2021 (6) TMI 6 - HC - Benami Property

Benami transaction - orders barred by limitation - SCN alleging that the petitioner is a benamidhar for Marg, its parent company, which beneficially owns the property - whether the impugned orders dated 26.08.2019, 27.08.2019 and 28.08.2019 are barred by limitation - HELD THAT - In this case, the records are lacking to prove that after the matters were reserved for orders on 17.07.19, the orders were, in fact, passed prior to 31.08.19. The matters were not listed for pronouncement. The despatch of the orders to the petitioners was only on 04 and 11.09.19 and there is no record to establish transfer of files to the registry/office of the authority in the interim before 31.08.2019. The provision imposes a ban upon the passing of an order beyond the period stipulated, a prohibition. It is a burden cast upon the respondent and one that the respondent must comply with, and prove that it has satisfied, within the statutory timeframe provided. In this case, it is of the view that this burden has not been discharged. In fact, the attempt to establish compliance is also lukewarm. R1 the Adjudicating Authority, has chosen not to file a counter and the only counter filed is by the Deputy Commissioner of Income Tax, Chennai, on his and on behalf of R1. Being a matter involving the internal records of R1, particularly one that has serious repercussions and ramifications on the veracity of the orders passed, it would have been appropriate for R1 to explain the exact position. The object and purpose of the enactment as well as the rigour it imposes, and the serious civil consequences that it carries require that the procedure and times lines set out there, are followed scrupulously. There must be no shadow cast upon the processes followed in decision making and rendition, that must be unimpeachable and cast-iron. In the paragraphs leading to this conclusion, I have set out the narrative in regard to the decision making process as well as the gaps, lapses as well as mismatch in the dates of the intervening events, prior to dispatch of the orders. We are of the view that the prohibition imposed by the provisions of Section 26(7) will apply squarely in this case and the impugned orders cannot be said to have been passed within the period of limitation, as provided. Writ Petitions are allowed and the impugned orders quashed.

Summary

Issues Involved:
1. Legitimacy of the petitioner's status as a benamidhar.
2. Bar of limitation under Section 26(7) of the Prohibition of Benami Property Transactions Act, 1988.
3. Validity of the orders passed by the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Legitimacy of the Petitioner's Status as a Benamidhar:
The petitioner, a private limited company engaged in real estate and infrastructure development, was alleged to be a benamidhar for Marg, its parent company. The show cause notice under Section 24(1) of the Act alleged that the petitioner was holding 17.702 acres of land in Muttam Village, Nagore Vattam, on behalf of Marg. The petitioner denied the allegation, explaining that Marg required extensive land resources for its business and had set up subsidiaries to procure and hold land to circumvent the Urban Land (Ceiling and Regulation) Act, 1976. The petitioner claimed that the land purchases were legitimate and declared to statutory authorities.

2. Bar of Limitation under Section 26(7) of the Act:
The primary ground pursued by the petitioner was the bar of limitation. The petitioner argued that the adjudication order should have been passed within one year from the end of the month in which the reference was received by the Adjudicating Authority, i.e., by 31.08.2019. The orders were allegedly communicated only on 29.10.2019, raising doubts about whether they were passed within the statutory period. The petitioner cited several judgments to support the argument that an order must be communicated to be considered valid and enforceable.

3. Validity of the Orders Passed by the Adjudicating Authority:
The petitioner questioned the delay between the reservation of the matter for orders on 17.07.2019 and the dispatch of orders on 13.09.2019. The respondent countered that the orders were passed on the stated dates and produced records to support this. However, discrepancies in the dates and the lack of records showing the exact sequence of events led to doubts about the validity of the orders. The court emphasized that an order must be out of the control of the authority before the expiry of the limitation period to be considered valid.

Conclusion:
The court found that the respondents failed to prove that the orders were passed within the statutory period. The provisions of Section 26(7) impose a strict limitation, and the orders must be shown to have been passed and communicated within this period. The lack of transparency and discrepancies in the records led the court to conclude that the orders were not passed within the limitation period. Consequently, the writ petitions were allowed, and the impugned orders were quashed.