# UNION OF INDIA & ANR v. M/s. GANPATI DEALCOM PVT. LTD

- **Citation:** [2022] 12 S.C.R. 320
- **Court:** Supreme Court of India
- **Decided:** 2022-08-23
- **Case number:** Civil Appeal No. 5783 of 2022
- **Bench:** N. V. Ramana, Krishna Murari, Hima Kohli
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-anr-v-m-s-ganpati-dealcom-pvt-ltd-35442
- **Pages:** 71

## Headnote

Prohibition of Benami Property Transactions Act, 1988 -
ss.3(2),5 - Benami Transactions (Prohibition) Amendment Act, 2016
- Held: s.3(2) of the unamended 1988 Act is unconstitutional for
being manifestly arbitrary - Accordingly, s.3(2) of the 2016 Act is
also unconstitutional as it is violative of Article 20(1) of the
Constitution - Further, in rem forfeiture provision u/s.5 of the
unamended Act of 1988, prior to the 2016 Amendment Act, was
unconstitutional for being manifestly arbitrary - 2016 Amendment
Act was not merely procedural, rather, prescribed substantive
provisions - In rem forfeiture provision u/s.5 of the 2016 Act, being
punitive in nature, can only be applied prospectively and not
retroactively - Thus, concerned authorities cannot initiate or
continue criminal prosecution or confiscation proceedings for
transactions entered into prior to the coming into force of the 2016
Act, viz., 1.11.2016 -Consequently, all such prosecutions or
confiscation proceedings stand quashed- Constitution of India -
Article 20(1).
Benami Property Transactions Act, 1988 - ss.2(a), 3 - Mens
rea, absence of - Effect of - Held: The criminal provision envisaged
u/ss. 2(a) and 3 does not expressly contemplate mens rea - Mens rea
is an essential ingredient of a criminal offence - Absence of mens
rea creates a harsh provision having strict liability -Mere fact that
the object of the statute is to promote welfare activities or to eradicate
a grave social evil which by itself is not decisive of the question as
to whether the element of a guilty mind is excluded from the
ingredients of an offence - Mens rea by necessary implication may
be excluded from a statute only where it is absolutely clear that
implementation of the object of the statute would otherwise be
defeated - The language of s.2(a) coupled with s.3, completely
[2022] 12 S.C.R. 320
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ignores the aspect of mens rea, as it intends to criminalize the very
act of one person paying consideration for acquisition of property
for another person - The 1988 law was envisaged on the touchstone
of strict liability.
Judicial Review- Law with respect to testing the
unconstitutionality of a statutory instrument - Held: Constitutional
Courts can test constitutionality of legislative instruments (statute
and delegated legislations)both on procedure as well as substantive
nature of these instruments - The test should be based on a combined
reading of Articles 14, 19 and 21 of the Constitution - Constitution
of India - Articles 14, 19, 21.
Doctrines/Principles - Doctrine of manifest arbitrarinessDiscussed.
Interpretation of Statutes - Law declared unconstitutional -
Effect of - Held: Such a declaration would render the law not to
exist in the law books since its inception - It is only a limited
exception under Constitutional law, or when substantial actions have
been undertaken under such unconstitutional laws that going back
to the original position would be next to impossible - In those cases
alone, would this Court take recourse to the concept of 'prospective
overruling'.
Constitution of India -Retroactive/retrospective legislations
- Legislature's power to enact - Held: Legislature has power to
enact retroactive/retrospective civil legislations under the
Constitution - However, Article 20(1) mandates that no law
mandating a punitive provision can be enacted retrospectively - A
punitive provision cannot be couched as a civil provision to by-pass
the mandate under Article 20(1) of the Constitution which follows
the settled legal principle that "what cannot be done directly, cannot
be done indirectly".
Words and Phrases- "Forfeiture", "Benami", "Benami
transaction", "Benamidar/ostensible owner"- Discussed.
Disposing of the appeal, the Court
HELD: 1. Reading Section 2(a) along with Section 3 makes
one thing clear - the criminal provision envisaged under the
aforesaid provisions does not expressly contemplate mens rea.
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## Text

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SUPREME COURT REPORTS
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320
UNION OF INDIA & ANR.
v.
M/s. GANPATI DEALCOM PVT. LTD.
(Civil Appeal No. 5783 of 2022)
AUGUST 23, 2022
[N. V. RAMANA, CJI, KRISHNA MURARI AND
HIMA KOHLI, JJ.]
Prohibition of Benami Property Transactions Act, 1988 -
ss.3(2),5 - Benami Transactions (Prohibition) Amendment Act, 2016
- Held: s.3(2) of the unamended 1988 Act is unconstitutional for
being manifestly arbitrary - Accordingly, s.3(2) of the 2016 Act is
also unconstitutional as it is violative of Article 20(1) of the
Constitution - Further, in rem forfeiture provision u/s.5 of the
unamended Act of 1988, prior to the 2016 Amendment Act, was
unconstitutional for being manifestly arbitrary - 2016 Amendment
Act was not merely procedural, rather, prescribed substantive
provisions - In rem forfeiture provision u/s.5 of the 2016 Act, being
punitive in nature, can only be applied prospectively and not
retroactively - Thus, concerned authorities cannot initiate or
continue criminal prosecution or confiscation proceedings for
transactions entered into prior to the coming into force of the 2016
Act, viz., 1.11.2016 -Consequently, all such prosecutions or
confiscation proceedings stand quashed- Constitution of India -
Article 20(1).
