SC recalls 2022 verdict on benami law as unconstitutional

In a significant development, the Supreme Court on Friday recalled its 2022 verdict that had declared as unconstitutional two provisions of the law on prohibition of benami property transactions that restrains such deals and acquisition of properties by authorities.

Allowing the Centre's review of the August 23, 2022 verdict, a bench Chief Justice of India DY Chandrachud, Justices PS Narasimha and Manoj Misra recalled the judgement delivered by a three-judge bench headed by former CJI NV Ramana.

In its August 2022 verdict, the top court had then held that Sections 3(2) and 5 of the Prohibition of Benami Property Transactions Act, 1988 being "manifestly arbitrary" were unconstitutional.

While Section 3 of the Act deals with prohibition of benami (a property held by a person through proxies) transactions, Section 5 pertains to property of benami liable to acquisition­.

On Friday, the top court agreed with the submissions of Solicitor General Tushar Mehta, who appeared for the Centre, that the validity of these two provisions were not under challenge before the erstwhile bench.

"In this view of the matter, the review would have to be allowed. It is trite law that challenge to the constitutional validity of a statutory provision can't be adjudicated upon in the absence of a live lis and contest between the parties," said the bench.

The top court consequently allowed the review petition.

It said the civil appeal, on which the August 2022 verdict was delivered, will stand restored to the file for a fresh adjudication before a bench nominated by the chief justice on the administrative side.

In its August 2022 verdict, the apex court had held that the benami law did not have a retrospective application and the authorities couldn't initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to when the legislation came into force.

The top court was dealing with a legal question -- whether the 1988 Act, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 had a prospective effect.

The 2022 verdict was delivered on an appeal of the Centre challenging a Calcutta high court judgment, which held that the amendment made in the 1988 Act in 2016 would be applicable prospectively.

The Centre had contended that the 2016 Act would be applicable retrospectively.

The benami law was enacted to prohibit such transactions and enforce the right to recover properties held to be "benami".

The law punishes a violator with a three-year jail term or fine or both.