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2024 (5) TMI 1161 - HC - Benami PropertyBenami Transaction - provisional attachment - beneficial owner of the Benami properties - SCN issued by Initiating Officer u/s 24 (1) of the Prohibition of Benami Property Transactions Act - The allegation is that there has been routing of funds from unknown sources through various companies and layering in this regard which have ultimately found a channel to the petitioners-companies through M/s Siddhi Vinayak Infra Zone. HELD THAT - As per statement of the concerned Directors/Partners/other Officials recorded and mentioned in the show cause notice the original sale-deeds were not found in the office of these companies who in fact had common addresses mostly so nor the Director/Partners had any inkling as to the activities and source of funds of these companies of which they were Directors/Partners and they had mentioned the names of certain persons who have been mentioned as interested persons in the show cause notice who have links with other companies and LLPs. Based on the aforesaid material the Initiating Officer has recorded his reasons to believe that the properties are result of benami transactions. At the stage of consideration of admission and interim relief application looking into the facts and material on record and that which we have perused it is difficult to hold at this stage that none of the material was relevant or that it did not have a rationale connection with the transactions which are being referred as benami however again we do not record any conclusive opinion in this regard as all these issues need to be thrashed out finally. No doubt the argument of learned counsel for the petitioners that the transactions are based on legal documents and are permissible in law is very attractive but the stand of the Revenue is that these are all colourable transactions and therefore the opinion formed by the Initiating Officer at the stage of Section 24(1) is an opinion formed on the basis of material and it has rationale nexus with the object sought to be achieved which does not require any interference. It is trite that merely because some legal documents have been prepared and agreements have been entered into that may lead to an initial presumption about the validity of such transactions but then this is rebuttable and the Revenue is entitled to inquire if there are grounds for it as are being claimed as to whether transactions are colourable and benami in terms of the Act 1988. How far the transactions at hand based on material in possession of the Initiating Officer at the stage of Section 24 (1) would bring the transactions within the meaning of Section 2(9)(A) and (B) is also required to be considered as the jurisdictional facts envisaged in Section 24(1) have to be preexist and are prerequisites on the satisfaction of which alone the Initiating Officer has the jurisdiction to proceed in the matter. On a perusal of records which have been produced separately before us in sealed cover we find that the reasons and materials contained therein have been substantially discussed in the show cause notice and prima facie it is not as if the reasons and materials discussed in the impugned show cause notice and those available in these records are absolutely unrelated or alien to each other. This aspect however is also open for consideration at the time of final hearing as to whether the records contain relevant reason or material which is not mentioned in the show cause notice thereby rendering it defective and prejudicial. Order of provisional attachment - Taking into consideration these facts especially regarding sale of some of the lands/flats by Tilicho Ventures LLP which is part of the same consortium but intriguingly has not challenged the notices before us and in spite of sufficient opportunities the counsel for the petitioners did not deny this fact even orally during argument although Mr. Parihar learned Senior Counsel along with Ms. Radhika Singh etc. appeared for all the seven petitioners-companies and Jitendera Prasad Verma is a Director in Tilocho Infra Developers Private Limited and also a partner in Tilocho Ventures Private LLP. whereas Satish Kumar who has filed the affidavits in two of the petitions on behalf of the other companies is also a Director in the Tilicho Infradevelopers Private Limited therefore we are not inclined to stay the order of provisional attachment. In our opinion the following orders would serve the ends of justice at this stage - (I) Subject to final disposal of writ petitions and without prejudice to the rights of the petitioners herein the proceedings under the Act 1988 may go on and the Initiating Officer shall take a considered decision under Section 24 (4) of the Act 1988 in accordance with law accordingly. (II) In the event the Initiating Officer revokes the provisional attachment of the property with the prior approval of the Approving Authority then of course the matter would end and no further adjudication would be required before the Adjudicating Authority. (III) However if the Initiating Officer passes an order continuing the provisional attachment of the property with prior approval of the Approving Authority and refers the matter to the Adjudicating Authority under Section 24(5) the Adjudicating Authority may go ahead with the proceedings however he shall not pass any final order under Section 26(3) of the Act 1988 till disposal of these writ petitions. (IV) In the event the opposite parties herein want to withdraw the impugned show cause notices and issue them afresh in accordance with law providing the noticees with the material in the possession of the Initiating Officer then the pendency of these proceedings shall not come in their way. We make it clear that this is not a direction which we have issued but only a liberty which we have granted to the opposite parties in case they are of the opinion that this would be a better course of action unless of course this is impermissible in law. The opposite parties shall file their counter affidavit within four weeks. Two weeks thereafter shall be available to the petitioners for filing rejoinder affidavit. Considering the important issues involved herein all these petitions shall come up for hearing in the 3rd week of July 2024.