Benami Property Transactions Act, 1988 - ss.2(a), 3 - Mens
rea, absence of - Effect of - Held: The criminal provision envisaged
u/ss. 2(a) and 3 does not expressly contemplate mens rea - Mens rea
is an essential ingredient of a criminal offence - Absence of mens
rea creates a harsh provision having strict liability -Mere fact that
the object of the statute is to promote welfare activities or to eradicate
a grave social evil which by itself is not decisive of the question as
to whether the element of a guilty mind is excluded from the
ingredients of an offence - Mens rea by necessary implication may
be excluded from a statute only where it is absolutely clear that
implementation of the object of the statute would otherwise be
defeated - The language of s.2(a) coupled with s.3, completely
[2022] 12 S.C.R. 320
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ignores the aspect of mens rea, as it intends to criminalize the very
act of one person paying consideration for acquisition of property
for another person - The 1988 law was envisaged on the touchstone
of strict liability.
Judicial Review- Law with respect to testing the
unconstitutionality of a statutory instrument - Held: Constitutional
Courts can test constitutionality of legislative instruments (statute
and delegated legislations)both on procedure as well as substantive
nature of these instruments - The test should be based on a combined
reading of Articles 14, 19 and 21 of the Constitution - Constitution
of India - Articles 14, 19, 21.
Doctrines/Principles - Doctrine of manifest arbitrarinessDiscussed.
Interpretation of Statutes - Law declared unconstitutional -
Effect of - Held: Such a declaration would render the law not to
exist in the law books since its inception - It is only a limited
exception under Constitutional law, or when substantial actions have
been undertaken under such unconstitutional laws that going back
to the original position would be next to impossible - In those cases
alone, would this Court take recourse to the concept of 'prospective
overruling'.
Constitution of India -Retroactive/retrospective legislations
- Legislature's power to enact - Held: Legislature has power to
enact retroactive/retrospective civil legislations under the
Constitution - However, Article 20(1) mandates that no law
mandating a punitive provision can be enacted retrospectively - A
punitive provision cannot be couched as a civil provision to by-pass
the mandate under Article 20(1) of the Constitution which follows
the settled legal principle that "what cannot be done directly, cannot
be done indirectly".
Words and Phrases- "Forfeiture", "Benami", "Benami
transaction", "Benamidar/ostensible owner"- Discussed.
Disposing of the appeal, the Court
HELD: 1. Reading Section 2(a) along with Section 3 makes
one thing clear - the criminal provision envisaged under the
aforesaid provisions does not expressly contemplate mens rea.
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Under the Indian jurisprudence, the law on the subject is fairly
well-settled. It has been subjected to the judicial scrutiny of this
Court on several occasions. It does not call for a detailed
discussion and is enough to restate the principles. Mens rea is an
essential ingredient of a criminal offence. Doubtless, a statute
may exclude the element of mens rea, but it is a sound rule of
construction adopted in England - and also accepted in India - to
construe a statutory provision creating an offence in conformity
with common law rather than against it, unless the statute
expressly or by necessary implication excluded mens rea. The
mere fact that the object of the statute is to promote welfare
activities or to eradicate a grave social evil which by itself is not
decisive of the question as to whether the element of a guilty
mind is excluded from the ingredients of an offence. Mens rea by
necessary implication may be excluded from a statute only where
it is absolutely clear that implementation of the object of the
statute would otherwise be defeated. The Language of Section
2(a) coupled with Section 3, completely ignores the aspect of mens
rea, as it intends to criminalize the very act of one person paying
consideration for acquisition of property for another person. The
1988 law was envisaged on the touchstone of strict liability. Such
strict statutory formulation under Section 2(a) read with Section
3 had left loose ends in the 1988 Act. In this light, the prosecution
would only have to prove only that consideration was paid or
consideration was provided by one person for another person
and nothing more. In all the judicial precedents, this Court has
had the occasion to examine this legislation on the civil side and
never on the criminal side, which would bear a higher standards.
Conflation of the ingredients under Section 3(1) and (2) with those
of Section 4, to forcefully implied mens rea, cannot be accepted.
[Para 14.10-14.12][355-D-G; 356-B-C]
Nathulal v. State of Madhya Pradesh, AIR 1966 SC
43; Mithilesh Kumari v. Prem Behari Khare, (1989) 2
SCC 95 : [1989] 1 SCR 621; R. Rajagopal Reddy v.
Padmini Chandrasekharan, (1995) 2 SCC 630 : [1995]
1 SCR 715 - referred to.
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2. The law with respect to testing the unconstitutionality of
a statutory instrument can be summarized as under:
a. Constitutional Courts can test constitutionality of
legislative instruments (statute and delegated legislations);
b. The Courts are empowered to test both on procedure as
well as substantive nature of these instruments.
c. The test should be based on a combined reading of
Articles 14, 19 and 21 of the Constitution.
