2019 (9) TMI 737 - HC - Benami Property

Validity of order of Tribunal staying the Show Cause Notice - Prohibition of Benami Property Transactions Act - HELD THAT - The show-cause notice issued on 21st June 2019, is under Section 26(1) of the Benami Act and not under Section 26 (3). The reasons for this are not far to seek. The scheme of the Benami Act, under Section 5, provides for confiscation of any property which is subject matter of a benami transaction, by the Central Government. An Adjudicating Authority is appointed under Section 7. The proceedings for confiscation are initiated by the Initiating Officer under Section 24 of the Benami Act. If the Initiating Officer passes a provisional order of attachment of the property, he draws up a statement of case and refers it to the Adjudicating Authority under Section 24(5) of the Benami Act. The second level of adjudication then begins by the Adjudicating Authority issuing a show cause notice u/s 26(1) of the Benami Act. The said show-cause has to be issued within a period of thirty days upon the reference being received. At least 30 days period has to be given for filing of the reply and furnishing the information. After affording an opportunity of being heard, the Adjudicating Authority has to pass appropriate orders as per Section 26. However, the statute provides a specific time period for the said process to be concluded i.e., a period of one year. The questions raised by the respective parties shall be finally adjudicated after completion of pleadings. Clearly, the show-cause notice under challenge has been issued under Section 26(1) and the same does not, prima facie, constitute an order passed by the Adjudicating Authority. The jurisdiction of the Appellate Tribunal to entertain the Respondent s challenge to the show-cause notice is in doubt. Issue notice to the Respondents returnable on 30th January, 2020. Till the next date of hearing, the interim order passed by the Appellate Tribunal staying the operation of the notice dated 21st June, 2019, shall remain suspended. Replies to the show cause notice, shall be filed within 30 days from today. The Adjudicating Authority shall thereafter proceed in accordance with law and in accordance with the timelines prescribed under Section 26 of the Act.

Summary

Issues: Challenge to the order passed by the Appellate Tribunal under the Benami Act, maintainability of a writ petition, jurisdiction of the High Court, interpretation of Sections 26 and 46 of the Benami Act, the scope of appeal to the High Court, impact of previous judgments under different acts, and the validity of the show-cause notice issued under Section 26(1) of the Benami Act.

Detailed Analysis:

1. The writ petition challenges the order of the Appellate Tribunal under the Benami Act, contending that no appeal lies against a show-cause notice issued by the adjudicating authority under Section 26 of the Act. The petitioner argues that the impugned order has halted further proceedings by staying the show-cause notice.

2. The respondent raises a preliminary objection on the maintainability of the writ petition, citing Section 49 of the Benami Act, which provides for appeals to the High Court, not writ petitions. Reference is made to previous judgments to support the argument that the issue has been decided in favor of the respondent in related cases.

3. The petitioner asserts that a writ petition is the appropriate remedy since the appeal to the High Court under Section 49 is limited to substantial questions of law, which may not apply to challenging an interim order like in the present case.

4. The jurisdiction of the Tribunal under Section 46 of the Benami Act allows appeals only from orders of the Adjudicating Authority under Section 26(3), not from show-cause notices issued under Section 26(1). The statutory scheme outlines a specific process for adjudication within a time frame, barring interdiction by the Tribunal during the Adjudicating Authority's proceedings.

5. The High Court's role in hearing appeals under Section 49 is contingent on the presence of substantial questions of law, as outlined in the Act. Previous judgments on similar provisions in other acts shed light on the interpretation of such provisions in the Benami Act.

6. The Supreme Court's status quo order in related proceedings does not preclude action under the Benami Act. The Court directs further proceedings, emphasizing that the show-cause notice does not constitute an order by the Adjudicating Authority, raising doubts on the Tribunal's jurisdiction to entertain challenges to such notices.

7. The Court issues notice to the respondents for further proceedings, suspends the Tribunal's interim order, and sets timelines for responses to the show-cause notice. The Adjudicating Authority is instructed to proceed as per law, subject to the outcome of the writ petition, maintaining the parties' rights and contentions.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the legal nuances and arguments presented by the parties involved.