2025 (1) TMI 802 - AT - Benami Property

Benami Transactions - beneficial owner of subject property Whether alleged Benamidars and the Beneficial Owner constitute Benami Transactions under the Prohibition of Benami Property Transactions Act, 1988 (PBPTA)? - HELD THAT - It is an admitted fact that only partial payments have been made by the alleged Benamidars to the interested party M/s ICON Constructions. These partial payments were made on signing of Agreement of Sale. Adjudicating Authority has not held the impugned property as Benami as the title therein was yet to be transferred to the alleged Benamidars in view of sale having not been completed due to partial payments made by the alleged Benamidars. There is nothing on record which could have let the Ld. Adjudicating Authority to provisionally attach any other property for which it could have carried reason to believe to hold that as Benami Property. Out of the total sale consideration of Rs.471.54 Lakhs for all the impugned properties only Rs.173.00 Lakhs was paid by the 8 alleged Benamidars. The interested party M/s ICON Constructions has also maintained that none of the Benamidars acquired any rights, interest and title to the impugned properties. Therefore M/s ICON Constructions continue to remain owner and in possession of the impugned properties. M/s ICON Constructions maintained that they had rented the commercial units to tenants for which they received the rental income. In view of this, the applicability of Section 2 (9) (A) is doubtful as neither the impugned properties were transferred to the alleged Benamidars nor the impugned properties were held by the alleged Benamidars. Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidars, there is no evidence on record as to show that such infusions were made by the Beneficial Owner. Thus we find that neither the properties which have been provisionally attached are Benami nor the transactions which have occurred with respect to the impugned properties are Benami. We are therefore unable to interfere with the Impugned Order.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the transactions involving the alleged Benamidars and the Beneficial Owner constitute "Benami Transactions" under the Prohibition of Benami Property Transactions Act, 1988 (PBPTA).
Whether the partial payments made by the alleged Benamidars to M/s ICON Constructions confer any ownership or title in the properties.
Whether the PBPTA can be applied retrospectively to transactions initiated before its amendment in November 2016.
Whether the Adjudicating Authority erred in not confirming the provisional attachment of the properties in question.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Definition and Application of Benami Transactions

Relevant legal framework and precedents: The PBPTA defines a Benami transaction as one where a property is transferred to or held by a person, and the consideration for such property has been provided by another person. The Act's definition includes both full and partial consideration.
Court's interpretation and reasoning: The court examined whether the transactions met the criteria of a Benami transaction, particularly focusing on whether the alleged Benamidars acted as mere name lenders for the Beneficial Owner.
Key evidence and findings: The court noted that the alleged Benamidars could not explain the source of cash deposits used for property payments, suggesting a possible Benami arrangement.
Application of law to facts: Despite the unexplained cash deposits, the court found no conclusive evidence linking the Beneficial Owner to the payments made by the Benamidars.
Treatment of competing arguments: The court considered the appellant's argument that the transactions were Benami but also weighed the respondents' claim that the payments were made from their own sources.
Conclusions: The court concluded that the transactions did not meet the criteria of Benami transactions due to a lack of evidence directly linking the Beneficial Owner to the payments.

Issue 2: Ownership and Title of the Properties

Relevant legal framework and precedents: Section 54 of the Transfer of Property Act, 1882, states that an agreement to sell does not confer ownership or title in the property.
Court's interpretation and reasoning: The court emphasized that partial payments and agreements to sell do not transfer ownership or title until a registered sale deed is executed.
Key evidence and findings: The court found that only partial payments were made, and no sale deeds were registered, meaning the properties remained with M/s ICON Constructions.
Application of law to facts: The court applied Section 54, confirming that the alleged Benamidars did not acquire any legal title to the properties.
Treatment of competing arguments: The respondents argued that without full payment and registration, the properties could not be considered Benami, which the court upheld.
Conclusions: The court concluded that ownership and title had not been transferred to the alleged Benamidars, thus negating the claim of Benami transactions.

Issue 3: Retrospective Application of PBPTA

Relevant legal framework and precedents: The PBPTA was amended in November 2016, and its retrospective application was questioned.
Court's interpretation and reasoning: The court considered whether the transactions, initiated before the amendment, could be subject to the amended provisions.
Key evidence and findings: The court noted that the agreements were executed before the amendment, and the transactions were not completed.
Application of law to facts: The court determined that applying the amended PBPTA retrospectively would be inappropriate.
Treatment of competing arguments: The respondents argued against retrospective application, which the court found persuasive.
Conclusions: The court concluded that the PBPTA could not be applied retrospectively to the transactions in question.

Issue 4: Confirmation of Provisional Attachment

Relevant legal framework and precedents: Section 26 of the PBPTA outlines the process for provisional attachment of properties suspected to be Benami.
Court's interpretation and reasoning: The court evaluated whether the Adjudicating Authority correctly refused to confirm the provisional attachment.
Key evidence and findings: The court found no evidence of ownership transfer or Benami transactions, supporting the Authority's decision.
Application of law to facts: The court applied the PBPTA's provisions and found no grounds for confirming the attachment.
Treatment of competing arguments: The appellant argued for attachment, but the court upheld the Authority's decision due to lack of evidence.
Conclusions: The court concluded that the provisional attachment was correctly not confirmed, as the properties were not Benami.

3. SIGNIFICANT HOLDINGS

Core principles established: The court reinforced that an agreement to sell does not confer ownership or title, and the PBPTA cannot be applied retrospectively to transactions initiated before its amendment.
Final determinations on each issue: The court dismissed the appeal, affirming that the transactions were not Benami and the properties remained with M/s ICON Constructions.
Verbatim quotes of crucial legal reasoning: "The Ld. IO invokes Section 2(9) but fails miserably to show what and how any consideration has been paid/provided by the alleged beneficial owner used for the purpose of acquiring the impugned property."

In conclusion, the court found no merit in the appeal and upheld the Adjudicating Authority's decision, confirming that the transactions did not constitute Benami transactions under the PBPTA.

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