AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1047
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....ly 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 respondent-company 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-ca....
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.... 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. State of Vindhya Pradesh, AIR 1953 SC 394; (iii) The 1988 Act, which came into force on 19.05.1988 [except Section 3, 5 and 8 thereof which came into force on 05.09.1988], provided for punishment for persons entering into a "benami transaction", which was made noncognizable and bailable, and also however, provided for acquisition of property held to be benami; provisions of the 1988 Act, were never operationalized since the rules and procedure required to be framed under Section 8 of the said Act bringing into existence the machinery for implementation of the 1988 Act, were never notified - therefore, although the 1988 Act was part of the statute book, the same was rendered a "dead letter", and all transactions and properties alleged 'benami', carried out / acquired between the period of 19.05.1988 and 01.11.2016, were deemed to have been accepted by the Government as valid 'vesting rights' in the parties to such alleged transactions; ergo, the Central Gover....
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....so held that confiscation as imposed by the Adjudicating Authority would not amount to any punishment, and is only a deprivation of the property of the person in question. vi. The learned ASG also referred to Mithilesh Kumari v. Prem Behari Khare, (1989) 2 SCC 95, para 21, to submit that by necessary implication, the machinery and procedural provisions of the amended Act are retrospective in nature. 12.2 Shri Vikramjit Banerjee, learned ASG has submitted as under: i. The Parliament has the power to enact retrospective legislation even in case of a criminal Statute, as long as it complies with Article 20(1) of the Constitution of India. He further argued that as per Article 20(1), prohibition exists only on conviction and sentencing of the expost facto law, and not against passing such a law. ii. Forfeiture, acquisition, and confiscation are not punishments and therefore not subject to Article 20(1) restrictions. He then pointed out that the adjudication proceedings are also not in the nature of prosecution, and hence cannot be restricted by Article 20. iii. That acquisition of property without paying compensation amounts to confiscation, and c....
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....d the parties, it is necessary for this Court to trace the history of benami transactions in India. The term 'benami transaction' generally implies that one purchases the property in the name of somebody else, i.e., a name lender, and the purchaser does not hold beneficial interest in the property. Literally, 'benami' means 'without a name'. The simplest of example is if person 'A' (real owner) purchases a property from 'B' in the name of 'C' (benamidar/ostensible owner), wherein 'A' exercise rights/interest over the property. 13.2 The term 'benami', which was alien to statutory law during the colonial regime and in the early days of the Republic, was known in the legal parlance of lawyers. Even in Mohammedan law, such transactions were commonly referred as furzee or farzi, derived from Arabic word furaz. McNaughten's Selected Report Vol. I, Reporter's Note at p. 368 Over the passage of time, this nebulous concept appeared in cases without much clarity with respect to its basic contours. Conceptually, there are two views which arise from the Doctrine of Benami. The first view is that the benamidar does not hold title over the property, and the second view is that although the ti....
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.... follows the analogy of our common law, that where a feoffment is made without consideration the use results to the feoffer." In Punjab Province v. Daulat Singh, AIR (29) 1942 FC 38, the Federal Court, while evaluating the propriety of such transactions, observed as under: "A notion has sometimes prevailed in this country that all benami transactions must be regarded as reprehensible and improper if not illegal; but, as late as in 1915, Sir George Farwell, delivering the judgment of the Judicial Committee in 37 ALL. 557 spoke of them as 'quite unobjectionable' and as having their analogues in the English law; and Mr. Amreer Ali, delivering the judgment of the Committee in 46 Cal. 566, observed that "there is nothing inherently wrong in it, and it accords, within its legitimate scope, with the ideas and habits of the people". As indicated by the qualifying words "within its legitimate scope", their Lordships' observations were clearly not meant to countenance transactions entered into for fraudulent or illegal purposes." 13.6 In Jaydayal Poddar v. Bibi Hazra, AIR 1974 SC 171, this Court laid down a test to determine whether a transaction is benami or not. The followin....
