2025 (1) TMI 1333 - HC - Benami Property

Benami Property Transactions - orders under Section 26 (3) of Prohibition of Benami Property Transactions Act - provisional attachment orders - Interpretation of Section 24(1) - HELD THAT - Writ petition was initially filed at the stage when the orders u/s 26 (3) of the Act were yet to be passed. After the said orders were passed an application under Order 6 Rule 17 of Civil Procedure Code was filed by the Petitioners seeking amendment of the writ petition and to seek further relief for quashing of the said orders under Section 26 (3) of the Act. This application also sought to place on record the orders passed u/s 26 (3) of the Act. Notice was issued in this application on 16th May 2023 and the said amendment application is still pending adjudication before this Court. Petitioners for whatever reason have sought to raise very broad challenges to the provisions itself in this writ petition. They have also brought on record the orders passed by the Adjudicating Authority under Section 26 (3) . Petitioners under normal circumstances would have been entitled to file the appeals before the Appellate Tribunal however the Petitioners did not avail of the said remedy when available and had chosen to dispute the vires of the foundational provisions of the Act before this Court. Ill-advised the said remedy i.e. to place the orders on record and file a writ petition before this Court challenging the provisions of the Act and the orders under Section 26 (3) of the Act may have been it cannot be said that the same is not a good faith proceeding. As noted by this Court that the appeals as per Section 46 of the Act have to be filed within forty-five days however the delay if sufficient cause is shown is condonable This Court is of the opinion that the Petitioners ought to be relegated to the appellate remedy as they no longer press the challenge to the validity of the provisions of the Act. The Petitioners may accordingly file appeals under Section 46 of the Act challenging the orders under Section 26 (3) of the Act before the Appellate Tribunal. Period during which the present writ petition remained pending would be liable to be excluded from the limitation period in terms of Section 14 of the Limitation Act. As made clear that this liberty is subject to the condition that the Petitioners prefer the appeals before the Appellate Tribunal by 28th February 2025. If the said appeals are filed by 28th February 2025 before the Appellate Tribunal the appeals shall not be dismissed on the ground of being barred by limitation or delay. Confiscation proceedings - Confiscation proceedings are listed before the Adjudicating Authority on 28th January 2025 at 2.30 p.m. On the said date the pleadings have to be completed before the Adjudicating Authority. The Petitioners are permitted to place today s order of this Court permitting them to file the appeals before the Adjudicating Authority in which case the Adjudicating Authority shall afford time to the Petitioners before proceeding further - in terms of the Proviso to Sec. 27 (1) of the Act.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this case were:

1. The constitutional validity of Section 2(9)(A) to (D) of the Prohibition of Benami Property Transactions Act, 1988, which defines 'benami transactions'.

2. The interpretation of Section 24(1) of the Act, specifically regarding the requirement for material possession to be of unimpeachable character and whether the reasons for believing a person to be a benamidar must be communicated in writing.

3. The legality of the show cause notices and provisional attachment orders issued under Sections 24(1), 24(2), and 24(3) of the Act.

4. The procedural propriety of the actions taken by the Initiating Officer and the subsequent proceedings by the Adjudicating Authority.

5. The Petitioners' request to be allowed to appeal the orders under Section 26(3) of the Act to the Appellate Tribunal.

ISSUE-WISE DETAILED ANALYSIS

1. Constitutional Validity of Section 2(9)(A) to (D)

The Petitioners challenged the constitutional validity of the definition of 'benami transactions' under Section 2(9)(A) to (D) of the Act, arguing that it was vague and allowed for arbitrary application, violating Articles 14, 19, and 21 of the Constitution.

Legal Framework and Precedents: The Court examined the statutory framework of the Act and the constitutional provisions cited by the Petitioners. The Court noted that the challenge to the vires of the Act was a significant legal question.

Court's Interpretation and Reasoning: The Court did not delve deeply into the merits of this constitutional challenge, as the Petitioners chose not to press this issue further and instead sought to pursue an appellate remedy.

2. Interpretation of Section 24(1)

The Petitioners sought a reading down of Section 24(1), arguing that the material in possession of the Initiating Officer must be unimpeachable and that reasons for belief should be communicated in writing.

Legal Framework and Precedents: The Court considered the language of Section 24(1) and the procedural safeguards it entails.

Court's Interpretation and Reasoning: The Court did not make a definitive ruling on this interpretation, as the focus shifted to the procedural aspects and the Petitioners' request to pursue an appellate remedy.

3. Legality of Show Cause Notices and Provisional Attachments

The Petitioners challenged the show cause notices and provisional attachment orders issued under Sections 24(1), 24(2), and 24(3) of the Act, arguing procedural violations.

Legal Framework and Precedents: The Court reviewed the procedural requirements under the Act for issuing such notices and orders.

Court's Interpretation and Reasoning: The Court noted that the Petitioners had the opportunity to challenge these orders through an appeal but had not availed themselves of this remedy at the appropriate time.

4. Procedural Propriety of Actions by Authorities

The Petitioners argued that the actions taken by the Initiating Officer and the Adjudicating Authority were procedurally flawed.

Legal Framework and Precedents: The Court examined the procedural steps outlined in the Act and the actions taken by the authorities.

Court's Interpretation and Reasoning: The Court observed that the Petitioners' challenges were primarily procedural and could be addressed through the appellate process.

5. Request to Appeal to the Appellate Tribunal

The Petitioners sought permission to appeal the orders under Section 26(3) of the Act to the Appellate Tribunal.

Legal Framework and Precedents: The Court referred to Section 46 of the Act, which provides for appeals to the Appellate Tribunal.

Court's Interpretation and Reasoning: The Court agreed to allow the Petitioners to pursue an appellate remedy, noting that the time during which the writ petition was pending would be excluded from the limitation period under Section 14 of the Limitation Act.

SIGNIFICANT HOLDINGS

The Court concluded that the Petitioners should be permitted to file appeals under Section 46 of the Act challenging the orders under Section 26(3) of the Act. The Court emphasized that the appeals should be filed by 28th February, 2025, and should not be dismissed on grounds of limitation or delay.

Core Principles Established: The Court underscored the importance of exhausting appellate remedies before seeking constitutional challenges in writ petitions. It also highlighted the procedural safeguards available under the Act for challenging orders.

Final Determinations: The Court disposed of the writ petition, allowing the Petitioners to pursue their appeals and ensuring that the time spent in the writ proceedings would not bar them from appealing on grounds of delay.