Holding

Sections 3(2) of the 1988 Benami Act and its 2016 counterpart are unconstitutional as manifestly arbitrary and violative of Article 20(1), and the in‑rem forfeiture provision of the 2016 Act is punitive and may only be applied prospectively.

Summary

The Supreme Court examined the constitutionality of the Benami Property Transactions Act, 1988 and its 2016 amendment in a dispute between the Union of India and M/s. Ganpati Dealcom Pvt. Ltd. The Court held that Section 3(2) of the 1988 Act, which created a strict‑liability offence without mens rea, is manifestly arbitrary and therefore unconstitutional, rendering the corresponding provision in the 2016 amendment also void under Article 20(1) of the Constitution. Section 5 of the 1988 Act, which allowed in‑rem forfeiture, was likewise struck down as arbitrary. The 2016 amendment was found to be substantive, not merely procedural, and its in‑rem forfeiture provision is punitive; consequently it can only operate prospectively and cannot be applied to benami transactions entered into before 1 November 2016. All criminal prosecutions and confiscation proceedings relating to pre‑2016 transactions were quashed, and the appeal was disposed.

Issues considered

The validity of Section 3(2) of the Benami Transactions (Prohibition) Act, 1988 on the ground of manifest arbitrariness and violation of Article 20(1).
Whether the corresponding provision in the 2016 amendment is unconstitutional for the same reasons.
The constitutionality of Section 5 of the 1988 Act (in‑rem forfeiture) and its amendment in 2016.
Whether the 2016 amendment constitutes substantive legislation or merely procedural amendment.
If the forfeiture provisions of the 2016 Act are punitive and therefore barred from retrospective application under Article 20(1).
The prospective or retrospective effect of the 2016 amendment on transactions entered into before its commencement.

Legislation cited

Benami Transactions (Prohibition) Amendment Act, 2016s. 24, s. 26, s. 27, s. 2(9), s. 3(2), s. 3(3), s. 4, s. 5, s. 53, s. 54, s. 55
Companies Act, 1956s. 187C
Constitution of Indias. Article 14, s. Article 19, s. Article 20(1), s. Article 21, s. Article 300A
Criminal Procedure Code, 1976s. 451, s. 452
Prohibition of Benami Property Transactions Act, 1988s. 2(a), s. 3, s. 4, s. 5, s. 6, s. 7, s. 8, s. 9
Transfer of Property Act, 1882s. 53A

Subjects

Benami transactionArticle 20(1) ex post factomanifest arbitrarinessmens reain‑rem forfeiturecivil vs criminal forfeitureprospective legislationsubstantive due processretrospective legislationconstitutional validity

Judgment

320 [2022]REPORTS
SUPREME COURT 12 S.C.R. 320 [2022] 12 S.C.R.

A UNION OF INDIA & ANR.
v.
M/s. GANPATI DEALCOM PVT. LTD.
(Civil Appeal No. 5783 of 2022)
B AUGUST 23, 2022
[N. V. RAMANA, CJI, KRISHNA MURARI AND
HIMA KOHLI, JJ.]
Prohibition of Benami Property Transactions Act, 1988 –
ss.3(2),5 – Benami Transactions (Prohibition) Amendment Act, 2016
C
– Held: s.3(2) of the unamended 1988 Act is unconstitutional for
being manifestly arbitrary – Accordingly, s.3(2) of the 2016 Act is
also unconstitutional as it is violative of Article 20(1) of the
Constitution – Further, in rem forfeiture provision u/s.5 of the
unamended Act of 1988, prior to the 2016 Amendment Act, was
D unconstitutional for being manifestly arbitrary – 2016 Amendment
Act was not merely procedural, rather, prescribed substantive
provisions – In rem forfeiture provision u/s.5 of the 2016 Act, being
punitive in nature, can only be applied prospectively and not
retroactively – Thus, concerned authorities cannot initiate or
continue criminal prosecution or confiscation proceedings for
E
transactions entered into prior to the coming into force of the 2016
Act, viz., 1.11.2016 –Consequently, all such prosecutions or
confiscation proceedings stand quashed– Constitution of India –
Article 20(1).
Benami Property Transactions Act, 1988 – ss.2(a), 3 – Mens
F
rea, absence of – Effect of – Held: The criminal provision envisaged
u/ss. 2(a) and 3 does not expressly contemplate mens rea – Mens rea
is an essential ingredient of a criminal offence – Absence of mens
rea creates a harsh provision having strict liability –Mere fact that
the object of the statute is to promote welfare activities or to eradicate
G a grave social evil which by itself is not decisive of the question as
to whether the element of a guilty mind is excluded from the
ingredients of an offence – Mens rea by necessary implication may
be excluded from a statute only where it is absolutely clear that
implementation of the object of the statute would otherwise be
defeated – The language of s.2(a) coupled with s.3, completely
H
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ignores the aspect of mens rea, as it intends to criminalize the very A
act of one person paying consideration for acquisition of property
for another person – The 1988 law was envisaged on the touchstone
of strict liability.
Judicial Review– Law with respect to testing the
unconstitutionality of a statutory instrument – Held: Constitutional B
Courts can test constitutionality of legislative instruments (statute
and delegated legislations)both on procedure as well as substantive
nature of these instruments – The test should be based on a combined
reading of Articles 14, 19 and 21 of the Constitution – Constitution
of India – Articles 14, 19, 21.
C
Doctrines/Principles – Doctrine of manifest arbitrariness–
Discussed.
Interpretation of Statutes – Law declared unconstitutional –
Effect of – Held: Such a declaration would render the law not to
exist in the law books since its inception – It is only a limited D
exception under Constitutional law, or when substantial actions have
been undertaken under such unconstitutional laws that going back
to the original position would be next to impossible – In those cases
alone, would this Court take recourse to the concept of ‘prospective
overruling’.
E
Constitution of India –Retroactive/retrospective legislations
– Legislature’s power to enact – Held: Legislature has power to
enact retroactive/retrospective civil legislations under the
Constitution – However, Article 20(1) mandates that no law
mandating a punitive provision can be enacted retrospectively – A
punitive provision cannot be couched as a civil provision to by-pass F
the mandate under Article 20(1) of the Constitution which follows
the settled legal principle that “what cannot be done directly, cannot
be done indirectly”.
Words and Phrases– “Forfeiture”, “Benami”, “Benami
transaction”, “Benamidar/ostensible owner”– Discussed. G
Disposing of the appeal, the Court
HELD: 1. Reading Section 2(a) along with Section 3 makes
one thing clear – the criminal provision envisaged under the
aforesaid provisions does not expressly contemplate mens rea.
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322 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Under the Indian jurisprudence, the law on the subject is fairly
well-settled. It has been subjected to the judicial scrutiny of this
Court on several occasions. It does not call for a detailed
discussion and is enough to restate the principles. Mens rea is an
essential ingredient of a criminal offence. Doubtless, a statute
B may exclude the element of mens rea, but it is a sound rule of
construction adopted in England – and also accepted in India – to
construe a statutory provision creating an offence in conformity
with common law rather than against it, unless the statute
expressly or by necessary implication excluded mens rea. The
mere fact that the object of the statute is to promote welfare
C activities or to eradicate a grave social evil which by itself is not
decisive of the question as to whether the element of a guilty
mind is excluded from the ingredients of an offence. Mens rea by
necessary implication may be excluded from a statute only where
it is absolutely clear that implementation of the object of the
D statute would otherwise be defeated. The Language of Section
2(a) coupled with Section 3, completely ignores the aspect of mens
rea, as it intends to criminalize the very act of one person paying
consideration for acquisition of property for another person. The
1988 law was envisaged on the touchstone of strict liability. Such
strict statutory formulation under Section 2(a) read with Section
E
3 had left loose ends in the 1988 Act. In this light, the prosecution
would only have to prove only that consideration was paid or
consideration was provided by one person for another person
and nothing more. In all the judicial precedents, this Court has
had the occasion to examine this legislation on the civil side and
F never on the criminal side, which would bear a higher standards.
Conflation of the ingredients under Section 3(1) and (2) with those
of Section 4, to forcefully implied mens rea, cannot be accepted.
[Para 14.10-14.12][355-D-G; 356-B-C]
Nathulal v. State of Madhya Pradesh, AIR 1966 SC
G 43; Mithilesh Kumari v. Prem Behari Khare, (1989) 2
SCC 95 : [1989] 1 SCR 621; R. Rajagopal Reddy v.
Padmini Chandrasekharan, (1995) 2 SCC 630 : [1995]
1 SCR 715 – referred to.

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2. The law with respect to testing the unconstitutionality of A
a statutory instrument can be summarized as under:
a. Constitutional Courts can test constitutionality of
legislative instruments (statute and delegated legislations);
b. The Courts are empowered to test both on procedure as
B
well as substantive nature of these instruments.
c. The test should be based on a combined reading of
Articles 14, 19 and 21 of the Constitution.
One of the offshoots of this test under Part III of the
Constitution is the development of the doctrine of manifest C
arbitrariness. [Paras 15.7, 15.8]
Shayara Bano v. Union of India, (2017) 9 SCC 1 :
[2017] 9 SCR 797; Joseph Shine v. Union of India, (2019)
3 SCC 39: [2018] 11 SCR 765; Hindustan Construction
Co. Ltd v. Union of India, (2020) 17 SCC 324 – relied D
on.
3.1 Coming back to the 1988 Act, the two provisions with
which the Court is concerned are Sections 3 and 5 of 1988 Act.
The enactment was merely a shell, lacking the substance that a
criminal legislation requires for being sustained. The reasons E
for the same are following. First, the absence of mens rea creates
a harsh provision having strict liability. Such an approach was
frowned upon by the 57th Law Commission Report as concerns
of tax evasion or sham transactions in order to avoid payment to
creditors were adequately addressed by the existing provisions F
of law. Even the 130th Law Commission Report did not expressly
rule out the inclusion of mens rea. The legislative move to ignore
earlier Law Commission Reports without there being a principle
identified to do away with the aspect of mens rea should be a
contributory factor in analysing the constitutionality of the aforesaid
criminal provision under the 1988 Act. Further, under the G
amended 2016 Act, the aspect of mens rea, is brought back through
Section 53. Such resurrection clearly indicates that doing away of
the mens rea aspect, was without any rhyme or reason, and ended
up creating an unusually harsh enactment. Second, ignoring the
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324 SUPREME COURT REPORTS [2022] 12 S.C.R.

A essential ingredient of beneficial ownership exercised by the real
owner contributes to making the law even more stringent and
disproportionate with respect to benami transactions that are
tripartite in nature. The Court cannot forcefully read the
ingredients developed through judicial pronouncements or under
Section 4 (having civil consequence) into the definition provided
B
under Sections 2 and 3 (espousing criminal consequences), to
save the enactment from unconstitutionality. Such a reading would
violate the express language of Section 2(a), of excluding one
ingredient from the definition of ‘benami transaction’, and would
suffer from the vice of judicial transgression. In removing such
C an essential ingredient, the legislature did not identify any reason
or principle, which made the entire provision of Section 3
susceptible to arbitrariness. Interestingly, for tripartite benami
transactions, the 2016 Act brings back this ingredient through
Section 2(9)(A)(b). In this context, it may be stated that it is a
simple requirement under Article 20(1) that a law needs to be
D
clear and not vague. It should not have incurable gaps which are
yet to be legislated/filled in by judicial process. Third, it is fairly
admitted by the learned ASG appearing for the Union of India,
that the criminal provision was never utilized as there was a
significant hiatus in enabling the functioning of such a provision.
E Fourth, reading Section 2(a) with Section 3(1) would have created
overly broad laws susceptible to be challenged on the grounds of
manifest arbitrariness. If this Court reads criminal provisions of
the Benami Act to have had force since 1988, then the following
deleterious consequences would ensue:
F (i.) Section 187C of the Companies Act, 1956 assured
protection to nominal and beneficial holding of shares if the
prescribed declaration duly made are at serious risk.
(ii.) Benami cooking gas connections which have been
regularized from time to time are at risk.
G (iii.) Housing colonies and benami allotments of DDA flats
which have been regularised from time to time are at risk.
The criminal provision under Section 3(1) of the 1988 Act
has serious lacunae which could not have been cured by judicial
forums, even through some form of harmonious interpretation. A
H conclusion contrary to the above would make the aforesaid law
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 325
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suspect to being overly oppressive, fanciful and manifestly A
arbitrary, thereby violating the ‘substantive due process’
requirement of the Constitution. [Paras 15.11-15.17][366-E-H;
367-A-H; 368-A-B]
3.2 Coming to Section 5 of the 1988 Act, it must be noted
that the acquisition proceedings contemplated under the earlier B
Act were in rem proceedings against benami property.
Jurisprudentially, such in rem proceedings transfer the guilt from
the person who utilized a property which is a general harm to the
society, to the property itself. When such proceedings are
contemplated under law, there need to be adequate safeguards
built into the provisions, without which the law would be C
susceptible to challenge under Article 14 of the Constitution.
Coming to Section 5 of the 1988 Act, it was conceived as a half--
baked provision which did not provide the following and rather
left the same to be prescribed through a delegated legislation:
(i) Whether the proceedings under Section 5 were D
independent or dependant on successful prosecution?
(ii) The standard of proof required to establish benami
transaction in terms of Section 5.
(iii) Mechanism for providing opportunity for a person to E
establish his defence.
(iv) No ‘defence of innocent owner’ was provided to save
legitimate innocent buyers.
(v) No adjudicatory mechanism was provided for.
F
(vi) No provision was included to determine vesting of
acquired property.
(vii) No provision to identify or trace benami properties.
(viii) Condemnation of property cannot include the power
of tracing, which needs an express provision. G
Such delegation of power to the Authority was squarely
excessive and arbitrary as it stood. From the aforesaid, the Union’s
stand that the 2016 Act was merely procedural, cannot stand
scrutiny. In any case, such an inconclusive law, which left the
essential features to be prescribed through delegation, can never H
326 SUPREME COURT REPORTS [2022] 12 S.C.R.

A be countenanced in law to be valid under Part III of the
Constitution. The gaps left in the 1988 Act were not merely
procedural, rather the same were essential and substantive. In
the absence of such substantive provisions, the omissions create
a law which is fanciful and oppressive at the same time. Such an
overbroad provision was manifestly arbitrary as the open texture
B
of the law did not have sufficient safeguards to be proportionate.
[Paras 15.18-15.20][368-B-H; 369-A-B]
3.3 When a Court declares a law as unconstitutional, the
effect of the same is that such a declaration would render the law
not to exist in the law books since its inception. It is only a limited
C exception under Constitutional law, or when substantial actions
have been undertaken under such unconstitutional laws that going
back to the original position would be next to impossible. In those
cases alone, would this Court take recourse to the concept of
‘prospective overruling’. Section 3 (criminal provision) read with
D Section 2(a) and Section 5 (confiscation proceedings) of the 1988
Act are overly broad, disproportionately harsh, and operate
without adequate safeguards in place. Such provisions were
still-born law and never utilized in the first place. In this light,
this Court finds that Sections 3 and 5 of the 1988 Act were
unconstitutional from their inception. It is made abundantly clear
E that the aforesaid discussion does not affect the civil consequences
contemplated under Section 4 of the 1988 Act, or any other
provisions. [Paras 15.21-15.23][369-C-E]
3.4 The discussion can be summarized as: (a) Section 3(1)
of 1988 Act is vague and arbitrary. (b) Section 3(1) created an
F unduly harsh law against settled principles and Law Commission
recommendations. (c) Section 5 of 1988 Act, the provision relating
to civil forfeiture, was manifestly arbitrary. (d) Both provisions
were unworkable and as a matter of fact, were never implemented.
Having arrived at the aforesaid conclusions that Sections 3
G and 5 were unconstitutional under the 1988 Act, it would mean
that the 2016 amendments were, in effect, creating new provisions
and new offences. Therefore, there was no question of retroactive
application of the 2016 Act. As for the offence under Section 3(1)

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for those transactions that were entered into between 05.09.1988 A
to 31.10.2016, the law cannot retroactively invigorate a stillborn
criminal offence. As per the concession made by the Union of
India and a fair reading of Section 53 of the 2016 Act, the offence
under the aforesaid provision is prospective, and only applied to
those transactions that were entered into after the amendment
B
came into force, viz., 1.11.2016. Any contrary interpretation of
Section 3 of the 1988 Act would be violative of Article 20(1) of
the Constitution. [Paras 17.2-17.4][375-B-F]
T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177 : [1983] 1
SCR 905 – relied on.
C
3.5 In the case at hand, the 2016 Act containing the criminal
provisions is applicable only prospectively, as the relevant
Sections of the pre-amendment 1988 Act containing the penal
provision, have been declared as unconstitutional. Therefore, the
question of construction of the 2016 Act as retroactive qua the
penal provisions under Sections 3 or 53, does not arise. The D
continued presence of an unconstitutional law on the statute book,
or the claim that such law was not challenged before
Constitutional Courts, does not prevent this Court from holding
that such unconstitutional laws cannot enure to the benefit of or
be utilized to retroactively amend laws to cure existing E
constitutional defects. If such curing is allowed, then Article 20(1)
of the Constitution would be rendered nugatory. Although it has
been held held that Section 5 of the 1988 Act was unconstitutional
for being manifestly arbitrary, however such holding is of no
consequence if this Court comes to the conclusion that
confiscation under Section 5 of 2016 Act read with Chapter IV, F
was civil in nature and is not punitive. It is well settled that the
legislature has power to enact retroactive/retrospective civil
legislations under the Constitution. However, Article 20(1)
mandates that no law mandating a punitive provision can be
enacted retrospectively. Further, a punitive provision cannot be G
couched as a civil provision to by-pass the mandate under Article
20(1) of the Constitution which follows the settled legal principle
that “what cannot be done directly, cannot be done indirectly”.
[Paras 17.6, 17.7, 17.9, 17.10][376-H; 377-A-B, E-F]

