Basics of Benami Transaction Prohibition Act 2017

Basics of Benami Transaction Prohibition Act 2017

This blog discusses Brief Understanding and Basics of Benami Transaction Prohibition Act 2017. You will find vital information on Benami Transaction(Prohibition) Act 2017, its Definitions, Purpose and Probable Motives behind Benami Transactions, Authorities to regulations, Power of Authorities, LegaI Procedures and powers of Special Courts for Prosecution.

Benami means “without a name”

The word Benami is of Persian Origin. However some says that it is an Indian origin Webster’s dictionary defines the term, “Benami” to mean : made, held, done, or transacted in the name of (another person). Thus, a Benami Transaction, in common parlance, refers to a transaction in which a property is transferred in the name of a person, whereas the consideration for the same is paid by some other person.

To illustrate, where X purchases a property, let’s call it ‘farm house however, the property is not purchased in his own name, but in the name of ‘Y’, though the consideration has flownin from X only. This would be a classic Benami Transaction. The subject matter of such a transaction (‘farm House’ ) is called a “benami property”.

Usually, any Benami Transaction would have two primary actors: a beneficial owner (Mr.X, in our example) and a Benamidar (Y). Benamidar is a real or a fictitious person in whose name the Benami Property is transferred or held. A beneficial owner, on the other hand, refers to the  person, whether his identity is known or not, for whose benefit the Benami Property is actually held by a Benamidar. Simply put, a Benamidar is a mere name lender; a mask or a facade, whereas, it is the beneficial owner who is the real culprit or maccoy.

  • In laymen terms Benami Transaction is a transaction where aperson buys a property in the name of another person or gratuitously transfers property to another person without anintention to benefit that other person

MOST IMPORTANT LEGISLATION

Brief Summary is not expected to provide complete information about the Benami Transaction (Prohibition), Act 2017 and Benami Transaction (Prohibition) Rules 2019.

In Pakistan this is one of the most important legislation which have been introduced in country and will have substantial and far reaching consequences in the fields of finance, tax , banking and other economic fields and  sectors in Basics of Benami Transaction Prohibition Act 2017.

Benami Transactions (Prohibition) Act 2017

  • Approved on August 2016 by the National Assembly’s Standing Committee on Finance
  • Benami Transaction (Prohibition) Act 2017 has been published in 14-02-2017 for general information.
  • Rules notified on 11th March 2019
  • Extends to the whole of Pakistan
  • Prohibits entering into benami transaction or holding of benami property from the date of enactment of the Act {Sec3}
  • Benami property to be confiscated {Sec 4)
  • Prohibits retransfer of property by Benamidar {Sec 5)

“To provide for prohibition of holding property in benami and restrict right to recover or transfer property held benami and provide mechanisms and procedure for confiscation of property held benami”

Definition of Benami Property

Sec 2(7)

Benami Property means

”Any  property  which is the  subject  matter of  benami transaction and also includes the proceeds from such property”

Sec 2(26)

Property means

”Asset of any kind whether moveable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title or interest in the  property and where the property is capable conversion into some other form, then the property in the converted form and also includes the proceeds from the property”

Benami Transaction

Sec 2(8)

Benami transaction means;

A transaction or arrangement where a property is transferred to, or held by, a personand the consideration for such property has been provided, or paid by, another person; and

The property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,

Exceptions created by the Law

Except when the property is held by-

  1. a) A person standing in fiduciary capacity for the benefit of another person towards whom he stands in such capacity and included a trustee, executor, partner, director of a company, agent or legal advisor, and any other person asmay be notified by the Federal Government for this; or
  2. b) Any person being an individual in the name of his spouseor in the name of any child or in the name of his brotheror sister or lineal ascendant or descendant and the individual appearing as Joint owner in any document of such individual and the consideration for such property has been provided or paid out of known sources of income of the individual; or

What is a Benami Transaction?

A transaction or arrangement in respect of a property carried out or made in a fictitious name; or

A transaction or arrangement in respect of a property where the owner of the property is not aware of, or denies knowledge of, such
ownership; or

A transaction or arrangement in respect of property where the person providing consideration is not traceable or is fictitious for Basics of Benami Transaction Prohibition Act 2017.

Who is a Benamidar?

Section 2(9)

Benamidar means

”A person or a fictitious person, as the casemay be, in whose name the Benami property is transferred or held and includesa person who
lends his name;”

Who is Beneficial Owner?