One of the offshoots of this test under Part III of the
Constitution is the development of the doctrine of manifest
arbitrariness. [Paras 15.7, 15.8]
Shayara Bano v. Union of India, (2017) 9 SCC 1 :
[2017] 9 SCR 797; Joseph Shine v. Union of India, (2019)
3 SCC 39: [2018] 11 SCR 765; Hindustan Construction
Co. Ltd v. Union of India, (2020) 17 SCC 324 - relied
on.
3.1 Coming back to the 1988 Act, the two provisions with
which the Court is concerned are Sections 3 and 5 of 1988 Act.
The enactment was merely a shell, lacking the substance that a
criminal legislation requires for being sustained. The reasons
for the same are following. First, the absence of mens rea creates
a harsh provision having strict liability. Such an approach was
frowned upon by the 57th Law Commission Report as concerns
of tax evasion or sham transactions in order to avoid payment to
creditors were adequately addressed by the existing provisions
of law. Even the 130th Law Commission Report did not expressly
rule out the inclusion of mens rea. The legislative move to ignore
earlier Law Commission Reports without there being a principle
identified to do away with the aspect of mens rea should be a
contributory factor in analysing the constitutionality of the aforesaid
criminal provision under the 1988 Act. Further, under the
amended 2016 Act, the aspect of mens rea, is brought back through
Section 53. Such resurrection clearly indicates that doing away of
the mens rea aspect, was without any rhyme or reason, and ended
up creating an unusually harsh enactment. Second, ignoring the
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essential ingredient of beneficial ownership exercised by the real
owner contributes to making the law even more stringent and
disproportionate with respect to benami transactions that are
tripartite in nature. The Court cannot forcefully read the
ingredients developed through judicial pronouncements or under
Section 4 (having civil consequence) into the definition provided
under Sections 2 and 3 (espousing criminal consequences), to
save the enactment from unconstitutionality. Such a reading would
violate the express language of Section 2(a), of excluding one
ingredient from the definition of 'benami transaction', and would
suffer from the vice of judicial transgression. In removing such
an essential ingredient, the legislature did not identify any reason
or principle, which made the entire provision of Section 3
susceptible to arbitrariness. Interestingly, for tripartite benami
transactions, the 2016 Act brings back this ingredient through
Section 2(9)(A)(b). In this context, it may be stated that it is a
simple requirement under Article 20(1) that a law needs to be
clear and not vague. It should not have incurable gaps which are
yet to be legislated/filled in by judicial process. Third, it is fairly
admitted by the learned ASG appearing for the Union of India,
that the criminal provision was never utilized as there was a
significant hiatus in enabling the functioning of such a provision.
Fourth, reading Section 2(a) with Section 3(1) would have created
overly broad laws susceptible to be challenged on the grounds of
manifest arbitrariness. If this Court reads criminal provisions of
the Benami Act to have had force since 1988, then the following
deleterious consequences would ensue:
(i.) Section 187C of the Companies Act, 1956 assured
protection to nominal and beneficial holding of shares if the
prescribed declaration duly made are at serious risk.
(ii.) Benami cooking gas connections which have been
regularized from time to time are at risk.
(iii.) Housing colonies and benami allotments of DDA flats
which have been regularised from time to time are at risk.
The criminal provision under Section 3(1) of the 1988 Act
has serious lacunae which could not have been cured by judicial
forums, even through some form of harmonious interpretation. A
conclusion contrary to the above would make the aforesaid law
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suspect to being overly oppressive, fanciful and manifestly
arbitrary, thereby violating the 'substantive due process'
requirement of the Constitution. [Paras 15.11-15.17][366-E-H;
367-A-H; 368-A-B]
3.2 Coming to Section 5 of the 1988 Act, it must be noted
that the acquisition proceedings contemplated under the earlier
Act were in rem proceedings against benami property.
Jurisprudentially, such in rem proceedings transfer the guilt from
the person who utilized a property which is a general harm to the
society, to the property itself. When such proceedings are
contemplated under law, there need to be adequate safeguards
built into the provisions, without which the law would be
susceptible to challenge under Article 14 of the Constitution.
Coming to Section 5 of the 1988 Act, it was conceived as a half--
baked provision which did not provide the following and rather
left the same to be prescribed through a delegated legislation:
(i) Whether the proceedings under Section 5 were
independent or dependant on successful prosecution?
(ii) The standard of proof required to establish benami
transaction in terms of Section 5.
(iii) Mechanism for providing opportunity for a person to
establish his defence.
(iv) No 'defence of innocent owner' was provided to save
legitimate innocent buyers.
(v) No adjudicatory mechanism was provided for.
(vi) No provision was included to determine vesting of
acquired property.
(vii) No provision to identify or trace benami properties.
(viii) Condemnation of property cannot include the power
of tracing, which needs an express provision.
