SC recalls verdict declaring benami law provisions unconstitutional

On Friday, a bench headed by CJI D Y Chandrachud and comprising Justices J B Pardiwala and Manoj Misra agreed with Solicitor General of India Tushar Mehta’s submission that the constitutional validity of the unamended Act was never a question before the court when it decided the matter first.

“It is undisputed that there was no challenge to the constitutional validity of the provisions of the unamended Act. This is clear from the formulation of the question… In this view of the matter, the review will have to be allowed. It is trite law that the challenge to the constitutional validity of a statutory provision cannot be adjudicated upon in the absence of a live lis (suit) and contest between the parties. Likewise, in the present case, we find after referring to the submissions which have been recorded in the judgment that the issue of constitutional validity was not squarely addressed. We accordingly allow the review petition and recall the judgment,” the bench said.

The SC also restored the civil appeal for fresh adjudication before a bench to be nominated by the CJI on the administrative side. It also allowed all those aggrieved by the application of the 2022 judgment in their cases to seek review of the respective orders.

The verdict in 2022 held as unconstitutional Section 3(2) of the Benami Transactions (Prohibition) Act, 1988, that prescribed a jail term for entering into benami transactions.

The order also held that the Act, which was amended in 2016, can only be applied prospectively and quashed all prosecutions or confiscation proceedings before the amended Act came into force.

The bench also expressed concern on certain findings in the top court’s judgment upholding the Prevention of Money Laundering Act, 2002 allowing authorities to take possession of property before trial in exceptional cases saying it leaves the scope for arbitrary application.

It said, “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”.

The August 2022 ruling had come on an appeal by the Centre challenging a December 2019 decision by the Calcutta HC which had held that the 2016 Act did not have any express provision allowing its retrospective application.