2024 (3) TMI 1147 - HC - Benami Property

Benami transaction - Jurisdiction by the Investigating Authority or the Adjudicating Authority under the Benami Act - Benami transaction - summons issued u/s 19 of Benami Act and the provisional order of attachment as well as extension of such order passed u/s 24 of the said Act challenged - petitioner argues that the respondent-Authorities do not have any jurisdiction to initiate a proceeding under the Benami Act - HELD THAT - The petitioner obviously acted as a conduit being owned by shareholders which were none other than shell companies having fictitious existence for channelizing money from undisclosed sources shown to have been advanced by Shakambhari and others into tangible properties by the 37 purchases which are in issue. Taking a broad view of Section 2(9)(D) the purchase of the properties through consideration which came from fictitious sources squarely attracts the said provision to the present transactions. It is to be noted that sub-clause (D) does not merely restrict itself to non-traceable sources of consideration but also to fictitious sources of consideration. Hence there is sufficient prima facie material to indicate that the transactions-in-question were arrangements in respect of properties where the person providing the consideration is fictitious. Hence this Court does not find that there is ex facie erroneous assumption of jurisdiction by the Investigating Authority or the Adjudicating Authority under the Benami Act sufficient to displace the legitimate opinion formed in writing by the Investigating Authority which justifies the reference to the Adjudicating Authority after issuance of notice and passing of provisional assessment order which was continued subsequently. For an adjudication of merits on the issues involved in the present case as indicated above a full-fledged enquiry on factual assessments based on appreciation of evidence is required which is entirely unwarranted at the instance of the writ court since a comprehensive procedure is provided in Section 26 of the Benami Act which is as the Madhya Pradesh High Court held in the nature of a self-contained code. Thus no ground to interfere with the impugned notice u/s 24 or the provisional orders passed therein particularly since the matter has already been referred to the Adjudicating Authority and is under consideration before it within the contemplation of Section 26 of the Benami Act. The appropriate remedy before the petitioner is to participate in the said proceedings and to have its defence vindicated there. In any event even thereafter the petitioner has two stages of remedies one a hearing before confiscation and the other by way of an appeal under Sections 30 and 31 of the Benami Act if aggrieved by the decision of the Adjudicating Authority.

Issues Involved:
1. Jurisdiction of respondent-authorities under the Benami Act.
2. Retrospective application of the 2016 Amendment to the Benami Act.
3. Compliance with principles of natural justice.
4. Maintainability of writ petition under Article 226 of the Constitution of India.

Summary:

1. Jurisdiction of respondent-authorities under the Benami Act:
The petitioner challenged the summons issued u/s 19 and the provisional order of attachment u/s 24 of the Benami Act. The petitioner argued that the respondent-authorities lacked jurisdiction to initiate proceedings under the Benami Act. They contended that the basic ingredients for assumption of jurisdiction under the Benami Act were not fulfilled. The petitioner disclosed the source of purchase money as loans from other companies, arguing that the transactions did not fall within the purview of Section 2(9) of the Act. The respondents relied on Section 2(9)(D), which includes transactions where the person providing the consideration is not traceable or is fictitious. The court held that there was no ex facie erroneous assumption of jurisdiction by the authorities under the Benami Act.

2. Retrospective application of the 2016 Amendment to the Benami Act:
The petitioner argued against the retrospective application of the 2016 Amendment, citing Union of India and another Vs. Ganpati Dealcom Private Ltd., arguing that the transactions occurred prior to the 2016 Amendment. The court noted that the definition of "benami transactions" had been altered by the 2016 Amendment, introducing sub-clause (D). The court did not find merit in the argument against the retrospective application in this context.

3. Compliance with principles of natural justice:
The petitioner argued that the principles of natural justice were not met, as there was no hearing before the issuance of the provisional attachment order u/s 24(3). The court observed that Section 24 does not require a prior opportunity of hearing before issuing a provisional attachment order, as the alleged benamidar gets a right of hearing under Section 26. The petitioner had the opportunity to reply to the show-cause notice, which they did. The court held that the principles of natural justice were codified in Section 26 and complied with.

4. Maintainability of writ petition under Article 226 of the Constitution of India:
The petitioner contended that the writ petition was maintainable, citing similar cases. The court referred to multiple judgments, including Union of India and Anr. Vs. Kunisetty Satyanarayana, where it was held that ordinarily a writ petition should not be entertained against a show-cause notice or provisional attachment order. The court concluded that a strong jurisdictional objection is required to challenge such notices under Article 226. In this case, the court found no ground to interfere with the impugned notice or provisional orders, as the matter was already referred to the Adjudicating Authority u/s 26 of the Benami Act.

Conclusion:
The writ petition was dismissed, with the court emphasizing that the petitioner has ample remedies under Sections 26 and 27, and by way of appeal under Sections 30 and 31 of the Benami Act. The findings were of a tentative nature, and the Adjudicating Authority was directed to act independently in accordance with law.

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