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A 3.6 Therefore, the immediate question which arises for
consideration is whether the retroactive confiscation provided
under Section 5 read with Chapter IV of 2016 Act is punitive or
not? Acquisition under the earlier 1988 Act as well as confiscation
under the 2016 Act are said to have been enacted on the reasoning
that the property emanating from the benami transaction also
B
gets tainted. The substantive difference between the acquisition
provision under the earlier enactment and the confiscation
provision under the 2016 Act is that proceeds of benami
transactions have been made traceable under the 2016 Act.
Before the other provisions are analysed, it is necessary to give
C a brief introduction to the concept of civil forfeiture in India, as
the same was argued by the learned ASG. Under Admiralty
jurisdiction, the concerned Admiralty Courts had the jurisdiction
to forfeit vessels under its civil jurisdiction in lieu of any maritime
claim. Same was the law across various common law jurisdictions,
such as the United States of America and the United Kingdom.
D
Forfeiture occurs in various types, few of which are found in India.
Broadly, forfeitures can be categorized as civil and criminal. On
the civil side, there can be in rem or in personam forfeitures.
Punitive forfeitures under the criminal law are in personam.
Criminal forfeitures usually take place at the conclusion of a trial,
E when the guilt of the accused is established. Standards of
evidentiary requirement differ greatly between civil and criminal
forfeiture. The historic origin of in rem civil forfeiture in common
law jurisdictions was earlier mostly restricted to trans-national
crimes. These early laws mandated that the property was subject
to forfeiture because it was the instrument by which the offence
F
was committed, and it was necessary to confiscate such property
to remove it from circulation. However, the Twentieth century
saw expansion of forfeiture laws into a wide array of crimes. The
modern forfeiture laws not only allow forfeiture of property used
to facilitate the crime, but cover the proceeds of the offence as
G well. In the Supreme Court of the United States, constitutional
challenges laid to such civil forfeiture laws have been dismissed
as they were usually attributed to historic prevalence of such
forfeiture laws. However, such historic reasons of its existence
cannot justify continued expansion of civil forfeiture laws. [Paras
17.11-17.16][377-G; 378-B-H]
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Leonard v. Texas, 137 S. Ct. 847, 847-48 (2017); Engel A
v The Netherlands (No.1), [1976] 1 EHRR 647,
Kennedy v Mendoza-Martinez, 372 US 144 (1963) –
referred to.
3.7 In Vijay Madanlal Choudary & Ors v. Union of India,
SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with B
confiscation proceedings under Section 8 of the Prevention of
Money Laundering Act, 2002 (“PMLA”) and limited the
application of Section 8(4) of PMLA concerning interim
possession by authority before conclusion of final trial to
exceptional cases. The Court distinguished the earlier cases in
view of the unique scheme under the impugned legislation therein. C
Having perused the said judgment, this Court is of the opinion
that the aforesaid ratio requires further expounding in an
appropriate case, without which, much scope is left for arbitrary
application. [Para 17.27][384-E-G]
Vijay Madanlal Choudary & Ors v. Union of India SLP D
(Civ.) No. 4634 of 2014 and others – referred to.
3.8 The Courts have read down the provisions of civil
forfeiture to be dependent on the underlying criminal prosecution
to temper the harsh consequences envisaged under such
provisions. No doubt, such reading down was mandated to E
ameliorate harsh consequences of confiscatory laws which
otherwise would have allowed the State agencies to take over
the property without seriously pursuing the criminal prosecutions.
At this stage, it can only be recommended that the utility of
independent provisions of forfeiture, distinct from criminal F
prosecution, needs to be utilised in a proportional manner, looking
at the gravity of the offence. Few examples which may pass the
muster of proportionality for having such stringent civil forfeiture,
may relate to crimes involving terrorist activities, drug cartels
or organised criminal activities. The application of such a
provision to numerous other offences which are not of such grave G
severity, would be of serious risk of being disproportionate, if
procedures independent of criminal prosecution are prescribed.
The proportionality of separate confiscation procedure prescribed
under the 2016 Act, has not been argued herein. Accordingly,
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A the aforesaid question of law is left open. Under the IPC, forfeiture
is recommended to be a form of punishment under Section 53.
Accordingly, the Code of Criminal Procedure, 1976 provides for
a mechanism for interim custody and forfeiture at the conclusion
of trial under Section 451 of the Cr.P.C. (in personam forfeiture).
Sections 451, 452 under the Cr.P.C. have inbuilt safeguards of in
B
personam criminal forfeiture, wherein confiscation occurs at the
end of the trial. Under these provisions, confiscation is to be
determined at an evidential standard of ‘beyond reasonable doubt’
and are dependent on the result of the criminal trial. [Para 17.28,
17.29][384-G-H; 385-A-D; 386-B]
C State of West Bengal v. S. K. Gosh, AIR 1963 SC 255 :
[1963] SCR 111; Divisional Forest Officer v. G. V.
Sudhakar Rao, (1985) 4 SCC 573 : [1985] 3 Suppl.
SCR 680; State of Madhya Pradesh v. Kallo Bai, (2017)
14 SCC 502 ; Yogendra Kumar Jaiswal v. State of Bihar,
D (2016) 3 SCC 183 : [2015] 14 SCR 1037; Abdul Vahab
v. State of Madhya Pradesh, (2022) SCC Online SC
262 – referred to.
3.9 Coming to the Benami Act post the Amendment, the
interplay of Sections 27(3), (5) and 67 of the 2016 Act creates a
E confiscation procedure which is distinct from the procedure
contemplated under the CrPC or any other enactment till now in
India. Such a change of standards cannot be merely termed as
procedural. Characterization of the confiscation proceedings under
Chapter IV of the 2016 Act as Civil may therefore not be
appropriate. There is an implicit recognition of the forfeiture being
F a punitive sanction, as the Officer is mandated to build a case
against the accused for such confiscation, wherein the
presumption of innocence is upheld structurally. Being a punitive
provision, it is trite that one integrates the ‘presumption of
innocence’ within the Chapter as the same forms a part of the
G fundamental right. Additionally, the 2016 Act now condemns not
only those transactions which were traditionally denominated as
benami, rather a new class of fictitious and sham transactions are
also covered under the same. In this regard, it may be noticed
that the intention of the legislature is to condemn such property

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and there is an implicit effort by the Parliament to take into A
consideration the fact that such transactions are often acquired
from ill-gotten wealth. These proceedings cannot be equated as
enforcing civil obligations as, for example, correcting deficiencies
in the title. It goes further and the taint attaches to the proceeds
as well. [Paras 17.30-17.32][386-C-G]
B
3.10 In view of the above discussion, it is manifest that the
2016 Act contemplates an in-rem forfeiture, wherein the taint of
entering into such a benami transaction is transposed to the asset
itself and the same becomes liable to confiscation. At the cost of
repetition, it may be noted that the taint of benami transactions
is not restricted to the person who is entering into the aforesaid C
transaction, rather, it attaches itself to the property perpetually
and extends itself to all proceeds arising from such a property,
unless the defence of innocent ownership is established under
Section 27(2) of the 2016 Act. When such a taint is being created
not on the individual, but on the property itself, a retroactive law D
would characterize itself as punitive for condemning the proceeds
of sale which may also involve legitimate means of addition of
wealth. Jurisprudentially, a law may enable forfeiture of property
by peculiar reason of its circumstances, of it being dangerous to
the community by reasons of any form or position that it assumes.
In such cases, forfeiture is not deemed to be punishment inflicted E
on its owner. By contrast, if the law provides that the Government
shall forfeit a property ‘A’ for, (1) what was carried on in property
‘B’, or (2) what the owner does in a matter not connected with
property ‘A’ or (3) a bare intent which does not necessarily relate
to the conduct in property ‘A’, in such cases, forfeiture is F
punishment without any exception. In this case, the property may
not be inherently dangerous or denigrate any standard of morality.
It is just the condemnation of the method of transfer and holding,
which was once a recognized form of property holding in India. In
such a case, the in rem civil proceeding utilized retroactively,
would characterize itself as penal. In the case at hand, the authority G
that initiates such confiscation, is granted extensive powers of
discovery, inspection, compelling attendance, compelling
production of documents. They are further empowered to take
the assistance of police officers, custom officers, income tax
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332 SUPREME COURT REPORTS [2022] 12 S.C.R.

A officers and other relevant officers for furnishing information. It
is also pertinent to note that any person who fails to furnish
information, is subjected to a penalty of Rs.25,000/- (Rupees
Twenty-Five Thousand) under Section 54(A). It is also necessary
to note that a person who supplies false information before any
authority, is subjected to rigorous imprisonment of upto 5 years
B
under Section 54 of the 2016 Act. This Court is aware of the fact
that the ‘Right to Property’ is not a fundamental right, rather it is
a constitutional right that can be abridged by law. However, this
Court is not concerned with the constitutionality of such a
measure, wherein such considerations have to be balanced.
C Rather, the focus is only on the characterization of retroactive
confiscation, which in these facts and circumstances, are punitive.
In view of the fact that this Court has already held that the criminal
provisions under the 1988 Act were arbitrary and incapable of
application, the law through the 2016 amendment could not
retroactively apply for confiscation of those transactions entered
D
into between 05.09.1988 to 31.10.2016 as the same would
tantamount to punitive punishment, in the absence of any other
form of punishment. It is in this unique circumstance that
confiscation contemplated under the period between 05.09.1988
and 31.10.2016 would characterise itself as punitive, if such
E confiscation is allowed retroactively. Usually, when confiscation
is enforced retroactively, the logical reason for accepting such
an action would be that the continuation of such a property or
instrument, would be dangerous for the community to be left free
in circulation. [Paras 17.33-17.37][387-A-H; 388-A-D]
F In R (on the appln of the Director of the Assets Recovery
Agency) v Jia Jin He and Dan Dan Chen, [2004]
EWHC Admin 3021 – referred to.
3.11 Coming to the present enactment, history points to a
different story wherein benami transactions were an accepted
G form of holding in our country. In fact, the Privy Council had, at
one point of time, praised the sui generis evolution of the doctrine
of trust in the Indian law. The response by the Government and
the Law Commission to curb benami transactions was also not
sufficient as it was conceded before this Court that Sections 3

H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 333
LTD.

and 5 of the 1988 Act in reality, dehors the legality, remained only A
on paper and were never implemented on ground. Any attempt
by the legislature to impose such restrictions retroactively would
no doubt be susceptible to prohibitions under Article 20(1) of
the Constitution. Looked at from a different angle, continuation
of only the civil provisions under Section 4, etc., would mean that
B
the legislative intention was to ensure that the ostensible owner
would continue to have full ownership over the property, without
allowing the real owner to interfere with the rights of benamidar.
If that be the case, then without effective any enforcement
proceedings for a long span of time, the rights that have
crystallized since 1988, would be in jeopardy. Such implied C
intrusion into the right to property cannot be permitted to operate
retroactively, as that would be unduly harsh and arbitrary. [Paras
17.38, 17.39][389-A-D]
3.12 In view of the above discussion, it is held: a) Section
3(2) of the unamended 1988 Act is declared as unconstitutional D
for being manifestly arbitrary. Accordingly, Section 3(2) of the
2016 Act is also unconstitutional as it is violative of Article 20(1)
of the Constitution. b) In rem forfeiture provision under Section
5 of the unamended Act of 1988, prior to the 2016 Amendment
Act, was unconstitutional for being manifestly arbitrary. c) The E
2016 Amendment Act was not merely procedural, rather,
prescribed substantive provisions. d) In rem forfeiture provision
under Section 5 of the 2016 Act, being punitive in nature, can
only be applied prospectively and not retroactively. e)
Concerned authorities cannot initiate or continue criminal
prosecution or confiscation proceedings for transactions entered F
into prior to the coming into force of the 2016 Act, viz.,
1.11.2016. As a consequence of the above declaration, all such
prosecutions or confiscation proceedings shall stand quashed.
f) As this Court is not concerned with the constitutionality of
such independent forfeiture proceedings contemplated under G
the 2016 Amendment Act on the other grounds, the aforesaid
questions are left open to be adjudicated in appropriate
proceedings. [Para 18.1][389-E-H; 390-A-B]

H
334 SUPREME COURT REPORTS [2022] 12 S.C.R.

A A.K Gopalan v. State of Madras AIR 1950 SC 27 :
[1950] SCR 88; Maneka Gandhi v. Union of India,
(1978) 1 SCC 248 : [1978] 2 SCR 621; Sunil Batra v.
Delhi Administration (1978) 4 SCC 494 : [1979] 1 SCR
392; K. Puttaswamy v. Union of India (2017) 10 SCC 1
: [2017] 10 SCR 569 – followed.
B
Niharika Jain v. Union of India [S.B.C.W.P. No. 2915/
2019]; Joseph Isharat v. Mrs. Rozy Nishikant Gaikwad
[S.A. No. 749/2015]; Rao Shiv Bahadur Singh vs. State
of Vindhya Pradesh, AIR 1953 SC 394 : [1953] SCR
1188; Mangathai Ammal v. Rajeswari (2020) 17 SCC
C 496; Commissioner of Income Tax (Central)-I New Delhi
v. Vatika Township Pvt. Ltd (2015) 1 SCC 1 : [2014] 12
SCR 1037; Sree Meenakshi Mills Ltd. v. Commissioner
of Income Tax, Madras AIR 1957 SC 49 : [1956] SCR
691; Thakur Bhim Singh v. Thakur Kan Singh AIR 1980
D SC 727 : [1980] 2 SCR 628; Punjab Province v. Daulat
Singh AIR (29) 1942 FC 38; Jaydayal Poddar v. Bibi
Hazra AIR 1974 SC 171: [1974] 2 SCR 90; Murlidhar
Narayandas v. Paramanand Luchmandas, AIR 1932
Bom. 190; Radhakishan Brijlal v. Union of India, AIR
1959 Bom. 102 (V46 C40); Gur Prasad v. Hansraj
E AIR (33) 1946 Oudh. 144; Kesavananda Bharati v.
State of Kerala (1973) 4 SCC 225 : [1973] Suppl. SCR
1; Narendra Singh v. State of Madhya Pradesh (2004)
10 SCC 699 : [2004] 3 SCR 1148 – referred to.
Case Law Reference
F
[1953] SCR 1188 referred to Para 10 (ii)
[2015] 14 SCR 1037 referred to Para 12.1(v)
[1989] 1 SCR 621 referred to Para 12.1(vi)
[1995] 1 SCR 715 referred to Para 12.3(iv)
G
[2014] 12 SCR 1037 referred to Para 12.3(v)
[1956] SCR 691 referred to Para 13.3
[1980] 2 SCR 628 referred to Para 13.3

H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 335
LTD.

[1974] 2 SCR 90 referred to Para 13.6 A
[1973] 0 Suppl. SCR 1 referred to Para 13.12
[1989] 1 SCR 621 referred to Para 14.13
[1995] 1 SCR 715 referred to Para 14.14
B
[1950] SCR 88 followed Para 15.5
[1978] 2 SCR 621 followed Para 15.5
[1979] 1 SCR 392 followed Para 15.5
[2017] 10 SCR 569 followed Para 15.6 C
[2017] 9 SCR 797 relied on Para 15.8
[2018] 11 SCR 765 relied on Para 15.9
[1983] 1 SCR 905 relied on Para 17.5
[1963] SCR 111 referred to Para 17.20 D
[1985] 3 Suppl. SCR 680 referred to Para 17.22
[2004] 3 SCR 1148 referred to Para 17.31
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5783
of 2022. E

From the Judgment and Order dated 12.12.2019 of the High Court
of Calcutta in APO No.8 of 2019 in W.P. No.687 of 2017.
S.V. Raju, Vikramjeet Banerjee, ASGs, Zoheb Hussain, Aakanksha
Kaul, Bhuvan Mishra, S.A. Haseeb, Siddharth Sinha, Tathagat, Ritwiz F
Rishab, Anshuman Singh, Ms. Janhvi Prakash, Raman Yadav, Ankit
Bhatia, Arpit Goel, Harsh Paul Singh, A.K. Sharma, Raj Bahadur Yadav,
Advs. for the Appellants.
Ajay Vohra, Sr. Adv., Ankit Anandraj Shah, Ms. Bhoomija Verma,
Aniket Agarwal, Abhimanu Singh, Advs. for the Respondent. G
Dr. Abhishek Manu Singhvi, Devadatt Kamat, Neeraj Kishan
Kaul, Sr. Advs., Mayank Jain, Parmatma Singh, Madhur Jain, Ms. Aakriti
Dhawan, Shankar Divate, Rohit Jain, Aniket D. Agrawal, Ms. Kavita
Jha, Saurabh Rajpal, Naveen Kumar, Ms. Shrinjan Khosla for M/s. Aura
& Co., Advs. for the Intervenor. H
336 SUPREME COURT REPORTS [2022] 12 S.C.R.

