Supreme Court strikes down Benami Law

By Our Special Correspondent

The Supreme Court on Tuesday ruled that the Benami Act can only be applied retrospectively and not retrospectively, and termed Section 3(2) of the Act as "unconstitutional".

Many businesses are awaiting the verdict on the Benami Transactions (Prohibition) Amendment Act, which came into effect from November 1, 2016.

The Apex Court held that the 2016 Act had only prospective effect and, therefore, set aside all measures taken prior to the amendment.

Section 3 of the Act, which the court termed "unconstitutional", makes any person entering into any benami transaction punishable with imprisonment for a term which may extend to three years or with fine or with both.

A bench headed by Chief Justice of India NV Ramana passed the verdict on the Centre's appeal against the Calcutta High Court's order that the 2016 Amendment Act was not prospective. A copy of the judgment is awaited.

The new law expands the definition of transactions classified as benami and imposes tougher penalties that will put many firms and individuals under the scanner as they are used retroactively.