Section 2(11)

Beneficial owner means

”A person/ whether his identity is known or not/ for whose benefit the Benami propertyis held by a Benamidar;/

Factors/Motives Behind Benami Transactions

Factors accounting for the origin of Benami

  • Fraud on creditors
  • Evade taxes
  • Avoid Social and political risk in holding property.
  • parking untaxed profits
  • To hide proceeds of crime/Corruption/Money Laundering
  • To defraud creditors/Banks/Financial Institutions
  • To avoid departmental probe and scrutiny of regulators
  • To avoid certain political and social risks
  • To bye -pass land reforms

EXCLUSION FROM THE PURVIEW OF BENAMI TRANSACTIONS AND ARRANGEMENTS

  • Properties Held By A Person In Fiduciary Capacity
  • Properties acquired out of the known sources of income by an individual in the name of spouse or in the name of any child of such individual and
  • Properties acquired in the joint name of an individual and his brother or sister or lineal ascendant or descendent and acquired from the know sources of income of the individual.
  • Any property held under a benami arrangement or transaction (including proceeds from such property) is treated as benami property.

Authorities regulating Benami Transactions

The following are the authorities under the Act (Sec 15)

Approving Authority: Can only be Commissioner IR. Heads the Benami Zone.

Initiating Officer : Can only be DCIR. Investigates cases and files references.

Administrator: Can only be ACIR. Confiscates and administers benamiproperty.

Adjudicating Authority: Adjudicates in the cases where references have beenfiled and declares whether a property is benami or not and passes the confiscation order

Power of the Authorities

Same powers as vested in Civil court under CCP 1908 while trying a suit in respect of following matters, namely (Sec 16)

  1. Discovery and inspection
  2. Enforcing attendance of any person
  3. Compelling production of books of accounts and otherdocuments
  4. Issuing Commissions
  5. Receiving evidence on affidavits; and
  6. Any other matter which may be prescribed

Proceedings to be deemed judicial proceeding within themeaning of section 193 and 228 of PPC 1860.

Power to Collect information

  • Call for record from any person for the purpose of this act (Sec 18)
  • Power to enter and search premises for the purpose of thisact (Sec 19)
  • Power to impound documents (Sec 20)

Penalties for Benami Transactions

  • Penalty for Benami Transaction (Sec 51)
  • Confiscation of Property
  • Imprisonment for 1 to 7 years and fine up to 25% of FMV of property in question
  • Penalty for False information (Sec 52)
  • Rigorous Imprisonment for 6 months to 5 years and fineup to 10% of Fair market value of property in question

Incentive for whistleblowers

As per the Benami Transaction Rules 2019

  • Price of Benami property Rs. 2 M or less, Amount of Reward  5% of the price of property
  • Price of Benami property Rs. 2 M to 5 M, Amount of Reward Rs. 100k plus 4% of amount exceeding 2 M
  • Price of Benami property Over 5 M, Amount of Reward Rs.220k plus 3% of amount exceeding Rs. 5 M

CASE LAW

IN THE LAHORE HIGH COURT, MULTAN BENCH MULTAN.

JUDICIAL DEPARTMENT

Civil Revision No.1242 of 2019.

Sadiq Rasheed and another.

Versus

Mst. Uzma Rizwan & 10 others.

J U D G M E N T

Date of hearing: 27.09.2021

Petitioners by: Mr. Imran Shahzad Bhatti, Advocate. Respondents by: M/s Muhammad Suleman Bhatti, Syed Tajamal Hussain Bukhari, Mr. Bilal Amin and Malik Nazir Hussain Advocates.

AHMAD NADEEM ARSHAD, J. Through this single judgment, Iintend to decide the instant civil revision as well as connected civil revisions bearing No.1305-D of 2019 & 1306-D of 2019 as common uestion of law is involved in all these civil revisions. The
petitioners have challenged the validity, legality and propriety of impugned judgment and decree dated 24.07.2019 passed by learned Additional District Judge, Multan, whereby while setting aside the judgment and decree dated 04.10.2018 passed by learned Civil Judge, Multan, remanded the case to the learned trial Court to decide the same afresh.

Facts in brevity are that respondent No.1/plaintiff instituted three suits for declaration by seeking declaration to the effect that suit property belongs to her predecessor namely Ghulam Yasin son of Mian Muhammad Maskeen and defendants are only

Benami owners, while actual owner was her predecessor, therefore, respondent No.1/plaintiff along with all other legal heirs are entitled
to get inherit the suit property being legal heirs of Ghulam Yasin. The defendants contested the suits. The learned trial court, while dealing
with the ground of maintainability, rejected the plaints under OrderVII Rule 11 C.P.C., being barred by law under Section 43 of Benami
Transactions (Prohibition) Act, 2017 vide judgments/orders and decrees dated 04.10.2018. Feeling aggrieved, respondent No.1 preferred
three separate appeals, which were allowed by the learned appellate court, vide judgments and decrees dated 24.07.2019. The
petitioners    assailed    the    impugned    judgments    and    decrees    dated 24.07.2019    through    these    civil    revisions.

I have heard the arguments advanced by the learned counsel for the parties and perused the record and relevant law with their able assistance.

