Case Law Details
Chhaganbhai Bholidas Patel Vs Deputy Director of Income Tax (Gujarat High Court)
Summary: The Gujarat High Court heard a petition filed by the petitioner challenging the attachment order passed under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988, as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, along with all consequential proceedings arising from it. The petitioner sought to quash the attachment order and related actions, contending that the 2016 Amendment Act could not be applied retrospectively. The prayer also included a declaration that the provisions of the 2016 Amendment Act were prospective in nature.
The matter was argued by senior counsel for both sides—Mr. S.N. Soparkar for the petitioner, and Mr. M.R. Bhatt for the Initiating Officer, while Mr. Devang Vyas, Additional Solicitor General of India, appeared for the Union of India and the Adjudicating Authority. The Court, after hearing the parties and perusing the record, noted that the issue raised in the petition was no longer res integra (open for adjudication), as it had already been conclusively decided by the Hon’ble Supreme Court in Civil Appeal No.5783 of 2022 dated 23 August 2022.
The Gujarat High Court referred extensively to paragraph 18.1 of the Supreme Court judgment, which held, inter alia:
(a) Section 3(2) of the unamended 1988 Act was unconstitutional for being manifestly arbitrary, and consequently, Section 3(2) of the 2016 Amendment Act was also unconstitutional as violative of Article 20(1) of the Constitution.
(b) The in rem forfeiture provision under Section 5 of the unamended 1988 Act was unconstitutional.
(c) The 2016 Amendment Act contained substantive provisions and was not merely procedural.
(d) The in rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, could only be applied prospectively, not retroactively.
(e) The authorities could not initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to 25 October 2016—the date of enforcement of the Amendment Act. All such proceedings were to stand quashed as a consequence.
(f) The question regarding the constitutionality of independent forfeiture proceedings under the 2016 Act on other grounds was left open for future adjudication.
Applying the above principles, the Gujarat High Court held that since the prosecution and initiation of proceedings in the present case were based on the 2016 Amendment Act, the declaration made by the Supreme Court in paragraph 18(e) was directly applicable. Consequently, the impugned attachment order and all related proceedings were quashed.
The Court further observed that the issue left open by the Supreme Court in paragraph 18.1(f) would also be applicable to the facts of the present case. The petition was accordingly allowed, and no order as to costs was made.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. We have heard Mr. S.N. Soparkar, learned Senior Advocate appearing on behalf of Ms. Nupur D. Shah for the petitioner, Mr. M.R. Bhatt, learned Senior Advocate appearing for respondent No.1 namely the Initiating Officer as defined under Section 2(19) read with Sections 18(1), 24 of the Prohibition of Benami Property Transactions Act, 1988 (for short ‘the Act’) and Mr. Devang Vyas, learned Additional Solicitor General of India appearing for respondent Nos.2 and 3 viz., Union of India and Adjudicating Authority as defined under Section 2(1) read with Sections 18(1)(d) and 24(3) of the Act. Perused the records.
2. Petitioner has prayed for quashing of the attachment order passed under Section 24(3) of the Benami Transactions (Prohibition) Amendment Act, 2016 and the all consequential proceedings initiated pursuant thereto.
3. In this petition, essentially petitioner is seeking for writ of certiorari to declare the provisions of Benami Transactions (Prohibition) Amendment Act, 2016 being prospective and consequently the notices issued to the petitioner and quashing of the orders passed pursuant to the same.
4. Having heard the learned advocates appearing for the parties, we are of the considered view that aforesaid issue is no more res integra in view of the judgment of the Hon’ble Apex Court rendered in Civil Appeal No.5783 of 2022 dated 23.8.2022 whereunder Hon’ble Apex Court after considering the contentions raised thereunder as well as relevant provisions of the Act pressed into service, has arrived at the following conclusion:
“18.1 In view of the above discussion, we hold as under:
a) Section 3(2) of the unamended 1988 Act is declared as unconstitutional for being manifestly arbitrary. Accordingly, Section 3(2) of the 2016 Act is also unconstitutional as it is violative of Article 20(1) of the Constitution.
b) In rem forfeiture provision under Section 5 of the unamended Act of 1988, prior to the 2016 Amendment Act, was unconstitutional for being manifestly arbitrary.
c) The 2016 Amendment Act was not merely procedural, rather, prescribed substantive provisions.
d) In rem forfeiture provision under Section 5 of the 2016 Act, being punitive in nature, can only be applied prospectively and not retroactively.
e) Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016. As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed.
f) As this Court is not concerned with the constitutionality of such independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, the aforesaid questions are left open to be adjudicated in appropriate proceedings.”
5. As could be seen from the aforesaid judgment, it has been clearly held by the Hon’ble Apex Court that authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., 25.10.2016 and as a consequence thereof, all such prosecutions and confiscation proceedings which had been initiated came to be quashed.
6. In that view of the matter, we are of the considered view prosecution and initiation of proceedings in the instant case being pursuant to the Amendment Act the declaration made by the Hon’ble Apex Court in paragraph 18(e) would squarely be applicable and as such, impugned attachment order stands quashed and all consequential proceedings initiated thereto. We also make it clear that question which has been kept open by the Hon’ble Apex Court in paragraph 18.1(f), would squarely be applicable to the facts on hand also.
With aforesaid observation, Special Civil Application stands allowed and we make no order as to costs.
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