THE mantra of the Financial Action Task Force to ‘do more’ regarding our 10-point action plan has provided another window of opportunity for setting our house in order by curbing the menace of terror financing and money laundering.
We are amongst the most vulnerable countries in the world that have their work cut out for them in the form of a vast, undocumented economy. Many have been taken aback by the discovery of bank accounts holding millions of rupees, bounties that the downtrodden ‘owners’ of these accounts were unaware of. Despite the media’s vibrant whistle-blowing and the subsequent knee-jerk reaction shown by the authorities, the tide of this menace has not been turned, as more such accounts surface. On the other hand, real estate has become one of the largest hideouts of assets in the thicket of money laundering. Objectively, some of the legislation, including the Benami Transactions (Prohibition) Act 2017, has provided some light at the end of tunnel.
The act relates to transactions and properties that are without a real name. As per the codified definition, benami property is one that is in the possession of one person (ostensible owner/ benamidar) but consideration is paid by another (real owner/ benami) from his sources, and this arrangement is for the benefit of the real owner. So the benamidar is the transferee or holder of the property which may be benefiting a known/ unknown person (the actual owner).
Historically, benami law has developed through numerous comprehensive judicial interpretations. However, after the promulgation of this law, general rules have been laid down. Firstly, it is prohibited for any person to hold benami property, and in the same way, the ‘right’ to recover such properties by the real owner has been restricted. Secondly, entering into benami transactions or becoming a benamidar has become a non-cognisable punishable offence. Thirdly, benami property is liable to be confiscated. Fourthly, a benamidar cannot transfer benami property to the beneficial owner. Fifthly, all rights, titles, or interests in benami property are to be vested in the government. And lastly, administrators are to be appointed to manage such property by actually taking possession of it.
The ‘benami’ transactions act has provided some light at the end of the tunnel.
However, there are exceptions in the case of certain transactions and properties, including where consideration has been paid to the holder of the property in its fiduciary capacity, or where property is held by a close relative.
The law has attempted to take into account all possible benami transactions, eg those carried out under unidentified/ fake names; when the owner is unaware/ denies such ownership; when the person making the transactions/ arrangements is unknown; if the owner is not aware of or denies knowledge of such property or transaction; and if the person who has paid the consideration cannot be located. So, it is all about unearthing the chain of names, their sources of income, and, most importantly, the documentation of the economy.
This law derives its strength from the tax machinery, as its executing mechanism has empowered the authorities to act for benami transactions too. The nomenclature of these to-be-established authorities has been provided. The initiating officer, for example, can conduct an inquiry regarding any person, property, assets etc. on the basis of the material in his possession. With reason to believe that any person is a benamidar with respect to a piece of property, he may initially attach that property and thereby file a reference before the adjudicating authority.
The authority’s function is judicial in nature, as it involves the ‘adjudication’ of right, title or interest with respect to the benami property. Therefore, transfers of property carried out under the Transfer of Property Act, 1882, are declared null and void. However, the jurisdiction of the civil court does not apply as it is the authority’s exclusive mandate to declare a property benami and settle the matter. The procedure for the attachment of benami property, which was non-existent earlier, has also been incorporated.
Making benami transactions punishable will discourage the purchase of property in the names of front men by public-office holders, money launderers, and tax evaders. Punishment for lawbreakers may extend up to seven years’ rigorous imprisonment, with a fine of up to 25 per cent of the market value of the property. Such a high fine is bound to lead to higher deterrence.
The task of building a comprehensive framework for accountability and the eradication of corruption will not be completed until the benami law becomes part of the exercise. On the to-do list, the top priority should include the establishment of benami authorities with all codal formalities and commitments defined.
The writer is additional collector, KP Revenue Authority.
Published in Dawn, December 4th, 2018