami Transactions (Prohibition) Amendment Act 2016 does not have retroactive application and authorities cannot initiate or continue criminal charges or forfeiture proceedings for transactions concluded before the entry into force of the legislation.

The Supreme Court also declared Section 3(2) and Section 5 of the Benami Transactions (Prohibition) Act 1988 to be vague and arbitrary.

The Supreme Court said that the continued presence of an unconstitutional law on the statute book does not prevent it from concluding that such unconstitutional laws cannot operate for the benefit of or be used to retroactively change laws to remedy to existing constitutional defects.

“Given that this Court has already held that the criminal provisions of the 1988 Act were arbitrary and unenforceable, the Act by the 2016 Amendment could not retroactively enforce the forfeiture of such transactions entered into between 5 September 1988, to October 25, 2016, as it would amount to a punitive sentence, in the absence of any other form of punishment,” said a bench headed by Chief Justice NV Ramana.

The verdict fell on the Centre’s appeal challenging the Calcutta High Court judgment in which it was held that the amendment made to the 1988 Act in 2016 would be enforceable with prospective effect. The center had argued that the 2016 law would apply retroactively.

The 1988 law was enacted to prohibit Benami transactions and the right to recover property considered “benami”.

“It is in this unique circumstance that the forfeiture contemplated for the period between September 5, 1988 and October 25, 2016 would be characterized as punitive if such forfeiture is authorized retroactively,” said the panel, also including judges Krishna Murari and Hima Kohli, says in his 96-page judgement.

The Supreme Court said the Legislature has the power to enact retroactive/retroactive civil legislation under the Constitution. However, Article 20(1) states that no law imposing a punitive provision may be enacted retroactively, he said.

“Section 3 (criminal provision) read with section 2(a) and section 5 (procedure for confiscation) of the 1988 Act is overbroad, disproportionately harsh and operates without adequate safeguards in place. Such provisions were stillborn laws and were never used in the first place.

With that in mind, this Court finds that Sections 3 and 5 of the 1988 Act were unconstitutional from the time they came into force,” the bench said.

The higher court stated that the taint of Benami transactions is not limited to the person who enters into the aforementioned transaction, but perpetually attaches to the property and extends to all proceeds arising from such property, unless a defense of innocent property is established.

“Where such a taint is created not on the individual, but on the property itself, a retroactive law would be characterized as punitive for condemning the sale proceeds which may also involve legitimate means of enrichment”, did he declare.

Regarding the forfeiture provision under Section 5 of the 2016 Act, the higher court said that being punitive in nature, can only be applied prospectively and not retroactively.

“As this Court is not concerned with the constitutionality of these independent forfeiture proceedings contemplated under the Other Grounds Amendment Act 2016, the above issues are left open for determination in appropriate proceedings” , said the bench.


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