2021 (9) TMI 311 - HC - Benami Property

Benami Transactions - provisional attachment of property - beneficial owner of the property - Scope of amendment Act - HELD THAT - In the present case, investigations and search were conducted prior to the amendment Act. The alleged benami transactions were also occurred prior to the amendment. But, the provisional attachment under Section 24 was made after the amendment, which is certainly permissible under Section 1 Sub- Section (3) of the Act. Thus, the reference made by the learned counsel for the petitioner regarding Sub-Section (3) to Section 3 cannot have any application in respect of the facts and circumstances of the case on hand. In the present case, it is not in dispute that the impugned order dated 12.05.2017, is an order of provisional attachment passed under Section 24(4)(a)(i) of the Benami Transactions (Prohibition) Amendment Act, 2016 and the second amendment order dated 26.05.2016 is the notice to show-cause under Section 26(1) of the Act. Thus, for all purposes, it is only the commencement of proceedings under the Act and the petitioner has to respond to the show cause notice by submitting their explanations/objections along with the documents and evidences and thereafter, the authorities are bound to adjudicate the matter in the manner provided and take appropriate decision. This being the scope of the Act, the petitioner has misconstrued the provisions based on certain incorrect interpretations, filed the present Writ Petition. Now, the impugned show cause notice dated 26.05.2017 is to be responded by the petitioner by submitting their explanations/objections, if any and thereafter, the authorities are bound to take a decision, considering the documents and the objections, if any filed by the petitioner. Thus, the petitioner has approached this Court at the initial stage and the adjudication is yet to be completed. Petitioner is at liberty to submit his objections/defence statements, evidences and documents, if any, within a period of three weeks from the date of receipt of copy of this order and on receipt of such objections etc., the respondents are bound to continue the proceedings and complete the same by following the procedures as contemplated as expeditiously as possible, since the matter is pending for a long time and the petitioner is directed to co-operate for the completion of proceedings instead of making an attempt to prolong and protract the issues on flimsy grounds.

Summary

Issues Involved:
1. Legal validity of the impugned orders dated 12.05.2017 and 26.05.2017.
2. Violation of principles of natural justice.
3. Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016 to transactions prior to its commencement.
4. Procedural adherence under the Benami Transactions (Prohibition) Amendment Act, 2016.

Detailed Analysis:

1. Legal Validity of the Impugned Orders:
The petitioner challenged the orders dated 12.05.2017 and 26.05.2017, claiming that the third respondent implicated him as the beneficial owner of the property without issuing any notice or providing an opportunity to defend, thus rendering the orders illegal and violative of natural justice. The petitioner argued that the impugned order dated 12.05.2017 was passed under Section 24(4)(a)(i) of the Benami Transactions (Prohibition) Amendment Act, 2016, which came into force on 01.11.2016. The petitioner contended that the Act should apply only to transactions entered into on or after this date, and since the alleged transaction occurred on 28.10.2016, the impugned order lacked jurisdiction.

2. Violation of Principles of Natural Justice:
The petitioner argued that the impugned order was passed without issuing a show-cause notice as mandated under Section 24(2) of the Act, thereby violating the principles of natural justice. The petitioner was not given an opportunity to defend his case, making the order void. The petitioner further contended that proceedings under the Benami Transactions (Prohibition) Amendment Act, 2016 should be independent and not based on statements recorded under Section 131 of the Income Tax Act by Income Tax Officers.

3. Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016:
The petitioner claimed that the provisions of the Benami Transactions (Prohibition) Amendment Act, 2016, which came into force on 01.11.2016, could not be enforced for transactions entered into before this date. The respondents countered this by stating that Section 1(3) of the Act clarifies that except for Sections 3, 5, and 8, the remaining provisions of the Act are deemed to have come into force on 19.05.1988. Therefore, the pre-amendment Act is in force for all purposes, and the amendments are meant to make the legislation more effective.

4. Procedural Adherence under the Benami Transactions (Prohibition) Amendment Act, 2016:
The respondents argued that the impugned order dated 12.05.2017 was a provisional attachment made under Section 24(4)(a)(i) of the Act, and after this provisional attachment, a show-cause notice under Section 26(1) was issued to the petitioner. The respondents emphasized that the procedures under the Act were followed scrupulously, and the petitioner should face the adjudication process rather than prolonging the issue.

Judgment:
The court examined the nature of the impugned proceedings with reference to the provisions of the Act. Section 1(3) clarifies that the provisions of Sections 3, 5, and 8 came into force immediately, while the remaining provisions are deemed to have come into force on 19.05.1988. The court noted that the provisional attachment under Section 24 was valid and in accordance with the law, even though the transactions occurred before the amendment. The court highlighted that Section 24 allows for provisional attachment to prevent encumbering the property during adjudication, and the petitioner must respond to the show-cause notice and submit explanations, objections, and evidence.

The court concluded that the petitioner misconstrued the provisions of the Act and filed the writ petition based on incorrect interpretations. The petitioner was directed to submit objections and evidence within three weeks, and the respondents were instructed to continue and complete the proceedings expeditiously. The writ petition was dismissed with no costs, and the connected miscellaneous petition was closed.