No retrospective effect of the Benami Law: Bombay HC

M/s. Armstrong Infrastructure Private Limited and Others Vs State of Maharashtra and Others (Criminal WP: 938, 939, 1341 and 1342 OF 2022)

Facts:

A complaint was filed under Section 3(2) r/w Section 62 of the Prohibition of Benami Property Transactions Act, 1988.

The brief allegations are that the accused No.1 – M/s. Armstrong Infrastructure Private Limited had purchased Benami property. The accused had acquired Benami properties by investing ill-gotten money through shell companies.

The properties were acquired through auction from D.R.T. on the basis funds channelized to M/s. Armstrong Infrastructure Private Limited. Initially show cause notice was issued under Section 24(1) of the said Act, which was resulted into attachment of the properties and thereafter, the complaint was filed.

The department alleged that the assets were allegedly created by them using a maze of about four dozen shell companies. Based on the complaint, the magistrate had initiated criminal proceedings against them on November 17, 2021.

The main issue urged by the learned counsel for petitioners is that the alleged transactions had occurred during the period from 2008 to 2011. The aforesaid Act was amended in 2016 and thus the provisions of amended Act cannot be applied retrospectively for the transactions which were performed prior to the amended act coming into force.

Learned counsel for the Petitioners has relied upon the several decisions, such as Nexus Feeds Limited and Others V/s. The Assistant Commissioner of Income Tax [2022(5)] TMI 262 delivered by Telangana High Court, Interim order passed in the case of Mahanti Traders Pvt. Ltd. V/s. Union of India and Others passed by this Court in Writ Petition (L) No.7640 of 2020, Joseph Isharat V/s. Rozy Nishikant Gaikwad 2017 (5) ABR 706 decided by this Court, Ganpati Dealcom Pvt. Ltd. V/s. Union of India and Ors. decided by Calcutta High Court, AIR 2020 Cal 182, and submitted that the Courts have taken a view that the effect of the Amended Act will have to prospective and not retrospective.

Hon Bombay HC held as below:

The issue raised in their petitions was “squarely covered” by the judgment in the case of Union of India & others v/s. Ganpati Delcom Pvt. Ltd.

The Supreme Court had held that the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, cannot have retrospective effect. The Central Board of Direct Taxes (CBDT) has filed a review petition before the SC judgement against its judgment which is pending.

The criminal proceedings are quashed. However liberty is granted to the authorities to revive the proceedings in case the review petition pending before the Supreme Court filed by the CBDT is allowed.

The copy of the order is as under: