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                   Facts contradict PM’s claim on Benami Transactions law

 (Image courtesy: nationalmuseaumindia.gov.in)
Prime Minister Narendra Modi has distorted the country’s multi-law battle against benami deals in his zeal to take jibes at the Opposition particularly the Congress and Left parties. 
Benami Transaction Prohibition Act (BTPA),1988 has been enforced and repeatedly taken cognisance of by the judiciary except for the unimplemented provision that enables authorities to seize benami immovable property.
Moreover, the anti-benami/anti-fictitious provisions have been incorporated into corporate, banking and other enactments & regulations over the decades. 
Modiji’s digitally-supercharged advisors should have searched Supreme Court (SC) website to access judgements that have factored in BTPA. Such an approach might have restrained PM from using BTPA gun to take pot shots at his political rivals. 
Before putting the entire domain of benami (literal meaning without name) in perspective, consider what Mr. Modi has stated on BTPA post-demonetization. In his ‘Mann Ki Baat’on 25th December 2016, he stated: “You are possibly aware of a Law about Benami Property in our country which came into being in 1988, but neither were its rules ever framed, nor was it notified. It just lay dormant gathering dust. We have retrieved it and turned it into an incisive law against benami property”.
Speaking at BJP Parliamentary meeting on 16th December 2016, PM referred to BTPA and quipped: “For some reason or the other no regulations were issued under the act. In other words, it remained unimplemented for more than twenty five years.” 
A plain reading of BTPA would show that our beloved PM is twisting facts.
The Act defines property as “property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property”. Section 1(3) of the BTPA reads as: “The provisions of sections 3, 5 and 8 shall come into force at once, and the remaining provisions of this Act shall be deemed to have come into force on the 19th day of May, 1988”.
One of these remaining provisions is the repeal of Sections 81, 82 and 94 of the Indian Trusts Act, 1882 that imparted legitimacy to benami deals. 
When PM says that no rules/regulations were issued under the Act, he was apparently referring to Article 5 of the Act. It says: “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 prescribed.”
Rajiv Gandhi Government left this provision open-ended because BTPA legislation comes under the concurrent list of the Constitution. And the Centre has to rely on States for acquiring benami realty assets as land is a State subject
The nation would be grateful to Modiji if he discloses why he didn’t facilitate enactment of State BTPA law during his 14-yr tenure as Chief Minister of Gujarat
The fact that BTPA has been enforced barring this provision can be verified by flipping through Parliament records as well as judgments delivered by Supreme Court and high courts. Mr. Modi's advisors might like to read Delhi High Court Verdict dated 22nd March 2011 whose subject is mentioned as Benami Transactions (Prohibition) Act, 1988.
The learned advisors are presumably familiar with SC judgment in the Justice P.D. Dinakaran versus Judges Inquiry Committee case. In this verdict dated 26th August 2011, Charge Number 13 reads as “Mr. Justice P.D. Dinakaran further charge against you is that you in your own individual capacity and as the de facto beneficiary of the assets created in the hands of the benamidars and your wife.”
This charge is linked to allegation against him that he entered into “Benami transactions prohibited and punishable under the Benami Transactions (Prohibition) Act, 1988.
The allegation was levelled by 50 members of the Rajya Sabha in “a notice of motion” submitted to President of India for removal of Justice P.D. Dinakaran, who was then posted as Chief Justice of the Karnataka High Court.
It here pertinent to recollect another Supreme Court verdict dated 11th July 2016. It upheld Securities and Exchange Board of India (SEBI) order on demat shares issued under initial public offer of certain companies and subscribed through dubious accounts. 
As noted by the Judgment, “From all the transactions, which are in the nature of a scam, it is clear that the demat account holders were not genuine and either they were benami or fictitious and the shares were purchased on behalf of someone, who had financed these demat account holders and a show was made as if the shares were finally sold to the concerned respondents.”
This brings us to anti-benami prohibiting tool, Know your customer (KYC) guidelines laid down by SEBI, Reserve Bank of India (RBI), other regulatory agencies and leading service providers.
One of the RBI’s earlier master circular on KYC issued to Banks during March 2004 says: “Care should be exercised to ensure that the joint accounts are not used for benami transactions”. The objective of BTPA is thus also achieved through KYC regulations laid under different laws.  
In fact, provisions to thwart Benami transactions were incorporated in certain laws much before BTPA was conceived. Modiji might well finding it interesting to know that the proposal to seize benami property was first put in legal format in early fifties. 
