Govt goes big time after benami, steep climb ahead

The raging fire over corruption and black money has now reached benami deals. The government’s move on Thursday to allow properties purchased in the name of spouse and siblings under this category shows that it’s determined to remove certain infirmities in the existing Benami Transactions (Prohibition) Act 1988. The express aim here is to get a firmer grip on such transactions and prevent any possible misuse in future.

The government may have taken a high moral ground, but it remains to be seen whether the new Benami Transactions (Prohibition) Bill 2011 will go the distance or meet with the same fate as the current Act. Given various factors at work, the job certainly looks daunting. Under the proposed new law, anyone violating the rule can be jailed for not less than six months, which may be extended to two years and also be liable to a fine.

The Bill excludes from the definition of benami transaction property held by a coparcener (who inherits from ancestors) in a Hindu undivided family and by a person in a fiduciary capacity (a legally appointed person who holds assets in trust on behalf of another), according to a Business Standard report on Friday.

Briefing the media on the Cabinet decision, information and broadcasting minister Ambika Soni said: “…Further, properties acquired by an individual in the name of the 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.” She said the new Bill is wider enough to deal 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.

The minister added that after Cabinet’s approval, the proposed Bill would be placed before Parliament. She, however, did not put a timeframe.

Parliament had in 1988 passed the Benami Act, but it never took off as the rules remained in a state of paralysis. The Act had allowed such deals in the name of wife or unmarried daughter. Besides, it had a longer term of imprisonment of up to three years.

Benami, a Persian word, means without name. In such transactions, a property is purchased in someone else’s name. The person in whose name the property is purchased is not the real beneficiary, but merely represents the real owner.