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....ct of benami transfer. The effect of a benami transfer is as follows: ( a)A person does not acquire any interest in property by merely leading his name; (b)The benamidar has no beneficial interest though he may represent the legal owner as to third person. (c)A benami transaction is legal, except in certain specified situations. (Emphasis supplied) 13.9 Prior to the 1973 Report, the broad position on the legality of various kinds of benami transactions can be captured as follows: SL. NO. NATURE OF TRANSFER LEGALITY AND CONSEQUENCES A Transfer in favour of wife or child (whether or not with the object of transferring title to the wife or child) without adequate consideration Governed by Section 64, Incometax Act (also see point G in table). [No criminal liability unless the case falls within Section 415 to 424 or Section 206207 of Indian Penal Code] B Transfer in favour of wife or child for consideration, but for a fraudulent purpose and not in good faith Governed by Section 6(h)(2) and Section 58 of Transfer of Property Act. [Criminal liability if the case falls within Section 415 to 424 or Section 206207 of Indian P....
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....ioned 57th Report, did not find it suitable to accept the stringent provision of making benami transactions liable to criminal action. Rather, it recommended adoption of certain less stringent, civil alternatives in the following manner: "6.3. Possible alternative for regulating benami transaction. Several possible alternatives could be thought of, with reference to prohibiting or regulating benami transactions for avoiding prejudice to private individuals or minimising litigation: (i) Entering into a Benami transactions could be made an offence; (ii) A provision may be enacted to the effect that in a civil suit a right shall not be enforced against the benamidar or against a third person, by or on behalf of the person claiming to be the real owner of the property on the ground of benami; a similar provision could be made to bar defences on the ground of benami. (This provision would be based on the principle on which the existing provisions in the Civil Procedure Code and the new provision in the Incometax Act are based but could be wider in scope and more radical). (iii) The present presumption of a resulting trust in favour of the per....
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.... into with the intention of facilitating the evasion of any law, or defeating the claims of his creditors, or the creditors of any other person be guilty of an offence punishable with imprisonment upto three years, or with fine, or with both." Yet another device to give effect to the first alternative would be to add a section in the Indian Penal Code as follows" 421A. Whoever, dishonestly or fraudulently causes to be transferred to any person, any property, for which transfer he has paid or provided the consideration, intending thereby to prevent, or knowing to be likely that he will thereby prevent, the distribution of that property according to law among his creditors or the creditors of any other person, or intending thereby to facilitate, or knowing it to be likely that he will thereby facilitate, the evasion of any law, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine. or with both." 6.25. Second alternative. The second alternative is less drastic than. the first. In form. it could follow the existing statutory provision limiting the judicial recognition of benami transactions, such as,....
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.... Courts and Privy Council are to be understood in a context where there was a general common law right to property, which later made its forays into the Constitution of India under Articles 19(1)(f) and 31. In 1978, the Indian Parliament took a drastic measure and did away with this fundamental right to property and relegated the same to a constitutional right under Article 300A. 13.12 Further, it was an era during which India pursued 'socialism', which was also included in the Preamble of the Constitution through the 42nd (Amendment) Act in 1976. Successive judicial opinions in Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225 etc., viewed the right to property as a stumbling block in the path of achieving social goals that the government of the time aspired to. 13.13 In 1988, an Ordinance -viz. The Benami Transactions (Prohibition of the Right of Recover Property) Ordinance, 1988 (Ordinance 2 of 1988.) - was promulgated. This statutory instrument being not satisfactory, it was referred to the Law Commission again. 13.14 In any case, the issue was reexamined by the Law Commission in the year 1988 through its 130th Report. Although the Law Commission characterized the ....
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....ay be read accordingly. But it was pointed out that where transfer of flats is prohibited either by the rules of the cooperative society which has built the flats or by the rules of authorities like the Delhi Development Authority, a modus operandi has come into existence whereby violating the law, the flat is sold and the purchaser would pay the amount and taken an irrevocable power of attorney and enter into possession. It was further said that the provisions of the Incometax Act have recognized such transfers and treat the attorney as owner for the purpose of incometax as per the provisions of the Finance Act, 1987. If the sole purpose of entering into such a transaction is the violation of existing law which has been passed after due consideration, it is time that no recognition is conferred and the law is allowed to take its own course. Even in the name of revenue loss, violation of existing laws cannot be protected. 4.6The Law Commission would like to make it very clear that some of provisions of the tax laws may become anachronistic because of the present approach of the law commission. This is inevitable. The tax laws were enacted at the time when benami was a part....