Issues Involved:
1. Challenge to Show Cause Notices u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988. 2. Locus Standi of the Petitioner. 3. Legality of Consortium-Deed and Joint Development Agreements (JDA). 4. Allegations of Dummy Companies and Benami Transactions. 5. Provisional Attachment Orders. 6. Requirement to Provide Material to Noticees. Summary: 1. Challenge to Show Cause Notices u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988: The petitioners challenged the show cause notices issued by the Initiating Officer u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 on various grounds, including the non-existence of jurisdictional facts, absence of relevant material, and lack of independent application of mind by the Initiating Officer. 2. Locus Standi of the Petitioner: One petitioner, Rajat Sahai, claimed to be a partner in M/s Siddhi Vinayak Infra Zone LLP but was not mentioned as a Benamidar or beneficial owner in the impugned notices. The court noted that his locus to challenge the notices appeared suspect and left this issue to be considered after the exchange of affidavits. 3. Legality of Consortium-Deed and Joint Development Agreements (JDA): The petitioners argued that the consortium-deed and JDAs were legally executed and registered, forming a legal relationship between the consortium members and developers. They contended that these transactions were legal and permissible under the law and did not constitute benami transactions as defined in Section 2(9) of the Act. 4. Allegations of Dummy Companies and Benami Transactions: The Revenue alleged that the petitioners' companies were dummy entities with no substantial business activities or financial assets, used to route funds through various transactions to purchase benami properties. The Initiating Officer recorded reasons to believe that the properties were benami, based on material collected during inquiries and investigations. 5. Provisional Attachment Orders: The Revenue issued provisional attachment orders u/s 24(3) of the Act, fearing that the properties might be alienated. The court noted that one of the consortium members, Tilicho Ventures LLP, had already sold some properties, supporting the Revenue's apprehension. The court did not stay the provisional attachment orders but allowed the proceedings to continue, subject to final adjudication. 6. Requirement to Provide Material to Noticees: The petitioners contended that the Initiating Officer did not provide the reasons to believe or the material forming the basis of the show cause notices, violating Section 24(1) of the Act. The Revenue argued that there was no obligation to provide such material at the stage of issuing notices. The court noted that this issue required further consideration, especially in light of the Supreme Court's judgment in Union of India vs. Ganpati Dealcom Private Limited. Orders: 1. The court admitted all writ petitions except Writ Tax No. 79 of 2024. 2. Proceedings under the Act may continue, and the Initiating Officer shall take a considered decision u/s 24(4) of the Act. 3. If the Initiating Officer continues the provisional attachment and refers the matter to the Adjudicating Authority, the latter shall not pass any final order u/s 26(3) of the Act until the writ petitions are disposed of. 4. The opposite parties may withdraw the impugned show cause notices and issue them afresh, providing the noticees with the material in the possession of the Initiating Officer. 5. The opposite parties shall file their counter affidavit within four weeks, and the petitioners shall file a rejoinder affidavit within two weeks thereafter. 6. The petitions shall come up for hearing in the 3rd week of July, 2024.
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