2019 (4) TMI 1161 - AT - Indian Laws

Benami transactions - offence under Benami Act - onus of proving a benami transaction - whether R-2 is the beneficial owner ? - whether transaction was bona fide for beyond reasonable doubt? - HELD THAT - In the present case, the beneficial interest in the property is with R- 1. The Adjudicating Authority has correctly observed that there is nothing to show that the property in question is held by R-1 for the benefit of R-2. The sale deeds for all the 10 flats has not been challenged by the IO. The erstwhile sellers had entered/executed the sale deed with R-1 , representing themselves to be the true owners. As per the mandate of Section 91 and Section 92 of the Indian Evidence Act, 1872, If a transfer has been done of an immovable property vide a written documentary evidences in the form of a registered sale deed. The contradictory stand by way of oral evidence is not available unless the party concerned challenging the written documents are able to prove that those are sham documents and executed between the parties contrary to law. It is correct that after amendment, the onus of proving a benami transaction rests entirely on the shoulders of the respondents. Before amendment, the burden of proof was on the prosecution to prove the guilt of the Benamidar and beneficial owner. Once both are able to discharge their burden of proof as per amended law, then the burden of proof would be shifted to the prosecution. In the present case, the respondents were able to discharge their initial burden of proof by producing the sale deeds and document pertaining to the loan amount and respondent no. 1 was also the promoter of respondent no. 2, no even prima contrary evidence is proved by the appellant. Thus, in the facts of present case and documentary evidence proved, the onus of proving a benami transaction rests entirely on the shoulders of the IO who is making the charge. The burden of proof shall shift to the person who is taking contrary of within the meaning of section 91 and 92 of the Evidences Act, 1972. The authority has also concurred with the submission of R-1 that the IO has miserably failed to discharge such burden of proof. Once the primary evidence is proved by way of written document which is not challenged, no evidence of an oral agreement or statement shall be admitted, the burden shall be shifted to the party who pleaded oral agreement. After the amendment in the Benami Act, if apply as it is, the burden of proof was shifted upon the appellant. In the present case, the IO has failed to discharge such burden and he has merely based on his personal perception with uncorroborated statements had passed the order without even a single iota of evidence to discharge such a burden of proof once the R-1 was able to prove that his transaction was bona fide for beyond reasonable doubt. Once the burden is shifted upon the IO,the principles of general law available prior to amendment would apply.

Summary

Issues Involved:
1. Whether the transaction involving the purchase of ten residential flats by the respondent no. 1 is a benami transaction under the PBPT Act.
2. Whether the Initiating Officer (IO) followed due process in provisional attachment under Section 24(3) of the PBPT Act.
3. Whether the Adjudicating Authority correctly disallowed the reference filed by the IO.

Issue-wise Detailed Analysis:

1. Benami Transaction Allegation:
The appellant alleged that the respondent no. 1 (Manpreet Estates LLP) is a benamidar and respondent no. 2 (RKW Developers Private Limited) is the beneficial owner. The allegation was based on the contention that the actual benefits from the immovable property would accrue to respondent no. 2. The appellant argued that the entire transaction was funded by Dewan Housing Finance Limited (DHFL), which has common promoters and directors with respondent no. 2. The IO claimed that the transaction met the criteria of a benami transaction under section 2(9)(A) of the PBPT Act, which requires that the consideration for the property has been provided by another person and the property is held for the benefit of the person who provided the consideration.

2. Due Process in Provisional Attachment:
The appellant argued that the IO failed to follow the mandatory procedure for provisional attachment as per the PBPT Rules, 2016. Specifically, the IO did not proclaim the attachment order at the property site or affix a copy of the order on a conspicuous part of the property and the notice board of the IO's office. This failure rendered the provisional attachment order invalid.

3. Adjudicating Authority’s Decision:
The Adjudicating Authority disallowed the reference filed by the IO for several reasons, including:
- The IO did not explain the change in the character of the original reference.
- The IO failed to serve the Provisional Attachment Order to respondent no. 2.
- The IO did not discharge the burden of proof to establish the transaction as benami.
- The transaction was genuine and bona fide, with no evidence connecting DHFL and RKW Developers Pvt. Ltd. (respondent no. 2).
- The possession, control, and enjoyment of the property were entirely with respondent no. 1, and there was no proof that the property was held for the benefit of respondent no. 2.
- The IO admitted that the funds for the purchase were not provided by respondent no. 2.

Detailed Findings:

1. Benami Transaction Allegation:
The Adjudicating Authority found that respondent no. 1 (Manpreet Estates LLP) had completed the transaction in a bona fide manner. The Authority noted that respondent no. 1 was a registered LLP with designated partners who had given personal guarantees for the loan taken from DHFL. The Authority also observed that the Midcity Group, of which respondent no. 1 is a part, had a history of taking loans from DHFL for other projects. The Authority concluded that the transaction was not benami as the beneficial interest in the property was with respondent no. 1, and there was no evidence to show that the property was held for the benefit of respondent no. 2.

2. Due Process in Provisional Attachment:
The Tribunal found that the IO did not follow the mandatory procedure for provisional attachment as laid down in the PBPT Rules, 2016. The IO failed to proclaim the attachment order at the property site and affix a copy of the order on a conspicuous part of the property and the notice board of the IO's office. This procedural lapse rendered the provisional attachment order invalid.

3. Adjudicating Authority’s Decision:
The Tribunal upheld the Adjudicating Authority's decision to disallow the reference filed by the IO. The Tribunal agreed with the Authority's findings that the IO failed to discharge the burden of proof to establish the transaction as benami. The Tribunal also noted that the transaction was genuine and bona fide, with no evidence connecting DHFL and respondent no. 2. The Tribunal concluded that the possession, control, and enjoyment of the property were entirely with respondent no. 1, and there was no proof that the property was held for the benefit of respondent no. 2.

Conclusion:
The Tribunal dismissed the appeal, finding no grounds for interference with the Adjudicating Authority's decision. The Tribunal concluded that the transaction was not benami, the IO did not follow due process in provisional attachment, and the Adjudicating Authority correctly disallowed the reference filed by the IO. The appeal was dismissed with no costs.