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TMI Blog2013 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... sue, in a short compass, is whether, for dues of the "defaulter"; the appellants, viz., wife and children of the defaulter, are entitled to be proceeded against and the properties standing in their name, applied to the satisfaction of such dues of the defaulter; on the premise that the same were in fact purchased by the defaulter and that the purchase in favour of the defaulter's dependents and in one instance the conveyance made to his son are to defeat the recovery of dues to the appellant-Department. The transactions with respect to the properties thus not disclosing the true nature of ownership; in any event being in the control of the "defaulter", the same are liable to be proceeded against for dues of the defaulter, is the contention of the appellant. 3. The brief facts leading to the recovery proceedings are that the defaulter was running a proprietary business, in the course of which he imported CF Lamps from China into India. The goods were cleared as per Bill of Entry dated 28.12.2001 by paying the customs duty and not the Anti-Dumping Duty. Admittedly the Government of India had imposed Anti-Dumping Duty by a notification dated 21.12.2001, seven days before the actual c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially considered the question whether the Department can attach and sell the property standing in the name of another person treating the same as hit by Section 53 of the Transfer of Property Act, 1882 and treating the same as a sham transaction. It was noticed that except Exhibit P2 property, which was conveyed by the defaulter in the name of his son, the allegation with respect to all the other properties were that they were purchased in the name of the defaulter's dependants with the funds of the defaulter. It was also found that certain properties were purchased in the name of the dependants even before the transaction, i.e., the import of the goods occurred. The learned Single Judge found that there is no vested right in the Department to take over any of the properties which are in the name of the dependants of the defaulter and it was categorically found that the statute does not permit such a course of action. Hence, the impugned notices were set aside and liberty was left to the Department to take appropriate proceedings known to law, if the Department intended to proceed against the properties and sell the same. 7. We have heard Sri.Thomas Mathew Nellimoottil,learned St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he defaulter; nor were they served with any notice, at the stage of initiation, by issue of show cause notice, for levy of Anti Dumping Duty; nor in the course of the adjudicatory proceedings, reaching upto the Supreme Court or even with respect to any recovery proceedings initiated against them. Even the notice dated 06.12.2010 (which are produced as Exhibits P4 and P8 in the respective writ petitions) was only to the Sub Registrar and the respondents have not been informed of the distrain order by the Department. They are aggrieved in so far as the distrain order issued purportedly under the Act and the Rules effectively prohibit and inhibit them from dealing with any of the properties. This was the subject of challenge in the writ petition and the respective counsels urge us not to disturb the findings of the learned Single Judge. 10. We would first deal with the contention raised by the Standing Counsel with regard to benami transactions and sham transactions. The reliance placed on Ouseph Chacko v. Raman Nair [AIR 1989 Kerala 317], in our opinion, is not at all relevant. A learned Single Judge, in the said case considered the difference between a ' benami transaction' and a ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther contention of the learned Standing Counsel is that the relationship between a husband and wife is fiduciary in character and that the husband having paid the consideration for the purchase of the property, the wife is bound to account to the husband and in such circumstance the property even if in the name of the wife, can be proceeded against for the dues of the husband/defaulter. The learned counsel also relies on the Division Bench decision of this Court in Sunitha v. Ramesh [2010 (3) KLT 501] and the decision of the Supreme Court in Marcel Martins (supra) to advance the said proposition. 12. Sunitha (supra) was a case in which an estranged wife claimed the cash and value of the ornaments and articles entrusted with the husband at the time of marriage. On execution proceedings initiated by the wife, the husband took a plea of no means. Looking at Section 51 of the Code of Civil Procedure, a Division Bench of this Court found that a plea of 'no means' would not help the husband in so far as clause (c) of proviso to Section 51 CPC enables the Court to execute the decree for payment of money by detention in prison if it is satisfied that "the decree is for a sum for which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanced amounts to secure transfer of tenancy rights in the name of the son was accepted; then the claim would fail and the plaintiffs would be non-suited for the sole reason of the transaction being hit by the Benami Act and the prohibition thereon. The Hon'ble Supreme Court dealt with the meaning of the term "fiduciary" in extenso and as garnered from various authoritative texts, being "Corpus Juris Secundum ", "Words and Phrases" Permanent Edn.( Vol.16 -A), "Blacks Law Dictionary", "Stroud's Judicial Dictionary" and " Bouvier's Law Dictionary"; found that the term connotes the idea of trust or confidence and applies to any person who occupies a position of peculiar confidence towards another. The term was held to refer to integrity and fidelity rather than a legal obligation as the basis of the transaction. Finding that on the facts established in evidence, it cannot be gainsaid that the transaction was a benami transaction hit by the provisions contained in Benami Act; the son was held to be holding such property in trust for his father and his siblings. 