A The Judgment of the Court was delivered by
N. V. RAMANA, CJI
1. Leave granted.
2. This case involves a tussle between the normative and positivist
B positions regarding the nature of a crime and punishment. Treating the
Constitution as a flag post, a result of this tussle is sought in the following
deliberation.
3. This appeal is filed against the impugned judgment dated
12.12.2019 passed by the High Court of Judicature at Calcutta in APO
C
No. 8 of 2019 along with Writ Petition No. 687 of 2017.
4. The short legal question which arises for this Court’s
consideration is whether the Prohibition of Benami Property Transactions
Act, 1988 [for short ‘the 1988 Act’], as amended by the Benami
D Transactions (Prohibition) Amendment Act, 2016 [for short the ‘2016
Act’] has a prospective effect. Although a purely legal question arises in
this appeal, it is necessary to have a brief factual background in mind
before we advert to the analysis.
5. On 02.05.2011, the respondent–company purchased a
E property in its name from various sellers for a total consideration of
Rs.9,44,00,000/-. It is said that the consideration for the aforesaid
purchase was paid from the capital of the company. On 31.03.2012,
99.9% of the respondent–company shareholdings were acquired by M/
s PLD Properties Pvt. Ltd. and M/s Ginger Marketing Pvt. Ltd. at a
discounted price of Rs.5/- per share for a total amount of Rs.19,10,000/-.
F It is a matter of fact that the two directors of the respondent-company
(viz. Shruti Goenka and Ritu Goenka) also held directorship in the
subsequent purchaser company.
6. Accordingly, on 29.08.2017, the Deputy Commissioner of
Income Tax (Adjudicating Authority) issued a notice to the respondent–
G
company invoking Section 24(1) of the 2016 Act to show cause as to
why the aforesaid property should not be considered as Benami property
and the respondent company as Benamidar within the meaning of Section
2(8) of the 2016 Act. On 06.09.2017, the respondent–company replied
to the aforesaid show-cause notice denying that the scheduled property
H is a Benami property.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 337
LTD. [N. V. RAMANA, CJI]

7. The Adjudicating Authority, by order dated 24.11.2017, passed A
an order under Section 24(4)(b)(i) of the 2016 Act, provisionally attaching
the property.
8. Aggrieved by the aforesaid attachment order, the respondent-
company filed a Writ Petition (being W.P. No. 687 of 2017) before the
High Court of Calcutta. The aforesaid writ petition was disposed of by B
the learned Single Judge by an order dated 18.12.2018 with a direction
to the Adjudicating Authority to conclude the proceedings within 12
weeks.
9. Aggrieved, the respondent-company filed an appeal against the
aforesaid order being APO No. 8 of 2019. C
10. The High Court, vide impugned order dated 12.12.2019, while
quashing the show-cause notice dated 29.08.2017, held that the 2016
Act does not have retrospective application.
(i) The 2016 Amendment Act, which came into force on
01.11.2016, was a new and substantive legislation, inter alia, D
substituting and widening the definition of ‘benami property
and benami transaction’, and in order to have retrospective
operation for the period or transactions entered into prior to
01.11.2016, a provision to that effect should have been
specifically providing under the said Act; in the absence of E
any express provision to that effect, simply by virtue of the
provisions contained in subsection (3) of Section 1 of the
1988 Act [which remained unaltered by the 2016
Amendment Act, and have consequently been retained under
the Benami Act], the provisions of the 2016 Amendment
Act cannot be impliedly construed as retrospective; F
(ii) Reference was made to and reliance was placed on the
unreported ruling of the learned Single Judge of the
Rajasthan High Court dated 12.07.2019 in the case of
Niharika Jain v. Union of India [S.B.C.W.P. No. 2915/
2019], wherein, following the ruling of the Single Judge of G
the Hon’ble Bombay High Court in the case of Joseph
Isharat v. Mrs. Rozy Nishikant Gaikwad [S.A. No. 749/
2015; decided on 01.03.2017/30.03.2017], it was held that
in terms of the protection enshrined under clause (1) of
Article 20 of the Constitution of India, the 2016 Amendment
H
338 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Act, amending, inter alia, the definition of “benami
transaction”, could not be given retrospective effect, and
the amendments brought about vide the said (amendment)
Act would be enforceable only with effect from the date of
the enactment / coming into force of the said amendment
Act i.e., on or after 01.11.2016 – reliance in this regard
B
was also placed on the ruling of this Court in the case of
Rao Shiv Bahadur Singh vs. State of Vindhya Pradesh,
AIR 1953 SC 394;
(iii) The 1988 Act, which came into force on 19.05.1988 [except
Section 3, 5 and 8 thereof which came into force on
C 05.09.1988], provided for punishment for persons entering
into a “benami transaction”, which was made non-cognizable
and bailable, and also however, provided for acquisition of
property held to be benami; provisions of the 1988 Act, were
never operationalized since the rules and procedure required
D to be framed under Section 8 of the said Act bringing into
existence the machinery for implementation of the 1988
Act, were never notified – therefore, although the 1988
Act was part of the statute book, the same was rendered a
“dead letter”, and all transactions and properties alleged
‘benami’, carried out / acquired between the period of
E 19.05.1988 and 01.11.2016, were deemed to have been
accepted by the Government as valid ‘vesting rights’ in the
parties to such alleged transactions; ergo, the Central
Government, having waived its right of implementation and
operationalisation of the 1988 Act for the period prior to
F 01.11.2016, cannot now do so indirectly by way of
retrospective operation of the 2016 Amendment Act.
11. Aggrieved by the aforesaid impugned order, the Union of India
is in appeal before this Court.
12. SUBMISSIONS
G
12.1 Shri S.V Raju, learned Additional Solicitor General (‘ASG’)
has contended as under:
i. As per the pre-amendment Act, there was no machinery or
procedure in place to effectuate proceedings against
Benami transactions. It is submitted that in order to remedy
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 339
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this mischief of lack of procedure, the Amendment Act, A
which was a consolidating Act, was brought in.
ii. It was not an offence that is sought to be implemented
retrospectively, but merely the procedures are laid down to
implement the Act of 1988. He stated that the pre-
amendment Act already recognizes Benami transactions B
as contrary to law, and hence no new or substantive law is
being made.
iii. It is settled law that procedural law can be applied
retrospectively, and the bar against retrospective application
is only applicable to substantive law. C
iv. The legislative intent for bringing an amendment to the
existing act, and not enacting a new law, was to ensure that
no immunity is granted to persons who engaged in benami
transactions while the pre-amendment Act was in operation.
v. It was further submitted that Section 5 and Section 27 of D
the Act are to be read together as the latter provides the
mechanism through which the Benami property may be
confiscated by the Adjudicating Authority. As per Section
27(3), once the confiscation order is passed by the Authority,
the rights in the property are vested in the Central E
Government. It was reiterated that confiscation is not a
penal provision, as the same has civil consequences. Both,
acquisition and confiscation are civil in nature, and therefore,
they can be used interchangeably. Therefore, any
amendment act which is consolidating in nature, can have
provisions which are confiscatory in nature and the same F
can be applied retrospectively. For this, the learned ASG
referred to Yogendra Kumar Jaiswal v. State of Bihar,
(2016) 3 SCC 183, para 149, and submitted that in this
judgment, this Court has held that confiscation is not a
punishment, and that Article 20(1) is not attracted. The Court G
also held that confiscation as imposed by the Adjudicating
Authority would not amount to any punishment, and is only
a deprivation of the property of the person in question.
vi. The learned ASG also referred to Mithilesh Kumari v.
Prem Behari Khare, (1989) 2 SCC 95, para 21,to submit
H
340 SUPREME COURT REPORTS [2022] 12 S.C.R.

A that by necessary implication, the machinery and procedural
provisions of the amended Act are retrospective in nature.
12.2 Shri Vikramjit Banerjee, learned ASG has submitted as under:
i. The Parliament has the power to enact retrospective
legislation even in case of a criminal Statute, as long as it
B complies with Article 20(1) of the Constitution of India. He
further argued that as per Article 20(1), prohibition exists
only on conviction and sentencing of the ex-postfacto law,
and not against passing such a law.
ii. Forfeiture, acquisition, and confiscation are not punishments
C and therefore not subject to Article 20(1) restrictions. He
then pointed out that the adjudication proceedings are also
not in the nature of prosecution, and hence cannot be
restricted by Article 20.
iii. That acquisition of property without paying compensation
D amounts to confiscation, and confiscation envisages a civil
liability.
12.3 Dr. Abhishek Manu Singhvi, learned Senior Advocate
appearing for the respondent has contended as under:
i. The 1988 Act did not make its provisions applied
E
retrospectively. The Parliament purposely ensured that when
the 1988 Ordinance was replaced by the parent Act, only
the provisions from the 1988 Ordinance were continued
from the date of the promulgation of the ordinance. The
other provisions introduced by the parent Act, namely
F Sections 3, 5 and 8, were made only prospectively applicable
from the date on which the parent Act was brought into
effect.
ii. The 2016 Act was not intended to be retrospectively
applicable as the same is not explicitly stated. Parliament
G deemed it fit to leave it to the Central Government to enforce
the 2016 Act from an appointed date by notifying it in the
official gazette, as mentioned in Section 1(2) of the 2016
Act.
iii. It was further argued that when the statute carves out
H distinct penalties in respect of benami transactions entered
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 341
LTD. [N. V. RAMANA, CJI]

into in the unamended regime vis-a-vis the benami A
transactions entered into after the amendment Act of 2016,
it clearly indicates that the amended Act is prospective in
nature.
iv. Learned Senior Advocate also relied on the cases of R.
Rajagopal Reddy v. Padmini Chandrasekharan, (1995) B
2 SCC 630and Mangathai Ammal v. Rajeswari, (2020)
17 SCC 496, in the context of Sections 4(1), 4(2) and 3(2)
of the parent Act, to contend that the abovementioned
provisions are prospective in nature.
v. It is also argued that insertion of Section 2(9) by an C
amendment to the parent Act provides a new definition to
benami transactions and has substantially changed the scope
of the offence by enlarging its ambit. In the unamended
Act, only transfer of property was an offence. However,
the 2016 Act has added multiple other actions as offences
under the category of benami transactions. It is a well settled D
principle of law that any enactment which substantially
affects the rights of people cannot be applied retrospectively,
and therefore, the amended 2016 Act can only be
prospective in nature. For this, the judgment of this Court in
the case of Commissioner of Income Tax (Central)-I, E
New Delhi v. Vatika Township Pvt. Ltd, (2015) 1 SCC 1
was relied on.
13. INTRODUCTION TO PRACTICE OF PROPERTIES HELD BENAMI IN
INDIA
13.1 Having heard the parties, it is necessary for this Court to F
trace the history of benami transactions in India. The term ‘benami
transaction’ generally implies that one purchases the property in the name
of somebody else, i.e., a name lender, and the purchaser does not hold
beneficial interest in the property. Literally, ‘benami’ means ‘without a
name’. The simplest of example is if person ‘A’ (real owner) purchases
a property from ‘B’ in the name of ‘C’ (benamidar/ostensible owner), G
wherein ‘A’ exercise rights/interest over the property.
13.2 The term ‘benami’, which was alien to statutory law during
the colonial regime and in the early days of the Republic, was known in
the legal parlance of lawyers. Even in Mohammedan law, such
transactions were commonly referred as furzee or farzi, derived from H
342 SUPREME COURT REPORTS [2022] 12 S.C.R.

A Arabic word furaz.1 Over the passage of time, this nebulous concept
appeared in cases without much clarity with respect to its basic contours.
Conceptually, there are two views which arise from the Doctrine of
Benami. The first view is that the benamidar does not hold title over the
property, and the second view is that although the title passes to the
benamidar, he holds it in trust.
B
13.3 Eventually, there developed two loose categories of
transactions that were colloquially termed as benami, which can be
explained through the following examples:
(i.) Tripartite: ‘B’ sells a property to ‘A’ (real owner), but the
C sale deed mentions ‘C’ as the owner/benamidar.
(ii.) Bipartite: ‘A’ sells property to ‘B’ without intending to pass
the title to ‘B’.
The first instance was usually termed as a real benami transaction,
and the second transaction was considered either as a sham transaction
D or “loosely” benami transaction. In Sree Meenakshi Mills Ltd. v.
Commissioner of Income Tax, Madras, AIR 1957 SC 49, speaking
for the Bench, Venkatarama Ayyar, J., stated that the first category of
transactions is ‘usually’ termed as benami, while the second category is
‘occasionally’ considered a benami transaction. He added that it is
E “perhaps not accurately so used”. In Thakur Bhim Singh v. Thakur
Kan Singh, AIR 1980 SC 727, Venkataramiah, J. straightway called the
first category as benami but chose to describe the second category as
“loosely” termed benami. This distinction is relevant and will be adverted
to later.

F 13.4 Numerous reasons, some desirable and some undesirable,
were contributory factors for the proliferation of such a practice in India.
Some of them are as follows:
(i) Secret provisions for families within Hindu Joint family
system;2
G (ii) Mitigation of political and social risk;3

1
McNaughten’s Selected Report Vol. I, Reporter’s Note at p. 368.
2
West and Buhler, ‘Hindu Law’, (Fourth Edition), Pg. 157, 563.
3
Pollock, The Law of fraud, Misrepresentation and Mistake in British India (1894),
page 83-84.
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 343
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(iii) Defrauding creditors;4 A
(iv) Evasion of taxes.
13.5 Judicial recognition of such transactions came about in the
early 19th century under the colonial courts. In Mt. Bilas Kunwar v.
Desraj Ranjit Singh, AIR 1915 PC 96, the Privy Council observed as
under: B
“Down to the taluqdar’s death the natural inference is that the
purchase was a benami transaction; a dealing common to Hindus
and Muhammadans alike, and much in use in India; it is quite
unobjectionable and has a curious resemblance to the doctrine of
our English law that the trust of the legal estate results to the man C
who pays the purchase money, and this again follows the analogy
of our common law, that where a feoffment is made without
consideration the use results to the feoffer.”
In Punjab Province v. Daulat Singh, AIR (29) 1942 FC 38, the
Federal Court, while evaluating the propriety of such transactions, D
observed as under:
“A notion has sometimes prevailed in this country that all benami
transactions must be regarded as reprehensible and improper if
not illegal; but, as late as in 1915, Sir George Farwell, delivering
the judgment of the Judicial Committee in 37 ALL. 557 spoke of E
them as ‘quite unobjectionable’ and as having their analogues in
the English law; and Mr. Amreer Ali, delivering the judgment of
the Committee in 46 Cal. 566, observed that “there is nothing
inherently wrong in it, and it accords, within its legitimate scope,
with the ideas and habits of the people”. As indicated by the
qualifying words “within its legitimate scope”, their Lordships’ F
observations were clearly not meant to countenance transactions
entered into for fraudulent or illegal purposes.”
13.6 In Jaydayal Poddar v. Bibi Hazra, AIR 1974 SC 171, this
Court laid down a test to determine whether a transaction is benami or
not. The following factors were to be considered: G
(i) The source from which the purchase money came;
(ii) The nature and possession of property after purchase;
4
K.. K. Bhattacharya, Joint Hindu Family, (Tagore Law Lectures) (1884-85) Pg. 469-
470. H
344 SUPREME COURT REPORTS [2022] 12 S.C.R.

A (iii) Motive, if any, for giving the transaction a benami colour;
(iv) The position of the parties and the relationship, if any,
between the Claimant and the alleged Benamidar.
(v) The custody of the title-deeds after the sale, and
(vi) The conduct of the parties concerned in dealing with the
B
property after the sale.
13.7 The judiciary came to establish the general principle that in
law, the real owner is recognized over the ostensible owner.5 This principle
had certain statutory exceptions, albeit limited, such as Section 66 of
Civil Procedure Code, 1908 with respect to properties wherein sale
C certificates are issued by courts; and Section 281A of the Income Tax
Act, 1961, which allows filing of suit by the original owner to enforce his
right over a benami property, only if the same is declared for taxing
purpose, as provided thereunder. Such provision under the Income Tax
Act did not bar such benami transactions completely, rather it only
D attempted to legitimize and bring them into the net of taxation. Such
provision, while disincentivizing transactions beyond the taxation net, had
also inevitably accepted the positive factors in recognizing the same.
Further, it is a matter of fact that the Indian Trusts Act has recognized
and accepted the principle behind benami transactions.
13.8 The 57th Report of the Law Commission (1973) succinctly
E
captures the general principles prevailing as on that date, in the following
manner:
“5.2 Summary of present position-in general-A few basic points
concerning benami transactions may be stated, as follows:
F (a) Benami transfer or transaction means the transfer by or to
a person who acts only as the ostensible owner in place of
real owner whose name is not disclosed;
(b) The question whether such transfer or transaction was real
or benami depends upon the intention of the beneficiary;
G (c) The real owner in such cases may be called the beneficiary,
and the ostensible owner the benamidar.
…
5
Murlidhar Narayandas v. Paramanand Luchmandas, AIR 1932 Bom. 190;
Radhakishan Brijlal v. Union of India, AIR 1959 Bom. 102 (V46 C40); Gur Prasad v.
H Hansraj, AIR (33) 1946 Oudh. 144.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 345
LTD. [N. V. RAMANA, CJI]

5.3. Effect of benami transfer.- The effect of a benami transfer A
is as follows:-
(a) A person does not acquire any interest in property by merely
leading his name;
(b) The benamidar has no beneficial interest though he may
re-present the legal owner as to third person. B

(c) A benami transaction is legal, except in certain
specified situations.
(Emphasis supplied)
13.9 Prior to the 1973 Report, the broad position on the legality of C
various kinds of benami transactions can be captured as follows:

D

E

F

G

H
346 SUPREME COURT REPORTS [2022] 12 S.C.R.

