Confiscation, the Appellate Tribunal, Offences and the Rest

The limits define the structure of the whole Act.

Only on a question of law. Findings of fact end at the Tribunal. Whether a transaction was benami, whether the money came from known sources, whether a relative was a joint owner, are all questions the Tribunal decides finally.

Sixty days, running from communication.

Any party, so the State may appeal here too.

Sections 50 to 52: the Special Court

Section 50(1). The Central Government, in consultation with the Chief Justice of the High Court, shall by notification designate one or more Courts of Session as Special Court or Special Courts for the trial of an offence punishable under the Act, for such area or areas, or such case or class or group of cases, as the notification specifies.

Sub-section (2). While trying an offence under the Act, a Special Court shall also try any other offence with which the accused may, under the Code of Criminal Procedure 1973, be charged at the same trial.

Sub-section (3). The Special Court shall not take cognizance of any offence punishable under the Act except upon a complaint in writing made by the authority, or by an officer of the Central Government or a State Government authorised in writing.

Section 51 applies the Code of Criminal Procedure 1973 to proceedings before a Special Court, which is deemed to be a Court of Session for that purpose.

The design should be stated in a sentence: the Act creates no new court, it designates an existing Court of Session; the trial is by ordinary criminal procedure; and only the authority may set the prosecution in motion, so a private person cannot use the Act as a weapon in a family dispute.

That last point is worth carrying into an answer about family property. A brother who suspects a benami purchase cannot prosecute. He may inform the authorities; the decision is theirs.

Section 53: the offence

Sub-section (1). 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, then the beneficial owner, the benamidar, and any other person who abets or induces any person to enter into the benami transaction, shall be guilty of the offence of benami transaction.

Sub-section (2). Whoever is found guilty shall be punishable with rigorous imprisonment for a term not less than one year but which may extend to seven years, and shall also be liable to fine which may extend to twenty-five per cent of the fair market value of the property.

The three things to say about section 53

A purpose is essential. The sub-section names three: defeating the provisions of any law, avoiding statutory dues, avoiding payment to creditors. A benami transaction entered into without any of them is still prohibited by section 3, and the property is still liable to confiscation under section 5, but the section 53 offence is not made out.

Three classes of person are guilty, and the abettor is expressly among them.

The fine is proportionate to the property, not fixed, and up to a quarter of its fair market value. Together with a minimum of one year's rigorous imprisonment, that is what section 3(3) means when it sends post-2016 transactions to Chapter VII.

Sections 54, 54A and 54B

Section 54: false information. Any person required to furnish information under the Act who knowingly gives false information to any authority, or furnishes a false document in any proceeding, is punishable with rigorous imprisonment not less than six months but which may extend to five years, and a fine which may extend to ten per cent of the fair market value of the property.

Section 54A: failure to comply. Any person who fails to comply with a summons under section 19(1), or to furnish information as required under section 21, is liable to a penalty of twenty-five thousand rupees for each such failure. The penalty is imposed by the authority who issued the summons or called for the information; no order may be passed without an opportunity of being heard; and no penalty shall be imposed if the person proves that there were good and sufficient reasons which prevented him from complying.

Section 54B: proof of entries. Entries in the records or other documents in the custody of an authority shall be admitted in evidence in any proceeding for the prosecution of a person for an offence under section 3 or under Chapter VII, and may be proved by the production of the records, or by a certified copy.

Section 54A is an example of a well-drafted penalty provision and is worth a line: a fixed sum, per failure, imposed by the officer concerned, only after a hearing, and with a complete defence of good and sufficient reasons.

Sections 55 to 72: the remainder, section by section

These are the general and machinery provisions, and each is given its own line because the Act is the boundary of this subject and a book that summarises fourteen sections as "the rest" has not covered them.

Section 55: previous sanction. No prosecution shall be instituted against any person in respect of an offence under section 3, section 53 or section 54 without the previous sanction of the Board, that is, the Central Board of Direct Taxes. Even the authorities cannot prosecute at will.

Section 55A: immunity from prosecution. The Initiating Officer may, with a view to obtaining the evidence of the benamidar or of any other person referred to in section 53 other than the beneficial owner, tender him immunity from prosecution for an offence under that section, with the previous sanction of the competent authority referred to in section 55, on the condition that he makes a full and true disclosure of the whole circumstances relating to the benami transaction. Immunity tendered and accepted renders him immune, to the extent it extends, both from prosecution and from any penalty under section 53. If he has not complied with the conditions, or is wilfully concealing anything, or is giving false evidence, the Initiating Officer may record a finding to that effect and, again with the previous sanction of the competent authority, withdraw the immunity; and a person from whom it is withdrawn may then be tried for that offence, or for any other offence he appears to have committed in connection with the same transaction, and is liable to any penalty he would otherwise have incurred.

Note who is excluded. Immunity may be offered to the benamidar, the name-lender, and to a third party, but never to the beneficial owner, who is the person the Act is really aimed at. It is the standard approver device, and it exists because a benami transaction is by its nature invisible without the co-operation of somebody inside it.

