All property is not theft

The Supreme Court’s unambiguous assertion of the Constitutional principle of prohibiting retrospective criminal laws has to be welcomed. This issue came up with respect to the poor legislative rigour in the framing of Benami Transactions (Prohibition) Amendment Act, 2016. A three-judge bench led by Chief Justice NV Ramana struck at the root of the statute that disguised criminal/punitive provisions as civil liabilities to punish those who funnelled black money into real estate in India. Such overzealousness in targeting black economy also fell foul of Article 20 of the Constitution, that prohibits the legislature from making retrospective criminal laws -- although it does not restrict similar action on civil liability. The judgement provides relief to thousands of property-holders like the respondent company in the present case which faced criminal prosecution for transactions that were denominated as “benami” prior to 2016. Striking at legislative overreach, the Court has, in fact, declared as unconstitutional Sections 3 and Section 5 of the original Prohibition of Benami Property Transactions Act, 1988, which mandates three years’ imprisonment and forfeiture, respectively, for those who have entered into benami transactions. While doing so, the Court held that the forfeiture provision under the 2016 Act can only be applied prospectively.

Explaining the Centre’s intent in introducing the Amendment to the 1988 Act in 2016, then finance minister Arun Jaitley said in Parliament: ““If we bring a new law and not amendments to the 1988 law, we run the risk of providing immunity to those who have amassed black money in this period.” Jaitley’s argument was that penal provisions for criminal prosecution and confiscation of benami property existed in the original 1988 Act and hence were applicable in the period between 1988 and 2016. They were merely not operationalised till 2016 because the relevant rules had not been framed. Through the enactment of the 2016 Amendment Act and framing of the rules subsequently, Parliament had sought to operationalise the existing law with penal provisions, thereby facilitating retrospective prosecution. The presumption was that Article 20 barring retrospective criminal legislation would not influence these prosecutions because the law was not being applied retrospectively; it already existed in the statute book.

The government accordingly argued before the Supreme Court that the 2016 Act was not substantive but only procedural in operationalising the 1988 Act. But the Court rightly gauged the problem as “a tussle between the normative (subjective opinion) and positivist (hypothesis that can be empirically tested) positions regarding the nature of a crime and punishment”. The judges reassuringly came up with a positivist response, “treating the Constitution as the flag post” to assess whether retroactive prosecution and confiscation under the civil law is punitive/criminal. “…A punitive provision cannot be couched as a civil provision to bypass the mandate under Article 20(1) of the Constitution which follows the settled legal principle that “what cannot be done directly, cannot be done indirectly”. The Court ruled against retrospective application of the confiscatory provision in Section 5, but left the question of its prospective application open. Yet, the provision is suspect. In sum, crucial Constitutional boundaries have been spelt out by the apex court as a reminder to lawmakers.

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