AAP Tax Law

Prohibition of Benami Property Transactions Act, 1988

Section 27: Confiscation and Vesting of Benami Property

Section 27 of the Prohibition of Benami Property Transactions Act, 1988, as substantially amended by the Benami Transactions (Prohibition) Amendment Act, 2016, governs the confiscation of property adjudged to be benami and its vesting in the Central Government.

Correct statutory reference: Section 27 is a provision of the Prohibition of Benami Property Transactions Act, 1988. The 2016 Amendment Act amended and expanded the 1988 Act and changed its short title.
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What does Section 27 provide?

Section 27 operates after adjudication under Section 26. Where the Adjudicating Authority has held property to be benami under Section 26(3), Section 27 authorises confiscation after an opportunity of hearing is given to the person concerned.

Confiscation is therefore not the first step in a benami proceeding. It follows the statutory process of notice, attachment and adjudication under the Act. If an appeal is filed, the confiscation remains subject to the order of the Appellate Tribunal under Section 46.

Section 27 explained clause by clause

Section 27(1): Order of confiscation

When an order under Section 26(3) holds a property to be benami, the Adjudicating Authority shall give the person concerned an opportunity of being heard and may then make an order confiscating that property.

If an appeal has been filed against the adjudication order, confiscation is subject to the order passed by the Appellate Tribunal under Section 46. The procedure for confiscation must also comply with the applicable prescribed rules.

Section 27(2): Protection for certain bona fide purchasers

The confiscation rule does not apply to property held or acquired from the benamidar for adequate consideration before the issue of notice under Section 24(1), where the purchaser had no knowledge of the benami transaction.

This protection is important because it distinguishes a bona fide pre-notice purchaser for value from a person participating in, or aware of, the benami arrangement.

Section 27(3): Vesting in the Central Government

Once a confiscation order is made, all rights and title in the property vest absolutely in the Central Government, free from encumbrances. The Act provides that no compensation is payable in respect of such confiscation.

Section 27(4): Sham third-party rights are void

A right created in favour of a third person with the object of defeating the purposes of the Act is treated as null and void. The provision is intended to prevent artificial transfers, charges or other arrangements designed to frustrate confiscation.

Section 27(5): No claim where confiscation is ultimately not ordered

Where the proceedings under the Act attain finality without an order of confiscation, Section 27(5) states that no claim shall lie against the Government.

Safeguards before confiscation

  • The property must first be held to be benami under Section 26(3).
  • The person concerned must be given an opportunity of being heard before confiscation.
  • If an appeal is filed, confiscation is subject to the order of the Appellate Tribunal under Section 46.
  • The confiscation procedure must comply with the procedure prescribed under the applicable rules.

Bona fide purchasers and third-party rights

Section 27 draws a distinction between genuine and colourable third-party interests. A person who acquired property from the benamidar for adequate consideration before the Section 24(1) notice and without knowledge of the benami transaction may fall within the protection in Section 27(2). In contrast, rights created to defeat the Act are expressly rendered void by Section 27(4).

The Supreme Court judgment delivered on 23 August 2022 in Union of India v. Ganpati Dealcom Pvt. Ltd. was recalled by the Supreme Court on 18 October 2024 in Review Petition (Civil) No. 359 of 2023, and Civil Appeal No. 5783 of 2022 was restored for fresh adjudication. Accordingly, the recalled 2022 judgment should not be treated as the current governing authority for the propositions decided in that judgment.

Readers dealing with transactions or proceedings involving periods before the 2016 amendments should check the latest binding judicial position and the facts of the particular case before relying on earlier decisions.

Official legal resources

For the authoritative statutory text and rules, refer to the official India Code and Income Tax Department resources linked in the right sidebar.

Last reviewed: 14 September 2026.