Section 56: repeal and savings. Repeals the Benami Transactions (Prohibition of the Right to Recover Property) Ordinances, with the usual savings.

Section 57: certain transfers to be null and void. Any transfer made after the issue of a notice under section 24, or after the filing of a complaint, with a view to defeating the purposes of the Act, is null and void.

Section 58: exemption. The Central Government may, by notification, exempt any property relating to charitable or religious trusts from the operation of the Act, and every such notification must be laid before each House of Parliament. This is the only power of exemption in the Act and it is confined to charitable and religious trusts.

Section 59: directions by the Central Government. The Central Government may issue orders, instructions or directions to the authorities, or require any person to furnish information, for the proper administration of the Act, and may have regard to territorial area, classes of persons, classes of cases and any other specified criterion. Sub-section (3) is the safeguard: no such direction may require an authority to decide a particular case in a particular manner, or interfere with the discretion of the Adjudicating Authority in the discharge of its functions.

Section 60: other laws not barred. The provisions of the Act are in addition to, and not, save as expressly provided, in derogation of any other law in force.

Section 61: offences non-cognizable. Notwithstanding the Code of Criminal Procedure 1973, an offence under this Act shall be non-cognizable. Read with section 50(3), which requires a complaint in writing by the authority, this means the police cannot begin a benami case on their own.

Section 62: offences by companies. Where the contravention is by a company, every person who at the time was in charge of and responsible to the company for the conduct of its business, as well as the company itself, is deemed guilty. Sub-section (2) gives a defence to a person who proves the contravention took place without his knowledge. Sub-section (3) additionally catches a director, manager, secretary or other officer with whose consent or connivance, or by reason of whose neglect, the contravention took place. The Explanation defines "company" to include a firm and an association of persons or body of individuals whether incorporated or not, and "director" to mean a partner in a firm and a controlling member of an association.

Section 63: defects do not invalidate. No notice, summons, order, document or other proceeding shall be invalid merely by reason of any mistake, defect or omission, if it is in substance and effect in conformity with the intent and purpose of the Act.

Section 64: good faith. No prosecution, suit or other proceeding lies against the Government, any officer of the Government, the Appellate Tribunal or the Adjudicating Authority for anything done or intended to be done in good faith under the Act.

Section 65: transfer of pending cases. Every suit or proceeding in respect of a benami transaction pending in any court other than a High Court, or in any tribunal or forum, on the date of commencement, stands transferred to the Adjudicating Authority or the Appellate Tribunal having jurisdiction.

Section 66: legal representatives. Where a person dies during a proceeding, anything taken against him before his death is deemed taken against his legal representative and may be continued from the stage it had reached. Any proceeding that could have been taken against the deceased may be taken against the legal representative, and the whole Act applies except section 3(2) and Chapter VII, that is, except the penal provisions. And where property has been held benami under section 26(3), the legal representative may appeal to the Appellate Tribunal in place of the deceased.

That exclusion of the penal provisions in sub-section (2) is the point to notice: the property proceedings survive a death, the criminal liability does not.

Section 67: overriding effect. The Act has effect notwithstanding anything inconsistent in any other law in force.

Section 68: rules. The Central Government may make rules, and sub-section (2) lists the matters, including the manner of ascertaining fair market value, the powers and functions of the authorities, the manner of provisional attachment, the procedure for confiscation, and the manner of receiving, managing and disposing of confiscated property.

Section 69: laying before Parliament. Every rule made and notification issued must be laid before each House for thirty days, with the usual power of modification or annulment and without prejudice to anything previously done.

Section 70: removal of difficulties. The Central Government may by order remove a difficulty in giving effect to the Act, but no such order may be made after two years from the commencement, and every order must be laid before each House.

Section 71: transitional provision. Until the Adjudicating Authorities are appointed and the Appellate Tribunal established under this Act, the Central Government may by notification provide that the Adjudicating Authority appointed under section 6(1) of the Prevention of Money-Laundering Act 2002, and the Appellate Tribunal established under section 25 of that Act, may discharge those functions, for such period and in respect of such cases as the notification specifies.

Section 72: amendment of other enactments, giving effect to the consequential amendments the 2016 Act required.

Two of these are worth taking into an answer. Section 61 read with section 50(3) means a benami case is not a police case: it is begun by the authority and by nobody else. And section 66(2) means that death ends the prosecution but not the confiscation.

How the whole Act fits together

For an essay, the Act has four layers and they should be named in this order.

The rule. Section 3: no person shall enter into a benami transaction. Section 2(9) defines what that is, and its four exceptions keep ordinary family purchases out, provided the money came from known sources.

The civil consequence. Section 4: the real owner can neither sue nor defend. Section 6: the benamidar cannot hand it back. Section 5: the property may be confiscated.

