Facts of the Case

The petitioner challenged a Show Cause Notice dated 04 April 2022 issued under Section 53 of the Prohibition of Benami Property Transactions Act, 1988 (as amended in 2016).

The notice pertained to alleged benami transactions involving purchase of land by a company between 2007 and 2010 and transfer of shares by the petitioner in 2014.

The petitioner had resigned as director in 2008 and divested his shareholding in 2014, i.e., prior to the enforcement of the 2016 amendment.

 Issues Involved

  1. Whether Section 53 of the 2016 amended Benami Act can be applied retrospectively to transactions undertaken before 01 November 2016.
  2. Whether initiation of criminal proceedings for pre-amendment transactions is legally sustainable.

 Petitioner’s Arguments

  • The impugned transactions occurred prior to the enforcement of the 2016 Amendment Act.
  • Penal provisions under Section 53 cannot be applied retrospectively.
  • Reliance was placed on the Supreme Court judgment in Union of India vs Ganpati Dealcom Pvt. Ltd. (2022), which held that the 2016 Act is prospective in nature.

 Respondent’s Arguments

  • The Revenue accepted notice and submitted that a review petition against the Supreme Court judgment in Ganpati Dealcom was under consideration.

 Court Findings / Order

  • The Court relied on the Supreme Court ruling in Ganpati Dealcom Pvt. Ltd.
  • It was held that:
    • Section 53 of the 2016 Amendment Act is prospective.
    • Criminal prosecution cannot be initiated for transactions prior to 01 November 2016.
  • Since the alleged transactions were admittedly prior to 2016, the Show Cause Notice was held invalid.

 Final Order:
The Show Cause Notice dated 04 April 2022 was quashed, and the writ petition was allowed.

 Important Clarification by Court

  • Penal provisions under the Benami Act (post-2016 amendment) cannot be applied retrospectively.
  • Any prosecution or confiscation proceedings for transactions before 25.10.2016 / 01.11.2016 are unsustainable in law.
  • Such retrospective application would violate Article 20(1) of the Constitution, which prohibits ex post facto penal liability.

Sections Involved

  • Section 53 – Prohibition of Benami Property Transactions Act, 1988 (as amended in 2016)
  • Article 20(1) – Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/58903112022CW84222022_211330.pdf

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