PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT, 1988

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Benami Transactions (Prohibition) Act, 1988 is an Act enacted by the Parliament of India on 19.05.1988. The said Act has been further amended by "The Benami Transactions (Prohibition) Amendment Act, 2016 [BTP Amendment Act ]" duly notified in The Official Gazette of India on 11.08.2016. Subsequently, the Central Government make Prohibition of Benami Property Transactions Rules, 2016 vide Notification on 25.10.2016. The said Rules and all the provisions of the BTP Amendment Act shall come into force on 1st November, 2016. After Coming into effect of BTP Amendment Act, the existing Benami Transactions (Prohibition) Act, 1988 shall be renamed as Prohibition of Benami Property Transactions Act, 1988 (PBPT Act).

PBPT Act is enacted by the Parliament of India to prohibit certain types of financial transactions commonly known as "Benami transactions". The Act bans all Benami transactions and gives the Government the right to recover property held as Benami without paying any compensation i.e Any property, which is subject matter of Benami transaction, shall be liable to be confiscated by the Central Government At present, the Government has set up 24 Benami Prohibition Units (BPUs) across India for taking action under the Benami Act.

Definitions
The act defines:
Benami' transaction as a transaction or an arrangement :
  1. 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
  2. The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except some transactions which has been specifically excluded from the above definition
  3. Entered in respect of a property in a fictitious name
  4. Entered in respect of a property without the knowledge of the owner of the property
  5. Where the person providing the consideration is not traceable or is fictitious.
Benami Property

Benami Property as any property which is the subject matter of a benami transaction and also includes the proceeds from such property

Benamidar

Benamidar means a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name.

Beneficial owner

Beneficial owner means a person, whether his identity is known or not, for whose benefit the Benami property is held by a Benamidar.

Beneficial owner

Beneficial owner means a person, whether his identity is known or not, for whose benefit the Benami property is held by a Benamidar.

Property held benami laible to confiscation
Under the PBPT Act, the property, which is subject matter of Benami transaction, shall be liable to be confiscated by the Central Government in these three steps:
  • Provisional attachment of Property involved in Benami transaction by Initiating Officer. The Initiating officer pass the Provisional attachment Order after giving opportunity of being heard to the person concerned and refers the case to the Adjudicating Authority within fifteen days from the date of the Provisional attachment.
  • Adjudication of Benami Property before Adjudicating Authority The Adjudicating Authority shall, after considering the reply in response to the notices issued, inquiries conducted, reports called for and after taking into account all relevant materials gathered also provide an opportunity of being heard to the person specified as a benamidar, the Initiating Officer, and any other person who claims to be the owner of the property, and, thereafter, pass an order as:
    1. holding the property not to be a Benami property and revoking the attachment order
    2. holding the property to be a Benami property and confirming the attachment order, in all other cases
  • Confiscation and vesting of Benami Property Where the Adjudicating Authority passed order in respect of any property holding such property to be a Benami property, the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a Benami property.
Appeals
Appeals to Appellate Tribunal
  1. Any person, including the Initiating Officer, aggrieved by an order of the Adjudicating Authority may prefer an appeal to the Appellate Tribunal against the order passed by the Adjudicating Authority.
  2. An appeal to the Appellate Tribunal shall be filed in Form No. 3 of PBPT Rules, 2016 within a period of forty-five days from the date of the order.
  3. At the time of filing, every appeal shall be accompanied by a fee of ten thousand rupees.
  4. At the time of filing appeal the grounds of objection to the order appealed against has to filed concisely and under distinct head.
Appeal to High Court.

Any party aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order.

Penalty and prosecution for offences under pbpt act

Under the PBPT Act, whoever is found guilty of the offence of benami transaction whether the beneficial owner, benamidar and any other person, shall be punishable with:

  • Imprisonment for a term: -
    1. Minimum: One Year
    2. Maximum: Seven Years
  • Fine which may extend to twenty-five per cent. of the fair market value of the property.

In addition to above, if any person who is required to furnish information under this Act knowingly gives false information to any authority or furnishes any false document in any proceeding under this Act, shall be punishable with

  • Imprisonment for a term: -
    1. Minimum: Six Months
    2. Maximum: Five Years
  • Fine which may extend to ten per cent. of the fair market value of the property.

For representations before the Initiating Officer and before the Adjudicating Authority and further for filing appeals with the Appellate Tribunal, The High Court and The Supreme Court one must take the help of the legal and professional consultancy otherwise it may escort to adverse consequences of imposition / levy of harsh fines and penalties along with prosecution.

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