The Hindu Business Line : The unnamed are unchallenged

It was a product of hectic and intense labours of the Law Commission. True, it is beset with definitional glitches and other shortcomings. But instead of setting them right, successive governments seem to have allowed it to languish in cold storage. Section 3(1) of the Act peremptorily bans entering into of benami transactions except that purchase of property in the name of one's wife or unmarried daughter is saved from its rigour.

Anyone violating this ban is punishable with imprisonment for a term which may extend to three years or with fine or with both. Section 4(1) of the Act denies the real owner the right to claim his property held benami through a suit, claim or action against anybody including the benamidar. Section 5 reads the riot act when it says all properties held benami shall be subject to acquisition by such authority, in such manner and after following such procedure, as may be prescribed sans compensation.

It is the Government's reluctance to activate the machinery contemplated by Section 5 that has made the Act a dead letter for all practical purposes. And there seems to be a conspiracy of silence by successive governments on this issue. The grim and inevitable prospect of acquisition by the government without compensation would have put the fear of god in the minds of those toying with the idea of acquiring property benami. But the Government's reluctance to constitute the prescribed authority is emboldening them to go ahead with chutzpah.

Incidentally, the Ordinance which preceded the Act did not contain the provision empowering the Government to seize the benami property without compensation. The Ordinance was, therefore, hailed by socialists as a progressive move in favour of the toiling tillers of land in whose names the wealthy landlords hold the agricultural lands to circumvent the land ceiling laws. But the subsequent inclusion of the seizure clause has come as a damp squib to them.

Besides correcting the definitional glitches, the Government should also make it explicit that the properties seized under the Act would be disposed of in a transparent bid and its proceeds would be used for the prescribed noble causes such as education and health. If this is done, the proposed education cess of 2 per cent on all direct and indirect taxes can be easily dispensed with.

The moot question of course is who will set the ball in motion — how will the properties held benami be identified? If all and sundry are allowed to make complaint to the prescribed authority, there would be no means of sifting the grain from the chaff. There doubtless would be unsubstantiated complaints. The Law Commission was in favour of allowing the registered voluntary organisations to do this. Tax authorities could perhaps be made worthy allies in this noble crusade. They must be allowed to call for information as to the source of funds for acquiring the declared properties purportedly owned by assessees. And wherever they smell fish, they must be allowed to lodge a complaint with the prescribed authority under the Act, which will thereafter take over the investigation culminating in the seizure of property if warranted. Of course this would only address a part of the problem given the fact that income-tax is largely an urban phenomenon.

There is a view that the power to confiscate the benami property is needless. Implied in this view is that the benamidar should be the de facto and de jure owner with the real owner, having been divested of the right to proceed against the benamidar, halted in his tracks. But then this would put premium on name lending if not on dishonesty and is hardly the way to usher in egalitarianism.

As it is, the Act has been left hanging, as it were. It is illegal to enter into benami transactions. The real owner cannot proceed against the benamidar when he wants to surface before the world. But the absence of implementing machinery frustrates the very object of the Act. It is common knowledge that the vast parallel economy thrives, thanks to the institution of benami. The players therein are alleged to include sundry mafia dons, industrialists and politicians.

Pussyfooting by successive governments in constituting the prescribed authority under the Act speaks volumes of Government's will, rather the lack of it, to make a frontal attack on the evil of benami. Many believe that successive governments have developed cold feet on the issue because the Act would hurt the political class more than anybody else.

(The author is a Delhi-based chartered accountant.)

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