2022 (7) TMI 528 - HC - Benami Property

Benami Property Transactions - provisional attachment of the property - applicability of the principles of natural justice - grievance of the appellants is that the first respondent did not furnish the entire documents relied on by them, nor provided any opportunity to the appellants to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the orders passed under section 24(4) which were impugned in the writ petitions, are arbitrary, illegal and violative of the principles of natural justice - HELD THAT - It is an admitted case that the appellants failed to furnish the necessary documents to substantiate their stand that the alleged transactions are not benami transactions. As such, the first respondent, after making enquiry and calling for reports or evidence and taking into account all the relevant materials, has, with the prior approval of the Approving Authority, passed the separate orders under section 24(4), continuing the provisional attachment of the property till the passing of the order by the Adjudicating Authority under section 26(3), which are purely provisional in nature. That apart, the provisions of law mandate the respondent authorities to furnish such documents, particulars or evidence and provide an opportunity of being heard to the appellants only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportuity to the appellants to cross examine the witnesses at the preliminary stage We are of the opinion that in the absence of any provision of law as well as the compelling circumstances warranting the respondent authorities to provide an opportunity of cross examination of witnesses, whose statements have been relied on by the respondent authorities, to the appellants at the stage of section 24 proceedings, the plea raised by the appellants in this regard, cannot be countenanced. Therefore, we do not find any error in the orders passed by the first respondent, as an interim measure, continuing the provisional attachment order of the property till the passing of the order under section 26(3) by the adjudicating authority. The learned Judge has also rightly affirmed the same and directed the respondent authorities to proceed further in accordance with law. Thus, the appellants have not made out any case to interfere with the order impugned herein as well as the orders impunged in the writ petition at this stage

Summary

Issues Involved:
1. Validity of the common order dated 25.10.2021.
2. Legitimacy of the proceedings under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988.
3. Alleged violation of principles of natural justice due to non-provision of documents and denial of cross-examination.

Issue-wise Detailed Analysis:

1. Validity of the Common Order Dated 25.10.2021:
The appellants challenged the common order passed by the learned Judge, which dismissed their writ petitions. The appellants argued that the transactions in question were commercial and not benami. They contended that the learned Judge erred in holding that the process under Section 24 is of a narrower compass compared to adjudication proceedings. The court, however, upheld the common order, stating that the enquiry under Section 24 is preliminary and based on prima facie reasons. The detailed verification of evidence should occur during the adjudication stage.

2. Legitimacy of the Proceedings under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988:
The appellants received show cause notices under Section 24(1) of the Act, alleging they were benamidars. They contended that the first respondent did not provide all material documents and denied the opportunity to cross-examine witnesses. The court noted that Section 24 proceedings are preliminary, requiring only a prima facie opinion. The first respondent conducted enquiries and continued the provisional attachment of the property under Section 24(4) with the prior approval of the Approving Authority. The court found no error in these interim orders and upheld the continuation of the provisional attachment until the adjudicating authority's final order under Section 26(3).

3. Alleged Violation of Principles of Natural Justice:
The appellants argued that not providing complete documents and denying cross-examination violated principles of natural justice. The court observed that the principles of natural justice are flexible and depend on the facts and circumstances of each case. It emphasized that the proceedings under Section 24 are preliminary and do not require cross-examination at this stage. The court cited several precedents, including K.L. Tripathi v. State Bank of India and Ors., and Commissioner of Central Excise v. Parmarth Iron Pvt Ltd, which support the view that cross-examination is not mandatory at the preliminary stage. The court concluded that the appellants' plea for cross-examination at this stage could not be entertained.

Conclusion:
The court dismissed the writ appeals, affirming the common order and the provisional attachment orders under Section 24(4). It directed the respondent authorities to proceed with adjudication under Sections 25 and 26, ensuring the appellants are given full opportunity to present their case during the adjudication process. The appellants' contentions on the merits of the case were left open for adjudication before the appropriate authority.