Is The Benami Act Retrospective?

CA Tilak Chandna has raised the interesting question whether The Prohibition of Benami Transactions Act, 1988 as amended by the Benami Transactions Prohibition Act, 2016, has retrospective or retroactive operation? He has answered the question in a clear-cut manner after an extensive research into the legislative scheme and several important judicial precedents

Background

The Prohibition of Benami Transactions Act, 1988 as amended by the Benami Transactions Prohibition Act, 2016, when implemented full throttle is likely to have adverse consequences of proportions far exceeding than are being grasped generally. One of the cardinal questions that is being hotly debated about this act is whether the law will have retrospective or retroactive operation?

It is a matter of satisfaction that as far as the Principal Act of 1988 (unamended by the act of 2016) is concerned, the matter of retrospectivity stands settled by a large bench of the highest court of the country holding in following terms:

Regarding application of section 3(3)

“A mere look at the above provisions shows that the prohibition under Section 3(1) is against persons who are to enter into benami transactions and it has laid down that no person shall enter into any benami transaction which obviously means from the date on which this prohibition comes into operation i.e. with effect from September 5, 1988. That takes care of future benami transactions. We are not concerned with Sub-section (2) but Sub-section (3) of Section 3 also throws light on this aspect. As seen above, it states that 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, Therefore, the provision creates a new offence of entering into such benami transactions. It is made non-cognizable and bailable as laid down under Sub-section (4). It is obvious that when a statutory provision creates new liability and new offence, it would naturally have prospective operation and would cover only those offences which take place after Section 3(1) comes into operation. In fact, Saikia J. speaking for the Court in Mithilesh Kumari’s case (supra) has in terms observed at page 635 of the report that Section 3 obviously cannot have retrospective operation. We respectfully concur with this part of the learned Judge’s view.”

Regarding section 4 (1) and 4(2)

“Before we deal with these six considerations which weighed with the Division Bench for taking view that Section 4 will apply retrospectively in the sense that it will get telescoped into all pending proceedings, howsoever earlier they might have been filed, if they were pending at different stages in the hierarchy of the proceedings even up to this Court, when Section 4 came into operation, it would be apposite to recapitulate the salient feature of the Act. As seen earlier, the preamble of the Act itself states that it is an act to prohibit benami transactions and the right to recover property held benami, for matters connected therewith or incidental thereto. Thus, it was enacted to efface the then existing rights of the real owners of properties held by others benami. Such an act was not given any retrospective effect by the legislature. 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 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. Plaintiffs 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 19th May, 1988, shall not lie. The legislature in its wisdom has nowhere 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 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). In Collins English Dictionary, 1979 Edition as reprinted subsequently, the word ‘lie’ has been defined in connection with suits and proceedings. At page 848 of the Dictionary while dealing with topic No. 9 under the definition of term ‘lie’ it is stated as under:

For an action, claim appeal etc. to subsist; be maintainable or admissible.

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 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 concerned defendant 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 by that Section 4(1) would apply even to such pending suits which were already filed and, entertained prior to the date when the Section came into force and which has the effect of 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 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 the real owner in respect of any property held benami would get effected once Section 4(1) operated, even if such transaction had been entered into prior to the coming into operation of Section 4(1), and hence after Section 4(1) applied no suit can lie in respect to such a past benami transaction. To that extent the Section may 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, 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 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) they would not survive, does not logically follow.

13. 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 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 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 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 19th May, 1988, then such a defence, as laid down by Section 4(2) will not be allowed to such a defendant. However, that would not mean that Section 4(1) and 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 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 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 picture. Section 4(2) nowhere uses 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 coming into operation of Section 4(2). We may at this stage refer 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:

Section 4(1) places a bar on a plaintiff pleading ‘benami’, while Section 4(2) places a bar on a defendant pleading ‘benami,’ after the coming into force of the Act. In this context it would be anomalous if the bar in Section 4 is not applicable if a suit pleading ‘benami’ is already filed prior to the prescribed date, and it is treated as applicable only to suit which he filed thereafter. It would have the effect of classifying the so-called ‘real’ owners into two classes – those who stand in the position of plaintiffs and those who stand in the position of defendants. This may be clarified by means of an illustration. A and B are ‘real’ owners who have both purchased properties in say 1970, in the names of C and D respectively who are ostensible owners viz. benamidars. “A” file a suit in February 1988 i.e. before the coming into force of the Act against C, for a declaration of his title saying that C is actually holding it as his benamidar. According to the petitioner’s argument, such a plea would be open to “A” even after coming into force of the Act, since the suit has already been laid. On the other hand, if D files a suit against B at the same for declaration and injunction, claiming himself to be the owner but B’s opportunity to file a written statement comes in say November 1988 when the Act has already come into force, he in his written statement cannot plead that D is a benamidar and that he, B is the real owner. Thus, A and B, both ‘real’ owners, would stand on a different footing, depending upon whether they would stand in the position of plaintiff or defendant. It is respectfully submitted that such a differential treatment would not be rational or logical.

14. According to us this difficulty is inbuilt in Section 4(2) and 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 re-write the section also. Even otherwise, in the operation of Section 4(1) and (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 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 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 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.

