India: Whether Cash Transactions During Demonetization Period Per-Se Fall Under The Scope Of Benami Act?

Last Updated: 5 June 2019
Article by Vijay Pal Dalmia, Partner and Rajat Jain

Vijay Pal Dalmia, Advocate
Supreme Court of India & High Court
Email id: Mobile No.: +91 9810081079
Twitter: @vpdalmia
Rajat Jain, Advocate
Email id: Mobile No. 9953887311

Under The Benami Transactions (Prohibition) Act, 1988, the scope of benami transaction was very limited and it used to include only those transactions in which property is transferred to one person for a consideration paid or provided by another person.

However, after the advent of The Benami Transactions (Prohibition) Amendment Act, 2016 which is also be called as Prohibition of Benami Property Transactions Act, 1988 (hereinafter also referred as "2016 Act") which came on 1st November 2016, just a bit prior in time to the demonetization, the scope of benami transaction has been widened, and the punishment and penalties have been made more stringent.

Under Section 1 (9) of the 2016 Act, the term "Benami Transaction" has been defined as under:

  • A Benami Transaction means,-
    • a transaction or an arrangement-
      • 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 property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,

        except when the property is held by-
        1. a Karta or a member of a Hindu undivided family..........;
        2. a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity.........;
        3. any person being an individual in the name of his spouse or child ............;
        4. any person in the name of his brother or sister or lineal ascendant or descendant........; or
    • a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or
    • a transaction or an 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 an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious.

From a plain reading of the above Section, it is apparent now that the following transactions shall fall under the scope of Benami Transaction:

  1. Where the property is held by or transferred to another person, and the property is held by that another person, for the immediate or future benefit of the person who has provided the consideration for such property;
  2. Where a transaction has been made under a fictitious name;
  3. Where the owner is not aware or denies knowledge of the ownership of the property; and
  4. The person providing the consideration is not traceable.

That on 8th November 2016, as a measure to curb counterfeiting Indian banknotes, to effectively nullify black money hoarded in cash and curb funding of terrorism with fake notes, the Government of India has demonetized the currency notes of Rs 500 and Rs 1000 with effect from 9th November, 2016. Due to the demonetization of Rs 500 and Rs 1000 notes by the Government of India, these banknotes ceased to be a legal tender.

As the said currency notes ceased to be a legal tender which made it obvious that no transaction in the demonetized currency notes can take place after the effective date of demonetization.

The answer to the question whether a transaction in the demonetized currency done by a party after the effective date of demonetization can be considered as a benami transaction or not, will depend upon the transaction and the intention of the parties.

The Hon'ble Appellate Tribunal, PMLA (Benami Law), in the  case of V N Nandhini Devi vs. Sh. K. Visakh, Dy. Commissioner of Income Tax, Chennai, FPA/PBPT/57/CHN/2018 (along with other 27 appeals) ( ), examined the action of the Initiating Officer, wherein the Officer provisionally attached the amount of Rs. 50,000/- of the Appellant, as the Appellant received on 17/11/2016 an amount of Rs. 50,000/- as salary advance from its employer Trust, which was later returned on the insistence of the Income Tax Authorities. While deciding in favour of the Appellant, Hon'ble Appellate Tribunal held as under:

"22. Thus, every cash transaction cannot be termed as a "benami" transaction. As per section 2(9) A of the Act, the following twin conditions need to be satisfied- 1) the property being held by a person who has not provided the consideration, 2) the property is held by that person for the immediate or future benefit, direct or indirect of the person who has provided the said consideration......

36. The impugned order is unsustainable as it punishes the appellants for wanting to defeat the purpose of demonetization, which has no direct nexus with the Act and is beyond the purview of the Act.....

46. The existence of the "benami" transaction has to be proved by the authorities i.e. the person who alleges the transaction (Sitaram Agarwal v. Subrata Chandra, (2008) 7 S.C.C. 716). The authorities have failed to discharge the burden of proof. The authority has purely gone on the premise that cash is transferred from one person to another, with an object to defeat demonetization. This is insufficient to establish a "benami" transaction...."

From the above judgment, it is apparent that only the cash transactions during the demonetization period which are fulfilling the prerequisite of the benami transaction provided under the 2016 Act, will only fall under the ambit of benami transaction. Hence, it can be concluded that every cash transaction during demonetization period cannot per-se be considered as benami transaction just because the parties have entered into the cash transaction to defeat the purpose of demonetization or otherwise.

This article can be read from here also:

© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions