2022 (7) TMI 529 - HC - Benami Property

Benami Property Transaction - validity of continuing the provisional attachment - prime contention of the learned counsel for the appellant is that the appellant was not at all involved in the alleged transaction, which the first respondent is treating as benami transaction - grievance of the appellant is that the first respondent did not furnish the entire documents relied on by them, nor provide any opportunity to the appellant to cross examine the persons whose statements have been referred to in the impugned proceedings and as such, the order passed under section 24(4) of the Act, which was impugned in the writ petition, is arbitrary, illegal and violative of the principles of natural justice. HELD THAT - Applicability of the principles of natural justice and fair play, depends on the facts and circumstances of each case and is subjected to statutory provisions; and that, the proceedings under section 24 only require a recording of prima facie opinion as to the benami nature of the transaction. It is an admitted case that the appellant failed to submit his reply to the notice issued under section 24(1). 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 order 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 is 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 appellant only at the stage of adjudication proceedings; and there is no provision under the Act to provide an opportunity to the appellant to cross examine the witnesses at the preliminary stage. As 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 appellant at the stage of section 24 proceedings, the plea raised by the appellant in this regard, cannot be countenanced. Therefore, we do not find any error in the order 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 appellant has not made out any case to interfere with the order impugned herein as well as the order impunged in the writ petition at this stage. Writ appeal stands dismissed.

Summary

Issues Involved:
1. Validity of the provisional attachment order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988.
2. Compliance with principles of natural justice, specifically regarding the opportunity to cross-examine witnesses and provision of documents.
3. Interpretation and application of Section 24 of the Prohibition of Benami Property Transactions Act, 1988.

Issue-wise Detailed Analysis:

1. Validity of the Provisional Attachment Order:
The appellant challenged the order dated 23.01.2020 under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988, which continued the provisional attachment of the property till the final order under Section 26(3) by the Adjudicating Authority. The court noted that the first respondent had sufficient material to form a "reason to believe" that the appellant was a benamidar. The respondent's order was based on corroborative evidence, including sworn statements and documents seized during the search. The court upheld the provisional attachment, stating it was a preliminary measure and the detailed adjudication would follow.

2. Compliance with Principles of Natural Justice:
The appellant argued that the principles of natural justice were violated as he was not provided with all the documents relied upon by the respondents nor given an opportunity to cross-examine witnesses. The court observed that the principles of natural justice are flexible and depend on the statutory provisions and the facts of each case. The court emphasized that the proceedings under Section 24 are preliminary and only require a prima facie opinion. The court referred to multiple judgments, including K.L. Tripathi v. State Bank of India and others, to assert that the right to cross-examine witnesses arises during the adjudication stage and not at the preliminary stage of issuing a show-cause notice.

3. Interpretation and Application of Section 24:
The court elaborated on the provisions of Section 24, which allows the Initiating Officer to issue a notice if there is reason to believe that a person is a benamidar. The Initiating Officer can provisionally attach the property with the approval of the Approving Authority. The court highlighted that the provisional attachment is subject to further adjudication under Section 26. The court noted that the appellant failed to reply to the notice issued under Section 24(1), which led the Initiating Officer to continue the provisional attachment based on the available evidence. The court clarified that the detailed verification of evidence and the opportunity for cross-examination would occur during the adjudication process.

Conclusion:
The court dismissed the writ appeal, affirming the provisional attachment order under Section 24(4) and directing the respondents to proceed with the adjudication under Sections 25 and 26. The court reiterated that the appellant's contentions on the merits of the case could be raised during the adjudication process. The court emphasized that the principles of natural justice would be fully adhered to during the adjudication, including providing the appellant with the relied-upon documents and the opportunity to cross-examine witnesses if necessary.