A

B

C

D

E

F
13.10 It may be necessary to note that the Law Commission,
through its aforementioned 57th Report, did not find it suitable to accept
the stringent provision of making benami transactions liable to criminal
action. Rather, it recommended adoption of certain less stringent, civil
G alternatives in the following manner:
“6.3. Possible alternative for regulating benami transaction.
- Several possible alternatives could be thought of, with reference
to prohibiting or regulating benami transactions for avoiding
prejudice to private individuals or minimising litigation:-
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 347
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(i) Entering into a Benami transactions could be made an A
offence;
(ii) A provision may be enacted to the effect that in a civil suit
a right shall not be enforced against the benamidar or against a
third person, by or on behalf of the person claiming to be the
real owner of the property on the ground of benami; a similar B
provision could be made to bar defences on the ground of
benami.
(This provision would be based on the principle on which the
existing provisions in the Civil Procedure Code and the new
provision in the Income-tax Act are based but could be wider in C
scope and more radical). -
(iii) The present presumption of a resulting trust in favour of the
person who provided the consideration may be displaced (as in
England) by the presumption of advancement, in cases where the
person to whom property is transferred is a near relative of the D
person who provided the consideration. (This would bring in the
doctrine of advancement, so as to rebut the presumption of resulting
trust under section 82 of the Trusts Act).
Whichever alternative is adopted, it may be desirable to make an
exception for an acquisition made by the manager of a joint Hindu E
family in the name of one of the co-parceners, and similar cases.
…
6.24. First alternative not likely to be effective-The ûrst
alternative referred to above, namely, the imposition of a criminal
prohibition against benami transactions, is the most drastic F
alternative, but it is not likely to be more effective than the others.
A prohibition backed by criminal sanctions would not, moreover,
be desirable, unless the mens rea is also included in the provision
to be enacted.
If this alternative is to be adopted, a provision could be enacted on G
the following lines:—
“Where property is transferred to one person for a consideration
paid or provided by another person, and it appears that such person
did not intend to pay or provide such consideration for the beneût
of the transferee, the person paying or providing the consideration H
348 SUPREME COURT REPORTS [2022] 12 S.C.R.

A shall be guilty of an offence punishable with imprisonment upto
three years, or with ûne, or both.
Provided that this section shall not apply where the transferee is a
co-parcener in a Hindu undivided family in which such other person
is also a co-parcener, and it is proved that such other person
B intended to pay or provide such consideration for the beneût of
the co-parceners in the family.
Exception—Nothing in this section shall be deemed to affect
section 66 of the Code of Civil Procedure, 1908 or any provision
similar thereto.”
C Yet another device for giving effect to the first alternative, with a
requirement of mens rea, would be to have a law on the following
lines:
“Where property is transferred to one person for a consideration
paid or provided by another person, and it appears that such
D person did not intend to pay or provide such consideration for
the beneût of the transferee, the person paying: or providing
the consideration shall, if he has caused the transfer to be
entered into with the intention of facilitating the evasion of any
law, or defeating the claims of his creditors, or the creditors of
any other person be guilty of an offence punishable with
E imprisonment upto three years, or with ûne, or with both.”
Yet another device to give effect to the ûrst alternative would be
to add a section in the Indian Penal Code as follows-
“421A. Whoever, dishonestly or fraudulently causes to be
transferred to any person, any property, for which transfer he
F has paid or provided the consideration, intending thereby to
prevent, or knowing to be likely that he will thereby prevent,
the distribution of that property according to law among his
creditors or the creditors of any other person, or intending
thereby to facilitate, or knowing it to be likely that he will
G thereby facilitate, the evasion of any law, shall be punished
with imprisonment of either description for a term which may
extend to two years, or with ûne. or with both.”
6.25. Second alternative. —The second alternative is less drastic
than. the ûrst. In form. it could follow the existing statutory provision
H limiting the judicial recognition of benami transactions, such as,
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 349
LTD. [N. V. RAMANA, CJI]

section 66. Code of Civil Procedure, 1908. But its scope would be A
much wider. The provision’ could be to the effect that no suit shall
lie to enforce a right in respect of any property held benami, either
against the person in whose name ‘the property is held or against
any other person, by or on behalf of a person who claims to be the
real owner ‘of the property on the ground that the person in whose
B
name the property is held is a benamidar of the claimant. (If
necessary, a defence can also be barred).
…
6.27. Second alternative refusal to recognise Benami
preferred. — In our opinion, the simplest alternative would be C
the second alternative. The law should refuse to- recognise the
Benami character of transactions, without making them an offence.
The law should, in effect, provide that where property is transferred
benami, the benamidar will become the real owner. The result of
such a provision will be that the fact that the benamidar did not
provide the consideration, or that the consideration was provided D
by a third person, will not be a ground for recognising a person
other than the benamidar as owner. To put the matter in broad
terms, the doctrine of benami will, under the pro- posed
amendment, cease to be a part of the Indian law.
It may be observed that in enacting the proposed provision, the E
legislature will carry, to its logical conclusion, the trend illustrated
by provisions, such as, section 66 of the Code of Civil Procedure.
The section in the Code is applicable to involuntary alienations,
while the proposed provision will extend the same principle to
voluntary transactions as Well. F
We think that this will be the simplest and most effective course,
and is, therefore, preferable to others.
The amendment will bring out a change in the legal position in
some of the situations where, at present, the benami character is
re- cognised. G
6.27 A. We are also of the view that it is not necessary to enact a
prohibition attracting criminal penalties——which is the course
suggested in the ûrst alternative. Such a prohibition will have to
be ac- companied by a requirement of mens rea, thus narrowing
down its scope and limiting its practical utility.” H
350 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 13.11 It must be noted that during this time, the Constitution was
undergoing a slow churning qua the right to property. The above
propositions, laid down by Federal Courts and Privy Council are to be
understood in a context where there was a general common law right to
property, which later made its forays into the Constitution of India under
Articles 19(1)(f) and 31. In 1978, the Indian Parliament took a drastic
B
measure and did away with this fundamental right to property and
relegated the same to a constitutional right under Article 300A.
13.12 Further, it was an era during which India pursued ‘socialism’,
which was also included in the Preamble of the Constitution through the
42 nd (Amendment) Act in 1976. Successive judicial opinions in
C Kesavananda Bharati v. State of Kerala, (1973) 4 SCC 225 etc.,
viewed the right to property as a stumbling block in the path of achieving
social goals that the government of the time aspired to.
13.13 In 1988, an Ordinance –viz. The Benami Transactions
(Prohibition of the Right of Recover Property) Ordinance, 1988
D (Ordinance 2 of 1988.) – was promulgated. This statutory instrument
being not satisfactory, it was referred to the Law Commission again.
13.14 In any case, the issue was re-examined by the Law
Commission in the year 1988 through its 130th Report. Although the
Law Commission characterized the 130th Report as a continuation of its
E earlier recommendations, it can be observed that some radical changes
were suggested. Some of the key observations are as under:
“3.2 The first question that must engage our attention at once is
the width and coverage of the proposed legislation. In order to
encompass benami transactions concerning various types
F of property, the legislation should cover both movable,
immovable, tangible and intangible property. Unfortunately
every type of property, such as land, houses, shares,
debentures, bonds, bank accounts, deposit receipts and
negotiable instruments, is capable of being held benami.
G Therefore, it is equally legitimate to have an extensive
coverage of the proposed legislation by encompassing
property of every denomination. …
…
3.18 Therefore, viewed from either angle, the Law Commission
H is of the firm opinion that the legislation replacing the ordinance
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 351
LTD. [N. V. RAMANA, CJI]

should also be retroactive in operation and that no locus penitentia A
need be given to the persons who had entered into benami
transactions in the past. They had notice of one and half decades
to set their house in order. No more indulgence is called for. …
…
4.5 Before we conclude on this chapter, it is necessary to point B
out that certain tax laws have confirmed legitimacy on the benami
transactions and derived benefit in the form of revenue collection
from it. It was, therefore, said that if now all benami transactions
are invalidated and an all-enveloping prohibition is imposed, the
revenue laws would suffer loss of revenue. Reference in this C
connection was made to section 27 of the Income-tax Act, 1962
dealing with income from house property. The various sub-sections
of section 27 deal with transfer of property by husband to wife
and vice-versa. It also involves the case of impartable estate.
The law commission is unable to appreciate how a total prohibition
of benami transaction and the holder being made the real owner D
would defeat revenue laws. If one escapes, the other pays, and if
it is suggested that the other may not be within the dragnet of the
tax laws and that both would benefit by the prohibition and abolition
of benami transactions. In the immediate future such effect may
be produced but the long term interest would help in defending E
such spurious transactions between husband and wife. Section
22 may be read accordingly. But it was pointed out that where
transfer of flats is prohibited either by the rules of the co-operative
society which has built the flats or by the rules of authorities like
the Delhi Development Authority, a modus operandi has come
into existence whereby violating the law, the flat is sold and the F
purchaser would pay the amount and taken an irrevocable power
of attorney and enter into possession. It was further said that the
provisions of the Income-tax Act have recognized such transfers
and treat the attorney as owner for the purpose of income-tax as
per the provisions of the Finance Act, 1987. If the sole purpose of G
entering into such a transaction is the violation of existing law
which has been passed after due consideration, it is time that no
recognition is conferred and the law is allowed to take its own
course. Even in the name of revenue loss, violation of existing
laws cannot be protected.
H
352 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 4.6 The Law Commission would like to make it very clear that
some of provisions of the tax laws may become anachronistic
because of the present approach of the law commission. This is
inevitable. The tax laws were enacted at the time when benami
was a part of Indian law. Such laws would have to conform to the
changing legal order. Yet a further solution is offered in this behalf
B
in the next chapter.”
(emphasis supplied)
14. FRAMEWORK UNDER THE 1988 ACT

C 14.1 This brings us to the statutory framework under the 1988
unamended Act, having nine sections. Section 2(a) defines benami
transactions as any transaction in which property is transferred to one
person for a consideration paid or provided by another person. The law
chose to include only tripartite benami transactions, while bipartite/loosely
described as benami transactions, were left out of the definition. Reading
D the aforesaid definition to include sham/bipartite arrangements within
the ambit would be against the strict reading of criminal law and would
amount to judicial overreach.
14.2 The above definition does not capture the essence of benami
transactions as the broad formulation includes certain types of legitimate
E transactions as well. The transferee/property holder’s lack of beneficial
interest in the property was a vital ingredient, as settled by years of
judicial pronouncements and common parlance, and found to be
completely absent in the definition given in the Act. On literal application
of the aforesaid Section 2(a), the following transactions could have been
F caught in the web of the Act:
(a) ‘A’ purchases property in name of his son’s wife ‘B’, for
the benefit of the son’s family from person ‘Y’, treats the
consideration as a gift to the son, and pays gift tax on it.
(b) ‘A’ who is old and infirm, purchases a property in the name
G of ‘B’, intending that ‘B’ will hold the property in trust of
the son of ‘A’, who is mentally retarded.
(c) A firm ‘X’ purchases property in the name of the working
partner ‘B’ for the benefit of the firm ‘X’, making the
payment out of the firm’s funds.
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 353
LTD. [N. V. RAMANA, CJI]

14.3 Section 2(c) of the 1988 Act defines property to be property A
of any kind, whether movable or immovable, tangible, or intangible, and
includes any right or interest in such property. This definition appears to
be broad and inclusive of all kinds of property and includes various rights
and interests. Interestingly, the aforesaid broad formulation of property
came about for the first time in the 130th Law Commission Report; such
B
definitional broadening was for the first time introduced only in 1988 and
was never contemplated during the 57th Report (1973). This aspect
becomes important, and will be addressed later, while analysing the
question of retrospectivity.
14.4 Section 3 of 1988 Act states as under:
C
3. Prohibition of benami transactions- (1) No person shall
enter into any benami transaction.
(2) Nothing in sub-section (1) shall apply to the purchase of property
by any person in the name of his wife or unmarried daughter and
it shall be presumed, unless the contrary is proved, that the said D
property had been purchased for the benefit of the wife of the
unmarried daughter.
(3) Whoever enters into any benami transaction shall be punishable
with imprisonment for a term which may extend to three years or
with fine or with both. E
(4) Notwithstanding anything contained in the Code of Criminal
Procedure, 1973 (2 of 1974), an offence under this section shall
be non-cognizable and bailable.
Section 3 puts forth a prohibitive provision. Further, it intended to
criminalize an act of entering into a benami transaction. F
14.5 Section 4 noted as under:
4. Prohibition of the right to recover property held benami-
(1) No suit, claim or action to enforce any right in respect of any
property held benami against the person in whose name the
property is held or against any other person shall lie by or on G
behalf of a person claiming to be the real owner of such property.
(2) No defence based on any right in respect of any property held
benami, whether against the person in whose name the property
is held or against any other person, shall be allowed in any suit,
H
354 SUPREME COURT REPORTS [2022] 12 S.C.R.

A claim or action by or on behalf of a person claiming to be the real
owner of such property.
(3) Nothing in this section shall apply,—
(a) where the person in whose name the property is held is a
coparcener in a Hindu undivided family and the property is held
B for the benefit of the coparceners in the family; or
(b) where the person in whose name the property is held is a
trustee or other person standing in a fiduciary capacity, and the
property is held for the benefit of another person for whom he is
a trustee or towards whom he stands in such capacity.
C
14.6 Section 5 states:
5. Property of benami liable to acquisition- (1) All properties
held benami shall be subject to acquisition by such authority, in
such manner and after following such procedure as may be
D prescribed.
(2) For the removal of doubts, it is hereby declared that no amount
shall be payable for the acquisition of any property under sub-
section (1).
It may be noted that Section 5 was never utilized as it was felt
E that there was requirement of additional statutory backing to make the
law effective.6
14.7 Section 6 provided that nothing in the 1988 Act will affect
Section 53 of the Transfer of Property Act or any law relating to transfers
for an illegal purpose. The object of Section 6 was to vest ownership
F rights in benamidars as opposed to the real owner. It was not the intention
of the 1988 Act to protect such persons from creditors who allege
diversion of funds in a fraudulent manner and allow them to escape their
liability to the creditors. Therefore, Section 6 limited the application of
Section 4 in such cases.
G 14.8 Section 7 of the 1988 Act repealed Sections 81, 82 and 94 of
the Indian Trusts Act, 1882 (2 of 1882); Section 66 of the Code of Civil
Procedure, 1908 (5 of 1908.); and Section 281A of the Income Tax Act,
6
Standing Committee on Finance 2015-2016, 16 th Lok Sabha, Ministry of Finance
(Deptt. of Revenue), The Benami Transactions Prohibition (Amendment) Bill, 2015,
H 28th Report, Part I.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 355
LTD. [N. V. RAMANA, CJI]

1961 (43 of 1961). Section 8 empowered the Central Government to A
make rules to give effect to the Act. The final section, Section 9, repealed
the earlier Ordinance.
14.9 The main thrust of the argument put forth by the Union of
India in this appeal is that the amended 2016 Act only clarified the 1988
Act. Law Officers appearing for the Union of India trained their guns B
on the point that the 1988 Act had already created substantial law for
criminalizing the offence and the 2016 amendments were merely
clarificatory and procedural, to give effect to the 1988 Act. Such a
submission mandates us to examine the law of the 1988 Act in detail and
determine the scope of the earlier regime to understand as to whether
the 2016 amendments were substantive or procedural. C

14.10 Reading Section 2(a) along with Section 3 makes one thing
clear -– the criminal provision envisaged under the aforesaid provisions
does not expressly contemplate mens rea. Under the Indian jurisprudence,
the law on the subject is fairly well-settled. It has been subjected to the
judicial scrutiny of this Court on several occasions. It does not call for a D
detailed discussion and is enough to restate the principles. Mens rea is
an essential ingredient of a criminal offence. Doubtless, a statute may
exclude the element of mens rea, but it is a sound rule of construction
adopted in England – and also accepted in India – to construe a statutory
provision creating an offence in conformity with common law rather E
than against it, unless the statute expressly or by necessary implication
excluded mens rea. The mere fact that the object of the statute is to
promote welfare activities or to eradicate a grave social evil which by
itself is not decisive of the question as to whether the element of a guilty
mind is excluded from the ingredients of an offence. Mens rea by
necessary implication may be excluded from a statute only where it is F
absolutely clear that implementation of the object of the statute would
otherwise be defeated. [refer Nathulal v. State of Madhya Pradesh,
AIR 1966 SC 43]
14.11 In the above light, this Court’s first endeavour is to attempt
to interpret the law to imply mens rea. However, the language of Section G
2(a) coupled with Section 3, completely ignores the aspect of mens rea,
as it intends to criminalize the very act of one person paying consideration
for acquisition of property for another person. The mens rea aspect was
specifically considered by the 57th Law Commission Report, and the
same was not integrated into the unamended 1988 Act. The observations H
356 SUPREME COURT REPORTS [2022] 12 S.C.R.