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....ted during the 57th Report (1973). This aspect becomes important, and will be addressed later, while analysing the question of retrospectivity. 14.4 Section 3 of 1988 Act states as under: 3. Prohibition of benami transactions - (1) No person shall enter into any benami transaction. (2) Nothing in subsection (1) shall apply to the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife of the unmarried daughter. (3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. (4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence under this section shall be noncognizable and bailable. Section 3 puts forth a prohibitive provision. Further, it intended to criminalize an act of entering into a benami transaction. 14.5 Section 4 noted as under: 4.Prohibition of the right to recover property held benami( 1) No suit, claim or action to enforce any ....
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.... of 1908.); and Section 281A of the Income Tax Act, 1961 (43 of 1961). Section 8 empowered the Central Government to make rules to give effect to the Act. The final section, Section 9, repealed the earlier Ordinance. 14.9 The main thrust of the argument put forth by the Union of India in this appeal is that the amended 2016 Act only clarified the 1988 Act. Law Officers appearing for the Union of India trained their guns on the point that the 1988 Act had already created substantial law for criminalizing the offence and the 2016 amendments were merely clarificatory and procedural, to give effect to the 1988 Act. Such a submission mandates us to examine the law of the 1988 Act in detail and determine the scope of the earlier regime to understand as to whether the 2016 amendments were substantive or procedural. 14.10 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. Under the Indian jurisprudence, the law on the subject is fairly wellsettled. It has been subjected to the judicial scrutiny of this Court on several occasions. It does not call for a detailed disc....
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....ion 4 of 1988 Act, on several occasions. In Mithilesh Kumari v. Prem Behari Khare, (1989) 2 SCC 95, this Court was called upon to examine as to whether the aforesaid provision has retrospective application, held as under: "22. As defined in Section 2(a) of the Act " 'benami transaction' means any transaction in which property is transferred to one person for a consideration paid or provided by another person". A transaction must, therefore, be benami irrespective of its date or duration. Section 3, subject to the exceptions, states that no person shall enter into any benami transaction. This section obviously cannot have retrospective operation. However, Section 4 clearly provides that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie, by or on behalf of a person claiming to be real owner of such property. This naturally relates to past transactions as well. The expression "any property held benami" is not limited to any particular time, date or duration. Once the property is found to have been held benami, no suit, claim or action to enforce any r....
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....es) and future suits, claims or actions only. This leads us to the question whether there was a present suit between the respondent plaintiff and the defendant appellant on the date of the law coming into force. We have noted the dates of filing the suit and judgments of the courts below. On the date of Section 4 of the Act coming into force, that is, 1951988 this appeal was pending and, of course, is still pending. Can the suit itself be said to be pending? (emphasis supplied) 14.14 The aforesaid interpretation was reexamined by this Court in R. Rajagopal Reddy v. Padmini Chandrasekharan, (1995) 2 SCC 630 and while partly overruling Mitilesh Kumari (supra), it was held as under: 11. ... Thus it was enacted to efface the then existing right of the real owners of properties held by others benami. Such an Act was not given any retrospective effect by the legislature. Even when we come to Section 4, it is easy to visualise that subsection (1) of Section 4 states that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other shall lie by or on behalf of a person cl....
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....ming into operation of Section 4(1), and henceafter Section 4(1) applied no suit can lie in respect to such a past benami transaction. To that extent the section may be retroactive. To highlight this aspect we may take an illustration. If a benami transaction has taken place in 1980 and a suit is filed in June 1988 by the plaintiff claiming that he is the real owner of the property and defendant is merely a benamidar and the consideration has flown from him, then such a suit would not lie on account of the provisions of Section 4(1). Bar against filing, entertaining and admission of such suits would have become operative by June 1988 and to that extent Section 4(1) would take in its sweep even past benami transactions which are sought to be litigated upon after coming into force of the prohibitory provision of Section 4(1); but that is the only effect of the retroactivity of Section 4(1) and nothing more than that. From the conclusion that Section 4(1) shall apply even to past benami transactions to the aforesaid extent, the next step taken by the Division Bench that therefore, the then existing rights got destroyed and even though suits by real owners were filed prior to coming in....