Such delegation of power to the Authority was squarely
excessive and arbitrary as it stood. From the aforesaid, the Union's
stand that the 2016 Act was merely procedural, cannot stand
scrutiny. In any case, such an inconclusive law, which left the
essential features to be prescribed through delegation, can never
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be countenanced in law to be valid under Part III of the
Constitution. The gaps left in the 1988 Act were not merely
procedural, rather the same were essential and substantive. In
the absence of such substantive provisions, the omissions create
a law which is fanciful and oppressive at the same time. Such an
overbroad provision was manifestly arbitrary as the open texture
of the law did not have sufficient safeguards to be proportionate.
[Paras 15.18-15.20][368-B-H; 369-A-B]
3.3 When a Court declares a law as unconstitutional, the
effect of the same is that such a declaration would render the law
not to exist in the law books since its inception. It is only a limited
exception under Constitutional law, or when substantial actions
have been undertaken under such unconstitutional laws that going
back to the original position would be next to impossible. In those
cases alone, would this Court take recourse to the concept of
'prospective overruling'. Section 3 (criminal provision) read with
Section 2(a) and Section 5 (confiscation proceedings) of the 1988
Act are overly broad, disproportionately harsh, and operate
without adequate safeguards in place. Such provisions were
still-born law and never utilized in the first place. In this light,
this Court finds that Sections 3 and 5 of the 1988 Act were
unconstitutional from their inception. It is made abundantly clear
that the aforesaid discussion does not affect the civil consequences
contemplated under Section 4 of the 1988 Act, or any other
provisions. [Paras 15.21-15.23][369-C-E]
3.4 The discussion can be summarized as: (a) Section 3(1)
of 1988 Act is vague and arbitrary. (b) Section 3(1) created an
unduly harsh law against settled principles and Law Commission
recommendations. (c) Section 5 of 1988 Act, the provision relating
to civil forfeiture, was manifestly arbitrary. (d) Both provisions
were unworkable and as a matter of fact, were never implemented.
Having arrived at the aforesaid conclusions that Sections 3
and 5 were unconstitutional under the 1988 Act, it would mean
that the 2016 amendments were, in effect, creating new provisions
and new offences. Therefore, there was no question of retroactive
application of the 2016 Act. As for the offence under Section 3(1)
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for those transactions that were entered into between 05.09.1988
to 31.10.2016, the law cannot retroactively invigorate a stillborn
criminal offence. As per the concession made by the Union of
India and a fair reading of Section 53 of the 2016 Act, the offence
under the aforesaid provision is prospective, and only applied to
those transactions that were entered into after the amendment
came into force, viz., 1.11.2016. Any contrary interpretation of
Section 3 of the 1988 Act would be violative of Article 20(1) of
the Constitution. [Paras 17.2-17.4][375-B-F]
T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177 : [1983] 1
SCR 905 - relied on.
3.5 In the case at hand, the 2016 Act containing the criminal
provisions is applicable only prospectively, as the relevant
Sections of the pre-amendment 1988 Act containing the penal
provision, have been declared as unconstitutional. Therefore, the
question of construction of the 2016 Act as retroactive qua the
penal provisions under Sections 3 or 53, does not arise. The
continued presence of an unconstitutional law on the statute book,
or the claim that such law was not challenged before
Constitutional Courts, does not prevent this Court from holding
that such unconstitutional laws cannot enure to the benefit of or
be utilized to retroactively amend laws to cure existing
constitutional defects. If such curing is allowed, then Article 20(1)
of the Constitution would be rendered nugatory. Although it has
been held held that Section 5 of the 1988 Act was unconstitutional
for being manifestly arbitrary, however such holding is of no
consequence if this Court comes to the conclusion that
confiscation under Section 5 of 2016 Act read with Chapter IV,
was civil in nature and is not punitive. It is well settled that the
legislature has power to enact retroactive/retrospective civil
legislations under the Constitution. However, Article 20(1)
mandates that no law mandating a punitive provision can be
enacted retrospectively. Further, a punitive provision cannot be
couched as a civil provision to by-pass the mandate under Article
20(1) of the Constitution which follows the settled legal principle
that "what cannot be done directly, cannot be done indirectly".
[Paras 17.6, 17.7, 17.9, 17.10][376-H; 377-A-B, E-F]
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3.6 Therefore, the immediate question which arises for
consideration is whether the retroactive confiscation provided
under Section 5 read with Chapter IV of 2016 Act is punitive or
not? Acquisition under the earlier 1988 Act as well as confiscation
under the 2016 Act are said to have been enacted on the reasoning
that the property emanating from the benami transaction also
gets tainted. The substantive difference between the acquisition
provision under the earlier enactment and the confiscation
provision under the 2016 Act is that proceeds of benami
transactions have been made traceable under the 2016 Act.
Before the other provisions are analysed, it is necessary to give
a brief introduction to the concept of civil forfeiture in India, as
the same was argued by the learned ASG. Under Admiralty
jurisdiction, the concerned Admiralty Courts had the jurisdiction
to forfeit vessels under its civil jurisdiction in lieu of any maritime
claim. Same was the law across various common law jurisdictions,
such as the United States of America and the United Kingdom.
Forfeiture occurs in various types, few of which are found in India.
Broadly, forfeitures can be categorized as civil and criminal. On
the civil side, there can be in rem or in personam forfeitures.
Punitive forfeitures under the criminal law are in personam.
Criminal forfeitures usually take place at the conclusion of a trial,
when the guilt of the accused is established. Standards of
evidentiary requirement differ greatly between civil and criminal
forfeiture. The historic origin of in rem civil forfeiture in common
law jurisdictions was earlier mostly restricted to trans-national
crimes. These early laws mandated that the property was subject
to forfeiture because it was the instrument by which the offence
was committed, and it was necessary to confiscate such property
to remove it from circulation. However, the Twentieth century
saw expansion of forfeiture laws into a wide array of crimes. The
modern forfeiture laws not only allow forfeiture of property used
to facilitate the crime, but cover the proceeds of the offence as
well. In the Supreme Court of the United States, constitutional
challenges laid to such civil forfeiture laws have been dismissed
as they were usually attributed to historic prevalence of such
forfeiture laws. However, such historic reasons of its existence
cannot justify continued expansion of civil forfeiture laws. [Paras
17.11-17.16][377-G; 378-B-H]
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Leonard v. Texas, 137 S. Ct. 847, 847-48 (2017); Engel
v The Netherlands (No.1), [1976] 1 EHRR 647,
Kennedy v Mendoza-Martinez, 372 US 144 (1963) -
referred to.
3.7 In Vijay Madanlal Choudary & Ors v. Union of India,
SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with
confiscation proceedings under Section 8 of the Prevention of
Money Laundering Act, 2002 ("PMLA") and limited the
application of Section 8(4) of PMLA concerning interim
possession by authority before conclusion of final trial to
exceptional cases. The Court distinguished the earlier cases in
view of the unique scheme under the impugned legislation therein.
Having perused the said judgment, this Court is of the opinion
that the aforesaid ratio requires further expounding in an
appropriate case, without which, much scope is left for arbitrary
application. [Para 17.27][384-E-G]
Vijay Madanlal Choudary & Ors v. Union of India SLP
(Civ.) No. 4634 of 2014 and others - referred to.
3.8 The Courts have read down the provisions of civil
forfeiture to be dependent on the underlying criminal prosecution
to temper the harsh consequences envisaged under such
provisions. No doubt, such reading down was mandated to
ameliorate harsh consequences of confiscatory laws which
otherwise would have allowed the State agencies to take over
the property without seriously pursuing the criminal prosecutions.
At this stage, it can only be recommended that the utility of
independent provisions of forfeiture, distinct from criminal
prosecution, needs to be utilised in a proportional manner, looking
at the gravity of the offence. Few examples which may pass the
muster of proportionality for having such stringent civil forfeiture,
may relate to crimes involving terrorist activities, drug cartels
or organised criminal activities. The application of such a
provision to numerous other offences which are not of such grave
severity, would be of serious risk of being disproportionate, if
procedures independent of criminal prosecution are prescribed.
The proportionality of separate confiscation procedure prescribed
under the 2016 Act, has not been argued herein. Accordingly,
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the aforesaid question of law is left open. Under the IPC, forfeiture
is recommended to be a form of punishment under Section 53.
Accordingly, the Code of Criminal Procedure, 1976 provides for
a mechanism for interim custody and forfeiture at the conclusion
of trial under Section 451 of the Cr.P.C. (in personam forfeiture).
Sections 451, 452 under the Cr.P.C. have inbuilt safeguards of in
personam criminal forfeiture, wherein confiscation occurs at the
end of the trial. Under these provisions, confiscation is to be
determined at an evidential standard of 'beyond reasonable doubt'
and are dependent on the result of the criminal trial. [Para 17.28,
17.29][384-G-H; 385-A-D; 386-B]
State of West Bengal v. S. K. Gosh, AIR 1963 SC 255 :
[1963] SCR 111; Divisional Forest Officer v. G. V.
Sudhakar Rao, (1985) 4 SCC 573 : [1985] 3 Suppl.
SCR 680; State of Madhya Pradesh v. Kallo Bai, (2017)
14 SCC 502 ; Yogendra Kumar Jaiswal v. State of Bihar,
(2016) 3 SCC 183 : [2015] 14 SCR 1037; Abdul Vahab
v. State of Madhya Pradesh, (2022) SCC Online SC
262 - referred to.
