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Benami Transactions (Prohibition) Amendment Act, 2016

Background & Introduction

Government is committed to curb the menace of corruption, and continue to attack it from all the directions and to nail it down the government brought the Benami Transactions (Prohibition) Amendment Act, which is a small step with a deep impact. The amendments of the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act) is effective from 1st November and demonetisation from 8th November. Looks like government was very cautious, they put a barrier before opening gates for rat race of money hoarders. The amendment act, Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), makes the existing act Benami Transactions (Prohibition) Act, 1988 stronger; provided more teeth by equipping the body with powers of a court. The PBPT Act provides for the creation of an appellate mechanism called the Adjudicating Authority and Appellate Tribunal. For the purpose of adjudication the act borrows the provisions from the Section 25 of the Prevention of Money Laundering Act, 2002 (PMLA). This is not a new act but amendment to the existing act however after this amendment act the new name of the principal act will be Prohibition of Benami Property Transactions Act, 1988. In fact the old law had these lacunae though the act was there yet the corruption and benami property business was thriving. This amendment act fixes the potholes in the old act.

Layout of the Act

The Prohibition of Benami Property Transactions Act, 1988 has more sections by inserting new Chapters III to VII.

  • CHAPTER I PRELIMINARY
  • CHAPTER II PROHIBITION OF BENAMI TRANSACTIONS
  • CHAPTER III AUTHORITIES
  • CHAPTER IV ATTACHMENT, ADJUDICATION AND CONFISCATION
  • CHAPTER V APPELLATE TRIBUNAL
  • CHAPTER VI SPECIAL COURTS
  • CHAPTER VII OFFENCES AND PROSECUTION
  • CHAPTER VIII MISCELLANEOUS

Key terms used in the Act

1. Benami property: means any property which is the subject-matter of a benami transaction and proceeds from the Benami property.

2. Benami transaction: the term has been defined very widely which includes any sort of arrangement with the help of which a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person with the intention to keep the property, directly or indirectly, for future benefits of the person who paid for it with certain exceptions such as Karta of HUF, paid in fiduciary capacity etc.

Violation of Act

Whoever enters into any benami transaction on and after the date of commencement of the Benami Transactions (Prohibition) Amendment Act, 2016, shall, notwithstanding anything contained in sub-section (2), be punishable.

a) Property held benami liable to confiscation by CG
b) Benamidar prohibited to re-transfer the property back to the payer if transferred then transfer will be treated as null and void except transfer made in accordance with section 190 of the Fin Act 2016

Adjudicating Authority

Appointment of Adjudicating authority proposed in by the act. this is new provision which empowers the act. he Adjudicating Authority shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice and, subject to the other provisions of this Act, the Authority shall have powers to regulate its own procedure. The authority shall have same powers as civil court under the Code of Civil Procedure, 1908 and all the proceedings deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the Indian Penal Code and respondent should also treat like court. If Initiating Officer, on the basis of material in his possession, has reason to believe issue show cause notice to the person within such time as may be specified in the notice why the property should not be treated as benami property with a copy to the beneficiary. Procedures which Initiating officer need to carry in the case of benami transaction or property.

Offences

If a person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into the benami transaction, shall be guilty of the offence of benami transaction.

Punishment

Rigorous imprisonment for a term which shall not be less than 01 year, but which may extend to 07 years and shall also be liable to fine which may extend to 25%. of the fair market value of the property. If anyone knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with rigorous imprisonment for a term which shall not be less than 06 months but which may extend to 05 years and shall also be liable to fine which may extend to 10% of the fair market value of the property.

Encapsulate

Under the Benami Transactions (Prohibition) Amendment Act 2016 recently came into force on 1 November, a transaction is named ‘benami’ if property is held by one person, but has been provided or paid for by another person. The Benami properties are liable for confiscation by the government without payment of any compensation on the contrary the beneficiary or the payer will serve the rigorous jail term and fine so also the person who furnishes false information. Does that mean henceforth property purchased and registered in the name other than the name of payer will be subject to confiscation or the payer will be subject to punishment? Well the answer is no there are certain exceptions such as purchase in the name of spouse or children are not benami property. The hardship it provides is that it doesn’t provide any threshold.

The author can also be reached at ca.vkd@rediffmail.com


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Category LAW, Other Articles by - CA. Vikash Dwivedi 



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