The machinery. Chapters III and IV: Initiating Officer, Approving Authority, Adjudicating Authority, Administrator, with notice, provisional attachment, adjudication and confiscation, all time-bound.

The remedies and the punishment. Appeal to the Appellate Tribunal in forty-five days, to the High Court on a question of law in sixty; trial by a designated Court of Session on the authority's complaint alone; and, where a dishonest purpose is proved, one to seven years' rigorous imprisonment and a fine of up to a quarter of the property's value.

A worked example

The Adjudicating Authority holds a flat to be benami and orders confiscation. The beneficial owner wants to challenge it; the Initiating Officer thinks the order let him off too lightly; and the authority wants him prosecuted.

Where does the appeal go? Section 46: to the Appellate Tribunal, at the instance of any person, including the Initiating Officer, aggrieved by an order of the Adjudicating Authority, within forty-five days from the date of the order, with power to condone delay.

Can the Initiating Officer really appeal? Yes; the section names him.

And after that? Section 49: an appeal to the High Court within sixty days from the date of communication of the Tribunal's decision, on any question of law arising out of the order.

Where is the offence tried? Sections 50 to 52: by a Special Court, which is a Court of Session designated as such, and the trial is on a complaint in writing made by the authority; no court takes cognizance otherwise.

What is the offence? Section 53: 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 person who abets or induces any person to enter into it are guilty of the offence of benami transaction, punishable with rigorous imprisonment of not less than one year but which may extend to seven years, and a fine which may extend to twenty-five per cent of the fair market value of the property.

And a false document or statement? Section 54: rigorous imprisonment of not less than six months but which may extend to five years, and a fine which may extend to ten per cent of the fair market value.

Suppose a person simply ignores a summons? Section 54A: a penalty of twenty-five thousand rupees for each failure to answer a question, sign a statement, attend or produce books, unless he proves there was good and sufficient reason.

Who prosecutes? Section 55: no prosecution for an offence under section 3, 53 or 54 without the previous sanction of the Board, the Central Board of Direct Taxes.

What it does NOT mean

The appeal to the High Court is not on the facts. It lies on any question of law arising out of the Tribunal's order.

Appeals are not only for the person who lost the property. The Initiating Officer may appeal too.

A Special Court is not a new court. It is a Court of Session designated as a Special Court.

Section 53 is not made out by a benami transaction alone. It requires the purpose of defeating a law, avoiding statutory dues, or avoiding payment to creditors.

It does not catch only the beneficial owner. The benamidar and any person who abets or induces are equally guilty.

The fine is not a fixed sum. It may extend to twenty-five per cent of the fair market value, and under section 54 to ten per cent.

Section 54A is not an offence. It is a penalty, with a defence of good and sufficient reason.

Nobody may simply file a complaint. By section 55 the previous sanction of the Board is required.

Quick revision

• ss.30 to 45: the Appellate Tribunal, its composition, qualifications, terms and procedure.
• s.46: appeal to the Appellate Tribunal by any person including the Initiating Officer, within forty-five days, with power to condone delay. s.49: appeal to the High Court within sixty days on a question of law.
• ss.50 to 52: a Special Court, being a Court of Session so designated, taking cognizance only on a complaint in writing by the authority.
• s.53: entering into a benami transaction to defeat any law, to avoid statutory dues, or to avoid payment to creditors: the beneficial owner, benamidar and abettor are guilty; rigorous imprisonment of one to seven years and a fine up to twenty-five per cent of the fair market value.
• s.54: false information: six months to five years and a fine up to ten per cent of fair market value. s.54A: twenty-five thousand rupees for failing to answer, sign, attend or produce, with a defence of good and sufficient reason. s.54B: the application of certain provisions.
• s.55: no prosecution under ss.3, 53 or 54 without the previous sanction of the Board. s.55A: immunity may be tendered to the benamidar or a third party, never the beneficial owner, with the competent authority's approval and on a full and true disclosure, and may be withdrawn.
• ss.56 to 72: repeals and savings, transfers to defeat the Act being null and void, the exemption power confined to charitable and religious trusts, and the remaining machinery.

Test yourself

1. Where does an appeal lie from an order of the Adjudicating Authority? To the Appellate Tribunal, within forty-five days from the date of the order, at the instance of any person, including the Initiating Officer, aggrieved by it; and from the Tribunal to the High Court within sixty days on any question of law.

2. What must be proved for the offence under section 53? That a person entered 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, the benamidar and any person who abets or induces any person to enter into the transaction are guilty.

3. What is the punishment? Rigorous imprisonment for a term not less than one year but which may extend to seven years, and a fine which may extend to twenty-five per cent of the fair market value of the property.

4. Who may be offered immunity from prosecution? Under section 55A the Initiating Officer may, with the previous sanction of the competent authority referred to in section 55, tender immunity to the benamidar or any other person referred to in section 53 other than the beneficial owner, on condition of a full and true disclosure of the whole circumstances relating to the benami transaction. The immunity may be withdrawn if the conditions are not complied with.