15. At this stage, we may also usefully refer to Section 7(1) of the Act which lays down that Sections 81,82 and 94 of the Indian" Trusts Act, 1882 (2 of 1882), Section 66 of the CPC, 1908 (5 of 1908), and Section 281 -A of the Income-tax Act, 1961 (43 of 1961), are thereby repealed. We have already seen Section 82 of the Indian Trusts Act which gave almost for a period of a century or more a legal right to the real owner to claim against the purported owner that the consideration paid was by the real owner and the transferee held the property for the benefit of the person paying consideration for supporting the transaction. It is this right which got destroyed by Section 7 of the Act with effect from 19th May, 1988. If any suits or proceedings were pending prior to that date, invoking Section 82 of the Indian Trusts Act, what is to happen to such suits is not answered by Section 4(1) of the Act or by any other provisions of the Act. We have, therefore, to turn the General Clauses Act, 1897 for finding out an answer. Section 6 of the General Clauses Act lays down "where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears the repeal shall not

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed." It becomes, therefore, obvious that the Act by Section 7 has effected a repeal of Section 82 of the Indian Trusts Act and while repealing this provision no different intention appears from the Act to affect any right, privilege or liability acquired under Section 82 by either side or any pending proceedings regarding such obligation or liability. Therefore, such pending proceedings will have to be continued or enforced as if the repealing Act had not been passed. A conjoint reading of Section 82 of the Indian Trusts Act and Section 6(b), (d) and (e) of the General Clauses Act clearly enjoins that if suits are pending wherein the plaintiffs have put forward claims under the then existing Section 82 of the Indian Trusts Act such proceedings are to be continued by assuming that the repealing of Section 82 of the Indian Trusts Act has not been effected in connection with such pending proceedings. Unfortunately, this aspect was not pressed for consideration before the Division bench and, therefore, the view taken by the Division Bench is likely to result in an incongruous situation. If a view is to be taken that a pending suit wherein plaintiff might have contended that the real consideration flowed from him and the defendant was not the real owner and held the property benami as per Section 82 of the Indian Trusts Act, 1882, has to be continued by ignoring the present Act, it will be inconsistent with the conclusion reached by the Division Bench. As per the Division Bench, such suits must necessarily be dismissed at whatever stage they might be pending between the parties. Therefore, interpretation of Section 4(1) by the Division Bench would directly conflict with the legislative scheme emanating from Section 82 of the Indian Trusts Act, 1882 read with Section 6 of the General Clauses Act discussed above. Even otherwise, it is now well-settled that where a statutory provision which is not expressly made retrospective by the legislature seeks to affect vested rights and corresponding obligations of parties, such provision cannot be said to have any retrospective effect by necessary implication. In Maxwell on the Interpretation of Statutes, 12th Edition (1969), the learned author has made the following observations based on various decisions of different Court, especially in Re Athlumney (1898) 2 QB 547 at PP. 551, 552:

Perhaps no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only." The rule has, in fact, two aspects, for it, "involves another and subordinate rule, to the effect that a statute is not to be construed so as to have a greater retrospective operation than its language renders necessary.

16. In the case of Garikapati v. N. Subbiah Choudhary of the report Chief Justice S.R. Das speaking for this Court has made the following pertinent observations in this connection:

The golden rule of construction is that, in the absence of anything in the enactment to show that it is to have retrospective operation, it cannot be so construed as to have ‘the effect of altering the law applicable to a claim in litigation at the time when the Act was passed.”

But Jury is still out as far the amended act is concerned

It should be clear that what was held in the context of the principal act of 1988 may not ipso facto apply to the amended act. As a matter of fact, the amendment act of 2016, has altered the “basic structure” of the principal act and therefore the question of its retrospectivity or retroactivity has to be judged on own merits.

It is not that while embarking on such examination, one has to start with a blank slate. We have the benefit of few judgements delivered on the subject and these are extracted below for the benefit of the readers.

Bombay High Court Judgement

“The central question before the court in this behalf is, whether or not these amended provisions apply to the suit transaction, the suit transaction itself having been executed prior to the amendment and the suit also having been filed and defence raised as well as the suit decreed by the courts below before the amended act was introduced.”

The court answered the above questions in following words “ 7 What is crucial here is, in the first place, whether the change effected by the legislature in the Benami Act is a matter of procedure or is it a matter of substantial rights between the parties. If it is merely a procedural law, then, of course, procedure applicable as on the date of hearing may be relevant. If, on the other hand, it is a matter of substantive rights, then prima facie it will only have a prospective application unless the amended law speaks in a language "which expressly or by clear intention, takes in even pending matters.". Short of such intendment, the law shall be applied prospectively and not retrospectively.

8 As held by the Supreme Court in the case of R. Rajagopal Reddy vs. Padmini Chandrasekharan4, Section 4 of the Benami Act, or for that matter, the Benami Act as a whole, creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transaction and for whom new liabilities are created 2 AIR 1966 SC 1423 (V 53 C 277) 3 AIR 1985 SC 111 4 (1995) 2 SCC 630. Merely because it uses the word "it is declared", the Act is not a piece of declaratory or curative legislation. If one has regard to the substance of the law rather than to its form, it is quite clear, as noted by the Supreme Court in R. Rajagopal Reddy, that the Benami Act affects substantive rights and cannot be regarded as having a retrospective operation. The Supreme Court in R. Rajagopal Reddy also held that since the law nullifies the defences available to the real owners in recovering the properties held benami, the law must apply irrespective of the time of the benami transaction and that the expression "shall lie" in Section 4(1) or "shall be allowed" in Section 4(2) are prospective and apply to the present (future stages) as well as future suits, claims and actions only. These observations clearly hold the field even as regards the present amendment to the Benami Act. The amendments introduced by the Legislature affect substantive rights of the parties and must be applied prospectively.”

Obiter dictum by honourable Supreme Court

“It is required to be noted that the Benami Transactions came to be amended in the year 2016. As per section 3 of the Benami Transaction (Prohibition) Act, 1988, there was a presumption that the transaction made in the name of wife and children is for their benefit. By Benami Act 2016, section 3(2) of the Benami Transaction Act, the statutory presumption, which was rebuttable, has been omitted. It is the case on behalf of the respondent that, therefore, in view of the omission of section 3(2) of the Benami Transaction Act, the plea of statutory presumption that purchase made in the name of wife and children is for their benefit would not be available in the present case. Aforesaid cannot be accepted. As held by this court in the case of Binapani Paul case (supra), Benami Transaction (Prohibition) Act, would not be applicable retrospectively. Even otherwise and as observed hereinabove, the plaintiff has miserably failed to discharge his onus to prove that the sale deeds executed in favour of defendant number 1 were benami transactions and the same were purchased in the name of defendant number 1 by Narayansaami Mudliar from the amount received from him from the sale of properties.”    