A made in the 130th Law Commission Report indicate that benami
transactions are abhorrent when it comes to public wealth and impedes
the government from achieving its social goals. This clearly allows us to
infer that the 1988 law was envisaged on the touchstone of strict liability.
14.12 Such strict statutory formulation under Section 2(a) read
B with Section 3 had left loose ends in the 1988 Act. In this light, the
prosecution would only have to prove only that consideration was paid
or consideration was provided by one person for another person and
nothing more. In all the judicial precedents, this Court has had the occasion
to examine this legislation on the civil side and never on the criminal side,
which would bear a higher standards. Conflation of the ingredients under
C Section 3(1) and (2) with those of Section 4, to forcefully implied mens
rea, cannot be accepted.
14.13 It may be noted that Supreme Court has dealt with the
interpretation of Section 4 of 1988 Act, on several occasions. In Mithilesh
Kumari v. Prem Behari Khare, (1989) 2 SCC 95, this Court was called
D upon to examine as to whether the aforesaid provision has retrospective
application, held as under:
“22. As defined in Section 2(a) of the Act “ ‘benami transaction’
means any transaction in which property is transferred to one
person for a consideration paid or provided by another person”. A
E transaction must, therefore, be benami irrespective of its date or
duration. Section 3, subject to the exceptions, states that no person
shall enter into any benami transaction. This section obviously
cannot have retrospective operation. However, Section 4 clearly
provides that no suit, claim or action to enforce any right in respect
F of any property held benami against the person in whose name
the property is held or against any other person shall lie, by or on
behalf of a person claiming to be real owner of such property.
This naturally relates to past transactions as well. The
expression “any property held benami” is not limited to
any particular time, date or duration. Once the property is
G found to have been held benami, no suit, claim or action to
enforce any right in respect thereof shall lie. Similarly, sub-
section (2) of Section 4 nullifies the defences based on any
right in respect of any property held benami whether against
the person in whose name the property is held or against
H any other person in any suit, claim or action by or on behalf
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 357
LTD. [N. V. RAMANA, CJI]

of a person claiming to be the real owner of such property. A
It means that once a property is found to have been held benami,
the real owner is bereft of any defence against the person in
whose name the property is held or any other person. In other
words in its sweep Section 4 envisages past benami
transactions also within its retroactivity. In this sense the Act
B
is both a penal and a disqualifying statute. In case of a qualifying
or disqualifying statute it may be necessarily retroactive. For
example when a Law of Representation declares that all who
have attained 18 years shall be eligible to vote, those who attained
18 years in the past would be as much eligible as those who attained
that age at the moment of the law coming into force. When an C
Act is declaratory in nature the presumption against retrospectivity
is not applicable. Acts of this kind only declare. A statute in effect
declaring the benami transactions to be unenforceable belongs to
this type. The presumption against taking away vested right will
not apply in this case inasmuch as under law it is the benamidar in
D
whose name the property stands, and law only enabled the real
owner to recover the property from him which right has now
been ceased by the Act. In one sense there was a right to recover
or resist in the real owner against the benamidar. Ubi jus ibi
remedium. Where there is a right, there is a remedy. Where the
remedy is barred, the right is rendered unenforceable. In this sense E
it is a disabling statute. All the real owners are equally affected by
the disability provision irrespective of the time of creation of the
right. A right is a legally protected interest. The real owner’s right
was hitherto protected and the Act has resulted in removal of that
protection.
F
23. When the law nullifies the defences available to the real
owner in recovering the benami property from the benamidar the
law must apply irrespective of the time of the benami transactions.
The expression “shall lie” in Section 4(1) and “shall be allowed”
in Section 4(2) are prospective and shall apply to present (future
stages) and future suits, claims or actions only. This leads us to G
the question whether there was a present suit between the
respondent-plaintiff and the defendant-appellant on the date of
the law coming into force. We have noted the dates of filing the
suit and judgments of the courts below. On the date of Section 4
of the Act coming into force, that is, 19-5-1988 this appeal was H
358 SUPREME COURT REPORTS [2022] 12 S.C.R.

A pending and, of course, is still pending. Can the suit itself be said
to be pending?
(emphasis supplied)
14.14 The aforesaid interpretation was re-examined by this Court
in R. Rajagopal Reddy v. Padmini Chandrasekharan, (1995) 2 SCC
B 630 and while partly over-ruling Mitilesh Kumari (supra), it was held
as under:
11. … Thus it was enacted to efface the then existing right of the
real owners of properties held by others benami. Such an Act
was not given any retrospective effect by the legislature.
C Even when we come to Section 4, it is easy to visualise that
sub-section (1) of Section 4 states that no suit, claim or
action to enforce any right in respect of any property held
benami against the person in whose name the property is
held or against any other shall lie by or on behalf of a person
D claiming to be the real owner of such property. As per Section
4(1) no such suit shall thenceforth lie to recover the possession of
the property held benami by the defendant. Plaintiff’s right to that
effect is sought to be taken away and any suit to enforce such a
right after coming into operation of Section 4(1) that is 19-5-1988,
shall not lie. The legislature in its wisdom has nowhere
E provided in Section 4(1) that no such suit, claim or action
pending on the date when Section 4 came into force shall
not be proceeded with and shall stand abated. On the contrary,
clear legislative intention is seen from the words “no such claim,
suit or action shall lie”, meaning thereby no such suit, claim or
F action shall be permitted to be filed or entertained or admitted to
the portals of any court for seeking such a relief after coming into
force of Section 4(1). …
The word ‘lie’ in connection with the suit, claim or action is not
defined by the Act. If we go by the aforesaid dictionary meaning
G it would mean that such suit, claim or action to get any property
declared benami will not be admitted on behalf of such plaintiff or
applicant against the defendant concerned in whose name the
property is held on and from the date on which this prohibition
against entertaining of such suits comes into force. With respect,
the view taken that Section 4(1) would apply even to such pending
H suits which were already filed and entertained prior to the date
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 359
LTD. [N. V. RAMANA, CJI]

when the section came into force and which has the effect of A
destroying the then existing right of plaintiff in connection with
the suit property cannot be sustained in the face of the clear
language of Section 4(1). It has to be visualised that the legislature
in its wisdom has not expressly made Section 4 retrospective.
Then to imply by necessary implication that Section 4 would have
B
retrospective effect and would cover pending litigations filed prior
to coming into force of the section would amount to taking a view
which would run counter to the legislative scheme and intent
projected by various provisions of the Act to which we have
referred earlier. It is, however, true as held by the Division Bench
that on the express language of Section 4(1) any right inhering in C
the real owner in respect of any property held benami would get
effaced once Section 4(1) operated, even if such transaction had
been entered into prior to the coming into operation of Section
4(1), and henceafter Section 4(1) applied no suit can lie in respect
to such a past benami transaction. To that extent the section may
D
be retroactive. To highlight this aspect we may take an illustration.
If a benami transaction has taken place in 1980 and a suit is filed
in June 1988 by the plaintiff claiming that he is the real owner of
the property and defendant is merely a benamidar and the
consideration has flown from him, then such a suit would not lie
on account of the provisions of Section 4(1). Bar against filing, E
entertaining and admission of such suits would have become
operative by June 1988 and to that extent Section 4(1) would take
in its sweep even past benami transactions which are sought to
be litigated upon after coming into force of the prohibitory provision
of Section 4(1); but that is the only effect of the retroactivity of
F
Section 4(1) and nothing more than that. From the conclusion
that Section 4(1) shall apply even to past benami
transactions to the aforesaid extent, the next step taken
by the Division Bench that therefore, the then existing
rights got destroyed and even though suits by real owners
were filed prior to coming into operation of Section 4(1) G
they would not survive, does not logically follow.
12. So far as Section 4(2) is concerned, all that is provided is that
if a suit is filed by a plaintiff who claims to be the owner of the
property under the document in his favour and holds the property
in his name, once Section 4(2) applies, no defence will be permitted H
360 SUPREME COURT REPORTS [2022] 12 S.C.R.

A or allowed in any such suit, claim or action by or on behalf of a
person claiming to be the real owner of such property held benami.
The disallowing of such a defence which earlier was available,
itself suggests that a new liability or restriction is imposed by
Section 4(2) on a pre-existing right of the defendant. Such a
provision also cannot be said to be retrospective or retroactive by
B
necessary implication. It is also pertinent to note that Section 4(2)
does not expressly seek to apply retrospectively. So far as such a
suit which is covered by the sweep of Section 4(2) is concerned,
the prohibition of Section 4(1) cannot apply to it as it is not a claim
or action filed by the plaintiff to enforce right in respect of any
C property held benami. On the contrary, it is a suit, claim or action
flowing from the sale deed or title deed in the name of the plaintiff.
Even though such a suit might have been filed prior to 19-5-1988,
if before the stage of filing of defence by the real owner is reached,
Section 4(2) becomes operative from 19-5-1988, then such a
defence, as laid down by Section 4(2) will not be allowed to such
D
a defendant. However, that would not mean that Section 4(1) and
Section 4(2) only on that score can be treated to be impliedly
retrospective so as to cover all the pending litigations in connection
with enforcement of such rights of real owners who are parties to
benami transactions entered into prior to the coming into operation
E of the Act and specially Section 4 thereof. It is also pertinent to
note that Section 4(2) enjoins that no such defence “shall be
allowed” in any claim, suit or action by or on behalf of a person
claiming to be the real owner of such property. That is to say no
such defence shall be allowed for the first time after coming into
operation of Section 4(2). If such a defence is already allowed in
F
a pending suit prior to the coming into operation of Section 4(2),
enabling an issue to be raised on such a defence, then the Court is
bound to decide the issue arising from such an already allowed
defence as at the relevant time when such defence was allowed
Section 4(2) was out of the picture. Section 4(2) nowhere uses
G the words: “No defence based on any right in respect of any
property held benami whether against the person in whose name
the property is held or against any other person, shall be allowed
to be raised or continued to be raised in any suit.” With respect, it
was wrongly assumed by the Division Bench that such an already
allowed defence in a pending suit would also get destroyed after
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 361
LTD. [N. V. RAMANA, CJI]

coming into operation of Section 4(2). We may at this stage refer A
to one difficulty projected by learned advocate for the respondents
in his written submissions, on the applicability of Section 4(2).
These submissions read as under:
…
13. According to us this difficulty is inbuilt in Section 4(2) and B
does not provide the rationale to hold that this section applies
retrospectively. The legislature itself thought it fit to do so and
there is no challenge to the vires on the ground of violation of
Article 14 of the Constitution. It is not open to us to rewrite the
section also. Even otherwise, in the operation of Section 4(1) and C
(2), no discrimination can be said to have been made amongst
different real owners of property, as tried to be pointed out in the
written objections. In fact, those cases in which suits are filed by
real owners or defences are allowed prior to coming into operation
of Section 4(2), would form a separate class as compared to those
cases where a stage for filing such suits or defences has still not D
reached by the time Section 4(1) and (2) starts operating.
Consequently, latter type of cases would form a distinct category
of cases. There is no question of discrimination being meted out
while dealing with these two classes of cases differently. A real
owner who has already been allowed defence on that ground E
prior to coming into operation of Section 4(2) cannot be said to
have been given a better treatment as compared to the real owner
who has still to take up such a defence and in the meantime he is
hit by the prohibition of Section 4(2). Equally there cannot be any
comparison between a real owner who has filed such suit earlier
and one who does not file such suit till Section 4(1) comes into F
operation. All real owners who stake their claims regarding benami
transactions after Section 4(1) and (2) came into operation are
given uniform treatment by these provisions, whether they come
as plaintiffs or as defendants. Consequently, the grievances raised
in this connection cannot be sustained. G
14.15 Returning to the discussion at hand, there is no doubt that
the unamended 1988 Act tried to create a strict liability offence and
allowed separate acquisition of benami property. This begs the question
whether such a criminal provision, which the State now intends to make
use of, in order to confiscate properties after 28 years of dormancy, H
362 SUPREME COURT REPORTS [2022] 12 S.C.R.

A could have existed in the books of law. Other than the abuse and
unfairness such exercise intends to bring about, there is a larger
constitutional question about existence of such strict provisions without
adequate safeguards.
15. SUBSTANTIVE DUE PROCESS , M ANIFEST ARBITRARINESS AND
B PROVISIONS UNDER 1988 ACT.

15.1 The simple question addressed by the counsel appearing for
both sides is whether the amended 2016 Act is retroactive or prospective.
Answering the above question is inevitably tied to an intermediate question
as to whether the 1988 Act was constitutional in the first place. The
C arguments addressed by the Union of India hinges on the fact that the
1988 Act was a valid substantive law, which required only some gap
filling through the 2016 Act, to ensure that sufficient procedural
safeguards and mechanisms are present to enforce the law. According,
to the Union of India, the 2016 Act was a mere gap filling exercise.
15.2 However, upon studying the provisions of the 1988 Act, we
D
find that there are questions of legality and constitutionality which arise
with respect to Sections 3 and 5 of 1988 Act. The answers to such
questions cannot be assumed in favour of constitutionality, simply because
the same was never questioned before the Court of law. We are clarifying
that we are not speaking of the presumption of constitutionality as a
E matter of burden of proof. Rather, we are indicating the assumption
taken by the Union as to the validity of these provisions in the present
litigation. Such assumption cannot be made when this Court is called
upon to answer whether the impugned provisions are attracted to those
transactions that have taken place before 2016.
F 15.3 Indian jurisprudence has matured through years of judicial
tempering, and the country has grown to be a jurisdiction having
‘substantive due process’. A brief sketch of the jurisprudential journey
thus far, may be necessary to aid our understanding.
15.4 There is no gain saying that deletion of the phrase ‘due process
of law’ from the draft Constitution was inspired by the views of James
G
Bradley Thayer and Justice Felix Frankfurter, who held that concentration
of power to examine reasonability of a legislation through judicial review
would fall foul of separation of powers and denigration of parliamentary
sovereignty. Dr. Ambedkar himself did not want to side with any of the
above opinions, rather he envisaged the situation as one who is caught
H between Charybdis and Scylla.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 363
LTD. [N. V. RAMANA, CJI]

15.5 The emphasis on the aforesaid deletion by the majority in A
A.K Gopalan v. State of Madras, AIR 1950 SC 27, was somewhat
drawn back by the celebrated dissent of Fazal Ali, J., wherein the term
“Procedure established by law” was interpreted to mean “Procedural
due process”. This judicial quibbling was ultimately set to rest in Maneka
Gandhi v. Union of India, (1978) 1 SCC 248, wherein a combined
B
reading of Articles 14, 19 and 21 would make it clear that the judiciary,
so to say, always had the forensic power to examine reasonability of a
law, both procedural as well as substantive. Later expositions have only
given colour to expand what was implicit under the three golden Articles
of Part III. In Sunil Batra v. Delhi Administration, (1978) 4 SCC 494,
the word law as occurring under Article 21 was interpreted to mean jus C
and not merely lex. It may be necessary to quote the observation of the
majority in the aforesaid case in the following manner:
“228…The word “law” in the expression “procedure established
by law” in Article 21 has been interpreted to mean in Maneka
Gandhi case that the law must be right, just and fair and not D
arbitrary, fanciful or oppressive.”
(Emphasis supplied)
15.6 Without burdening this judgment with a series of precedents
laid down by this Court, we may refer only to the majority opinion in K.
E
Puttaswamy v. Union of India, (2017) 10 SCC 1, wherein the law has
been settled by a Nine-Judge Bench of this Court in the following manner:
“294. The Court, in the exercise of its power of judicial review,
is unquestionably vested with the constitutional power to adjudicate
upon the validity of a law. When the validity of a law is questioned
F
on the ground that it violates a guarantee contained in Article 21,
the scope of the challenge is not confined only to whether the
procedure for the deprivation of life or personal liberty is fair, just
and reasonable. Substantive challenges to the validity of laws
encroaching upon the right to life or personal liberty has been
considered and dealt with in varying contexts, such as the death G
penalty (Bachan Singh [Bachan Singh v. State of Punjab,
(1980) 2 SCC 684 : 1980 SCC (Cri) 580] ) and mandatory death
sentence (Mithu [Mithu v. State of Punjab, (1983) 2 SCC 277 :
1983 SCC (Cri) 405] ), among other cases. A person cannot be
deprived of life or personal liberty except in accordance with the H
364 SUPREME COURT REPORTS [2022] 12 S.C.R.

