SC recalls 2022 verdict striking down Benami Property Act provisions
New Delhi: In a significant legal reversal, the Supreme Court on Friday recalled its 2022 verdict that had declared two key provisions of the Benami Property Transactions Act unconstitutional.
The bench, led by Chief Justice of India D Y Chandrachud and including Justices P S Narasimha and Manoj Misra, allowed the Centre’s review petition against the August 23, 2022 judgement. The earlier verdict, delivered by a three-judge bench headed by former CJI N V Ramana, had struck down Sections 3(2) and 5 of the Prohibition of Benami Property Transactions Act, 1988, deeming them “manifestly arbitrary.”
Section 3 of the Act deals with the prohibition of benami transactions, where properties are held by individuals through proxies, while Section 5 pertains to the acquisition of benami properties by authorities.
The 2022 ruling had significantly weakened the government’s ability to tackle benami transactions, which are often used to conceal illicit wealth.
In Friday’s hearing, Solicitor General Tushar Mehta, representing the Centre, successfully argued that the validity of these two provisions was not under challenge before the previous bench. The current bench agreed, stating: “It is trite law that challenge to the constitutional validity of a statutory provision can’t be adjudicated upon in the absence of a live lis and contest between the parties.”
Consequently, the Supreme Court allowed the review petition and ordered that the civil appeal on which the August 2022 verdict was based be restored for fresh adjudication. This case will now be heard by a bench to be nominated by the Chief Justice on the administrative side.
The 2022 judgement had also ruled that the benami law could not be applied retrospectively, preventing authorities from initiating or continuing criminal prosecution or confiscation proceedings for transactions entered into before the legislation came into force. This aspect of the law had been a point of contention between the Centre and various High Courts, with the government arguing for retrospective application.
The benami law, originally enacted in 1988 and significantly amended in 2016, aims to prohibit benami transactions and enforce the right to recover properties held under such arrangements. Violators can face up to three years in jail, a fine, or both.