Rajasthan High court Judgement

“By now, it is well settled law that unless a contrary intention is reflected, a legislation is presumed and intended to be prospective.  For in the normal course of human behaviour, one is entitled to arrange his affairs keeping in view the laws for the time being in force and such arrangement of affairs should not be dislodged by retrospective application of law.  The principle of law known as lex prospicit non prospicit (law looks forward not backward), is a well- known and accepted principle. The retrospective legislation is contrary to general principle for legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried out in the faith of the then existing law (vide Phillips Vs. Eyre (1870)LR 6 QB.

1).  Thus, the principle against retrospectivity is the principle of ‘fair play’ and unless there is a clear and unambiguous intendment for retrospective effect to the legislation which affects accrued rights or imposes obligations or castes new duties or attaches a new disability is to be treated as prospective.

81. It is trite law that an explanatory or declaratory Act is intended to supply an obvious omission or is enacted to clear doubts as to the meaning of the previous Act.  While retrospective operation is generally intended as to declaratory or curative provisions, which is supplied with the ‘language’ "shall be deemed always to have meant". Therefore, in absence of clarity amendment being declaratory or curative in the face of unambiguous or confusion in the pre-amended provisions; the same is not required to be treated as curative or declaratory amendment.  Viewed in the light of the settled legal proposition, as aforesaid, Benami Amendment Act, 2016, neither appears to be clarificatory nor curative.  Moreover, by way of amendment penal consequences have been introduced providing for confiscation of the benami property and enhanced punishment.

82. In the case of Prakash and Ors. (supra), the Apex Court of the land while dealing with the very Benami Amendment Act, 2016, held thus:

“17. The text of the amendment itself clearly provides that the right conferred on a ‘daughter of a coparcener’ is ‘on and from the commencement of Hindu Succession (Amendment) Act, 2005’. Section 6(3) talks of death after the amendment for its applicability. In view of plain language of the statute, there is no scope for a different interpretation than the one suggested by the text of the amendment. An amendment of a substantive provision is always prospective unless either expressly or by necessary intendment it is retrospective Shyam Sunder v. Ram Kumar (2001) 8 SCC 24, Paras 22 to 27. In the present case, there is neither any express provision for giving retrospective effect to the amended provision nor necessary intendment to that effect. Requirement of partition being registered can have no application to statutory notional partition on opening of succession as per unamended provision, having regard to nature of such partition which is by operation of law. The intent and effect of the Amendment will be considered a little later. On this finding, the view of the High Court cannot be sustained.

18. Contention of the Respondents that the Amendment should be read as retrospective being a piece of social legislation cannot be accepted. Even a social legislation cannot be given retrospective effect unless so provided for or so intended by the legislature. In the present case, the legislature has expressly made the Amendment applicable on and from its commencement and only if death of the coparcener in question is after the Amendment. Thus, no other interpretation is possible in view of express language of the statute. The proviso keeping dispositions or alienations or partitions prior to 20th December, 2004 unaffected can also not lead to the inference that the daughter could be a coparcener prior to the commencement of the Act. The proviso only means that the transactions not covered thereby will not affect the extent of coparcenary property which may be available when the main provision is applicable. Similarly, Explanation has to be read harmoniously with the substantive provision of Section 6(5) by being limited to a transaction of partition effected after 20th December, 2004. Notional partition, by its very nature, is not covered either under proviso or under Subsection 5 or under the Explanation.”

83. By now, it is well settled law that a substantive provision unless specifically made retrospective or otherwise intended by the Parliament should always be held to be prospective. The power to confiscate and consequent forfeiture of rights or interests are drastic being penal in nature, and therefore, such statutes are to be read very strictly.  However, there can be no exercise of powers under such statutes by way of extension or implication (vide O. Konavalov (supra).

84. In the case of D.L.F. Qutab Enclave Complex Educational Charitable Trust (supra), the Apex Court of the land in no uncertain terms observed that extraordinary legislation must be strictly construed and a penal statute must receive strict construction. The Supreme Court further observed that the mischief of rule, if applied, in view of amendment made would be in infraction to the provisions of Article 20 of the Constitution of India, cannot be given retrospective effect.  Similar is the position operating in the instant batch of cases at hand.  The rights accrued in favour of any person owing to a transaction in the nature of contract protected under a statute, in that event transgression/violation of those rights could only be by a legislation with retrospective effect.

85. In view of the settled legal proposition that no authority, much less, a quasi- judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly; is a question that is always open for scrutiny by the High Court in an application under Article 226/227 of the Constitution of India.  The very question of correctness and legality of the issuance of notice can be examined in exercise of writ jurisdiction.

86. In the case of Mangathai Ammal (died) through L.Rs. & ors. (supra), the Apex Court of the land while dealing with issue of retrospective effect of the Benami Amendment Act, 2016, in unambiguous terms held that Benami Transaction Act would not be applicable retrospectively.  At this juncture, it would be relevant to take note of the text of para 12 of the said judgment which reads thus:

“12. It is required to be noted that the benami transaction came to be amended in the year 2016. As per Section 3 of the Benami Transaction (Prohibition) Act 1988, there was a presumption that the transaction made in the name of the wife and children is for their benefit. By Benami Amendment Act, 2016, Section 3(2) of the Benami Transaction Act, 1988 the statutory presumption, which was rebuttable, has been omitted. It is the case on behalf of the Respondents that therefore in view of omission of Section 3(2) of the Benami Transaction Act, the plea of statutory transaction that the purchase made in the name of wife or children is for their benefit would not be available in the present case. Aforesaid cannot be accepted. As held by this Court in the case of Binapani Paul (Supra) the Benami Transaction (Prohibition) Act would not be applicable retrospectively. Even otherwise and as observed hereinabove, the Plaintiff has miserably failed to discharge his onus to prove that the Sale Deeds executed in favour of Defendant No. 1 were benami transactions and the same properties were purchased in the name of Defendant No. 1 by Narayanasamy Mudaliar from the amount received by him from the sale of other ancestral properties.”