The learned trial court rejected the plaints being barred by law by declaring that all the plaints are hit by section 43 of the Benami Transactions (Prohibition) Act, 2017 which barred the jurisdiction of Civil Courts. Before proceedings further, it is appropriate to read section 43 of the Act ibid which is hereby reproduced as under: –

43—-Bar of jurisdiction of Civil Courts.–No Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which any of the authorities, or the Tribunal is empowered by or under this Act to determine, and no injunction shall be granted by any Court or other forum in respect of any action taken or to be taken in pursuance of any power conferred by or under this Basics of Benami Transaction Prohibition Act 2017.

From the reading of above-mentioned provision of law, it is manifestly clear that Civil Courts shall have no jurisdiction to entertain any
suit or proceedings in respect of any matter to which any of the authorities or the tribunal is empowered by or under the Act to
determine. The question, which requires determination, is whether respondent No.1/plaintiff had instituted the suit to challenge any
matter regarding Benami Transaction (Prohibition) Act, 2017 and any act of the authorities or proceedings conducted by the tribunal
under the Act ibid.

Intent and object of Benami Transactions (Prohibition) Act, 2017 is very much clear. According to which, if a property was purchased in the name of a person who according to his social status unable to have purchased any property by his own means, if found such property in his name then the Act ibid will come into play and will act upon the procedure as laid down in Section 22 of the Act ibid and such property shall be considered as “Benami property” and would be subject to confiscation in favour of the State. Section 22 provides that when the Initiating Officer has reason to believe on the basis of material in his possession that any person is a Benamidar in respect of a property, he may issue a notice of show cause that why should not be treated such property as a Benami property and after making inquiry and calling for evidence draw up a statement of case and refer it to the Adjudicating Authority. After receipt of the reference proceedings for adjudication of Benami property shall start by the adjudicating authority under Section 24 of the Act, ibid. It is manifest from the reading of above mentioned provision of law that Civil Court shall have no jurisdiction to entertain any suit or proceedings in respect of any matter to which any of the authorities or the tribunal is empowered by or under the Basics of Benami Transaction Prohibition Act 2017 to determine.

The respondent No.1 neither impugned any proceedings initiated or conducted by the authorities under the Benami transaction Act nor claimed any other relief regarding such acts or deeds, therefore, section 43 of the Act ibid is not applicable in the instant case. Furthermore, there is nowhere mentioned that any private person has remedial step or has any remedy under the provisions to get redress the grievance. Hence, section 43 of the Benami Transaction (Prohibition) Act, 2017 does not apply in suit filed by respondent No.1 in which no act of authority or tribunal had been challenged.

Unit (ii) of Clause 8(B) of the Act ibid, excludes those properties from the purview of Sub Section 8 Clause-B (ii) of Section 2 of the
Act, which suggests that the properties of the individuals are exempted from the meaning of Benami properties upon which the Act is
exclusively inapplicable. Sub-Section 8 of Section 2 of Benami Transactions (Prohibition) Act, 2017 defines Benami transaction as
under: –

(8) “benami transaction” means: –

(A) a transaction or arrangement

(a) Where a property is transferred to, or is held by a person and the consideration for such property has been provided or paid by, another person; and

(b) the property is held for the immediate or future benefit, direct or indirect of the person who has Provided the consideration, except which the property is held by—

(i) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, agent or legal adviser, and any other person as may, be notified by the Federal Government for this purpose; or

(ii) Any person being an individual in the name of his spouse or in the name of any child or in the name of his brother and sister or lineal ascendant or descendant and the individual appearing as joint owner in any document of such individual and the consideration for such property has been provided or paid out of known resources of income of the individual; or

(B) a transaction arrangement in respect of a property carried out or made in a fictitious name; or

(C) a transaction or arrangement in respect of a property where the owner of the property is not aware of, or denies knowledge of, such ownership; or

(D) a transaction, or arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious.”

Admittedly, in the instant matter, one party claims the ownership of the house in dispute whereas the opposite party denies the said claim based on registered documents, which means, the property in dispute is not an un-attended and title-less property. The same has been duly registered in the office of Sub-Registrar, Multan, after payment of all the charges, however, respondent No.1 finds fault with the claim of ownership of the same on the ground that the said property was basically purchased by her late father in the name of Mst. Humaira Haroon widow of Haroon Rasheed when such controversy arises between the parties regarding the ownership of the house, exclusive jurisdiction vests in the Civil Courts to decide the title and ownership of such property after recording of evidence of the parties. The Civil Courts have the exclusive and ultimate jurisdiction to declare the rights, title and status of a person or property. Respondent No.1 rightly instituted a suit for declaration in order to get declare her rights with regard to the suit property before the Civil Court. The learned appellate Court has rightly observed that the property in dispute does not fall within the ambit of Benami property as defined in the Act, ibid and the learned Civil Court has jurisdiction to conduct the trial and decide the lis regarding title and ownership in accordance with law and the Benami Transactions (Prohibition) Act, 2017 is not applicable upon the instant case.

Learned counsel for the petitioners has failed to point out any error in the impugned judgment and decree, which is based upon correct appraisal of law. The same is maintained and upheld.

Resultantly, all the three revision petitions are, hereby, dismissed with no order as to costs.

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