The Benami Transactions (Prohibition) Amendment Bill, 2015

The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in Lok Sabha on May 13, 2015 by the Minister of Finance Mr. Arun Jaitley.  The Bill seeks to amend the Benami Transactions Act, 1988.  The Act prohibits benami transactions and provides for confiscating benami properties. The Bill seeks to: (i) amend the definition of benami transactions, (ii) establish adjudicating authorities and an Appellate Tribunal to deal with benami transactions, and (iii) specify the penalty for entering into benami transactions.  The Act defines a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.  The Bill amends this definition to add other transactions which qualify as benami, such as property transactions where: (i) the transaction is made in a fictitious name, (ii) the owner is not aware of denies knowledge of the ownership of the property, or (iii) the person providing the consideration for the property is not traceable. The Bill also specifies certain cases will be exempt from the definition of a benami transaction.  These include cases when a property is held by: (i) a member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family; (ii) a person in a fiduciary capacity; (iii) a person in the name of his spouse or child, and the property has been paid for from the person’s income; and The Bill defines benamidar as the person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar.  Under the Act, an Authority to acquire benami properties was to be established by the Rules.  The Bill seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions: (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator and (iv) Adjudicating Authority.  If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person.  The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority.  At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property. If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority.  The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami. Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed.  The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority.  Appeals against orders of the Appellate Tribunal will lie to the high court. Under the Act, the penalty for entering into benami transactions is imprisonment up to three years, or a fine, or both.  The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property.  The Bill also specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property. Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill.  The Initiating Officer or the Adjudicating Authority may impound or retain any books of accounts that it may feel is required for the inquiry, for a period not exceeding three months from the date of attachment of the property. The Adjudicating Officer, after hearing the person whose property is attached, may make an order for the confiscation of the property held benami.  The Administrator shall have the power to receive and manage the property which has been confiscated.  The Administrator shall issue the notice for the surrender or forcible takeover of possession of the benami property. Any person aggrieved by an order of the Adjudicating Officer shall appeal to the Appellate Tribunal.  Any person aggrieved by the Appellate Tribunal in turn may appeal to the High Court. Any person who enters into benami transactions, or abets or induces another person to enter into such transactions shall be punishable with an imprisonment for six months to two years, and liable to a fine of up to 25 per cent of the fair market value of the property held in benami.  In addition, any person who wilfully gives false information shall be liable to an imprisonment of three months to two years and a fine of up to 10 per cent of the market value of the property.  The Bill provides for Special Courts to try such cases.