87. Article 20 of the Constitution of India is fundamental right guaranteed under Part-III of the Constitution and the penal consequences emanating from the Benami Amendment Act, 2016,

in infraction to the mandate of fundamental rights guaranteed under Article 20 of the Constitution; cannot be given retrospective effect in absence of a clear stipulation by the Parliament on retrospectivity.

88. In the case of Joseph Isharat (supra), relying upon the opinion of the Apex Court of the land in the case of R. Rajagopal Reddy (Dead) by L.Rs. and Ors. (supra) while examining the provisions of amendment introduced by the Legislature through Benami Amendment Act, 2016, made effective from 1st November, 2016, the Bombay High Court observed thus:

4. Under the Benami Act, as it stood on the date of the suit as well as on the date of filing of written statement and passing of the decree by the courts below, provided for the definition of a "benami transaction" under clause (a) of Section 2. Under that provision, any transaction in which property is transferred to one person for consideration paid or provided by another came within the definition of "benami transaction". Section 3 of the Benami Act, in sub-section (1), provided that no person shall enter into any benami transaction. Sub-section (2) contained two exceptions to the prohibition contained in sub-section (1). The first exception, contained in clause (a) of sub-section (2), was in respect of purchase of property by any person in the name of his wife or unmarried daughter. In the case of such purchase, it was to be presumed, unless the contrary was proved, that the property was purchased for the benefit of the wife or unmarried daughter, as the case may be. Simultaneously, Section 4 of the Benami Act contained a prohibition in respect of right to recover property held benami. Sub-section (1) provided 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 person, shall lie by or on behalf of a person claiming to be the real owner of such property. Sub-section (2) made provisions likewise in respect of a defence based on a plea of benami transaction. Sub-section (2) provided that 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, claim or action by or on behalf of a person claiming to be the real owner of such property. There was a twofold exception to this restriction. First was in respect of the person in whose name the property is held being a coparcener in a Hindu undivided family and the property being held for the benefit of the coparceners of the family. The second exception was in respect of the person, in whose name the property was held, being a trustee or other person standing in a fiduciary capacity and the property being held for the benefit of another person for whom he was such trustee or towards whom he stood in such capacity. The present suit was filed when these provisions were in operation. These provisions continued to apply even when the written statement was filed by the Defendant and the suit was heard and decreed by both the courts below. The legal provisions continued to apply even when the second appeal was filed before this court. It is only now during the pendency of the second appeal, when it has come up for final hearing, that there is a change in law. The Benami Act has been amended by the Parliament in 2016 with the passing of the Benami Transactions (Prohibition) Amendment Act, 2016. This amendment has come into effect from 01 November 2016. In the Amended Act the definition of "benami transaction" has undergone a change. Under the Amended Act "benami transaction" means (under Section 2(9) of the Act) a transaction or an arrangement 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 the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration. There are four exceptions to this rule. The first is in respect of a karta or a member of a Hindu undivided family holding the property for the benefit of the family. The second exception is in respect of a person standing in a fiduciary capacity holding the property for the benefit of another person towards whom he stands in such capacity. The third exception is in the case of an individual who purchases the property in the name of his spouse or child, the consideration being provided or paid out of the known sources of the individual. The fourth exception is in the case of purchase of property in the name of brother or sister or lineal ascendant or descendant where the names of such brother or sister or lineal ascendant or descendant, as the case may be, and the individual appear as joint owners in any document. Sub-section (1) of Section 3 contains the very same prohibition as under the unamended Act, in that it prohibits all benami transactions. Section 4 likewise prohibits suits, claims or actions or defences based on the plea of benami as in the case of the unamended Act. The submission is that under this scheme of law, step-daughter not having been defined under the Benami Act, but having been defined under the Income Tax Act, 1961, by virtue of sub-section (31) of Section 2 of the amended Benami Act, the meaning of the expression will be the one assigned to it under the Income Tax Act. The definition of daughter under the Income Tax Act admits of a step-child within it. It is submitted that under the amended definition of "benami transaction", thus, there is a clear exception in respect of a purchase made in the name of a step-daughter by an individual provided, of course, the consideration has been provided or paid out of known sources of the individual. 7. What is crucial here is, in the first place, whether the change effected by the legislature in the Benami Act is a matter of procedure or is it a matter of substantial rights between the parties. If it is merely a procedural law, then, of course, procedure applicable as on the date of hearing may be relevant. If, on the other hand, it is a matter of substantive rights, then prima facie it will only have a prospective application unless the amended law speaks in a language "which expressly or by clear intention, takes in even pending matters.". Short of such intendment, the law shall be applied prospectively and not retrospectively. 8. As held by the Supreme Court in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan (1995) 2 SCC 630, Section 4 of the Benami Act, or for that matter, the Benami Act as a whole, creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transaction and for whom new liabilities are created under the Act. Merely because it uses the word "it is declared", the Act is not a piece of declaratory or curative legislation. If one has regard to the substance of the law rather than to its form, it is quite clear, as noted by the Supreme Court in R. Rajagopal Reddy, that the Benami Act affects substantive rights and cannot be regarded as having a retrospective operation. The Supreme Court in R. Rajagopal Reddy also held that since the law nullifies the defences available to the real owners in recovering the properties held benami, the law must apply irrespective of the time of the benami transaction and that the expression "shall lie" in Section 4(1) or "shall be allowed" in Section 4(2) are prospective and apply to the present (future stages) as well as future suits, claims and actions only. These observations clearly hold the field even as regards the present amendment to the Benami Act. The amendments introduced by the Legislature affect substantive rights of the parties and must be applied prospectively.”

89. It is also a fact that an SLP instituted against the opinion (supra), has also been declined by the Supreme Court on 28th April, 2017 in Special Leave to Appeal (C) No. 12328/2017.

