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Kalpeshkumar L GuptaAssistant Professor of Law

kalpesh.gupta@aurouniversity.edu.in

The Benami Transactions (Prohibition) Act, 1988

2016

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What does word Benami means?Benami word is originated from Persia which means “No Names” or “Without Name”

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Objectives of ActAn act to prohibit be benami transactions and the right to recover property held benami and for matters connected therewith or incidental thereto.

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Benami Transaction (Section 2(a))…means any transaction in which property (2(c)) is transferred to one person for a consideration paid or provided by another person.

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Property (Section 2(c))….means property of any kind, whether movable or immovable, tangible or intangible and includes any rights or interest in such property.

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Prohibition of benami transaction (Section 3)1. No person shall enter into any benami transaction.

2. Nothing in sub-section (1) shall apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter.

3. Whoever enters into any benami transaction shall be punishable with imprisonment upto 3 years or with fine or both.

Cont…

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Plea of benami transaction whether heritable by heirs of real owner.

An ostensible owner does not hold any interest or title over the property in a benami transaction. The title lies with the real owner. Upon his death, necessarily the property remains as an estate of real owner and becomes liable for inheritance according to law of succession governing the parties.

…the heirs of benamidar do have a legal right to set up a plea of benami and to claim the property from the ostensible owner (T. Jayamma v/s. Devamma, AIR 2004 Kant. 96).

Cont…

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Prohibition of the right to recover property held benami (Section 4)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 real owner of such property.

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Property held benami liable to acquisition (Section 5)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 doubt, it is hereby declared that no amount shall be payable for the acquisition of any property under sub-section (1).

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Act not to apply in certain cases (Section 6)

Nothing in this act shall affect the provisions of Section 53 of the Transfer of Property Act, 1882 (Fraudulent Transfer) or any law relating to transfer for an illegal purpose.

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Power to make rules (Section 8)Central Govt. may by notification in the official gazette, make rules for carrying out the purpose of this Act.

Rules may provide for

- The authority competent to acquire properties under Sec. 5.

- The manner in which, and the procedure to be followed for the acquisition of properties under Sec. 5.

- Any other matter which is required to be or may be prescribed.

Rules not made till date

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Changes in Benami Act will block black money in realty (The Economics Times, March 13, 2015)

Govt. proposed amendment to Benami Transaction Act will enable confiscation of such property, prosecution of offenders as also help deal effectively with the menace of black money within the country.

Earlier in 2011 new bill was introduced replacing old act but bill lapses as 15th Loksabha dissolved. Property can be transferred to Spouse/Siblings.

Budget proposed amendment in Income Tax Act to prohibit “acceptance or payment of advance of Rs. 20,000 or more in cash for purchase of immovable property.

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Benami definition to go stricter, may include only wife, unmarried daughter (The Economics Times, March 21, 2015)

The new law is likely to say that property acquired in the name of any other person —brother, sister, father, mother, son —risks being confiscated and would lead to jail time.

The legislation will lead to confiscation of benami property and provide a mechanism for this. The Benami Transaction (Prohibition) Act was first enacted in 1988 but has not been notified due to some infirmities. Rules under that law were never framed.

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The Benami Transactions (Prohibition) Amendment Bill, 2015

The Benami Transactions (Prohibition) Amendment Bill, 2015 cleared by cabinat. The Bill seeks to amend the Benami Transactions Act, 1988. The Act prohibits benami transactions and provides for confiscating benami properties. *

* Economic Times, May 13, 2015http://economictimes.indiatimes.com/news/politics-and-nation/cabinet-clears-bill-to-check-benami-transactions-aimed-at-curbing-domestic-black-money/articleshow/47262290.cms

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The Benami Transactions (Prohibition) Amendment Bill, 2015

The Bill seeks to:

(i) amend the definition of benami transactions,

(ii) establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and

(iii) specify the penalty for entering into benami transactions.

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The Benami Transactions (Prohibition) Amendment Bill, 2015

The Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.

The Bill amends this definition to add other transactions which qualify as benami, such as property transactions where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable.

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The Benami Transactions (Prohibition) Amendment Bill, 2015

The Bill also specifies certain cases will be exempt from the definition of a benami transaction.

These include cases when a property is held by:

(i) a member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family;

(ii) a person in a fiduciary capacity; (iii) a person in the name of his spouse or child, and the

property has been paid for from the person’s income;

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The Benami Transactions (Prohibition) Amendment Bill, 2015

The Bill defines benamidar as the person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar.

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The Benami Transactions (Prohibition) Amendment Bill, 2015

Initiating Officer

Approving Authority

Administrator

Adjudicating Authority

Appellate Tribunal

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The Benami Transactions (Prohibition) Amendment Bill, 2015If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person. The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority. At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.

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The Benami Transactions (Prohibition) Amendment Bill, 2015If an order is passed 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 then pass an order on whether or not to hold the property as benami.

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The Benami Transactions (Prohibition) Amendment Bill, 2015Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.

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The Benami Transactions (Prohibition) Amendment Bill, 2015The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority. Appeals against orders of the Appellate Tribunal will lie to the high court.

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The Benami Transactions (Prohibition) Amendment Bill, 2015Under the Act, the penalty for entering into benami transactions is imprisonment up to 3 years, or a fine, or both. The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property.

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The Benami Transactions (Prohibition) Amendment Bill, 2015The Bill also specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.

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The Benami Transactions (Prohibition) Amendment Bill, 2015Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill.

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Thank you !