Introducing the Banking Companies (Amendment) Bill,1953 in Rajya Sabha on 14th December 1953, Deputy Minister for Finance late A.C. Guha stated: “we have provided that benami property should also be attached. It is not a question of just seizing and putting it to auction. The liquidator with the help of the court should have the right to attach a benami property. There is a similar provision in the Indian Companies Act in section 235 and we are providing here the same thing, so that it may be easily available to the liquidators.”
He added: “So we are providing here that any property suspected to be benami might be attached by the liquidator and then it will be the responsibility of the director to go before the court and prove that it is not a benami property, and that the property really belongs to the person in whose name it stands.” 
Another case in point is Section 68A of Companies Act. It stated: “(1) Any person who - (a) makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or (b) otherwise induces a company to allot, or register any transfer of, shares therein to him, or any other person in a fictitious name, shall be punishable with imprisonment for a term which may extend to five years”.
Yet another pre-BTPA initiative was unveiled in 1972. Moving the Taxation Laws (Amendment) Bill, 1972 in Rajya Sabha, the Finance Minister, late Y. B. Chavan stated: “Finally, in order to discourage benami holding of property with a view to tax evasion, the Bill seeks to make a provision in the Income-tax Act debarring a person from enforcing his claim in a court of law to any property held for him benami by another person, unless the claimant has disclosed the income from the property in a return of income, or the property itself in a return of net wealth furnished by him. If he has done neither, he may give notice to the Income-tax Officer of his claim to the property, and thereupon the proposed restriction will cease to operate”. 
Apart from preventing or prohibiting benami transactions, the Government has also amended/repealed laws and eased controls, thereby obviating or reducing the urge or compulsion of citizens to forge benami deals. 
A case in point is Urban Land (Ceiling & Regulation Act),1976 in 1999. Similarly, delicensing of most of the industries reduced the need for promoting benami firms to secure licences. 
More such reforms especially competition in all sectors and simplification of tax laws are needed to take the sheen out of benami transactions. 
The historical perspective on benami would not be complete without recapitulating a few facts.
As put by the Law Commission (LC) in its first report on benami transactions issued during August 1973, the practice of benami might have come into existence by reason of a number of factors: A) the joint Hindu family system and a desire to make secret provisions is one factor which led to the practice of  benami; B) fraud on creditors might be another such factor; C) Desire to evade taxes may be another motive of persons entering into benami transactions and D) Benami transactions might also have originated in a desire to avoid certain political and social risks. 
Yet another reason for benami deals especially corporate ones is the urge to bag as much as licences/permits as possible in highly regulated sectors. 
LC report says that , “this custom(benami transactions) has been recognized by Indian courts for a long time.”
In its 2nd report on benami transactions released in August 1988, LC observed: “In the past benami transactions were entered into, when benami was part of the Indian law, Benami transactions came to acquire the legal affirmance by Judge-made law.”
As regards non-enforcement of BTPA’s provision relating to acquisition of benami properties by authorities, Law Ministry pointed out “legal infirmities” in implementation of this provision perhaps as early as 1990. 
A hint about the legal hitch is available in answer to parliament question put during May 1990. The Reply stated: “In order to make it more difficult for assessees to hold wealth in ‘benami’ forms, the Benami Transactions (Prohibition) Act is being reviewed to make it more effective for curbing benami transactions.”
Successive Governments notably NDA Government dragged their feet over amending BTPA.  UPA Government, in 2nd tenure, decided to replace BTPA with a new law. It thus introduced The Benami Transactions (Prohibition) Bill, 2011 in Lok Sabha during August 2011. The Bill lapsed with the dissolution of the 15th Lok Sabha in May 2014.
NDA did not revive this Bill and instead drafted a new one not to replace BTPA but to amend it. The Benami Transactions (Prohibition) Amendment Bill, 2015 was introduced in May 2015. After its enactment, the Government notified Benami Transactions (Prohibition) Amendment Act, 2016 during August 2016 and later notified the rules during October 2016.  This is “incisive law” that Modiji has repeatedly referred to his speech right the day he announced demonetization decision on 8th November 2016.
How incisive the new law would be known only when it is applied to farm land and urban properties held under the power of attorney. 
It is here apt to quote the Working Group (WG) on Land Relations for Formulation of 11th Five Year Plan. In its report submitted during July2006, WG pointed out the “big land owners, in anticipation of (agricultural) ceiling laws had resorted to partitioned and fictitious transfers in benami names on a very large scale.”
Pitching for amendment of BTPA to detect & nullify such transactions, WG also drew attention to the benami land deals that are forged on the basis of inside information about the proposed location of the project and the resulting need to acquire farm land. 
Suffice it to say that challenges in implementation of Modiji’s incisive law are aplenty and daunting.  
A shorter version of this write-up was published by tiolcorplaws.com on 11th January 2016.
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