October 28, 2011
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Purpose: To prohibit holding property Benami and restrict the right to recover or transfer such property. Background: Under growing attack over corruption and black money, the Union Cabinet on 21st July, 2011, approved the proposal for the enactment of a new legislation in the form of the Benami Transactions (Prohibition) Bill, 2011 to replace the existing Benami Transactions (Prohibition) Act. During the process of formulating the rules for implementing certain provisions of the present Act which was passed in 1988, it was found that owing to infirmities in the legislation, formulation of the rules would not be possible without a comprehensive legislation by repealing the Act. The major infirmities of the existing Act were:
- Powers of a civil court have to be conferred on the authorities under the Act.
- Specific provisions have to be introduced for vesting of confiscated property with the Central Government.
- An appropriate appellate structure has to be defined, while barring jurisdiction of a civil court against an action taken by the authorities under the Act.
- Matters of procedure relating to its administration, notice of hearing to parties concerned, etc are to be provided.
- The word ‘wife’ needs to be replaced with the word ‘spouse’.
- Property purchased in the name of certain other family members is to be allowed under the Act.
- (A) a transaction or arrangement –
- (a) where a property is transferred to, or is held by, a person for a consideration provided, or paid by, another person; and
- (b) the property is held for the immediate or future benefit, direct or indirect, of the person providing the consideration, except where the property is held by -
- (i) a karta, or a member of a Hindu Undivided Family, as the case may be, and the property is held for his benefit or the benefit of other members of the family; or
- (ii) a person standing in fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, agent, director of a company or legal adviser, a depository or participant as an agent of a depository under Depository Act, 1996 and any other person as may be notified by the Central Government for this purpose;
- (B) a transaction or arrangement in respect of a property carried out or made in a fictitious name; or
- (C) a transaction or arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership.
- Properties held by coparcener in a Hindu undivided family; or
- Properties held by a person in “fiduciary’’ capacity are excluded from the definition of benami transaction.
- Properties acquired by an individual in the name of spouse, brother or sister or any other lineal ascendant or descendant are benami transactions which are not prohibited