September 19, 2023

Gujarat Leads in Misuse of Farmland Laws to Acquire Benami Property

With vast tracts of land still available in Gujarat, an equally large economy of organized money laundering coexists. According to high-ranking sources within the income tax department, the Benami property is now the top choice to “absorb” black money. Builders make a deal with farmers to acquire farmland. The poor farmer gets a commission. And the builder brings home a world of investment opportunities.

The Benami Transactions (Prohibition) Act 1988 was introduced with the aim of recovering all property held under Benami’s umbrella. The law was changed in 2016. In Gujarat, a state of over six million people, there are only two Benami prevention commissioners. One deals with Ahmedabad region in Porbandar and the other overseas from Nadiad in Vapi. Gujarat receives more than 1000 leads for Benami transactions every year. However, in the past three years, only 55 cases have been registered under the Benami Property Act (BPA).

(Read more about the inefficient functioning of Benami cell in Gujarat: )

“The coordinates of Ahmedabad are changing rapidly. Earlier, even SG Highway looked like an extended part of the city. From now on, the city easily covers Sindhu Bhavan, Ghuma or even South Bopal. It was mostly farmland, but over the years the city builders made a deal with the farmers to get the land by abusing the laws. Here, the farmer becomes an aggregator for the land. This violation falls under the BPA,” an IRS officer explained to Aaykar Bhavan, Ahmedabad.

The officer added that such agreements are illegal and criminal. “The offender can be imprisoned for up to seven years. We have yet to build a strong department, but our eyes are on the offenders. »

The Gujarat Agriculture and Tenancy Act 1949 states that an owner of cultivable land in Gujarat is one whose ancestors were farmers before 1949. This means that for those who can prove that their ancestors were farmers before the limit year, the right to land ownership is undisputed.

According to the agricultural land laws of Gujarat, a non-farmer cannot purchase agricultural land in the state. Previously, only those in the state of Gujarat were allowed to invest in agricultural land. Later, the High Court of Gujarat authorized in favor of any farmer across the country to purchase land for cultivation in Gujarat.

Indian law states that fertile agricultural land can only be used for agricultural purposes and nothing else. To use it for purposes other than that, ie. residential, commercial or industrial, the landlord must seek approval from the relevant authorities and change the “land use”.

Benami’s property cell gets leads through computer raids. “Over 60% of our leads come from searches. Whether it’s Chiripal Group or Shivalik Builders, most have amassed Benami properties, but the department is still investigating their materials,” the officials added.

How do officials identify misuse of agricultural land?

“Usually tax raids are the source. We conducted more than 10 raids in Gujarat in 2022. Of the seized papers, most had agricultural title deeds. Here begins our journey. How does a builder become the owner of agricultural land? Tracking and preparing for a trial is difficult and so far only 55 companies have been identified under the BPA,” the IRS officer explained. He explained that the farmland laws are similar in Gujarat and Maharashtra and these two states also account for the maximum misuse of the laws.

Case in point: Abusive use of agricultural land by Shah Rukh Khan

In Maharashtra, actor Shah Rukh Khan’s Alibaug farmhouse has been seized under Section 24 of the Benami Prohibition of Property Transactions Act (PBPT). SRK was charged with misuse of land. His company, Deja Vu Farms Pvt Ltd was incorporated on December 29, 2004 with interests in crops, gardening and horticulture. SRK provided an unsecured loan of Rs 8.5 crore to Deja Vu Farms to purchase farmland for farming in Alibaug but later converted the land into a farm for personal use. This constitutes a Benami transaction under Section 2(9) of the Act. A swimming pool and a heliport are located on this plot. Deja Vu Farms has no income to show from farming.

Benami transactions: old law (1988)

The Benami Transactions (Prohibition) Act 1988 (Old Act) was introduced to prohibit such transactions and also to recover property held as Benami. The old law contained nine articles; however, the rules, regulations and procedures necessary to implement the law have not been defined. In particular, there are no regulations relating to the confiscation of property.

Benami transactions: new law (2016)

This law entered into force on November 1, 2016. The amended law contains 72 articles.

Conversion of agricultural land to non-agricultural purposes

The Revenue Department of Gujarat received 56,566 applications in two years – 2019 and 2020 – for the conversion of agricultural land for non-agricultural purposes. In total, applications have been made to convert 57.73 crore square meters of farmland. The government has granted permission to convert 16.80 crore square meters of agricultural land in 2019 and 13.47 crore square meters in 2020.

Interestingly, the state government realized an income of Rs 1,153.33 crore in 2019 and Rs 898.95 crore in 2020 by granting permission to convert agricultural land for non-agricultural purposes.