90. In the case of Mohar Singh (supra), the Apex Court of the land dealt with the consequences of repeal of the Act. The question in the case of Zile Singh (supra), was related to disqualification from being a member of Municipal Council (if children were more than two). Thus, there was no violation of any fundamental right or penal consequence contemplated. Hence, the principles cannot be applied to the controversy raised in the instant batch of writ applications. Similarly, in the case of Yogendra Kumar Jaiswal (supra), the observations made by the Apex Court of the land while dealing with the issue of confiscation or attachment of money/property that was acquired illegally and that too at an interim stage of prosecution.

91. In the case of Titaghur Paper Mills Co. Ltd. and Ors. (supra), the matter that fell for consideration of the Supreme Court, was with regard to ultra vires/jurisdiction of Sales Tax Officer and no question of law was involved therein.

92. In the case of Gujarat Ambuja Cement Ltd. and Ors. (supra), while dealing with scope and ambit of writ application under Article 226 of the Constitution of India, the Supreme Court observed that what is to be ensured before entertaining such an application is that a strong case is made out and there exists no ground to interfere in extra-ordinary jurisdiction. It was further observed that where under a statute there is an allegation of infringement of fundamental right or when on the undisputed facts the Taxing Authorities are shown to have assumed jurisdiction which they do not possess, can be the grounds for entertaining writ application. To the same effect is opinion of the Supreme Court in the case of Harbanslal Sahnia and ors. (supra).

93. For the reason aforesaid and in the backdrop of the settled legal proposition so also in view of singular factual matrix of the matters herein; this Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect.”

Calcutta High Court Judgement

“By an amendment an existing Act is supplemented by new provisions adding to or subtracting from it. It is usual that parts of the existing Act are retained. Say for example, there is a provision in the existing Act for penalty in the case of acquisition of property described as benami. If the definition of benami property, its acquisition and the penal provisions remain unaltered after the amendment, and the alleged contravention took place before the amendment, it would not affect any proceeding taken in respect of that contravention, after the amendment, because these provisions are continued by the amending Act, untouched and unaffected by it. But take the case here. The definitions of benami transaction and property are radically changed by the amending Act. So are the provisions regarding investigation of contraventions, offences etc., the consequence of it namely, confiscation, prosecution etc. The show-cause notice dated 29th August, 2017 was issued under Section 24(1) of the 1988 Act as amended. It referred to the alleged benami transaction by the appellant under Section 2(8) and 2(9)(D) thereunder. Therefore, to allege contravention of the 1988 Act as amended in 2016 the contravention should have been made after the date of coming into force of the amendment. In the absence of retrospective operation of the amending Act, one cannot allege that the transaction resulting in the said contravention of the 1988 Act as amended in 2016 took place in 2011. That is exactly what the impugned show-cause notice proposed to do.

Now, it is an accepted principle of law that the statute cannot have any retrospectivity unless expressly provided therein. In Rao Shiv Bahadur Singh and Anr. Vs. State of Vindhya Pradesh reported in AIR 1953 SC 394, the Supreme Court was concerned with the interpretation and application of Article 20 of our Constitution. The court remarked that "this article in its broad import has been enacted to prohibit convictions and sentences under ex-facto laws." It defined ex-post facto laws as those which "voided and punished what had been lawful when done."

This case was cited to support the argument that the 2016 amendment could not be utilized to charge the appellant with contravention or convict him for an alleged offence under it but which was not so under the 1988 Act.

All the above authorities were cited by Mr. Khaitan. I reject the contention of the Additional Solicitor General that the provision in Section 1(2) of the said Act automatically made the amending Act of 2016 retrospective. The 2016 amendment is a new legislation and in order to have retrospectivity it should have been specifically provided therein that it was intended to cover contraventions at an earlier point of time. That express provision is not there. Therefore, this contention of the Additional Solicitor General fails.

Now, I come to the second most important point.

This point raised by Mr. Khaitan is also very substantial. Section 5 of the 1988 Act before amendment provided for acquisition of benami property. Section 3 provided for punishment with imprisonment for a term extending to three years for persons entering into a benami transaction, which was made non-cognizable and bailable.

That the property was benami would be held to be so and acquired following a procedure to be prescribed.

Now, it follows that a decision whether a property was benami or not had to be made followed by acquisition and initiation of criminal proceedings, if one has to make a proper construction of the said Act. A declaration that the property was benami could not have been made unless a procedure was prescribed by rules made under Section 8. No rules under that section were ever made. Hence, although the Act was entered in the statute book, it was an Act on paper only and inoperative. By the addition of Chapter III to the Act by the Amendment Act of 2016, an adjudicating authority and its composition, jurisdiction and powers were provided.

Exercising powers under Section 28(2) read with Section 59 of the Amendment Act the Central Government by a Notification No. SO 3290E dated 25th October, 2016 notified specified Income Tax Authorities to act as "Initiating Officer, Approving Authority and Administrator" for benami transactions. Furthermore, by another Notification No. SO 3288E dated 25th October, 2016 Adjudicating Authority was notified. In P. Kasilingam & Ors. Vs. P.S.G. College of Technology & Ors. reported in 1995 Supp (2) SCC 348, the Supreme Court said: "Moreover, the Act and the Rules form part of a composite scheme. Many of the provisions of the Act can be put into operation only after the relevant provision or form is prescribed in the Rules. In the absence of the Rules the Act cannot be enforced."

In Canbank Financial Services Ltd vs Custodian & Others reported in (2004) 8 SCC 355 the Supreme Court specifically held in paragraph 67 that the said Act of 1988 had not been made workable as no rules under Section 8 of the said Act for acquisition of benami property had been framed. These two cases were also cited by Mr. Khaitan. Section 6(c) of the General Clauses Act, 1897 is most important. It lays down that repeal of an enactment, which necessarily includes an amendment, would not affect "any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed", unless a different intention is expressed by the legislature. Without question, the omission on the part of the government to frame rules under Section 8 of the 1988 Act rendered it a dead letter and wholly inoperative. Assuming that the appellant had entered into a benami transaction in 2011, no action could be taken by the Central government, in the absence of enabling procedural rules. It is well within the right of the appellant to contend that the Central government had waived its rights. It could also contend that no criminal action could be initiated on the ground of limitation. Now, these rights which had accrued to the appellant could not, in the absence of an express provision be extinguished by the amending Act of 2016. In other words, applying the definition of benami property and benami transaction the Central government could not, on the basis of the 2016 amendment allege contravention and start the prosecution in respect of a transaction in 2011.

