Coming Soon - New Law on Benami transactions

A new law is proposed to strengthen punishment procedures for benami transactions.

Upon the Benami Transactions (Prohibition) Bill, 2011 becoming an Act, it shall replace the Benami Transactions (Prohibition) Act, 1988. The Bill is to consolidate and amend the law relating to benami transactions, prohibit holding property in benami and restrict right to recover or transfer property held benami and provide mechanism and procedure for confiscation of property held benami and for matters connected therewith or incidental thereto.

Property means property of any kind whether movable or immovable and benami property means any property which is the subject matter of a benami transaction. Benamidar means a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a name lender. Beneficial owner means a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar.

Benami transaction means a transaction or arrangement: 

a)    where a property is transferred to, or is held by a person for a consideration provided, or paid by, another person and the property is held for the immediate or future benefit, direct or indirect of the person providing the consideration except when the property is held by a karta or a member of Hindu undivided family for his benefit or benefit of other members in the family or except when the property is held by a person standing in a fiduciary capacity, such as a trustee, executor, partner, agent, director of a company or legal advisor, etc for the benefit of another person towards whom he stand in such capacity,

b)    In respect of a property carried out or made in a fictitious name, or

c)     In respect of a property where the owner of the property is not aware of, or denies knowledge of such ownership. It is provided that no person shall on or after the commencement of the Act enter into any benami transaction. However this shall not apply to any transaction entered into by any person being an individual, in the name of his spouse, brother or sister or any lineal ascendant or descendant.

It is provided that any property which is the subject matter of a benami transaction shall be liable to be confiscated by the Central Government. Where any property is attached, the Adjudicating Authority shall after giving an opportunity to the person concerned to be heard make an order confiscating the property held to be a benami property. However if a person acquires a benami property from the benamidar for adequate consideration without his having knowledge of the benami transaction, the same shall not be liable for confiscation.

It is further provided where any 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 such benami transaction shall be guilty of the offence of benami transaction. Whoever is found guilty of such offence shall be punishable with imprisonment for a term not less than 6 months but which may extend up to 2 years and shall also be liable to a fine which may extend to 25% of the fair market value of the property.

The Benami Transactions (Prohibition) Act, 1988 was found to be inadequate to deal with the benami transactions as the Act inter-alia

I.        does not contain any specific provision for vesting of confiscated property with the Central Government,

II.      does not have any provisions for appellate mechanism against any action taken by the authorities under the Act, while barring jurisdiction of the Civil Court,

III.      does not confer powers of the Civil Court upon the authorities for its implementation. In view of the above circumstances, the present bill is brought forward so that a comprehensive legislation is put in place of the Benami Transactions (Prohibition) Act, 1988.

-      Adv. R. P. Rathod.