14. The principle stated in the said decision cannot clothe the Department with any power or authority or a legal right to st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Independent of the rejection of any general right sought to be asserted by the person against whom proceedings are taken, the Department should establish that such person is a "defaulter" under the Act and is liable to be proceeded with. If any person is holding property other than the defaulter and on which property the defaulter is said to have an interest, then there should be a provision in the statute clothing the officer entrusted with the levy or collection, to so adjudicate on the interest of the defaulter and come to a finding with respect to that. Of course then notice should also be served on all affected parties. We have already found that the contention with respect to the fiduciary relationship, benami transactions and sham transactions do not at all aid the Department unless they approach the proper forum for adjudication of such grounds, especially so when no officer authorized under the Act and the Rules are conferred with such adjudicatory powers. In the absence of any such judicial or quasi-judicial powers conferred on the authorities, the same can only be exercised by the Courts on which the State has conferred its judicial powers. 16. The provisions relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person. Provided that where the person (hereinafter referred toas predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under Section 28-B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per officer. (ii) Where an attachment has been made under these rules, any private transfer or delivery of the property attached or of any debt, dividend or other moneys contrary to such attachment, shall be void as against claims enforceable under the attachment". The contention of the appellants is that Rule 4 notice has been issued on the defaulter and under Rule 9, the properties mentioned in the notice under that rule are not entitled to be dealt with. Primarily we have to notice that the issue of Certificate under Chapter II is for the dues not paid by the defaulter to the Government and the amounts specified as the amounts due from 'such person', and that 'such person' can only be the "defaulter" and no other; going by the Act and the Rules. The Rules by its definition of "defaulter" also does not go beyond the person from whom the Government dues are recoverable under the Act. Even according to the notice dated 06.12.2010, notice under Rule 4 was served on the defaulter alone, i.e., the husband and father of the writ petitioners. Invoking Rule 9, the wife and children of the defaulter were interdicted from dealing with the properties owned by them, viz., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were all held to be facts which are not matters for determination in the proceedings under the Act and the Rules. It was also clarified by the Bench decision that what they have said in the order would not amount to a determination on such aspects as that does not fall within the purview of the provisions of the Act and the Rules. This specifically is the liberty preserved by the learned Single Judge in the impugned judgment. 21. The learned Judges of the Division Bench in the earlier cited judgment referred to two earlier Division Bench judgments of that Court, reported in Sunil Parmeshwar Mittal v. Deputy Commissioner (Recovery Cell) [2005 (6) Bom.C.R.778 ] and Vandana Bidyut Chaterjee v. Union of India [Laws ( Bom )- 2012-2-151].Both the said decisions were under the Central Excise Act, 1944 and the proceedings for recovery initiated under the Rules which has come up for consideration in the instant case. Sunil Parmeshwar Mittal (supra) was with respect to recovery against the former Directors of a Company. The Court was concerned with whether from the backdrop of facts such former Directors could be made liable to pay the dues of the Company. Going by the provisions of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act 1961 or under Section 18 of the Central Sales Tax Act, 1956 where the dues of a private limited company can be recovered from its Directors when the private limited company is under liquidation, in specific circumstances. It is a well settled position in law that a Company incorporated under the Companies Act, 1956 is a separate person having a distinct independent identity, independent from its shareholders and Directors. Consequently, the dues of the company cannot be recovered from the Directors and/or individual shareholder of the company. Further, it is pertinent to note that it is not the case of the Respondents that they are seeking to lift the Corporate veil of the said company to establish that the said company was a mere shell and being utilized to defraud the revenue of its legitimate dues. Further the case of lifting the corporate veil, if any, was to be made out at the time notices of demand were issued to the said company by making the Directors/shareholders liable to pay the dues and the same being confirmed by the authorities under the said Act. Once it is an admitted position between the parties that the arrears of duty and penalty are those of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the like of which is found in the Kerala Sales Tax Act, the Central Sales Tax Act, the Income Tax Act and the Kerala Revenue Recovery Act, we are afraid, the Department cannot avail of any general principle to find a property possessed and owned by a person as being actually owned or under the control of a "defaulter" under the Act and then to proceed for recovery of such properties. Even if there were such a provision that would definitely require a process of adjudication ; before, a property standing in the name of one is to be found actually or in control of another. Obviously, such a procedure would require notice too. Any such provision or procedure is totally absent from the provisions of the Act and the Rules and admittedly no notice has been sent to the petitioners in the two writ petitions. We also notice that the provision under Rule 9 making any transfer or delivery of a property attached as void would in any event be only effective from the date of notice under Rule 4, that too applicable only to the "defaulter's" properties. The transactions said to have been made by the defaulter in the name of the wife and children are all before such notice was served on the "def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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