The Union Cabinet today approved the proposal for the enactment of a new legislation in the form of the Benami Transactions (Prohibition) Bill, 2011 to replace the existing Benami Transactions (Prohibition) Act, 1988 and for its introduction in Parliament. During the process of formulating the rules for implementing certain provisions of the present Act which was passed in 1988, it was found that owing to infirmities in the legislation, formulation of the rules would not be possible without a comprehensive legislation by repealing the Act. 

The Bill contains elaborate provisions dealing with the definition of benami transaction and benami property, prohibited benami transactions, consequences of entering into a prohibited benami transaction and the procedure for implementing the benami law. 

Properties held by a coparcener in a Hindu undivided family and property held by a person in fiduciary capacity are excluded from the definition of benami transaction. Further, properties acquired by an individual in the name of spouse, brother or sister or any lineal ascendant or descendant are benami transactions which are not prohibited. Consequently, they are not subject to penal provisions. 

Where any person enters into a benami transaction in order to defeat the provisions of any law or to avoid payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar and any other person who abets or induces any person to enter into such benami transaction, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to two years and shall also be liable to a fine. 

A benami property shall also be liable for confiscation by the Adjudicating Authority after the person concerned has been given due opportunity of being heard. 

Background: 

The major infirmities of the existing Act were: 

1. Powers of a civil court have to be conferred on the authorities under the Act. 

2. Specific provisions have to be introduced for vesting of confiscated property with the Central Government. 

3. An appropriate appellate structure has to be defined, while barring jurisdiction of a civil court against an action taken by the authorities under the Act. 

4. Matters of procedure relating to its administration, notice of hearing to parties concerned, service of notice and orders, powers of the competent authority relating to gathering of evidence etc are to be provided. 

5. The word ‘wife’ needs to be replaced with the word ‘spouse’ and property purchased in the name of certain other family members is to be allowed under the Act.