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....n already allowed defence as at the relevant time when such defence was allowed Section 4(2) was out of the picture. Section 4(2) nowhere uses the words: "No defence based on any right in respect of any property held benami whether against the person in whose name the property is held or against any other person, shall be allowed to be raised or continued to be raised in any suit." With respect, it was wrongly assumed by the Division Bench that such an already allowed defence in a pending suit would also get destroyed after coming into operation of Section 4(2). We may at this stage refer to one difficulty projected by learned advocate for the respondents in his written submissions, on the applicability of Section 4(2). These submissions read as under: ... 13. According to us this difficulty is inbuilt in Section 4(2) and does not provide the rationale to hold that this section applies retrospectively. The legislature itself thought it fit to do so and there is no challenge to the vires on the ground of violation of Article 14 of the Constitution. It is not open to us to rewrite the section also. Even otherwise, in the operation of Section 4(1) and (2), no discrim....
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....he fact that the 1988 Act was a valid substantive law, which required only some gap filling through the 2016 Act, to ensure that sufficient procedural safeguards and mechanisms are present to enforce the law. According, to the Union of India, the 2016 Act was a mere gap filling exercise. 15.2 However, upon studying the provisions of the 1988 Act, we find that there are questions of legality and constitutionality which arise with respect to Sections 3 and 5 of 1988 Act. The answers to such questions cannot be assumed in favour of constitutionality, simply because the same was never questioned before the Court of law. We are clarifying that we are not speaking of the presumption of constitutionality as a matter of burden of proof. Rather, we are indicating the assumption taken by the Union as to the validity of these provisions in the present litigation. Such assumption cannot be made when this Court is called upon to answer whether the impugned provisions are attracted to those transactions that have taken place before 2016. 15.3 Indian jurisprudence has matured through years of judicial tempering, and the country has grown to be a jurisdiction having 'substantive due process'....
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.... contained in Article 21, the scope of the challenge is not confined only to whether the procedure for the deprivation of life or personal liberty is fair, just and reasonable. Substantive challenges to the validity of laws encroaching upon the right to life or personal liberty has been considered and dealt with in varying contexts, such as the death penalty (Bachan Singh [Bachan Singh v. State of Punjab, (1980) 2 SCC 684 : 1980 SCC (Cri) 580] ) and mandatory death sentence (Mithu [Mithu v. State of Punjab, (1983) 2 SCC 277 : 1983 SCC (Cri) 405] ), among other cases. A person cannot be deprived of life or personal liberty except in accordance with the procedure established by law. Article 14, as a guarantee against arbitrariness, infuses the entirety of Article 21. The interrelationship between the guarantee against arbitrariness and the protection of life and personal liberty operates in a multifaceted plane. First, it ensures that the procedure for deprivation must be fair, just and reasonable. Second, Article 14 impacts both the procedure and the expression "law". A law within the meaning of Article 21 must be consistent with the norms of fairness which originate in Article 14. ....
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..... A doctrinal study of the development of this area may not be warranted herein. It is well traced in Shayara Bano v. Union of India, (2017) 9 SCC 1. We may only state that the development of jurisprudence has come full circle from an overly formalistic test of classification to include the test of manifest arbitrariness. A broad formulation of the test was noted in the aforesaid case as under: "95. On a reading of this judgment in Natural Resources Allocation case [Natural Resources Allocation, In re, Special Reference No. 1 of 2012, (2012) 10 SCC 1], it is clear that this Court did not read McDowell [State of A.P. v. McDowell and Co., (1996) 3 SCC 709] as being an authority for the proposition that legislation can never be struck down as being arbitrary. Indeed the Court, after referring to all the earlier judgments, and Ajay Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722] in particular, which stated that legislation can be struck down on the ground that it is "arbitrary" under Article 14, went on to conclude that "arbitrariness" when applied to legislation cannot be used loosely. Instead, it broad based the test, stating that if a constitutional infirmit....
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....n 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. 15.13 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. 15.14 Second, ignoring the 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 Secti....
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....uch 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. 15.19 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 halfbaked 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 cann....
