Section 27 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 27 is the last step of the adjudication chain. Where the Adjudicating Authority holds property to be benami under section 26(3), it makes an order confiscating it after hearing the person concerned. The property then vests in the Central Government. The section also protects a purchaser who paid adequate consideration and did not know of the benami transaction.
As per the consolidated text consulted, once an order under section 26(3) holds property benami, the Adjudicating Authority makes an order confiscating it after giving the person concerned an opportunity of being heard (sub-section (1)). Confiscation is subject to any order of the Appellate Tribunal on appeal. It does not apply to a person who acquired the property from the benamidar for adequate consideration, before the section 24 notice, without knowing of the benami transaction (sub-section (2)). On confiscation the rights and title vest absolutely in the Central Government, clear of all encumbrances, and no compensation is payable (sub-section (3)).
How section 27 came in
Section 27 is in Chapter IV (Attachment, Adjudication and Confiscation) and was inserted by the Benami Transactions (Prohibition) Amendment Act, 2016. The text is checked against the Gazette of India copy of that Act (assent 10 August 2016). The 2016 changes were brought into force by notification; the date is not in the sources consulted.
If a confiscation order is in view for property you hold or have bought, early advice matters. A legal due diligence review of how you acquired the property, what you paid and when you first heard of any notice will show whether sub-section (2) can be in play.
Sub-section (1): the confiscation order
"Where an order is passed in respect of any property under sub-section (3) of section 26 holding such property to be a benami property, the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a benami property."
There are two provisos.
- Appeal. "Where an appeal has been filed against the order of the Adjudicating Authority, the confiscation of property shall be made subject to the order passed by the Appellate Tribunal under section 46." The confiscation does not stand apart from the appeal; it follows the Tribunal's order. For the appeal, see our article on sections 45 and 46.
- Procedure. "The confiscation of the property shall be made in accordance with such procedure as may be prescribed." The procedure is left to rules, which are not in the sources consulted, so no step is stated here.
Two points from the main sentence. First, the trigger is an order under section 26(3) holding property benami, which is the second of the two orders in that sub-section; see our article on section 26. Second, a hearing is built in: the Authority gives "an opportunity of being heard to the person concerned" before confiscating.
Sub-section (2): the purchaser who did not know
"Nothing in sub-section (1) shall apply to a property held or acquired by a person from the benamidar for adequate consideration, prior to the issue of notice under sub-section (1) of section 24 without his having knowledge of the benami transaction."
Break the protection into its parts. The person must have held or acquired the property:
| Element | Wording |
|---|---|
| Source | From the benamidar |
| Price | For adequate consideration |
| Timing | Prior to the issue of notice under section 24(1) |
| Knowledge | Without having knowledge of the benami transaction |
All four elements appear in the sentence together. Where they are met, sub-section (1) does not apply to that property, so the confiscation order is not made under that sub-section for it. The Act does not define "adequate consideration" and the sources consulted give no test; fair market value in section 2(16) is a defined term but is not used in this sub-section, so this article does not equate the two. The timing element ties to section 57, under which a transfer made after a section 24 notice is ignored for the proceedings; see our article on sections 6 and 57.
A buyer therefore protects himself by paying a full price, acquiring before any notice, and being able to show that he did not know. A search of title records helps; see our guide on checking an encumbrance certificate online.
Sub-section (3): vesting
Where an order of confiscation is made under sub-section (1), "all the rights and title in such property shall vest absolutely in the Central Government", clear of all encumbrances, and "no compensation shall be payable in respect of such confiscation". Three consequences follow from the words. The vesting is "absolute". It is clear of encumbrances, so a charge, mortgage or similar burden on the property does not remain with it. And the owner receives no compensation. The management and possession of confiscated property is dealt with in sections 28 and 29; see our article on sections 28 and 29.
Sub-section (4): rights created to defeat the Act
"Any right of any third person created in such property with a view to defeat the purposes of this Act shall be null and void."
The test is purpose. A right created in the property to defeat the purposes of the Act is void. A right created in good faith is not caught by these words, though the other sub-sections should be read with it.
Sub-section (5): no claim against the Government
"Where no order of confiscation is made upon the proceedings under this Act attaining finality, no claim shall lie against the Government." If the proceedings end without a confiscation order, no claim can be brought against the Government under this sub-section. The text does not say what claims are meant, and this article does not guess.
The chain at a glance
| Step | Section | Outcome |
|---|---|---|
| Notice and provisional attachment | 24 | Show-cause notice, attachment |
| Adjudication | 26(3) | Order holding the property benami or not |
| Confiscation order | 27(1) | After hearing; subject to the Tribunal on appeal |
| Vesting | 27(3) | Absolute, clear of all encumbrances, no compensation |
| Possession and management | 28, 29 | Administrator; see our article |
Who is affected
- Beneficial owners and benamidars, whose property is at risk of confiscation without compensation.
- Purchasers and lenders, who may have the protection in sub-section (2) if they meet all its elements.
- Persons who created rights in the property after the arrangement, who risk sub-section (4).
Practical example
Ritika Soni buys a plot in Lucknow from Arvind Gupta for a full market price in a registered sale, with no knowledge that Arvind was only a benamidar for someone else. Four months later, a notice under section 24(1) is issued about the plot. Ritika acquired from the benamidar, for adequate consideration, before the notice, and without knowledge. Section 27(2) says confiscation under sub-section (1) does not apply to her property. If instead she had bought after the notice, section 57 and the timing element of section 27(2) would work against her.
Other laws and later amendments
Section 27 names no other law. Where other sections refer to the Income-tax Act, 1961 or procedural codes, check the current law for the corresponding provisions. Later amendments to the Act are not in the sources consulted; check them.
Need help with confiscation or a purchase from a benamidar?
If you bought from someone who may have been a benamidar, or you hold property on which a confiscation order is expected, the dates, the price paid and your knowledge will be central. Our legal due diligence service can review the chain of title and payments with you.
Key takeaways
- Confiscation follows an order under section 26(3) holding the property benami, after a hearing.
- On appeal, confiscation is made subject to the order of the Appellate Tribunal under section 46.
- A person who acquired from the benamidar for adequate consideration, before the section 24 notice and without knowledge, is outside sub-section (1).
- Confiscated property vests absolutely in the Central Government clear of all encumbrances, with no compensation.
- Third-party rights created to defeat the purposes of the Act are null and void.
Read next
- Section 26: adjudication of benami property
- Sections 28 and 29: management and possession of confiscated property
- Sections 6 and 57: re-transfer and transfers after notice
- How to check an encumbrance certificate online
Disclaimer: Based on a third-party consolidated text of the Prohibition of Benami Property Transactions Act, 1988 as amended by the Benami Transactions (Prohibition) Amendment Act, 2016, checked against the Gazette of India copy of that amending Act (11 August 2016), as consulted on 2 October 2026. The commencement notification, the rules and later amendments should be checked. This article is general information, not legal advice; check the official text before acting.