Why the Supreme Court Invalidated Benami Sections 3 and 5 in 2022—and What the Recall Changed
Which provision was struck down is only the starting point. The more important questions are why the Court found it constitutionally defective, whether it invalidated the provision or merely limited its operation, and whether that decision still governs. This article separates those questions instead of treating the benami legislation as a single undifferentiated prohibition.
The declarations in Ganpati Dealcom and their present status
Union of India v. Ganpati Dealcom Pvt. Ltd., decided on 23 August 2022, (2023) 3 SCC 315, concerned the temporal application of the 2016 amendments. Its conclusions are reproduced in paragraph 3 of the subsequent review order:
Unamended Section 3: the declaration, reproduced as “Section 3(2) (sic Section 3)”, rested on manifest arbitrariness. The numbering qualification is material, as explained below.
Amended Section 3(2): declared unconstitutional under Article 20(1).
Unamended Section 5: its forfeiture provision was declared unconstitutional for manifest arbitrariness.
Amended Section 5: confiscation was held prospective, rather than the entire provision being struck down; other constitutional challenges were left open.
On 18 October 2024, however, the Supreme Court recalled the entire judgment. It held that constitutional validity had not been properly challenged and contested, and restored Civil Appeal No. 5783 of 2022 for fresh adjudication. Consequently, the declarations just described are historical findings, not presently operative invalidations. [2, paragraphs 2–6]
Read Section 3 using the correct statutory numbering
Section 3(1) prohibits benami transactions. The original punishment provision was Section 3(3), renumbered as Section 3(2) by Section 6 of the 2016 Amendment. It provides imprisonment up to three years, a fine, or both. The newly inserted Section 3(3) directs post-commencement transactions to Chapter VII. Section 53(1) addresses transactions intended to defeat a law, avoid statutory dues or avoid creditors; Section 53(2) prescribes one to seven years’ rigorous imprisonment and a fine up to 25% of fair market value. Thus, referring to the old punishment clause simply as original Section 3(2) would obscure the statutory history. [3, Section 3 and amendment notes; Section 53]
Why the 2022 Court found the criminal provision arbitrary
Reading old Section 2(a) with Section 3, the Court identified unjustified strict liability without a guilty-mind requirement. Section 53’s restoration of intention reinforced that criticism. It also found the beneficial-ownership element missing; importing it through interpretation would rewrite the offence. Overbreadth endangered recognised or regularised arrangements. Non-implementation supported, but did not exhaust, the criticism. [1, paragraphs 14.10–14.12, 15.12–15.17]
Why unamended Section 5 failed the safeguards test
The Court identified missing rules on prosecution-dependence, proof, defence opportunity, innocent purchasers, adjudication, vesting, identification and tracing. These were substantive safeguards, not administrative details safely left to delegation. Their absence made property deprivation excessively discretionary and disproportionate under Article 14. [1, paragraphs 15.18–15.22]
Why Article 20(1) entered the analysis
Having treated the original provisions as invalid from inception, the Court rejected their retrospective revival. It characterised the disputed retrospective confiscation as punitive, not merely procedural. Its reasoning did not invalidate Section 4’s civil consequences. [1, paragraphs 15.23, 17.2–17.4, 17.33–17.38]
Understanding the constitutional objection
The significance of those identified defects is best understood through the questions they leave unanswered. If paying for property registered to someone else is the allegation, what additional fact distinguishes the prohibited arrangement from a permissible one? If property is to be taken, who decides, what must be proved, and how can the affected owner answer the case?
These are different questions from whether benami transactions deserve regulation. A legitimate enforcement objective does not, by itself, explain the scope of an offence or the safeguards surrounding deprivation. Nor does an administrative failure to use a law necessarily establish that the law is unconstitutional. The analysis must identify the defect in the legal rule itself.
This is an explanation of the constitutional concerns, not a claim that the recalled judgment remains binding or that every strict-liability offence is invalid.
The amended confiscation framework must be examined separately
Amended Section 5 makes benami property liable to Central Government confiscation. Sections 24, 26 and 27 respectively address notice and attachment, adjudication, and confiscation and vesting. Section 4 concerns the bar on enforcing benami ownership claims and defences. A challenge to one consequence therefore should not assume that every other consequence automatically falls with it. [3]
What Manjula decided in 2026
In Manjula and Others v. D.A. Srinivas, 2026 INSC 465, Civil Appeal No. 7370 of 2026, decided on 8 May 2026, the Court expressly acknowledged the recall. Paragraphs 21.5–21.7 distinguish Chapter IV’s property proceedings from Chapter VII’s criminal framework. The Court considered the confiscation power pre-existing and the amended machinery a means of making it effective.
Paragraphs 22.12–22.15 hold the amendments retrospective or retroactive insofar as they are declaratory, procedural, curative and machinery-oriented. The express qualification in paragraph 22.15 is:
“while penal provisions creating new offences or enhancing punishment can operate only prospectively.”
The operative distinction is therefore between applying enforcement machinery to an earlier transaction and retrospectively creating an offence or increasing punishment. Neither the proposition that every pre-2016 transaction is immune nor the proposition that every amended penal consequence applies retrospectively accurately states this reasoning. [4]
Practical conclusion
For a contested matter, prepare separate analyses of the alleged transaction, the provision authorising the particular order, the procedural safeguards followed, and any penal consequence sought. Record whether the argument concerns validity, interpretation, retrospectivity or breach of procedure. Each requires its own reasoning and relief.
The revised account of Ganpati Dealcom must therefore do two things together: explain the constitutional defects identified in 2022 and disclose that those declarations were recalled. Omitting either produces an incomplete legal argument.
Sources
[1] Union of India & Anr. v. M/s Ganpati Dealcom Pvt. Ltd., Civil Appeal No. 5783 of 2022, judgment dated 23 August 2022, subsequently recalled; paragraphs 14.10–14.12, 15.12–15.23, 17.2–17.4 and 17.33–17.38. Paragraph numbering follows the original Supreme Court PDF: https://api.sci.gov.in/supremecourt/2020/2941/2941_2020_1_1501_37575_Judgement_23-Aug-2022.pdf
[2] Union of India & Anr. v. M/s Ganpati Dealcom Pvt. Ltd., 2024 INSC 799, Review Petition (Civil) No. 359 of 2023 in Civil Appeal No. 5783 of 2022, order dated 18 October 2024, paragraphs 2–6: https://api.sci.gov.in/supremecourt/2022/34619/34619_2022_1_301_56563_Order_18-Oct-2024.pdf
[3] Prohibition of Benami Property Transactions Act, 1988, Sections 3–5, 24, 26, 27 and 53, including amendment notes to Section 3: https://upload.indiacode.nic.in/showfile?actid=AC_CEN_2_2_00032_198845_1517807326369&filename=a1988-45.pdf&type=actfile
[4] Manjula and Others v. D.A. Srinivas, 2026 INSC 465, Civil Appeal No. 7370 of 2026, judgment dated 8 May 2026, paragraphs 21.5–21.7 and 22.12–22.15: https://api.sci.gov.in/supremecourt/2024/13889/13889_2024_7_1501_71025_Judgement_08-May-2026.pdf
Disclaimer: General legal information, not advice on any particular dispute. The relevant documents and applicable court orders must be examined before acting.
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