The Benami Transactions (Prohibition) Act, 1988 and its loopholes

I had gone through the Benami Transactions (Prohibition) Act, 1988 earlier but I never noticed the loopholes in it. In fact I had no reason to examine the Act as I never had an opportunity to deal with that Act. It was only yesterday when a journalist called me and told that a Benami Transactions Prohibition Bill is about to take formation and he asked for my suggestions, I went through the Act once again and examined it thoroughly. Although it is the duty of the Legislature and the Legislature will see what are the expedient factors for an amended bill, I am inclined to point out some factors that may be necessary for a revised bill on the prohibition of Benami Transactions.

1.  Section 3 of the Act prohibits any kind of benami transaction whereas no distinction has been made between immovable and movable properties. The Act should clearly state the properties which shall come under the purview of the Act.

2.  The definition of benami transaction should include the sham transactions, in which no transaction actually takes place.

3.  When one is not refrained from entering into a benami transaction with one’s wife/unmarried daughter/coparceners, the object of the Act is not fulfilled and may lead to misuse of law. At the same time there is every chance that it would be difficult to prove such transaction is not made with a view to benefit such persons. On the other hand, if the Legislature takes a liberal view and is inclined to exempt some transactions from the purview of benami transaction, the provision should be made in favour of all the dependants, and not only in favour of wife/unmarried daughter/Hindu coparceners.

4.  When the Act justifies benami transactions in favour of some specific close relatives, it appears quite ridiculous that the said close relatives shall come forward to claim his/her right against the real owner.

5.  As the penal provision is made against the real owner as well as the benamidar, it can not be said that either of them shall take shelter of law to claim his/her right under this Act. In such a case the discovery of a benami transaction shall be that of a third party incident which shall be a rare case.

6.  The Act should clearly state by whom the cognizance may be taken and who should try the case under this Act. The jurisdiction of Court i to be clearly mentioned. Moreover, there should have a lower limit to the discretion of the Court.

In view of the above facts, the Benami Transactions (Prohibition) Act, 1988 must be amended and in such a way that shall suit the timely need of the Act.