3.9 Coming to the Benami Act post the Amendment, the
interplay of Sections 27(3), (5) and 67 of the 2016 Act creates a
confiscation procedure which is distinct from the procedure
contemplated under the CrPC or any other enactment till now in
India. Such a change of standards cannot be merely termed as
procedural. Characterization of the confiscation proceedings under
Chapter IV of the 2016 Act as Civil may therefore not be
appropriate. There is an implicit recognition of the forfeiture being
a punitive sanction, as the Officer is mandated to build a case
against the accused for such confiscation, wherein the
presumption of innocence is upheld structurally. Being a punitive
provision, it is trite that one integrates the 'presumption of
innocence' within the Chapter as the same forms a part of the
fundamental right. Additionally, the 2016 Act now condemns not
only those transactions which were traditionally denominated as
benami, rather a new class of fictitious and sham transactions are
also covered under the same. In this regard, it may be noticed
that the intention of the legislature is to condemn such property
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and there is an implicit effort by the Parliament to take into
consideration the fact that such transactions are often acquired
from ill-gotten wealth. These proceedings cannot be equated as
enforcing civil obligations as, for example, correcting deficiencies
in the title. It goes further and the taint attaches to the proceeds
as well. [Paras 17.30-17.32][386-C-G]
3.10 In view of the above discussion, it is manifest that the
2016 Act contemplates an in-rem forfeiture, wherein the taint of
entering into such a benami transaction is transposed to the asset
itself and the same becomes liable to confiscation. At the cost of
repetition, it may be noted that the taint of benami transactions
is not restricted to the person who is entering into the aforesaid
transaction, rather, it attaches itself to the property perpetually
and extends itself to all proceeds arising from such a property,
unless the defence of innocent ownership is established under
Section 27(2) of the 2016 Act. When such a taint is being created
not on the individual, but on the property itself, a retroactive law
would characterize itself as punitive for condemning the proceeds
of sale which may also involve legitimate means of addition of
wealth. Jurisprudentially, a law may enable forfeiture of property
by peculiar reason of its circumstances, of it being dangerous to
the community by reasons of any form or position that it assumes.
In such cases, forfeiture is not deemed to be punishment inflicted
on its owner. By contrast, if the law provides that the Government
shall forfeit a property 'A' for, (1) what was carried on in property
'B', or (2) what the owner does in a matter not connected with
property 'A' or (3) a bare intent which does not necessarily relate
to the conduct in property 'A', in such cases, forfeiture is
punishment without any exception. In this case, the property may
not be inherently dangerous or denigrate any standard of morality.
It is just the condemnation of the method of transfer and holding,
which was once a recognized form of property holding in India. In
such a case, the in rem civil proceeding utilized retroactively,
would characterize itself as penal. In the case at hand, the authority
that initiates such confiscation, is granted extensive powers of
discovery, inspection, compelling attendance, compelling
production of documents. They are further empowered to take
the assistance of police officers, custom officers, income tax
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officers and other relevant officers for furnishing information. It
is also pertinent to note that any person who fails to furnish
information, is subjected to a penalty of Rs.25,000/- (Rupees
Twenty-Five Thousand) under Section 54(A). It is also necessary
to note that a person who supplies false information before any
authority, is subjected to rigorous imprisonment of upto 5 years
under Section 54 of the 2016 Act. This Court is aware of the fact
that the 'Right to Property' is not a fundamental right, rather it is
a constitutional right that can be abridged by law. However, this
Court is not concerned with the constitutionality of such a
measure, wherein such considerations have to be balanced.
Rather, the focus is only on the characterization of retroactive
confiscation, which in these facts and circumstances, are punitive.
In view of the fact that this Court has already held that the criminal
provisions under the 1988 Act were arbitrary and incapable of
application, the law through the 2016 amendment could not
retroactively apply for confiscation of those transactions entered
into between 05.09.1988 to 31.10.2016 as the same would
tantamount to punitive punishment, in the absence of any other
form of punishment. It is in this unique circumstance that
confiscation contemplated under the period between 05.09.1988
and 31.10.2016 would characterise itself as punitive, if such
confiscation is allowed retroactively. Usually, when confiscation
is enforced retroactively, the logical reason for accepting such
an action would be that the continuation of such a property or
instrument, would be dangerous for the community to be left free
in circulation. [Paras 17.33-17.37][387-A-H; 388-A-D]
In R (on the appln of the Director of the Assets Recovery
Agency) v Jia Jin He and Dan Dan Chen, [2004]
EWHC Admin 3021 - referred to.
3.11 Coming to the present enactment, history points to a
different story wherein benami transactions were an accepted
form of holding in our country. In fact, the Privy Council had, at
one point of time, praised the sui generis evolution of the doctrine
of trust in the Indian law. The response by the Government and
the Law Commission to curb benami transactions was also not
sufficient as it was conceded before this Court that Sections 3
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and 5 of the 1988 Act in reality, dehors the legality, remained only
on paper and were never implemented on ground. Any attempt
by the legislature to impose such restrictions retroactively would
no doubt be susceptible to prohibitions under Article 20(1) of
the Constitution. Looked at from a different angle, continuation
of only the civil provisions under Section 4, etc., would mean that
the legislative intention was to ensure that the ostensible owner
would continue to have full ownership over the property, without
allowing the real owner to interfere with the rights of benamidar.
