In a significant legal development, the Supreme Court on May 7 stayed an interim order by the Madhya Pradesh High Court that had permitted the release and sale of equity shares in Som Distilleries Breweries & Wineries Ltd. (SDBWL), valued at approximately ₹350 crore, which are alleged to be benami assets.
Legal Background: The Benami Transactions (Prohibition) Act, 1988
Legal Desk, New Delhi, 12 May: The Benami Transactions (Prohibition) Act, 1988, was enacted to prohibit benami transactions and the right to recover property held benami. A benami transaction is defined as one where property is transferred to one person for a consideration paid by another person. Such transactions were prevalent in India and were believed to contribute to the black money problem. The Act prohibits all benami transactions and gives the government the right to recover property held benami without paying any compensation. The Act came into force on 5 September 1988. However, due to various deficiencies in the Act, the rules required for operationalizing the Act were not framed. To address these deficiencies, the Government of India introduced the Benami Transactions (Prohibition) Bill, 2011. In July 2016, the Modi government decided to amend the original Act, which was subsequently passed by the Parliament as “The Benami Transactions (Prohibition) Amendment Act, 2016.” The 2016 Act expanded the scope of the original Act and introduced new offences and penalties. Notably, it included both the transfer of title and possession of benami property within its ambit. The Amendment Act defines Benami Property as any property which is the subject matter of a benami transaction and also includes the proceeds from such property. It also defines Benami Transactions as transactions 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. The Amendment Act also defines the Benamidar as a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name. TaxGuru+2Wikipedia+2Bar and Bench – Indian Legal news+2Bar and Bench – Indian Legal news
Critical Analysis: Madhya Pradesh High Court’s Interim Relief
The Madhya Pradesh High Court’s interim order allowing the release and sale of the alleged benami shares in SDBWL raised significant concerns. Critics argue that such interim relief undermines the objectives of the Benami Transactions (Prohibition) Act, 1988, which aims to prevent the transfer of property held benami and to recover such property without paying compensation. Allowing the release of shares valued at ₹350 crore, which are alleged to be benami assets, could set a concerning precedent and may weaken the enforcement of the Act. Furthermore, the High Court’s decision could be seen as conflicting with the legislative intent behind the Act, which seeks to curb black money and ensure that property held benami is not used to circumvent the law.
Som Distilleries: Past Controversies and Enforcement Actions
Som Distilleries Breweries & Wineries Ltd. (SDBWL) has been at the center of several controversies in recent years. In June 2024, shares of the company fell up to 9% after authorities announced the confiscation of one of its distilleries in Madhya Pradesh, where 59 children were found working illegally. The National Commission for Protection of Child Rights (NCPCR) discovered that 39 boys and 20 girls were working at the distillery, with some children having chemical burns on their hands. The state government temporarily suspended the plant’s manufacturing licenses in response. Som attributed the issue to contractors who failed to conduct proper age checks and emphasized its policies against child labor in its annual reports. Reuters
Supreme Court’s Intervention: A Step Towards Upholding the Law
The Supreme Court’s decision to stay the High Court’s interim order is a significant step towards upholding the integrity of the Benami Transactions (Prohibition) Act, 1988. By intervening, the Supreme Court has reinforced the necessity of adhering to the legal framework established to combat benami transactions and recover properties held benami. This intervention serves as a reminder that the judiciary must ensure that interim reliefs do not contravene the objectives of legislation aimed at curbing black money and illegal property holdings.Verdictum+3Wikipedia+3TaxGuru+3
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