For the reasons given above, the main show- cause notice dated 29th August, 2017 and the subsequent notice dated 9th October, 2017 issued by the respondents are a nullity, in my opinion.”

Observation by Honourable Delhi High Court

“The Delhi High court on Wednesday asked the income tax department whether it intended to examine under the new benami law, all accommodation entries made prior to 2016, when it came into effect.” “ Justice Vibhu Bakhru said if the newly amended benami law was being interpreted by the tax department in such a manner as to give it retrospective effect from 1988, when the legislation was first enacted, then it would lead to reopening of 23-30 years old cases, many of which would have gone all the way to the Supreme court. You have to take a clear stand on how this act would be administered, the court told the tax department and added that the issue would have huge ramifications.”  

Calcutta High Court order (supra) stayed by Honourable Supreme court

“In the meantime, the operation of the impugned order insofar as it holds that 2016 amendment of the Benami Transactions Act, 1988 was prospective in nature, shall remain stayed.”

Speaking of some brass tacks

Discussion above would make it amply clear that retrospectivity of the amended law is ridden with several nuances and indeed is far from simple and resolution.

Intention of the Government

It is acknowledged that the real test to ascertain its retrospectivity or otherwise has to be gathered from the language of the amendment act itself, both implicit or explicit. Yet, it is interesting to refer to what is stated in paragraph 5 of the 28th  Report of Standing Committee on Finance, Ministry of Finance ( Department of Revenue) on The Benami Transactions (Amendment ) Bill, 2015 and it read “The present Bill Benami Transactions (Prohibition) Amendment Bill is a Bill to amend the 1988 Act and remove the infirmities present therein. The reasons for introducing an Amendment Bill to the 1988 Act instead of preparing a new bill are as under: “In this context it is submitted that a new bill incorporating the above features was prepared and forwarded to the Ministry of Law. In the Repeals and savings clause, a specific sub-clause had been included, so as to ensure that any benami transaction which had been undertaken by any person between the year 1988 and the date the proposed Bill coming into force, was also covered under the new legislation.  This implied that Benami transactions on which no action was taken under the 1988 Act, would be recognized as a Benami transaction under the new Act, and consequential action would follow.  The Ministry of Law was of the opinion that aforesaid provision was unconstitutional in view of Article 20 of the Constitution, and therefore, could not be included in the repeals and savings. Therefore, no action would be possible on any such transaction which occurred between 1988 and the date of repeal of the 1988 Act.  As a consequence, the Benami transactions during the period of twenty- six years, would be in fact granted immunity since no action could be initiated in the absence of a specific provision in the Repeals and Savings clause. It was therefore suggested by the Ministry of Law, that it would be advisable to comprehensively amend the existing Benami Transactions (Prohibition) Act, 1988, so that the offences committed during the last twenty- six years are also covered.  This would enable action against Benami transactions undertaken after the commencement of the 1988 Act. Therefore, the present Bill is an Amendment Bill and not a Bill proposing a new Act.”  In this context, reference to discussion in the parliament on the amendment act, replies of the minister on the floor of the house and similar other documents may serve as useful guide as aid to construction, but we are moving forward on this for the time being.

Retrospectivity, if at all held so, cannot travel beyond 1988

It is safer to assume that the amended act will not have application as far as transactions entered into in the period before coming into force the Principal Act of 1988 or ordinance as the case may be. The law held and settled by the honourable supreme court in R. Rajagopal Reddy & Ors. Vs Padmini Chandrashekharan (supra) will hold the field.  In our view, what is held by the highest court of the land in interpreting section 4(1) and section 4(2) of the Principal Act will also continue to hold good as far as pending suits are concerned.

What really is on the table, therefore.  

Recapitulating the fact sheet once again; we have the only two high courts’ ruling wholesomely against the retrospectivity, then we have a stay by the highest court of the country staying one of such judgements, therefore, things are even steven, for the time being. Nuances seem to be far from simpler as far the retrospectivity or retroactivity is concerned. Reasons are not far to seek when one delves little deeper the skin. It is important to start with these triggers and then test them on touchstones of well laid and well tested principles on the subject:

• When the Legislature has, in its wisdom, has preferred to enliven an enactment which in courts’ language and in the language of the committees appointed by the parliament was a “paper tiger”; when the purported better choice would have been to repeal this nearly three decades old pauper and bring new enactment with limited retroactivity or retrospectivity;
• When the Amending Act of 2016 has no independent and separate object and its only object is to amend the principal act of 1988;
• When there is the visible approach running throughout the amending act to legislate by substitution;
• When a good part of the amending act deals with procedure apparatus and machinery, lack of which was the hallmark of the principal act of 1988;
• When there is allowed to exist in the amended act an intelligible differentia between the offences under the principal act and the offences committed in the post amendment period;
• When sub section 3 of section 3 of the amendment act provides specifically that “ whoever enters into benami transaction on or after the date of commencement of the Benami Transaction (Prohibition) Amendment Act 2016, shall, notwithstanding anything contained in sub section (2), be punishable in accordance with the provisions contained in chapter VII.”   
•  When the definition of benami transactions as well as several other provisions of the amendment act create fresh obligations, liabilities and or substantive in nature;
• When in clause A of section 2(9) defining the definition of benami transaction, it is stated that benami transaction means transaction or arrangement where the property is transferred to, or is held by, a person the consideration for which is paid or provided by another person. In this the phrase “the property is held by” is of quite curious character. For the purpose of benami transaction, it is not the date of transfer which is of only relevance but the date when the property is held so is also of significance.

Approach to judge retrospectivity

It is amply clear that the new benami law is not made retrospective expressly. The real challenge is to find out whether it is retrospective by necessary implications and if yes to what extent.

