Benami transaction will not be a criminal offence

The Government has rejected the Home Ministry's suggestion that benami transactions be considered as criminal offence.

The Union Cabinet on Thursday approved the Benami Transactions (Prohibition) Bill, 2011. The new Bill, proposed to be tabled during the monsoon session of Parliament, will replace the Benami Transactions (Prohibition) Act, 1988. Though enacted 23 years ago, the Rules under this Act had not been notified. As a result, the Act could not be made operational.

The earlier Act defined a

benami transaction as one “…in which property is transferred to one person for a consideration paid or provided by another person”. The new Bill lists the reasons why a person does this, such as to defeat the provisions of law, avoid payment of statutory dues or to avoid payment to creditors.

However, the new Bill has diluted the punishment for the beneficial owner or

benamidar and any other person who abets or induces any person to enter into a benami transaction and holds benami property. The earlier Act stated that whosoever entered into any benami transaction shall be punishable with imprisonment up to three years. The term has now been reduced to up to two years. The fine, however, stays.

The Home Ministry wanted to make such transactions a criminal offence. The Cabinet, however, seems to have gone by the Finance Ministry's views. “Power of civil courts will be applicable,” said the Union Information and Broadcasting Minister, Ms Ambika Soni, briefing reporters after the Cabinet meeting.

EXEMPTED PERSONS

While the 1988 Act exempted wife and unmarried daughter, the new Bill has expanded the list. It says, “Properties acquired by an individual in the name of spouse, brother or sister or any lineal ascendant or descendant are benami transactions which are not prohibited.”

It has also clarified that property held by coparcener (a person who inherits an estate as coheir with others) in a Hindu Undivided Family and property held by a person in fiduciary capacity are excluded from the definition of benami transaction. Neither transaction will be subject to penal provisions.

Except for these exempted categories, under all other transactions, an Adjudicating Authority can confiscate the benami property, but only after the person concerned has been given an opportunity to be heard.