If that be the case, then without effective any enforcement
proceedings for a long span of time, the rights that have
crystallized since 1988, would be in jeopardy. Such implied
intrusion into the right to property cannot be permitted to operate
retroactively, as that would be unduly harsh and arbitrary. [Paras
17.38, 17.39][389-A-D]
3.12 In view of the above discussion, it is held: a) Section
3(2) of the unamended 1988 Act is declared as unconstitutional
for being manifestly arbitrary. Accordingly, Section 3(2) of the
2016 Act is also unconstitutional as it is violative of Article 20(1)
of the Constitution. b) In rem forfeiture provision under Section
5 of the unamended Act of 1988, prior to the 2016 Amendment
Act, was unconstitutional for being manifestly arbitrary. c) The
2016 Amendment Act was not merely procedural, rather,
prescribed substantive provisions. d) In rem forfeiture provision
under Section 5 of the 2016 Act, being punitive in nature, can
only be applied prospectively and not retroactively. e)
Concerned authorities cannot initiate or continue criminal
prosecution or confiscation proceedings for transactions entered
into prior to the coming into force of the 2016 Act, viz.,
1.11.2016. As a consequence of the above declaration, all such
prosecutions or confiscation proceedings shall stand quashed.
f) As this Court is not concerned with the constitutionality of
such independent forfeiture proceedings contemplated under
the 2016 Amendment Act on the other grounds, the aforesaid
questions are left open to be adjudicated in appropriate
proceedings. [Para 18.1][389-E-H; 390-A-B]
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A.K Gopalan v. State of Madras AIR 1950 SC 27 :
[1950] SCR 88; Maneka Gandhi v. Union of India,
(1978) 1 SCC 248 : [1978] 2 SCR 621; Sunil Batra v.
Delhi Administration (1978) 4 SCC 494 : [1979] 1 SCR
392; K. Puttaswamy v. Union of India (2017) 10 SCC 1
: [2017] 10 SCR 569 - followed.
Niharika Jain v. Union of India [S.B.C.W.P. No. 2915/
2019]; Joseph Isharat v. Mrs. Rozy Nishikant Gaikwad
[S.A. No. 749/2015]; Rao Shiv Bahadur Singh vs. State
of Vindhya Pradesh, AIR 1953 SC 394 : [1953] SCR
1188; Mangathai Ammal v. Rajeswari (2020) 17 SCC
496; Commissioner of Income Tax (Central)-I New Delhi
v. Vatika Township Pvt. Ltd (2015) 1 SCC 1 : [2014] 12
SCR 1037; Sree Meenakshi Mills Ltd. v. Commissioner
of Income Tax, Madras AIR 1957 SC 49 : [1956] SCR
691; Thakur Bhim Singh v. Thakur Kan Singh AIR 1980
SC 727 : [1980] 2 SCR 628; Punjab Province v. Daulat
Singh AIR (29) 1942 FC 38; Jaydayal Poddar v. Bibi
Hazra AIR 1974 SC 171: [1974] 2 SCR 90; Murlidhar
Narayandas v. Paramanand Luchmandas, AIR 1932
Bom. 190; Radhakishan Brijlal v. Union of India, AIR
1959 Bom. 102 (V46 C40); Gur Prasad v. Hansraj
AIR (33) 1946 Oudh. 144; Kesavananda Bharati v.
State of Kerala (1973) 4 SCC 225 : [1973] Suppl. SCR
1; Narendra Singh v. State of Madhya Pradesh (2004)
10 SCC 699 : [2004] 3 SCR 1148 - referred to.
Case Law Reference
[1953] SCR 1188
referred to
Para 10 (ii)
[2015] 14 SCR 1037
referred to
Para 12.1(v)
[1989] 1 SCR 621
referred to
Para 12.1(vi)
[1995] 1 SCR 715
referred to
Para 12.3(iv)
[2014] 12 SCR 1037
referred to
Para 12.3(v)
[1956] SCR 691
referred to
Para 13.3
[1980] 2 SCR 628
referred to
Para 13.3
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[1974] 2 SCR 90
referred to
Para 13.6
[1973] 0 Suppl. SCR 1
referred to
Para 13.12
[1989] 1 SCR 621
referred to
Para 14.13
[1995] 1 SCR 715
referred to
Para 14.14
[1950] SCR 88
followed
Para 15.5
[1978] 2 SCR 621
followed
Para 15.5
[1979] 1 SCR 392
followed
Para 15.5
[2017] 10 SCR 569
followed
Para 15.6
[2017] 9 SCR 797
relied on
Para 15.8
[2018] 11 SCR 765
relied on
Para 15.9
[1983] 1 SCR 905
relied on
Para 17.5
[1963] SCR 111
referred to
Para 17.20
[1985] 3 Suppl. SCR 680
referred to
Para 17.22
[2004] 3 SCR 1148
referred to
Para 17.31
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5783
of 2022.
From the Judgment and Order dated 12.12.2019 of the High Court
of Calcutta in APO No.8 of 2019 in W.P. No.687 of 2017.
S.V. Raju, Vikramjeet Banerjee, ASGs, Zoheb Hussain, Aakanksha
Kaul, Bhuvan Mishra, S.A. Haseeb, Siddharth Sinha, Tathagat, Ritwiz
Rishab, Anshuman Singh, Ms. Janhvi Prakash, Raman Yadav, Ankit
Bhatia, Arpit Goel, Harsh Paul Singh, A.K. Sharma, Raj Bahadur Yadav,
Advs. for the Appellants.
