New Delhi,  The Supreme Court on Tuesday said the Section 3(2) of the Benami Transactions (Prohibition) Act 1988 as unconstitutional on the ground of being manifestly arbitrary.

A bench headed by Chief Justice N.V. Ramana said the amendment Act of 2016 to the 1988 Act is prospective in nature and it cannot apply retrospectively. Section 3(2) prescribes that whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both.

The bench said, "We hold Section 3(2) of 1988 unamended act as unconstitutional", and added that such a coercive provision can't have a retrospective effect.

The bench noted that the 2016 amendment cannot be held as merely procedural. A detailed copy of the judgment will be uploaded later in the day.

The top court judgment came on an appeal filed by the Centre against a Calcutta High Court judgment, which held that the 2016 Amendment Act was prospective in nature.

The amendment also increased the punishment for benami transactions from imprisonment up to three years to seven years, and a fine which may extend to 25 per cent of the fair market value of the benami property.