High Court invalidates Benami Property Act provisions, protecting transactions pre-2016 Amendment

The High Court set aside an order under Section 26(3) of the Benami Property Act, 1988, due to the Act's unconstitutional nature. The court ruled that the provisions lacked safeguards and were overly broad. It was clarified that criminal prosecution or confiscation proceedings cannot be initiated for transactions predating the 2016 Amendment Act. The court held that the in rem forfeiture provision of the Amendment Act was punitive and could only apply prospectively. Consequently, all such proceedings for transactions before 25.10.2016 were quashed, aligning with the Supreme Court's decision.

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Issues:
1. Quashing of order under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988.
2. Retroactive or prospective effect of the Benami Property Act as amended by the Amendment Act of 2016.

Analysis:
Issue 1: The petitioner sought the quashing of an order dated 27.04.2022 passed by the adjudicating authority under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988. The alleged benami property transaction occurred before the 2016 amendment came into force. The High Court referred to a recent decision in a similar matter where it was held that the provisions of the Benami Property Act were unconstitutional from their inception due to being overly broad and lacking adequate safeguards. Consequently, the High Court set aside the impugned order dated 27.04.2022.

Issue 2: The High Court discussed the retroactive or prospective effect of the Benami Property Act as amended by the Amendment Act of 2016. The Supreme Court's decision clarified that the Amendment Act of 2016 was not merely procedural but contained substantive provisions. It was held that concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into before the 2016 Amendment Act came into force. The in rem forfeiture provision under Section 5 of the Amendment Act of 2016, being punitive in nature, can only be applied prospectively and not retroactively. As a result, all such prosecutions or confiscation proceedings for transactions entered into before 25.10.2016 were to be quashed. The High Court, in line with the Supreme Court's ruling, allowed the writ petition to the extent of setting aside the impugned order and closed any pending miscellaneous petitions.

In summary, the High Court's judgment addressed the quashing of the order under the Benami Property Transactions Act, 1988, and the application of the Amendment Act of 2016, following the Supreme Court's decision on the retroactive or prospective effect of the amended provisions.

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