Supreme Court strikes down Section 3(2) of Benami Transaction (Prohibition) Amendment Act 2016; holds it unconstitutional

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The 1988 act was amended in 2016 in order to curb black money menace. 

A Supreme Court bench headed by CJI NV Ramana today held Section 3(2) of the Benami Transactions (Prohibition) Act 1988 unconstitutional on the ground of being manifestly arbitrary.

Section 3 (2) stated that whoever enters into any benami transaction shall be punished with imprisonment for a term which may extend to three years or with fine or with both.

The bench, also consisting of Justices Krishna Murari and Hima Kohli, held that the Amendment Act of 2016 to the 1988 Act is prospective in nature and it cannot apply retrospectively. It was noted that the 2016 amendment cannot be held as merely procedural. 

The above was held in a plea by Centre against a Calcutta High Court judgment, which held that the 2016 Amendment Act was prospective in nature.

The amendment also increased the punishment for benami transactions from imprisonment up to three years to seven years, and a fine which may extend to 25 percent of the fair market value of the benami property.

In 2016, Centre amended the original 1988 Act in order to curb black money. Subsequently, certain provisions were notified and the Act came into force on November 1, 2016.  'Benami' transaction is defined in the Act as any transaction in which property is transferred to one person for consideration paid by another person.

The amendment increased the scope of “benami transactions” 

Case title: Union of India Vs Ganapati Dealcom