A procedure established by law. Article 14, as a guarantee against
arbitrariness, infuses the entirety of Article 21. The interrelationship
between the guarantee against arbitrariness and the protection of
life and personal liberty operates in a multi-faceted plane. First, it
ensures that the procedure for deprivation must be fair, just and
reasonable. Second, Article 14 impacts both the procedure and
B
the expression “law”. A law within the meaning of Article 21
must be consistent with the norms of fairness which originate in
Article 14. As a matter of principle, once Article 14 has a connect
with Article 21, norms of fairness and reasonableness would apply
not only to the procedure but to the law as well.
C 295. Above all, it must be recognised that judicial review is a
powerful guarantee against legislative encroachments on life and
personal liberty. To cede this right would dilute the importance of
the protection granted to life and personal liberty by the Constitution.
Hence, while judicial review in constitutional challenges to the
D validity of legislation is exercised with a conscious regard for the
presumption of constitutionality and for the separation of powers
between the legislative, executive and judicial institutions, the
constitutional power which is vested in the Court must be retained
as a vibrant means of protecting the lives and freedoms of
individuals.
E
296. The danger of construing this as an exercise of
“substantive due process” is that it results in the incorporation of
a concept from the American Constitution which was consciously
not accepted when the Constitution was framed. Moreover, even
in the country of its origin, substantive due process has led to
F vagaries of judicial interpretation. Particularly having regard to
the constitutional history surrounding the deletion of that phrase in
our Constitution, it would be inappropriate to equate the jurisdiction
of a constitutional court in India to entertain a substantive challenge
to the validity of a law with the exercise of substantive due process
G under the US Constitution. Reference to substantive due process
in some of the judgments is essentially a reference to a substantive
challenge to the validity of a law on the ground that its substantive
(as distinct from procedural) provisions violate the Constitution.”
15.7 The law with respect to testing the unconstitutionality of a
H statutory instrument can be summarized as under:
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 365
LTD. [N. V. RAMANA, CJI]

a. Constitutional Courts can test constitutionality of legislative A
instruments (statute and delegated legislations);
b. The Courts are empowered to test both on procedure as
well as substantive nature of these instruments.
c. The test should be based on a combined reading of Articles
14, 19 and 21 of the Constitution. B

15.8 One of the offshoots of this test under Part III of the
Constitution is the development of the doctrine of manifest arbitrariness.
A doctrinal study of the development of this area may not be warranted
herein. It is well traced in Shayara Bano v. Union of India, (2017) 9
SCC 1. We may only state that the development of jurisprudence has C
come full circle from an overly formalistic test of classification to include
the test of manifest arbitrariness. A broad formulation of the test was
noted in the aforesaid case as under:
“95. On a reading of this judgment in Natural Resources
Allocation case [Natural Resources Allocation, In re, Special D
Reference No. 1 of 2012, (2012) 10 SCC 1], it is clear that this
Court did not read McDowell [State of A.P. v. McDowell and
Co., (1996) 3 SCC 709] as being an authority for the proposition
that legislation can never be struck down as being arbitrary. Indeed
the Court, after referring to all the earlier judgments, and Ajay E
Hasia [Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC
722] in particular, which stated that legislation can be struck down
on the ground that it is “arbitrary” under Article 14, went on to
conclude that “arbitrariness” when applied to legislation cannot
be used loosely. Instead, it broad based the test, stating that if a
constitutional infirmity is found, Article 14 will interdict such F
infirmity. And a constitutional infirmity is found in Article 14 itself
whenever legislation is “manifestly arbitrary” i.e. when it is not
fair, not reasonable, discriminatory, not transparent,
capricious, biased, with favouritism or nepotism and not in
pursuit of promotion of healthy competition and equitable G
treatment. Positively speaking, it should conform to norms which
are rational, informed with reason and guided by public interest,
etc.”
(emphasis supplied)
H
366 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 15.9 In Joseph Shine v. Union of India, (2019) 3 SCC 39, this
Court was concerned with the constitutionality of Section 497 of the
IPC relating to the provision of adultery. While declaring the aforesaid
provision as unconstitutional on the aspect of it being manifestly arbitrary,
this Court reiterated the test as under:
B “...The test of manifest arbitrariness, therefore, as laid down in
the aforesaid judgments would apply to invalidate legislation as
well as subordinate legislation Under Article 14. Manifest
arbitrariness, therefore, must be something done by the
legislature capriciously, irrationally and/or without adequate
determining principle. Also, when something is done which
C is excessive and disproportionate, such legislation would
be manifestly arbitrary. We are, therefore, of the view that
arbitrariness in the sense of manifest arbitrariness as pointed out
by us above would apply to negate legislation as well Under Article
14.”
D (emphasis supplied)
15.10 In Hindustan Construction Co. Ltd v. Union of India,
(2020) 17 SCC 324, this Court struck down Section 87 of the Arbitration
Act on the ground of manifest arbitrariness as the Parliament chose to
ignore the judgment of this Court, without removing the basis of the
E same or identifying a principle for militating against the same.
15.11 Coming back to the 1988 Act, the two provisions with which
we are concerned are Sections 3 and 5 of 1988 Act. They are required
to be separately analysed herein. At the outset, we may notice that the
enactment was merely a shell, lacking the substance that a criminal
F legislation requires for being sustained. The reasons for the same are
enumerated in the following paragraphs.
15.12 First, the absence of mens rea creates a harsh provision
having strict liability. Such an approach was frowned upon by the 57th
Law Commission Report as concerns of tax evasion or sham transactions
G in order to avoid payment to creditors were adequately addressed by the
existing provisions of law. Even the 130th Law Commission Report did
not expressly rule out the inclusion of mens rea. The legislative move to
ignore earlier Law Commission Reports without there being a principle
identified to do away with the aspect of mens rea should be a contributory
factor in analysing the constitutionality of the aforesaid criminal provision
H under the 1988 Act.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 367
LTD. [N. V. RAMANA, CJI]

15.13 Further, under the amended 2016 Act, the aspect of mens A
rea, is brought back through Section 53. Such resurrection clearly
indicates that doing away of the mens rea aspect, was without any rhyme
or reason, and ended up creating an unusually harsh enactment.
15.14 Second, ignoring the essential ingredient of beneficial
ownership exercised by the real owner contributes to making the law B
even more stringent and disproportionate with respect to benami
transactions that are tripartite in nature. The Court cannot forcefully
read the ingredients developed through judicial pronouncements or under
Section 4 (having civil consequence) into the definition provided under
Sections 2 and 3 (espousing criminal consequences), to save the
enactment from unconstitutionality. Such a reading would violate the C
express language of Section 2(a), of excluding one ingredient from the
definition of ‘benami transaction’, and would suffer from the vice of
judicial transgression. In removing such an essential ingredient, the
legislature did not identify any reason or principle, which made the entire
provision of Section 3 susceptible to arbitrariness. Interestingly, for D
tripartite benami transactions, the 2016 Act brings back this ingredient
through Section 2(9)(A)(b). In this context, we may state that it is a
simple requirement under Article 20(1) that a law needs to be clear and
not vague. It should not have incurable gaps which are yet to be legislated/
filled in by judicial process.
15.15 Third, it is fairly admitted by the learned ASG, Mr. Vikramjit E
Banerjee appearing for the Union of India, that the criminal provision
was never utilized as there was a significant hiatus in enabling the
functioning of such a provision.
15.16 Fourth, reading Section 2(a) with Section 3(1) would have
created overly broad laws susceptible to be challenged on the grounds F
of manifest arbitrariness. If this Court reads criminal provisions of the
Benami Act to have had force since 1988, then the following deleterious
consequences would ensue:
(i.) Section 187C of the Companies Act, 1956 assured
protection to nominal and beneficial holding of shares if the G
prescribed declaration duly made are at serious risk.
(ii.) Benami cooking gas connections which have been
regularized from time to time are at risk.
(iii.) Housing colonies and benami allotments of DDA flats which
have been regularised from time to time are at risk. H
368 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 15.17 The criminal provision under Section 3(1) of the 1988 Act
has serious lacunae which could not have been cured by judicial forums,
even through some form of harmonious interpretation. A conclusion
contrary to the above would make the aforesaid law suspect to being
overly oppressive, fanciful and manifestly arbitrary, thereby violating the
‘substantive due process’ requirement of the Constitution.
B
15.18 Coming to Section 5 of the 1988 Act, it must be noted that
the acquisition proceedings contemplated under the earlier Act were in
rem proceedings against benami property. We may note that,
jurisprudentially, such in rem proceedings transfer the guilt from the person
who utilized a property which is a general harm to the society, to the
C property itself.
15.19 When such proceedings are contemplated under law, there
need to be adequate safeguards built into the provisions, without which
the law would be susceptible to challenge under Article 14 of the
Constitution. Coming to Section 5 of the 1988 Act, it was conceived as a
D half-baked provision which did not provide the following and rather left
the same to be prescribed through a delegated legislation:
(i) Whether the proceedings under Section 5 were independent
or dependant on successful prosecution?

E (ii) The standard of proof required to establish benami
transaction in terms of Section 5.
(iii) Mechanism for providing opportunity for a person to establish
his defence.
(iv) No ‘defence of innocent owner’ was provided to save
F legitimate innocent buyers.
(v) No adjudicatory mechanism was provided for.
(vi) No provision was included to determine vesting of acquired
property.
G (vii) No provision to identify or trace benami properties.
(viii) Condemnation of property cannot include the power of
tracing, which needs an express provision.
Such delegation of power to the Authority was squarely excessive
and arbitrary as it stood. From the aforesaid, the Union’s stand that the
H 2016 Act was merely procedural, cannot stand scrutiny.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 369
LTD. [N. V. RAMANA, CJI]

15.20 In any case, such an inconclusive law, which left the essential A
features to be prescribed through delegation, can never be countenanced
in law to be valid under Part III of the Constitution. The gaps left in the
1988 Act were not merely procedural, rather the same were essential
and substantive. In the absence of such substantive provisions, the
omissions create a law which is fanciful and oppressive at the same
B
time. Such an overbroad provision was manifestly arbitrary as the open
texture of the law did not have sufficient safeguards to be proportionate.
15.21 At this stage, we may only note that when a Court declares
a law as unconstitutional, the effect of the same is that such a declaration
would render the law not to exist in the law books since its inception. It
is only a limited exception under Constitutional law, or when substantial C
actions have been undertaken under such unconstitutional laws that going
back to the original position would be next to impossible. In those cases
alone, would this Court take recourse to the concept of ‘prospective
overruling’.
15.22 From the above, Section 3 (criminal provision) read with D
Section 2(a) and Section 5 (confiscation proceedings) of the 1988 Act
are overly broad, disproportionately harsh, and operate without adequate
safeguards in place. Such provisions were still-born law and never utilized
in the first place. In this light, this Court finds that Sections 3 and 5 of the
1988 Act were unconstitutional from their inception. E
15.23 Having said so, we make it abundantly clear that the
aforesaid discussion does not affect the civil consequences contemplated
under Section 4 of the 1988 Act, or any other provisions.
16. 2016 ACT AND ITS ANALYSIS
F
16.1 The next subject of examination is the 2016 Act, which amends
the 1988 Act, and expanded the 1988 Act to 72 sections (from 9 sections),
divided into 8 chapters. At the outset, we need to understand the general
scheme of the law. The definition of benami transactions, which is the
heart of the entire 1988 Act, has undergone a metamorphosis and stands
as under: G
[DEFINITIONS.
Section 2(9) “benami transaction” means:
(A) a transaction or an arrangement-
H
370 SUPREME COURT REPORTS [2022] 12 S.C.R.

A (a) where a property is transferred to, or is held by, a person,
and the consideration for such property has been provided, or
paid by, another person; and
(b) the property is held for the immediate or future benefit,
direct or indirect, of the person who has provided the
B consideration,
except when 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
benefit of other members in the family and the consideration
C for such property has been provided or paid out of the known
sources of the Hindu undivided family;
(ii) a person standing in a fiduciary capacity for the benefit
of another person towards whom he stands in such capacity
and includes a trustee, executor, partner, director of a company,
D a depository or a participant as an agent of a depository under
the Depositories Act, 1996 (22 of 1996) and any other person
as may be notified by the Central Government for this purpose;
(iii) any person being an individual in the name of his spouse
or in the name of any child of such individual and the
E consideration for such property has been provided or paid out
of the known sources of the individual;
(iv) any person in the name of his brother or sister or lineal
ascendant or descendant, where the names of brother or sister
or lineal ascendant or descendant and the individual appear as
F joint-owners in any document, and the consideration for such
property has been provided or paid out of the known sources
of the individual; or
(B) a transaction or an arrangement in respect of a property
carried out or made in a fictitious name; or
G (C) a transaction or an arrangement in respect of a property
where the owner of the property is not aware of, or, denies
knowledge of, such ownership;
(D) a transaction or an arrangement in respect of a property
where the person providing the consideration is not traceable
H or is fictitious;
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 371
LTD. [N. V. RAMANA, CJI]

Explanation. - For the removal of doubts, it is hereby declared A
that benami transaction shall not include any transaction
involving the allowing of possession of any property to be taken
or retained in part performance of a contract referred to in
section 53A of the Transfer of Property Act, 1882, if, under
any law for the time being in force,-
B
(i) consideration for such property has been provided by the
person to whom possession of property has been allowed but
the person who has granted possession thereof continues to
hold ownership of such property;
(ii) stamp duty on such transaction or arrangement has been C
paid; and
(iii) the contract has been registered.
16.2 Major changes envisaged under the definition are as under:
(i) Expansion of the definition from arm’s length transactions D
contemplated under the 1988 Act, to arrangements and
schemes.
(ii) Additional ingredient of benefits flowing to the real owner,
a lacuna pointed in the earlier part, under 1988 Act, is included
in terms of Section 2(9)(A)(b). E

(iii) Expansion of the ambit through Section 2(9)(C), to those
properties where benamidar denies knowledge of such
ownership.
(iv) Expansion of the ambit through Section 2(9)(D), wherein F
the person providing the consideration is not traceable or is
fictitious.
(v) Expansion from recognition of only tripartite transactions
under 1988 Act, to also include bipartite transactions.
16.3 Section 2(26) of the 2016 Act defines a property. This G
definition has been expanded to include proceeds from the property as
well. Such expansion allows for tracing of proceeds and is a substantial
change as compared to the 1988 Act. Along with this, benami property
has been defined under Section 2(8). Benamidar is defined under Section
2(10). H
372 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 16.4 Chapter 2 contains four provisions which are modified
provisions of the 1988 Act. Section 3 now bifurcates offences into two
separate categories based on the time period of the benami transaction.
Under Section 3(2), punishment of three years is mandated for those
who have entered into benami transactions from 05.09.1988 to 25.10.2016.
Section 3(3) applies to those benami transactions which have been entered
B
into after commencement of the amended 2016 Act and the punishment
for the aforesaid is prescribed under Section 53 of Chapter VII. It may
be noted that under Section 3(3), the punishment is increased from three
years to a maximum of seven years and a fine may be imposed which
extend up to 25% of the fair market value of the property. This distinction
C between Section 3(2) and 3(3) read with Section 53, contains the element
of mens rea.
16.5 Section 4 remains the same as under the 1988 Act, barring
the fact that Section 4(3) has integrated the exceptions provided under
the definition of benami transaction in terms of Section 2(9). The civil
D consequences provided under Section 4 continue to apply even post the
2016 Act. The interpretation of the aforesaid section, as given in the R.
Rajagopal Reddy Case (supra), continues to apply.
16.6 Section 5 on the other hand has been modified and it presently
stands as under:
E 5. Property held benami liable to confiscation. —Any
property, which is subject matter of benami transaction, shall be
liable to be confiscated by the Central Government.
16.7 Chapter III relates to the administrative mechanism of the
authorities required for implementation of the 2016 Act. Chapter IV
F relates to attachment, adjudication, and confiscation of benami property.
These provisions relate to forfeiture, which need to be analysed
hereinafter.
16.8 Section 24(1) states that, if the initiating Officer, on the
basis of gathered material, having reason to believe, that a particular
G property is a benami property, then he ought to issue notice7 to the
beneficial owner (if identified) as well as to the ostensible owner (if
any) seeking an explanation as to why the property should not be treated
as Benami.