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.... Section 2(9) "benami transaction" means: (A) a transaction or an arrangement( a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) 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 (22 of 1996) and any other person as may be notified by the Central Government for this purpose; (iii) any person being an individual in the name of his spouse or in the name of any child of such....
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....e 2016 Act defines a property. This definition has been expanded to include proceeds from the property as well. Such expansion allows for tracing of proceeds and is a substantial change as compared to the 1988 Act. Along with this, benami property has been defined under Section 2(8). Benamidar is defined under Section 2(10). 16.4 Chapter 2 contains four provisions which are modified provisions of the 1988 Act. Section 3 now bifurcates offences into two separate categories based on the time period of the benami transaction. Under Section 3(2), punishment of three years is mandated for those who have entered into benami transactions from 05.09.1988 to 25.10.2016. Section 3(3) applies to those benami transactions which have been entered into after commencement of the amended 2016 Act and the punishment for the aforesaid is prescribed under Section 53 of Chapter VII. It may be noted that under Section 3(3), the punishment is increased from three years to a maximum of seven years and a fine may be imposed which extend up to 25% of the fair market value of the property. This distinction between Section 3(2) and 3(3) read with Section 53, contains the element of mens rea. 16.5 Secti....
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.... other persons. The adjudicating authority can either pass an order in terms of Section 26(3)(c)(i) or (ii), or pass an order for further inquiries in terms of Section 26(3)(b). 16.12 Section 27(1) relates to confiscation of property, wherein if a property is adjudicated as a benami property under Section 26(3), then the adjudicating authority can give an opportunity to the concerned persons, and after hearing the parties, pass an order confiscating the property. The aforesaid confiscation order is subject to the order passed by the Appellate Tribunal under Section 46. Order of confiscation vests such property absolutely in the Central Government, free from all encumbrances and no compensation shall be payable in respect of such confiscation. 16.13 Section 27(4) provides that in the interregnum of initiating confiscation proceedings, any thirdparty rights created to defeat the purpose of the Act shall be null and void. Sub clause 5 mandates that if no order of confiscation is made and the same has attained finality, no claim can be made against the Government for the process. 16.14 Section 28 mandates appointment of an Administrator by the Central Government to manage the ....
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.... (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. 17.3 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) for those transactions that were entered into between 05.09.1988 to 25.10.2016, the law cannot retroactively invigorate a stillborn criminal offence, as established above. 17.4 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., 25.10.2016. Any contrary interpretation of Section ....
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....fit of the community and also of individuals relate to a time antecedent to their commencement: as statutes of oblivion or of pardon. They are certainly retrospective, and literally both concerning and after the facts committed. But I do not consider any law ex post facto within the prohibition that mollifies the rigour of the criminal law, but only those that create or aggravate the crime , or increase the punishment or change the rules of evidence for the purpose of conviction.... There is a great and apparent difference between making an unlawful act lawful and the making an innocent action criminal and punishing it as a crime." 17.6 In the case at hand, the 2016 Act containing the criminal provisions is applicable only prospectively, as the relevant Sections of the preamendment 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. 17.7 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....
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....inted. 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. 17.14 Before we analyse the other provisions, 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. 17.15 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. 17.16 The historic origin of....
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....Engel v The Netherlands (No.1), [1976] 1 EHRR 647, have been treated as giving authoritative guidance. Those tests are set out in paragraphs 80 to 82 of the Report and are as follows: "(i) The manner in which the domestic state classifies the proceedings. This normally carries comparatively little weight and is regarded as a starting point rather than determinative see Ozturk v Germany [1984] 6 EHRR 409 at 421 and 422. (ii) The nature of the conduct in question classified objectively bearing in mind the object and purpose of the Convention. (iii) The severity of any possible penalty severe penalties, including those with imprisonment in default and penalties intended to deter are pointers towards a criminal classification of proceedings see Schmautzer v Austria [1995] 21 EHRR 511. In Lauko v Slovakia [1998] ECHR 26138/95 the court observed that these criteria were alternatives and not cumulative although a cumulative approach might be adopted where a separate analysis of each criterion did not make it possible to reach a clear conclusion as to the existence of a 'criminal charge'." (emphasis supplied) The aforesaid proposition....