Having set out the context and the text in which the new enactment is cast, one can spell out the approach to decide on the question whether the benami act as a whole or parts therefore are retrospective by necessary implications. In this approach, one should test the new law or parts thereof, which is subject matter of scrutiny at the given point of time, as the case may be, on following touchstones:

That part of the Law which is procedural

There cannot be any denial that a good part of the amended benami act comprises of procedural law; starting with chapter III-dealing with authorities and comprised of section 7 to section 23, chapter V-dealing with Appellate Tribunal and comprised of section 30 to 49, part of chapter IV-dealing with Attachment, Adjudication and Confiscation and comprised of sections 24 to section 29, Chapter VI-dealing with Special Courts and comprised of section 50 to section 52 and large part of chapter VIII-dealing with miscellaneous provisions and comprised of section 56 to section 72. The presumption in respect of procedural law is that these are retrospective unless there is express or implied intendment otherwise. What is held in following cases by the honourable Supreme Court should be clinching on this issue.

Judgement of 1995

“64. A statute dealing with substantive rights differs from a statute which relates to procedure or evidence or is declaratory in nature inasmuch as while a statute dealing with substantive rights is prima facie prospective unless it is expressly or by necessary implication made to have retrospective effect, a statute concerned mainly with matters of procedure or evidence or which is declaratory in nature has to be construed as retrospective unless there is a clear indication that such was not the intention of the legislature. A statute is regarded retrospective if it operates on cases or facts coming into existence before its commencement in the sense that it affects, even if for the future only, the character or consequences of transactions previously entered into or of other past conduct. By virtue of the presumption against retrospective applicability of laws dealing with substantive rights transactions are neither invalidated by reason of their failure to comply with formal requirements subsequently imposed, nor open to attack under powers of avoidance subsequently conferred. They are also not rendered valid by subsequent relaxations of the law, whether relating to form or to substance. Similarly, provisions in which a contrary intention does not appear neither impose new liabilities in respect of events taking place before their commencement, nor relieve persons from liabilities then existing, and the view that existing obligations were not intended to be affected has been taken in varying degrees even of provisions expressly prohibiting proceedings. (See: Halsbury’s Laws of England, 4th Edition Vol. 44, paras 921, 922, 925 and 926). 

Another Judgement of Honourable Supreme court

“8. The contention of the learned Counsel that recourse could not be had to the amended Section 23(1) read with Section 23C of the Act in respect of the contravention of Section 12(2) for failure on the part of the appellants to repatriate foreign exchange on shipments of manganese ore made prior to September 20, 1957, and there could be no initiation of adjudication proceedings under the amended Section 23(1) read with Section 23C or levy of penalty on the appellants must also fail for another reason. In Sukumar Pyne’s case the Court reversed the decision of the Calcutta High Court in Sukumar Pyne v. Union of India and Ors., AIR 1962 Calcutta 590 striking down Section 23(1)(a) as being violative of Article 14 of the Constitution. Regarding the point, namely, whether Section 23(1)(a) having been substituted by Amendment Act XXXIX of 1957 would have retrospective operation in respect of the alleged offence which took place in 1954, the High Court came to the conclusion that the petitioner had a vested right to be tried by an ordinary court of the land with such rights of appeal as were open to all and although Section 23(1)(a) was procedural, where a vested right was affected, prima facie, it was not a question of procedure. Therefore, the High Court came to the conclusion that the provision as to adjudication by the Director of Enforcement could not have any retrospective operation. It was held that ‘the impairment of a right by putting a new restriction thereupon is not a matter of procedure only’. It impairs a substantive right and an enactment that does so is not retrospective unless it says so expressly or by necessary intendment. The Court reversed the High Court decision and held that effect of these provisions was that after the amendment of 1957, adjudication or criminal proceedings could be taken up in respect of a contravention mentioned in section 23(1) while before the amendment only criminal proceedings before a Court could be instituted to punish the offender. In repelling the contention advanced by Shri N.C. Chatterjee that the new amendments did not apply to contravention which took place before the Act came into force, the Court observed:

In our opinion, there is force in the contention of the learned Solicitor-General. As observed by this Court in Rao Shiv Bahadur Singh vs. The State of Vindhya Pradesh (1953) SCR 1188, a person accused of the commission of an offence has no vested right to be tried by a particular court or a particular procedure except in so far as there is any constitutional objection by way of discrimination or the violation of any other fundamental right is involved. It is well recognised that "no person has a vested right in any course of procedure" (vide Maxwell 11th Edition, p. 216), and we see no reason why this ordinary rule should not prevail in the present case. There is no principle underlying Art. 20 of the Constitution which makes a right to any course of procedure a vested right.”

That part of the law which is clarificatory or directory

First a word about the declaratory statutes as held by the honourable Supreme Court and then to see if any part of the benami act is hit by this rule.

“Declaratory enactment declares and clarifies the real intention of the legislature in connection with an earlier existing transaction or enactment, it does not create new rights or obligations. On the express language of Section 3, the Act cannot be said to be declaratory but in substance it is prohibitory in nature and seeks to destroy the rights of the real owner qua properties held benami and in this connection it has taken away the right of the real owner both for filing a suit or for taking such a defence in a suit by benamidar. Such an Act which prohibits benami transactions and destroys rights flowing from such transactions as existing earlier is really not a declaratory enactment. With respect, we disagree with the line of reasoning which commanded to the Division Bench. In this connection, we may refer to the following observations in ‘Principles of Statutory Interpretation’, 5th Edition 1992, by Shri G.P. Singh, at page 315 under the caption ‘Declaratory statutes’:

The presumption against retrospective operation is not applicable to declaratory statutes. As states in CRAIES and approved by the Supreme Court: "For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error whether in the statement of the common law or in the interpretation of statutes. Usually, if not invariably, such an Act contains a preamble, and also the word ‘declared’ as well as the word enacted". But the use of the words ‘it is declared’ is not conclusive that the Act is declaratory for these words may, at times be used to introduce new rules of law and the Act in the latter case will only be amending the law and will not necessarily be retrospective. In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language ‘shall be deemed always to have meant’ is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law when the constitution came into force the amending Act also will be part of the existing law.”