7
H In terms of Section 25 of the 2016 Act.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 373
LTD. [N. V. RAMANA, CJI]

16.9 The 2016 Act provides for provisional attachment of the A
property where the concerned officer has genuine reason to believe,
based on the material gathered, that the person in possession of the
property held in benami may alienate the property. Such provisional
attachment cannot be taken recourse to every time. Recourse under
Section 24(3) of the 2016 Act should be exercised in exceptional
B
circumstance after previous approval of Approving Authority. Such
interim provisional attachment is strictly limited by time.
16.10 Adjudication under Section 24(4) is mandatory and requires
the authority to examine the same on a prima facie basis. Such
adjudication must take place after providing collected material to the
accused, along with the show cause notice. A reasoned order is mandated C
under the aforesaid provision. The Officer is mandated to present a
statement of case to the adjudicating officer, in terms of Section 24(5) of
the 2016 Act.
16.11 Adjudication under Section 26 mandates notice and disclosure
obligation to various other persons. The adjudicating authority can either D
pass an order in terms of Section 26(3)(c)(i) or (ii), or pass an order for
further inquiries in terms of Section 26(3)(b).
16.12 Section 27(1) relates to confiscation of property, wherein if
a property is adjudicated as a benami property under Section 26(3), then
the adjudicating authority can give an opportunity to the concerned E
persons, and after hearing the parties, pass an order confiscating the
property. The aforesaid confiscation order is subject to the order passed
by the Appellate Tribunal under Section 46. Order of confiscation vests
such property absolutely in the Central Government, free from all
encumbrances and no compensation shall be payable in respect of such F
confiscation.
16.13 Section 27(4) provides that in the interregnum of initiating
confiscation proceedings, any third-party rights created to defeat the
purpose of the Act shall be null and void. Sub clause 5 mandates that if
no order of confiscation is made and the same has attained finality, no G
claim can be made against the Government for the process.
16.14 Section 28 mandates appointment of an Administrator by
the Central Government to manage the property. Such an Administrator
shall have the power to take possession of such a property upon order of
confiscation, in terms of Section 29.
H
374 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 16.15 Chapters V and VI delineate the powers of the Appellate
Tribunal as well as Special Courts. Chapter VII consists of offences
and penalties. Specifically, we may refer to Section 53:
53. Penalty for Benami Transaction
(1) Where any person enters into a benami transaction in order to
B defeat the provisions of any law or to avoid payment of statutory
dues or to avoid payment to creditors, the beneficial owner,
benamidar and any other person who abets or induces any person
to enter into the benami transaction, shall be guilty of the offence
of Benami transaction.
C (2) Whoever is found guilty of the offence of benami transaction
referred to in sub-section (1) shall be punishable with rigorous
imprisonment for a term which shall not be less than one year, but
which may extend to seven years and shall also be liable to fine
which may extend to twenty-five per cent. of the fair market
D value of the property.
Interestingly, a crime which attracted strict liability under the 1988
Act, is modified to include a mens rea aspect in terms of the
recommendations of the 57th and 130th Law Commission Reports.
16.16 It may be necessary to note that no prosecution can be
E initiated without previous sanction of the competent authority as provided
under Section 55, which reads as under:
55. No prosecution shall be instituted against any person in respect
of any offence under sections 3, 53 or section 54 without the
previous sanction of the Board.
F
16.17 Perusal of the remaining provisions is not required for the
purpose at hand.
17. WHETHER SECTION 3(1) AND CHAPTER IV READ WITH SECTION
5 OF THE 2016 ACT HAVE RETROACTIVE EFFECT?
G 17.1 The thrust of the arguments advanced by the Union of India
can be crystallized as under:
(i.) That the 1988 Act was a valid enactment with procedural
gaps that were filled retrospectively by the 2016 amendment.
(ii.) That the provision of confiscation (civil forfeiture) under
H the 1988 Act, being in the domain of civil law, is not punitive
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 375
LTD. [N. V. RAMANA, CJI]

and therefore, the prohibition under Article 20(1) of the A
Constitution is not attracted in this case.
17.2 With respect to the first line of argument, our discussion
above can be summarized as under:
(a.) Section 3(1) of 1988 Act is vague and arbitrary.
B
(b.) Section 3(1) created an unduly harsh law against settled
principles and Law Commission recommendations.
(c.) Section 5 of 1988 Act, the provision relating to civil
forfeiture, was manifestly arbitrary.
(d.) Both provisions were unworkable and as a matter of fact, C
were never implemented.
17.3 Having arrived at the aforesaid conclusions that Sections 3
and 5 were unconstitutional under the 1988 Act, it would mean that the
2016 amendments were, in effect, creating new provisions and new
offences. Therefore, there was no question of retroactive application of D
the 2016 Act. As for the offence under Section 3(1) for those transactions
that were entered into between 05.09.1988 to 25.10.2016, the law cannot
retroactively invigorate a stillborn criminal offence, as established above.
17.4 As per the concession made by the Union of India and a fair
reading of Section 53 of the 2016 Act, the offence under the aforesaid E
provision is prospective, and only applied to those transactions that were
entered into after the amendment came into force, viz., 25.10.2016. Any
contrary interpretation of Section 3 of the 1988 Act would be violative of
Article 20(1) of the Constitution. Article 20(1) reads as under:
20. Protection in respect of conviction for offences F
(1) No person shall be convicted of any offence except for violation
of the law in force at the time of the commission of the act charged
as an offence, nor be subjected to a penalty greater than that
which might have been inflicted under the law in force at the time
of the commission of the offence. G
17.5 In T. Barai v. Henry Ah Hoe, (1983) 1 SCC 177, this Court
has expounded Article 20 (1) in the following manner:
“22. It is only retroactive criminal legislation that is prohibited
under Article 20(1). The prohibition contained in Article 20(1) is
that no person shall be convicted of any offence except for violation H
376 SUPREME COURT REPORTS [2022] 12 S.C.R.

A of a law in force at the time of the commission of the act charged
as an offence prohibits nor shall he be subjected to a penalty
greater than that which might have been inflicted under the law in
force at the time of the commission of the offence. It is quite
clear that insofar as the Central Amendment Act creates new
offences or enhances punishment for a particular type of offence
B
no person can be convicted by such ex post facto law nor can the
enhanced punishment prescribed by the amendment be applicable.
But insofar as the Central Amendment Act reduces the punishment
for an offence punishable under Section 16(1)(a) of the Act, there
is no reason why the accused should not have the benefit of such
C reduced punishment. The rule of beneficial construction requires
that even ex post facto law of such a type should be applied to
mitigate the rigour of the law. The principle is based both on sound
reason and common sense. This finds support in the following
passage from Craies on Statute Law, 7th Edn., at pp. 388-89:
D “A retrospective statute is different from an ex post facto
statute. “Every ex post facto law…” said Chase, J., in the American
case of Calder v. Bull [3 US (3 Dall) 386: 1 L Ed 648 (1798)]
“must necessarily be retrospective, but every retrospective law is
not an ex post facto law. Every law that takes away or impairs
rights vested agreeably to existing laws is retrospective, and is
E
generally unjust and may be oppressive; it is a good general rule
that a law should have no retrospect, but in cases in which the
laws may justly and for the benefit of the community and also of
individuals relate to a time antecedent to their commencement: as
statutes of oblivion or of pardon. They are certainly retrospective,
F and literally both concerning and after the facts committed. But I
do not consider any law ex post facto within the prohibition
that mollifies the rigour of the criminal law, but only those
that createor aggravate the crime, or increase the punishment
or change the rules of evidence for the purpose of
G conviction.... There is a great and apparent difference between
making an unlawful act lawful and the making an innocent action
criminal and punishing it as a crime.”
17.6 In the case at hand, the 2016 Act containing the criminal
provisions is applicable only prospectively, as the relevant Sections of
the pre-amendment 1988 Act containing the penal provision, have been
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 377
LTD. [N. V. RAMANA, CJI]

declared as unconstitutional. Therefore, the question of construction of A
the 2016 Act as retroactive qua the penal provisions under Sections 3 or
53, does not arise.
17.7 The continued presence of an unconstitutional law on the
statute book, or the claim that such law was not challenged before
Constitutional Courts, does not prevent this Court from holding that such B
unconstitutional laws cannot enure to the benefit of or be utilized to
retroactively amend laws to cure existing constitutional defects. If such
curing is allowed, then Article 20(1) of the Constitution would be rendered
nugatory.
17.8 This brings us to the last aspect as to the retroactive operation C
of confiscation (forfeiture) under Section 5 read with Chapter IV of the
2016 Act. It is the argument of the Union of India that civil forfeiture
being in the domain of civil law is not punitive in nature. Therefore, it
does not attract the prohibition contained under Article 20(1) of the
Constitution. Meaning thereby, that if this Court holds that the civil
forfeiture prescribed under the 2016 Act is punitive, only then will the D
prohibition under Article 20(1) apply. If not, then the prohibition does not
apply.
17.9 Although we have held that Section 5 of the 1988 Act was
unconstitutional for being manifestly arbitrary, however such holding is
of no consequence if this Court comes to the conclusion that confiscation E
under Section 5 of 2016 Act read with Chapter IV, was civil in nature
and is not punitive.
17.10 It is well settled that the legislature has power to enact
retroactive/retrospective civil legislations under the Constitution. However,
Article 20(1) mandates that no law mandating a punitive provision can F
be enacted retrospectively. Further, a punitive provision cannot be
couched as a civil provision to by-pass the mandate under Article 20(1)
of the Constitution which follows the settled legal principle that “what
cannot be done directly, cannot be done indirectly”.
17.11 Therefore, the immediate question which arises for G
consideration is whether the retroactive confiscation provided under
Section 5 read with Chapter IV of 2016 Act is punitive or not?
17.12 At the outset, we may note that Shri S. V. Raju, learned
ASG, has submitted that acquisition provided under Section 5 of the 1988
Act is same as confiscation provided under Section 5 read with Chapter H
378 SUPREME COURT REPORTS [2022] 12 S.C.R.

A IV of the 2016 Act. He states that both concepts are related to civil law
and is not concerned with punitive punishments as provided under the
Indian Penal Code, 1860.
17.13 Acquisition under the earlier 1988 Act as well as confiscation
under the 2016 Act are said to have been enacted on the reasoning that
B the property emanating from the benami transaction also gets tainted.
The substantive difference between the acquisition provision under the
earlier enactment and the confiscation provision under the 2016 Act is
that proceeds of benami transactions have been made traceable under
the 2016 Act.
C 17.14 Before we analyse the other provisions, it is necessary to
give a brief introduction to the concept of civil forfeiture in India, as the
same was argued by the learned ASG. Under Admiralty jurisdiction, the
concerned Admiralty Courts had the jurisdiction to forfeit vessels under
its civil jurisdiction in lieu of any maritime claim. Same was the law
across various common law jurisdictions, such as the United States of
D America and the United Kingdom.
17.15 Forfeiture occurs in various types, few of which are found
in India. Broadly, forfeitures can be categorized as civil and criminal. On
the civil side, there can be in rem or in personam forfeitures. Punitive
forfeitures under the criminal law are in personam. Criminal forfeitures
E usually take place at the conclusion of a trial, when the guilt of the accused
is established. Standards of evidentiary requirement differ greatly
between civil and criminal forfeiture.
17.16 The historic origin of in rem civil forfeiture in common law
jurisdictions was earlier mostly restricted to trans-national crimes. These
F early laws mandated that the property was subject to forfeiture because
it was the instrument by which the offence was committed, and it was
necessary to confiscate such property to remove it from circulation.
However, the Twentieth century saw expansion of forfeiture laws into a
wide array of crimes. The modern forfeiture laws not only allow forfeiture
G of property used to facilitate the crime, but cover the proceeds of the
offence as well. In the Supreme Court of the United States, constitutional
challenges laid to such civil forfeiture laws have been dismissed as they
were usually attributed to historic prevalence of such forfeiture laws.
However, such historic reasons of its existence cannot justify continued
expansion of civil forfeiture laws, as has been observed by Justice
H Clarence Thomas in the following manner:
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 379
LTD. [N. V. RAMANA, CJI]

“This system—where police can seize property with limited judicial A
oversight and retain it for their own use—has led to egregious
and well-chronicled abuses,” and “These forfeiture operations
frequently target the poor and other groups least able to defend
their interests in forfeiture proceedings”.8
17.17 In the case at hand, although expansion of forfeiture laws B
originates from the Parliament’s concern for decriminalizing property
holdings, however, we are reminded of Justice Oliver Wendell Holmes,
who has stated as under:
“The customs beliefs or needs of a primitive time establish a rule
or a formula. In the course of centuries, the custom, belief, or C
necessity disappears, but the rule remains. The reason which gave
rise to the rule has been forgotten, and ingenious minds set
themselves to enquire how it is to be accounted for. Some ground
of policy is thought of, which seems to explain it and to reconcile
it with the present state of things; and then the rule adapts itself to
the new reasons which have been found for it, and enters on a D
new career. The old form receives a new content and in time
even the form modifies itself to for the meaning which it has
received.”9
17.18 While categorizing the forfeiture proceedings as civil or
criminal, the test laid down by the European Court of Human Rights in E
Engel v The Netherlands (No.1), [1976] 1 EHRR 647, have been treated
as giving authoritative guidance. Those tests are set out in paragraphs
80 to 82 of the Report and are as follows:
“(i) The manner in which the domestic state classifies the
proceedings. This normally carries comparatively little weight and F
is regarded as a starting point rather than determinative — see
Ozturk v Germany [1984] 6 EHRR 409 at 421 and 422.
(ii) The nature of the conduct in question classified objectively
bearing in mind the object and purpose of the Convention.
G
(iii) The severity of any possible penalty — severe penalties,
including those with imprisonment in default and penalties
intended to deter are pointers towards a criminal

8
Leonard v. Texas, 137 S. Ct. 847, 847-48 (2017).
9
Oliver Wendell Holmes in The Common Law 5 (1881). H
380 SUPREME COURT REPORTS [2022] 12 S.C.R.

A classification of proceedings — see Schmautzer v Austria
[1995] 21 EHRR 511.
In Lauko v Slovakia [1998] ECHR 26138/95 the court observed
that these criteria were alternatives and not cumulative although
a cumulative approach might be adopted where a separate analysis
B of each criterion did not make it possible to reach a clear conclusion
as to the existence of a ‘criminal charge’.”
(emphasis supplied)
The aforesaid proposition has also been confirmed by the House
of Lords in R v. H, [2003] 1 ALL ER 497.
C
17.19 In Kennedy v Mendoza-Martinez, 372 US 144 (1963), the
Supreme Court of the United States, while concerned with the
constitutionality of legislation that imposed forfeiture of citizenship on
those who had left or remained outside the United States during wartime
to evade military service, had laid down the following relevant factors to
D classify forfeiture law:
(a) Whether the sanction involves an affirmative disability or
restraint;
(b) Whether it has been historically regarded as a punishment;
E (c) Whether it is only applicable where there has been a finding
of scienter (that is, a finding that an act has been done
knowingly and intentionally);
(d) Whether its operation promotes the traditional retributive
and deterrent aims of punishment;
F (e) Whether the behaviour to which the statute applies is already
a crime;
(f) Whether an alternative purpose to which it may be rationally
connected is attributable to it; and

G (g) Whether it appears excessive in light of the alternative
purpose assigned.
17.20 Coming to the Indian case laws, in State of West Bengal v.
S. K. Gosh, AIR 1963 SC 255, this Court was concerned with the Criminal
Law Amendment Ordinance 38 of 1944, wherein the law provided only
for attachment of the property, after conviction is given effect to. Unlike
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 381
LTD. [N. V. RAMANA, CJI]

the present law, the taint on the property is squarely determined by the A
Criminal Court deciding the criminal conviction. Confiscation contemplated
under Section 13 of the Criminal Law Amendment Ordinance 38 of
1944 could only be given effect to after the verdict of guilty by Criminal
Court. In the light of such unique provisions, the Court characterized
such forfeiture laws as civil in nature. We may note that such a law did
B
not contemplate an independent confiscation proceeding as created under
this law, rather, a mechanism was devised to confiscate a property after
criminal conviction.
17.21 This Court, while noting that forfeiture is no doubt punitive
under Article 20(1) of the Constitution as it is one of the punishments
prescribed under Section 53 of IPC, held that Section 13(3) of the Criminal C
Law Amendment Ordinance 38 of 1944 was not punitive as the same
was dependent on prior criminal prosecution and determination of amount
which was to be forfeited in the following manner:
“12. Further what s. 13(3) of the 1944-Ordinance which provides
for forfeiture requires is that there should be in the final judgment D
of the criminal court a finding as to the amount of money or value
of property in pursuance of s. 12. As soon as that finding is there,
the District Judge would know the amount he is to forfeit, and the
purpose of the finding is that if the District Judge is asked to make
a forfeiture under s. 13(3) he should know exactly the amount E
which he is require to forfeit. So long therefore as the criminal
court trying an offender has given a finding as to the amount of
money or value of other property procured by means of the offence
in the judgment that in our opinion is sufficient compliance with s.
12(1) of the 1944-Ordinance and the requirement therein that it
should be on the representation of the prosecution is a mere F
formality. Obviously, even a determination under s. 10 of the 1943-
Ordinance as amended in 1945 of the amount procured by the
offence must be at the instance of the prosecution for it is the
prosecution which will provide the material for that determination
which in turn will be the basis on which the fine will be determined G
by the court under s. 10. …
…
14. This brings us to the contention which found favour with
Bhattacharya J., namely, that the provision of s. 13(3) is a
punishment and that as the 1944-Ordinance was not in force at H
382 SUPREME COURT REPORTS [2022] 12 S.C.R.

