BENAMI DEPOSITS AND PROPERTIES – A DISCUSSION
The government aims to prosecute persons who have deposited someone else money in their bank account by bringing new legislature called Benami transaction (prohibition) amendment act, 2016.
This amendment act is introduced in replacement of the original Benami Transaction (prohibition) act 1988.
This act serves the purpose of identifying the properties registered under fake names. Since an offence under this act is non-cognizable in nature, the chances of imprisonment are very less and the person guilty under this act maybe free just by paying fine of 25%.
As per the preamble of the original act, the main intention for enactment of this legislature was to “prohibit benami transactions and right to recover the property held benami for matter connected with or incidental thereto.”
There are three parts to this act:-
- Benami property;
- Benami transaction.
Benami property means, any property, which is the subject matter to “benami transaction” and also includes proceeds from such property.
Benamidar as per this act is “a person or a fictitious person, as the case may be, in whose name the “benami property” in transferred or held also includes the person who lends his name”
The amendment act defines the words “benami transaction” under section 2, sub-section (8),which is the most important definition of this enactment. On analysis of this section a “benami transaction” or an arrangement shall fulfill following 2 conditions: –
- Property is held by or transferred to any person for which the consideration is paid by another person, and;
- The property is held for the benefit or future benefit, either directly or indirectly, for the person who has provided such consideration.
However following 4 transactions shall not count as benami property: –
- Property is held by the karta, for the benefit of himself or the member of the HUF, where the consideration is paid out of the known sources of the HUF;
- Property held by a person standing in fiduciary relationship with another person, and property is held for the benefit of such person. This also includes trustee, executor, partner, director of the company and the depository also;
- Property held in the name of the children or spouse of any individual, provided that the consideration is paid out of the known sources of such individual;
- Property held in the name of his brother or sister or father, mother, grandfather, grandmother, grandchildren, etc. (word used in the section are “lineal ascendant or descendant”), provided that the name of the individual appears on the document as joint-owners and the consideration is paid out of the known sources of such individual.
Apart from the above following, are also included in the definition of “benami transaction”: –
- Transaction or an arrangement in respect of a property carried out or made in a fictitious name;
- A transaction or an arrangement in respect of a property where the owner of the property is not aware of such ownership;
- A transaction or an arrangement on respect of a property where the person providing the consideration is not traceable or fictitious.
As per an explanation given by this section, benami transaction shall not include any transaction involving the allowing of possession of any property taken or retained on part performance of a contract referred in section 53 of transfer of property Act, 1882.
The transaction as mentioned in Sec. 53 is that is a property transfer between transferor and transferee has to be valid transfer and it cannot be a fictitious or sham transaction.
Section 3 of chapter II of the act states that whosoever enters into any benami transaction shall be punishable with rigorous imprisonment for a term which shall not be less than one year but shall not exceed seven years, in addition to this shall be payable with a fine of 25% of the fair market value of the property (stated in chapter VII of the act). Further an offence under this act is non-cognizable offence, meaning an arrest can only be made on the order of the court (sec 61).
The act recites for appointment of 4 authorities; they are initiating officer, approving authority, adjudication authority and administrator. Each of the authority has different powers and duties (section 18(1)).
Proceedings under this act,
- The proceedings under this act will begin when the initiating officer on identifying a person as “benamidar”, shall send a notice to such person to show why the concerned property shall not be treated as “benami property”, copy shall be sent to the beneficial owner also, if identifiable (section 24);
- After the proceedings if the officer believes that a property is “benami property”, then he shall alienate such property by the way of provisional attachment, with the previous approval of approving authority for 90 days or less;
- During the 90 days the officer can ask for information, evidences and relevant material, as he deems fit;
- If his belief of benami property is confirmed then he shall pass a order to extend the provisional attachment and refer it to adjudication authority within 15 days (section 24(5));
- Adjudication authority is the person who will review the evidences and give a formal judgment. He shall ask for documents and particulars has he requires (sec 26(3));
- Salient features of this act: –The adjudication authority if he is of the opinion that the property concerned is benami then he shall pass and order confirming it and visa versa;
- Person aggrieved by the order of Adjudication authority shall appeal to appellate tribunal formulated under this act within 45 days of passing an order;
- Further if appeal to high court can also be preferred against the order of appellate tribunal within 60 days. High court will only hear appeal on question of law.
- Central government may also constitute special courts under this act.
- All the authorities under this act shall not be bound by code of civil proceedings, 1908 and shall have the power to regulate its own proceeding’s, however it shall have same powers as accrue to a civil court (sec 11 and 40(1)).
- The proceedings of adjudication authority and appellate tribunal shall be judicial proceedings; in simple words they shall be deemed to be quasi-judicial authorities (sec 40(5) and 18(3)).
- Adjudication authority shall pass order within one year from the end of month in which the reference is received from initiating officer (sec 26(7)).
- The central government my exempt any property related to charitable or religious trusts from the operation of this act (sec 58(1)).
- The act protects action taken in good faith (sec 64).
- No order shall be passed under this act after expiry of two years from the commencement of this act(sec 70(2)).
- Any act done to defeat the purpose of this act shall be null and void.