BRIEF BENAMI TRANSACTION ACT, 2013

BRIEF BENAMI TRANSACTION ACT, 2013

The recently cleared amendment to Benami Transaction (Prohibition) Amendment Act, 2016 indicates the resolve of the Government of India to control the menace of black money and its by-product Benami transactions with the new stringent law and its effective implementation.

It looks like our PM will be hooking up several shikaars as the current demonetization drive is just the beginning of anti-corruption stir and will spur on a number of measures to rid India of its corrupt image: a warning has been issued by our PM Narendra Modi, who has said clearly in Goa, “I am not going to stop at this. I will expose the history of corruption of 70 years since Independence.

The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in the Lok Sabha on May 13, 2015 to amend the Benami Transactions Act of 1988. The Amendment Bill received the presidential assent on August 10, 2016 and the Benami Transactions (Prohibition) Amendment Act, 2016 (hereinafter referred as the “Amendment Act, 2016”) was brought into force. The rules and all the provisions of the Benami Transactions (Prohibition) Act, came into force on November 1, 2016. 

India has a new law on Benami Transactions- STRINGENT Law:

Highlights of the Act: 

·    Up to seven years' imprisonment and fine for indulging in benami transactions. 

·   Furnishing false information is punishable by imprisonment up to five years and fine. 

· Properties held benami are liable for Confiscation by government without compensation. 

o    holding the property and may then refer case to Adjudicating Authority. 

·         Adjudicating Authority will then examine evidence and pass an order. 

·         Appellate Tribunal will hear appeals against orders of Adjudicating Authority. 

·         High Court to hear appeals against orders of Appellate Tribunal.

Legislature Background:

The Benami Transactions (Prohibition) Amendment Act, 2016 is an amendment of the older Benami Transactions (Prohibition) Act 1988.

·         The Amendment Bill, 2015 was first introduced in the Lok Sabha last year, on May 13, 2016 by    Finance Minister Arun Jaitley.

·         Then referred to by a Standing Committee on Finance.

·         The Committee submitted its report on April 28, 2016.

·         Then amendments proposed by Government to the Amendment Bill, 2015 on July 22^nd , 2016.

·         Amendment Bill Passed by the Lok Sabha on July 27, 2016

·        Approved by the Rajya Sabha on August 2, 2016

    The Amendment Bill received the presidential assent on August 10, 2016 and the Benami Transactions (Prohibition) Amendment Act, 2016 (hereinafter referred as the “Amendment Act, 2016”) was brought into force.

 What is Benami?

Benami essentially means property without a name. The term “Benami” has its origin from the Persian language. Benami property or assets, therefore, is a reference to property/assets whose actual owner is not the person in whose name it is. 

Benami deals have been quite common in India; cases date back to the late nineteenth century, So the practice has got judicial recognition. Not all benami transactions are illegal.

Benami transactions proliferated during India’s socialist past. Large scale benami deals happened when land reforms entailed the abolition of zamindari, giving tillers rights to own the land as well as imposition of agricultural land ceilings. (In urban areas, this became quite rampant after the passage of the now-scrapped Urban Land (Ceiling and Regulation) Act, 1976.

The concern on Benami transaction comes into light with full energy, in the year 2014 “in the election manifesto of the political party now in power at the Centre, i.e., the Bharatiya Janata Party”

[1]Meaning of Benami as per ‘Merriam Webster” dictionary: made, held, done, or transacted in the name of (another person) —used in Hindu law to designate a transaction, contract, or property that is made or held under a name that is fictitious or is that of a third party who holds as [2]ostensible owner for the principal or beneficial owner.

Denotation of Benami property:

As per Clause 2(8) of Benami Transactions (Prohibition) Amendment Act, 2016 Benami Property “means any [3]Property which is the

§  subject matter of a benami transaction and

§  also includes the proceeds from such property”

Legal Meaning of Property: As per clause 2(26)

“Property" means assets of any kind, whether

·         movable or immovable,

·         [4]tangible or intangible,

·         corporeal or incorporeal and

includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property;

Factual Gist:

The word benami property means the property which has purchased in the name of some person other than the person who has financed it. The person who has rendered the required money for the said purchase has not purchased it in his name but in the name of some other person’s name. The person who financed the property has not really purchase and/or purchased it to the benefit of the person on whose name he has purchased it.

Legal impact:

§  The beneficial ownership vests on the real owner.