Ajay Vohra, Sr. Adv., Ankit Anandraj Shah, Ms. Bhoomija Verma,
Aniket Agarwal, Abhimanu Singh, Advs. for the Respondent.
Dr. Abhishek Manu Singhvi, Devadatt Kamat, Neeraj Kishan
Kaul, Sr. Advs., Mayank Jain, Parmatma Singh, Madhur Jain, Ms. Aakriti
Dhawan, Shankar Divate, Rohit Jain, Aniket D. Agrawal, Ms. Kavita
Jha, Saurabh Rajpal, Naveen Kumar, Ms. Shrinjan Khosla for M/s. Aura
& Co., Advs. for the Intervenor.
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The Judgment of the Court was delivered by
N. V. RAMANA, CJI
1. Leave granted.
2. This case involves a tussle between the normative and positivist
positions regarding the nature of a crime and punishment. Treating the
Constitution as a flag post, a result of this tussle is sought in the following
deliberation.
3. This appeal is filed against the impugned judgment dated
12.12.2019 passed by the High Court of Judicature at Calcutta in APO
No. 8 of 2019 along with Writ Petition No. 687 of 2017.
4. The short legal question which arises for this Court's
consideration is whether the Prohibition of Benami Property Transactions
Act, 1988 [for short 'the 1988 Act'], as amended by the Benami
Transactions (Prohibition) Amendment Act, 2016 [for short the '2016
Act'] has a prospective effect. Although a purely legal question arises in
this appeal, it is necessary to have a brief factual background in mind
before we advert to the analysis.
5. On 02.05.2011, the respondent-company purchased a
property in its name from various sellers for a total consideration of
Rs.9,44,00,000/-. It is said that the consideration for the aforesaid
purchase was paid from the capital of the company. On 31.03.2012,
99.9% of the respondent-company shareholdings were acquired by M/
s PLD Properties Pvt. Ltd. and M/s Ginger Marketing Pvt. Ltd. at a
discounted price of Rs.5/- per share for a total amount of Rs.19,10,000/-.
It is a matter of fact that the two directors of the respondent-company
(viz. Shruti Goenka and Ritu Goenka) also held directorship in the
subsequent purchaser company.
6. Accordingly, on 29.08.2017, the Deputy Commissioner of
Income Tax (Adjudicating Authority) issued a notice to the respondentcompany invoking Section 24(1) of the 2016 Act to show cause as to
why the aforesaid property should not be considered as Benami property
and the respondent company as Benamidar within the meaning of Section
2(8) of the 2016 Act. On 06.09.2017, the respondent-company replied
to the aforesaid show-cause notice denying that the scheduled property
is a Benami property.
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7. The Adjudicating Authority, by order dated 24.11.2017, passed
an order under Section 24(4)(b)(i) of the 2016 Act, provisionally attaching
the property.
8. Aggrieved by the aforesaid attachment order, the respondentcompany filed a Writ Petition (being W.P. No. 687 of 2017) before the
High Court of Calcutta. The aforesaid writ petition was disposed of by
the learned Single Judge by an order dated 18.12.2018 with a direction
to the Adjudicating Authority to conclude the proceedings within 12
weeks.
9. Aggrieved, the respondent-company filed an appeal against the
aforesaid order being APO No. 8 of 2019.
10. The High Court, vide impugned order dated 12.12.2019, while
quashing the show-cause notice dated 29.08.2017, held that the 2016
Act does not have retrospective application.
(i)
The 2016 Amendment Act, which came into force on
01.11.2016, was a new and substantive legislation, inter alia,
substituting and widening the definition of 'benami property
and benami transaction', and in order to have retrospective
operation for the period or transactions entered into prior to
01.11.2016, a provision to that effect should have been
specifically providing under the said Act; in the absence of
any express provision to that effect, simply by virtue of the
provisions contained in subsection (3) of Section 1 of the
1988 Act [which remained unaltered by the 2016
Amendment Act, and have consequently been retained under
the Benami Act], the provisions of the 2016 Amendment
Act cannot be impliedly construed as retrospective;
(ii)
Reference was made to and reliance was placed on the
unreported ruling of the learned Single Judge of the
Rajasthan High Court dated 12.07.2019 in the case of
Niharika Jain v. Union of India [S.B.C.W.P. No. 2915/
2019], wherein, following the ruling of the Single Judge of
the Hon'ble Bombay High Court in the case of Joseph
Isharat v. Mrs. Rozy Nishikant Gaikwad [S.A. No. 749/
2015; decided on 01.03.2017/30.03.2017], it was held that
in terms of the protection enshrined under clause (1) of
Article 20 of the Constitution of India, the 2016 Amendment
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Act, amending, inter alia, the definition of "benami
transaction", could not be given retrospective effect, and
the amendments brought about vide the said (amendment)
Act would be enforceable only with effect from the date of
the enactment / coming into force of the said amendment
Act i.e., on or after 01.11.2016 - reliance in this regard
was also placed on the ruling of this Court in the case of
Rao Shiv Bahadur Singh vs.