A the time when the offence was committed s. 13(3) could not be
applied to the respondent inasmuch as Art. 20(1) lays down that
no person shall be subjected to a penalty greater than that which
might have been inflicted under the law in force at the time of the
commission of the offence. Two arguments have been urged on
behalf of the appellant in this connection. In the first place, it is
B
urged that the respondent remained in office till August 25, 1944
while the Ordinance came into force on August 23, 1944 and
therefore the conspiracy by means of which the money was
procured continued till after the Ordinance had come into force
and therefore Art. 20(1) can have no application, for it cannot be
C said that the respondent was being subjected to a penalty greater
than that which might have been inflicted under the law in force
at the time of the commission of the offence. In the second place,
it is urged that the forfeiture provided by s. 13(3) is not a penalty
at all within the meaning of Art, 20(1), but is merely a method of
recovering money belonging to the Government which had been
D
embezzled. It is urged that the Government could file a suit to
recover the money embezzled and s. 13(3) only provides a speedier
remedy for that purpose and the forfeiture provided therein is not
a penalty within the meaning of Art. 20(1).”
17.22 In Divisional Forest Officer v. G. V. Sudhakar Rao, (1985)
E 4 SCC 573, this Court was concerned with the power of forfeiture under
Section 44(2)(A) of Andhra Pradesh Forest Act, 1967. Noting that
Section 45 of the Forest Act prior to the amendment had a provision for
civil forfeiture only after the conviction of an accused under the Forest
Act, it was felt that such a provision was insufficient to prevent the
F growing menace of ruthless exploitation of government forests and illicit
smuggling of teak, red sandalwood, etc. It was in this context that a
separate mechanism was formulated to ensure that there was no
unreasonable delay in confiscation of property.
17.23 It may be noted that this case did not involve a constitutional
G challenge under Article 20(1) to the aforesaid rules. In any case, this
Court has held that the new mechanism formulated under the amended
Act was completely independent of criminal prosecution.
17.24 To the same extent, in State of Madhya Pradesh v. Kallo
Bai, (2017) 14 SCC 502, this Court interpreted the Madhya Pradesh
H Van Upaj (Vyapar Viniyam) Adhiniyam, 1969 to have independent
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 383
LTD. [N. V. RAMANA, CJI]

confiscation proceedings from criminal prosecution in view of the non- A
obstante clause under Section 15C of the Adhiniyam. It may also be
noted that there was no challenge to the aforesaid Act, as being violative
of Article 20(1) of the Constitution. The Court held as under:
“14. Sub-section (1) of Section 15 empowers forest officers
concerned to conduct search to secure compliance with the B
provisions of the Adhiniyam. On a plain reading of sub-section
(2), it is clear that the officer concerned may seize vehicles, ropes,
etc. if he has reason to believe that the said items were used for
the commission of an offence under the Adhiniyam. Confiscation
proceedings as contemplated under Section 15 of the Adhiniyam
is a quasi-judicial proceedings and not a criminal proceedings. C
Confiscation proceeds on the basis of the “satisfaction” of the
authorised officer with regard to the commission of forest offence.
Sub-section (3) of the provision lays down the procedure to be
followed for confiscation under the Adhiniyam. Sub-section (3-
A) authorises forest officers of rank not inferior to that of a Ranger, D
who or whose subordinate, has seized any tools, boats, vehicles,
ropes, chains or any other article as liable for confiscation, may
release the same on execution of a security worth double the
amount of the property so seized. This provision is similar to that
of Section 53 of the Forest Act as amended by the State of Madhya
Pradesh. Sub-section (4) mandates that the officer concerned E
should pass a written order recording reasons for confiscation, if
he is satisfied that a forest offence has been committed by using
the items marked for confiscation. Sub-section (5) prescribes
various procedures for confiscation proceedings. Sub-section (5-
A) prescribes that whenever an authorised officer having F
jurisdiction over the case is himself involved in the seizure, the
next higher authority may transfer the case to any other officer of
the same rank for conducting confiscation proceedings. Sub-section
(6) provides that with respect to tools, vehicles, boats, ropes, chains
or any other article other than timber or forest produce seized,
confiscation may be directed unless the person referred to in clause G
(b) of sub-section (5) is able to satisfy that the articles were used
without his knowledge or connivance or, as the case may be,
without the knowledge or connivance of his servant or agent and
that all reasonable and necessary precautions had been taken
against the use of such objects for commission of forest offence.” H
384 SUPREME COURT REPORTS [2022] 12 S.C.R.

A 17.25 In Yogendra Kumar Jaiswal v. State of Bihar, (2016) 3
SCC 183, a Division Bench of this Court was concerned with the
constitutional challenge to various enactments such as the Orissa Special
Courts Act, 2006 and the Bihar Special Courts Act, 2009. Both the
enactments had provisions for confiscation. While interpreting the
confiscation provisions, this Court read down the same to only mean
B
interim attachment. In other words, confiscation was interpreted as akin
to attachment proceedings. The Court mandated that any confiscation
would be contingent on the final outcome of the criminal proceedings
and the logical corollary to the same was that confiscation proceedings
were not completely independent and ultimately had to be adjudicated
C along with the trial of the main criminal case.
17.26 In Abdul Vahab v. State of Madhya Pradesh, (2022) SCC
Online SC 262, this Court was concerned with the interpretation of the
Madhya Pradesh Cow Slaughter (Prohibition) Act, 2004, wherein it was
held that confiscation proceedings could not be independent of acquittal
D in the criminal case. If a contrary interpretation was taken, then the
same would be violative of Article 300A of the Constitution. This Court
distinguished the case from the judgment of Kallo Bai (supra), by placing
reliance on the absence of a provision such as Section 15C of Madhya
Pradesh Van Upaj (Vyapar Viniyam) Adhiniyam, 1969 under the Madhya
Pradesh Cow Slaughter (Prohibition) Act, 2004.
E
17.27 In Vijay Madanlal Choudary & Ors v. Union of India,
SLP (Civ.) No. 4634 of 2014 and others, this Court dealt with confiscation
proceedings under Section 8 of the Prevention of Money Laundering
Act, 2002 (“PMLA”) and limited the application of Section 8(4) of PMLA
concerning interim possession by authority before conclusion of final
F trial to exceptional cases. The Court distinguished the earlier cases in
view of the unique scheme under the impugned legislation therein. Having
perused the said judgment, we are of the opinion that the aforesaid ratio
requires further expounding in an appropriate case, without which, much
scope is left for arbitrary application.
G 17.28 From the above discussion, it is manifest that the Courts
have read down the provisions of civil forfeiture to be dependent on the
underlying criminal prosecution to temper the harsh consequences
envisaged under such provisions. No doubt, such reading down was
mandated to ameliorate harsh consequences of confiscatory laws which
H otherwise would have allowed the State agencies to take over the property
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 385
LTD. [N. V. RAMANA, CJI]

without seriously pursuing the criminal prosecutions. At this stage, we A
can only recommend that the utility of independent provisions of forfeiture,
distinct from criminal prosecution, needs to be utilised in a proportional
manner, looking at the gravity of the offence. Few examples which may
pass the muster of proportionality for having such stringent civil forfeiture,
may relate to crimes involving terrorist activities, drug cartels or organised
B
criminal activities. As we have discussed, the application of such a
provision to numerous other offences which are not of such grave severity,
would be of serious risk of being disproportionate, if procedures
independent of criminal prosecution are prescribed. We may note that
the proportionality of separate confiscation procedure prescribed under
the 2016 Act, has not been argued herein. Accordingly, we leave the C
aforesaid question of law open.
17.29 Under the IPC, forfeiture is recommended to be a form of
punishment under Section 53. Accordingly, the Code of Criminal
Procedure, 1976 provides for a mechanism for interim custody and
forfeiture at the conclusion of trial under Section 451 of the Cr.P.C. (in D
personam forfeiture), which reads as under:
451. Order for custody and disposal of property pending
trial in certain cases. When any property is produced before
any Criminal Court during any inquiry or trial, the Court may make
such order as it thinks fit for the proper custody of such property E
pending the conclusion of the inquiry or trial, and, if the property is
subject to speedy and natural decay, or if it is otherwise expedient
so to do, the Court may, after recording such evidence as it thinks
necessary, order it to be sold or otherwise disposed of.
Explanation.- For the purposes of this section,” property” includes- F
(a) property of any kind or document which is produced before
the Court or which is in its custody,
(b) any property regarding which an offence appears to have been
committed or which appears to have been used for the commission
of any offence. G
452. Order for disposal of property at conclusion of trial.
(1) When an inquiry or trial in any Criminal Court is concluded,
the Court may make such order as it thinks fit for the disposal, by
destruction, confiscation or delivery to any person claiming to be
H
386 SUPREME COURT REPORTS [2022] 12 S.C.R.

A entitle to possession thereof or otherwise, of any property or
document produced before it or in its custody, or regarding which
any offence appears to have been committed, or which has been
used for the commission of any offence.
Aforesaid provisions under the Cr.P.C. have inbuilt safeguards of
B in personam criminal forfeiture, wherein confiscation occurs at the end
of the trial. Under these provisions, confiscation is to be determined at
an evidential standard of ‘beyond reasonable doubt’ and are dependent
on the result of the criminal trial.
17.30 Coming to the Benami Act post the Amendment, the interplay
C of Sections 27(3), (5) and 67 of the 2016 Act creates a confiscation
procedure which is distinct from the procedure contemplated under the
CrPC or any other enactment till now in India. This separation of the
confiscation mechanism is not merely procedural. It has also altered
substantive rights of the evidentiary standards from ‘beyond reasonable
doubt’ to ‘preponderance of probabilities’. Such a change of standards
D
cannot be merely termed as procedural.
17.31 Characterization of the confiscation proceedings under
Chapter IV of the 2016 Act as Civil may therefore not be appropriate.
There is an implicit recognition of the forfeiture being a punitive sanction,
as the Officer is mandated to build a case against the accused for such
E
confiscation, wherein the presumption of innocence is upheld structurally.
Being a punitive provision, it is trite that one integrates the ‘presumption
of innocence’ within the Chapter as the same forms a part of the
fundamental right.10

F 17.32 Additionally, the 2016 Act now condemns not only those
transactions which were traditionally denominated as benami, rather a
new class of fictitious and sham transactions are also covered under
the same. In this regard, we may notice that the intention of the
legislature is to condemn such property and there is an implicit effort
by the Parliament to take into consideration the fact that such
G transactions are often acquired from ill-gotten wealth. These
proceedings cannot be equated as enforcing civil obligations as, for
example, correcting deficiencies in the title. It goes further and the
taint attaches to the proceeds as well.

10
H Narendra Singh v. State of Madhya Pradesh, (2004) 10 SCC 699.
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 387
LTD. [N. V. RAMANA, CJI]

17.33 In view of the above discussion, it is manifest that the 2016 A
Act contemplates an in-rem forfeiture, wherein the taint of entering into
such a benami transaction is transposed to the asset itself and the same
becomes liable to confiscation. At the cost of repetition, we may note
that the taint of benami transactions is not restricted to the person who is
entering into the aforesaid transaction, rather, it attaches itself to the
B
property perpetually and extends itself to all proceeds arising from such
a property, unless the defence of innocent ownership is established under
Section 27(2) of the 2016 Act. When such a taint is being created not on
the individual, but on the property itself, a retroactive law would
characterize itself as punitive for condemning the proceeds of sale which
may also involve legitimate means of addition of wealth. C
17.34 Jurisprudentially, a law may enable forfeiture of property
by peculiar reason of its circumstances, of it being dangerous to the
community by reasons of any form or position that it assumes. In such
cases, forfeiture is not deemed to be punishment inflicted on its owner.
By contrast, if the law provides that the Government shall forfeit a D
property ‘A’ for, (1) what was carried on in property ‘B’, or (2) what the
owner does in a matter not connected with property ‘A’ or (3) a bare
intent which does not necessarily relate to the conduct in property ‘A’, in
such cases, forfeiture is punishment without any exception. In this case,
the property may not be inherently dangerous or denigrate any standard
of morality. It is just the condemnation of the method of transfer and E
holding, which was once a recognized form of property holding in India.
In such a case, the in rem civil proceeding utilized retroactively, would
characterize itself as penal.
17.35 In the case at hand, the authority that initiates such
confiscation, is granted extensive powers of discovery, inspection, F
compelling attendance, compelling production of documents. They are
further empowered to take the assistance of police officers, custom
officers, income tax officers and other relevant officers for furnishing
information. It is also pertinent to note that any person who fails to furnish
information, is subjected to a penalty of ¹ 25,000/- (Rupees Twenty-Five G
Thousand) under Section 54(A). It is also necessary to note that a person
who supplies false information before any authority, is subjected to
rigorous imprisonment of upto 5 years under Section 54 of the 2016 Act.
17.36 This Court is aware of the fact that the ‘Right to Property’
is not a fundamental right, rather it is a constitutional right that can be H
388 SUPREME COURT REPORTS [2022] 12 S.C.R.

A abridged by law. However, this Court is not concerned with the
constitutionality of such a measure, wherein such considerations have to
be balanced. Rather, the focus is only on the characterization of
retroactive confiscation, which in these facts and circumstances, are
punitive.
B 17.37 In view of the fact that this Court has already held that the
criminal provisions under the 1988 Act were arbitrary and incapable of
application, the law through the 2016 amendment could not retroactively
apply for confiscation of those transactions entered into between
05.09.1988 to 25.10.2016 as the same would tantamount to punitive
C punishment, in the absence of any other form of punishment. It is in this
unique circumstance that confiscation contemplated under the period
between 05.09.1988 and 25.10.2016 would characterise itself as punitive,
if such confiscation is allowed retroactively. Usually, when confiscation
is enforced retroactively, the logical reason for accepting such an action
would be that the continuation of such a property or instrument, would
D be dangerous for the community to be left free in circulation. In R (on
the appln of the Director of the Assets Recovery Agency) v Jia Jin
He and Dan Dan Chen, [2004] EWHC Admin 3021, where Collins, J.
had stated thus:
“52. In Mudie, at page 1254, in the judgment of Laws LJ, who
E gave the only reasoned judgment, there is set out the citation from
Butler which reads, so far as material, as follows:
“It is the applicant’s contention that the forfeiture of his money
in reality represented a severe criminal sanction, handed down
in the absence of the procedural guarantees afforded to him
F
under article 6 of the Convention, in particular his right to be
presumed innocence [sic]. The court does not accept that view.
In its opinion, the forfeiture order was a preventive measure
and cannot be compared to a criminal sanction, since it was
designed to take out of circulation money which was presumed
G to be bound up with the international trade in illicit drugs. It
follows that proceedings which led to the making of the order
did not involve ‘the determination ... of a criminal charge (see
Raimondo v Italy [1994] 18 EHRR 237, 264, at para 43; and
more recently Arcuri v Italy (Application No 52024/99),
inadmissibility decision of 5th July 2001...””
H
UNION OF INDIA & ANR. v. M/s. GANPATI DEALCOM PVT. 389
LTD. [N. V. RAMANA, CJI]

17.38 When we come to the present enactment, history points to A
a different story wherein benami transactions were an accepted form of
holding in our country. In fact, the Privy Council had, at one point of
time, praised the sui generis evolution of the doctrine of trust in the
Indian law. The response by the Government and the Law Commission
to curb benami transactions was also not sufficient as it was conceded
B
before this Court that Sections 3 and 5 of the 1988 Act in reality, dehors
the legality, remained only on paper and were never implemented on
ground. Any attempt by the legislature to impose such restrictions
retroactively would no doubt be susceptible to prohibitions under Article
20(1) of the Constitution.
17.39 Looked at from a different angle, continuation of only the C
civil provisions under Section 4, etc., would mean that the legislative
intention was to ensure that the ostensible owner would continue to have
full ownership over the property, without allowing the real owner to
interfere with the rights of benamidar. If that be the case, then without
effective any enforcement proceedings for a long span of time, the rights D
that have crystallized since 1988, would be in jeopardy. Such implied
intrusion into the right to property cannot be permitted to operate
retroactively, as that would be unduly harsh and arbitrary.
18. Conclusion
18.1 In view of the above discussion, we hold as under: E

a) Section 3(2) of the unamended 1988 Act is declared as
unconstitutional for being manifestly arbitrary. Accordingly,
Section 3(2) of the 2016 Act is also unconstitutional as it is
violative of Article 20(1) of the Constitution.
F
b) In rem forfeiture provision under Section 5 of the
unamended Act of 1988, prior to the 2016 Amendment Act,
was unconstitutional for being manifestly arbitrary.
c) The 2016 Amendment Act was not merely procedural,
rather, prescribed substantive provisions.
G
d) In rem forfeiture provision under Section 5 of the 2016 Act,
being punitive in nature, can only be applied prospectively
and not retroactively.
e) Concerned authorities cannot initiate or continue criminal
prosecution or confiscation proceedings for transactions H
390 SUPREME COURT REPORTS [2022] 12 S.C.R.

A entered into prior to the coming into force of the 2016 Act,
viz., 25.10.2016. As a consequence of the above declaration,
all such prosecutions or confiscation proceedings shall stand
quashed.
f) As this Court is not concerned with the constitutionality of
B such independent forfeiture proceedings contemplated
under the 2016 Amendment Act on the other grounds, the
aforesaid questions are left open to be adjudicated in
appropriate proceedings.
18.2 The appeal is disposed of in the above terms.
C
Divya Pandey Appeal disposed of.
(Assisted by : Deepak Panwar, LCRA)

D

E

F

G

H