§  The benamidar bears the ostensible  title as described in the Tranfer of Property Act,1882.

§  There is no intention to benefit the person in whose name the transaction is made by the person who has financed the purchase of the said benami property.

§  The name of that person, benamidar, is an alias for that of the person beneficially interested the real owner.

Rationale of hold the Benami property:

There are numerous purposes mainly of those are illegal ones and only to accomplish the illegal intentions of the populace:

§  The Benami transactions were made in order to find a way with the land ceiling laws, so the real owner can have more landed properties than provided in the abovementioned laws.

§  The abovementioned transactions are made to transfer the property in the name of the relatives of the real owner or some other’s name to evade taxation as provided by the tax laws.

§  Benami transactions were also used as a way to conceal black money obtained through corrupt practices.

What is Benami transaction?

As per Section Clause 2(9) of Benami Transactions (Prohibition) Amendment Act, 2016 Benami Transactions are as follow:

Table-A

S. No.	TRANSACTIONS CONSIDERED AS BENAMI TRANSACTION
a)	(i) A Transaction or an arrangement: § where a property is transferred to, or is held by, a [5]person, and § the consideration for such property has been provided, or paid by, another person; and (ii)The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration There are some exemptions in point (ii) as given below in Table – B
b)	A transaction or an arrangement in respect of a property carried out or made in a [6]fictitious name.
c)	A Transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, [7]denies knowledge of, such ownership;
d)	A transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious

Table-B

S. No.	TRANSACTIONS NOT CONSIDERED AS BENAMI TRANSACTION
The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration  except when the property is held by
i.	a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family
ii.	a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 and any other
iii.	[8]any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual
iv.	7any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual
v.	any transaction involving the allowing of possession of any property to be taken or retained in part performance of a contract referred to in section 53A of the Transfer of Property Act, 1882, if, under any law for the time being in force: (i) consideration for such property has been provided by the person to whom       possession of property has been allowed but the person who has granted       possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid; and (iii) the contract has been registered.

Penalty

Anyone entering into a benami transaction for whatever reason – to defeat the law, avoid payment of statutory dues or creditors – or abetting such a transaction is liable for rigorous imprisonment for a period between one and seven years as well as fine up to 25 per cent of the fair market value of the property.

Anyone providing false information or providing false documentation can get rigorous imprisonment of six months to five years and may also have to pay fine up to 10 per cent of the fair market value of the property.

Conclusion:

This new Benami Transactions (Prohibition) Act 2016  offers a wider scope. With its wider scope the new act will be a great help to deal with this social fallacy i.e. benami properties. Due to the narrow and ambiguous scope of the earlier Act many such cases regarding benami properties could not be solved. But now with the wider and specific scope of the said such cases can be easily proved in the court of law.

The popular perception of “Benami property” has now undergone to sea change and it will include all transactions and arrangements beyond the transactions in respect of immovable property.

There is a saying of Justice Holmes “Taxes are what we pay for civilized society. I like to pay taxes, with them I buy civilization .”

The Benami Transactions (Prohibition) Amendment Act is certainly a very comprehensive piece of legislation and also very stringent. There could be scope for harassment but how that plays out remains to be seen

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written permission of the author. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION. This is only a knowledge sharing initiative and author do not intend to solicit any business or profession.

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[1] http://www.merriam-webster.com/dictionary/benami

[2] According to The Black’s Law Dictionary the term ostensible owner means “apparent owner”

[3] The term `property’ is not confined to a piece of real estate. The definition covers assets of any kind – moveable or immoveable, tangible or intangible, corporeal or incorporeal.

[4] The transactions relating to shares, securities in limited companies or in partnership firms or the sale proceeds of such shares will also attract the provisions of the new law.

[5] As per Clause 2(24) Person shall include- (i) an individual, (iI) a Hindu undivided family, (iii) a Company, (iv) a firm an association of persons or a body of individuals, (v) whether incorporated or not, every artificial juridical person, not falling under sub-clauses (i) to (v)

[6] As per Merriam Webster law dictionary fictitious meaning “a supposed but in fact nonexistent person referred to in some legal documents or proceedings”.

In other words “A fictitious name is an assumed name that differs from an individual's actual name”

[7] mean to refuse to accept as true or valid

[8] This provision is new under Amendment Act, 2016, it was not in The Benami Transaction (Prohibition) Act, 1988