In the context of amended benami act, one can clearly see that no separate object is imputed to it except to amend the act of 1988. Barring that one feature of the declaratory act, on a serious scrutiny of it, nothing comes out from its language to suggest that it is declaratory or clarificatory. 

That part of the Law which is hit by mischief rule

In our opinion, this rule may weigh quite heavily in favour of retrospectivity of the act or parts thereof. In support of this contention we have to refer to the observation of judgement of the honourable Supreme Court when it held “5. Two reasons have operated on my mind to lead me to the conclusion that the general rule should not be applied in the present case. First, it is recognised that the general rule is not invariable and that it is a sound principle in considering whether the intention was that the general rule should not be applied, to "look to the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of the law and what it was that the Legislature contemplated." : see Pardo v. Bingham (1869) L.R. 4 Ch. A. 735. Again in Craies on Statute Law, 6th ed., it is stated at p. 395, "If a statute is passed for the purpose of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right." To the same effect is the observation in Halsbury’s Laws of England, 3rd ed., vol. 36 p. 425. This seems to me to be plain common sense. In ascertaining the intention of the legislature, it is certainly relevant to enquire what the Act aimed to achieve. In Pardo v. Bingham L.R(1869)Ch. A. 735 a statute which took away the benefit of a longer period of limitation for a suit provided by an earlier Act was held to have retrospective operation as otherwise it would not have any operation for fifty years or more in the case of persons who were at the time of its passing residing beyond the seas. It was thought that such an extraordinary result could not have been intended. In R. v. Vine (1875) 10 Q.B. 195 the words "Every person convicted of felony shall for ever be disqualified from selling spirits by retail…. and if any person shall, after having been so convicted, take out or have any licence to sell spirits by retail, the same shall be void to all intents and purposes" were applied to a person who had been convicted of felony before the Act was passed though by doing so vested rights were affected. Mellor J. observed, (pp. 200-201). "It appears to me to be the general object of this statute that there should be restrains as to the persons who should be qualified to hold licences, not as a punishment, but for the public good, upon the ground of character… A man convicted before the Act passed is quite as much tainted as a man convicted after; and it appears to me not only the possible but the natural interpretation of the section that anyone convicted of felony shall be ipso facto disqualified and license, if granted, void.”

That part of the law which is hit by Article 20 of the Constitution

This article is part III of the Constitution and is extracted below for ready reference.

 20. (1) No person shall be convicted of any offence except for violation of a 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.

(2) No person shall be prosecuted and punished for the same offence more than once.

(3) No person accused of any offence shall be compelled to be a witness against himself.

Article 20, it must be noted, prevails over both express and by necessary implications and therefore conviction of offence will in accordance with law in force at the time commission of the act only. So, would also be the case with imposition of penalties.

A point of contention may arise in respect of benami transaction in clause A of section 2(9) which stipulates that benami transaction means any transaction or arrangement where property is held by a person the consideration for which is paid or provided by other person. The argument could be that in such cases where the property is continued to be held so, even as a result of transfer on a date which precedes the commencement of the act of 2016, benami transaction takes place on the date coming into force of the amended act and the law in force in the amended act should apply to such benami transaction and Article 20 will not be bar on higher punishment. This view may not hold good for the reasons below, in our view:

• Object of the Benami act is to hit the benami transaction and not benami property per se. The amended act had made a clear distinction and demarcation in two categories of cases; one those covered under section 3(2) and two, those covered under section 3(3).
• The words “is held” in the definition of benami transaction in clause A of section 2(9) cannot be construed to mean continued to be held. The words “is held” has to read at the time of entering into of a transaction or arrangement and not anytime thereafter.
• Emphasis in sub section1 and sub section 2 and sub section 3 of section 3 is on the words whoever enters into.  The word enter is used as verb and that necessarily is an activity at a point of time only.
• Therefore, the words “is held” in clause A of section 2(9) cannot cover the benami transaction entered into before the date of commencement of the amendment act 2016.
• Any other interpretation of the words above would make section 3(2) otiose which cannot be object of the act.
• Therefore, punishment for the benami transaction entered into before the commencement of the act will be governed by section 3(2) and the transaction on or after the commencement of the act will be governed by section 3(3).     

That part of the law which is incorporated by substitution

One should not lose sight of the fact that several provisions in the amended act have been brought through the route of substitution rather than repeal alone. Such legislation has its significance. In the words of the honourable Court it is stated “What is the meaning and effect of the expression employed therein – "shall be substituted".

24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. ‘Substitution’ has to be distinguished from ‘supersession’ or a mere repeal of an existing provision.

25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (See Principles of Statutory Interpretation, ibid, p.565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. and Ors. v. State of U.P. and Ors. [2002]1SCR897, State of Rajasthan v. Mangilal Pindwal: (1997) IILLJ756SC. Koteswar Vittal Kamath v. K. Rangappa Baliga and Co. – [1969]3SCR40 and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael and Ors. AIR1963SC933. In West U.P. Sugar Mills Association and Ors.’s case (supra) a three-Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal’s case (supra) this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar’s case (supra) a three-Judges Bench of this Court emphasized the distinction between ‘supersession’ of a rule arid ‘substitution’ of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place.”

Concluding Remarks

To sum up, as far as the amended law which deals with substantive provisions and new obligations is concerned, it is most likely to be continued to be held prospective. It should not be in any doubt, though, that Principal act was and is was always on the statute book and cannot be wished away. The real challenge, therefore, for the highest court of the country would be as to how to operationalize the Principal Act of 1988 with the help of machinery and procedural provisions of the amended act. Machinery and Procedural provisions, in their essential characteristics are retrospective and there should not be major problem to that extent.  But certainly, operationalisation would involve upsetting in some cases of transactions of nearly three decades vintage and to pass the muster of fairness and reasonableness will require an ingenuity, of greater order, on the part of the highest court. 

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