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.... forfeited in the following manner: "12. Further what s. 13(3) of the 1944Ordinance which provides for forfeiture requires is that there should be in the final judgment of the criminal court a finding as to the amount of money or value of property in pursuance of s. 12. As soon as that finding is there, the District Judge would know the amount he is to forfeit, and the purpose of the finding is that if the District Judge is asked to make a forfeiture under s. 13(3) he should know exactly the amount which he is require to forfeit. So long therefore as the criminal court trying an offender has given a finding as to the amount of money or value of other property procured by means of the offence in the judgment that in our opinion is sufficient compliance with s. 12(1) of the 1944Ordinance and the requirement therein that it should be on the representation of the prosecution is a mere formality. Obviously, even a determination under s. 10 of the 1943Ordinance as amended in 1945 of the amount procured by the offence must be at the instance of the prosecution for it is the prosecution which will provide the material for that determination which in turn will be the basis on which....
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....ules. In any case, this Court has held that the new mechanism formulated under the amended Act was completely independent of criminal prosecution. 17.24 To the same extent, in State of Madhya Pradesh v. Kallo Bai, (2017) 14 SCC 502, this Court interpreted the Madhya Pradesh Van Upaj (Vyapar Viniyam) Adhiniyam, 1969 to have independent confiscation proceedings from criminal prosecution in view of the nonobstante clause under Section 15C of the Adhiniyam. It may also be noted that there was no challenge to the aforesaid Act, as being violative of Article 20(1) of the Constitution. The Court held as under: "14. Subsection (1) of Section 15 empowers forest officers concerned to conduct search to secure compliance with the provisions of the Adhiniyam. On a plain reading of subsection (2), it is clear that the officer concerned may seize vehicles, ropes, etc. if he has reason to believe that the said items were used for the commission of an offence under the Adhiniyam. Confiscation proceedings as contemplated under Section 15 of the Adhiniyam is a quasijudicial proceedings and not a criminal proceedings. Confiscation proceeds on the basis of the "satisfaction" of the authoris....
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.... ultimately had to be adjudicated along with the trial of the main criminal case. 17.26 In Abdul Vahab v. State of Madhya Pradesh, (2022) SCC Online SC 262, this Court was concerned with the interpretation of the Madhya Pradesh Cow Slaughter (Prohibition) Act, 2004, wherein it was held that confiscation proceedings could not be independent of acquittal in the criminal case. If a contrary interpretation was taken, then the same would be violative of Article 300A of the Constitution. This Court distinguished the case from the judgment of Kallo Bai (supra), by placing reliance on the absence of a provision such as Section 15C of Madhya Pradesh Van Upaj (Vyapar Viniyam) Adhiniyam, 1969 under the Madhya Pradesh Cow Slaughter (Prohibition) Act, 2004. 17.27 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 ....
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.... Explanation. For the purposes of this section," property" includes (a) property of any kind or document which is produced before the Court or which is in its custody, (b) any property regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence. 452. Order for disposal of property at conclusion of trial. (1) When an inquiry or trial in any Criminal Court is concluded, the Court may make such order as it thinks fit for the disposal, by destruction, confiscation or delivery to any person claiming to be entitle to possession thereof or otherwise, of any property or document produced before it or in its custody, or regarding which any offence appears to have been committed, or which has been used for the commission of any offence. Aforesaid provisions 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. 17.30 Coming to the Benami A....
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.... 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. 17.34 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. 17.35 In the case at hand, the authority that initi....
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...., handed down in the absence of the procedural guarantees afforded to him under article 6 of the Convention, in particular his right to be presumed innocence [sic]. The court does not accept that view. In its opinion, the forfeiture order was a preventive measure and cannot be compared to a criminal sanction, since it was designed to take out of circulation money which was presumed to be bound up with the international trade in illicit drugs. It follows that proceedings which led to the making of the order did not involve 'the determination ... of a criminal charge (see Raimondo v Italy [1994] 18 EHRR 237, 264, at para 43; and more recently Arcuri v Italy (Application No 52024/99), inadmissibility decision of 5th July 2001..."" 17.38 When we come 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....