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TMI Blog2019 (4) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... hose 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that these 5 individuals and the Directors of these 5 companies are dummy directors of these companies and dummy owner of the properties. The individuals and directors of these companies are employees of the respondent no. 2. They were not aware of any details, transactions or day to day functioning of the companies, though they are the directors of the said companies, which were handled by Mr. SachinPathak and Mr.Hemant Bhatia, who are in turn the accountants of M/s RKW Developers Private Limited and related concern. Both Mr. SachinPathak and Mr. Hemant Bhatia are employees of Wadhawan Group and are managing and controlling these companies on the instruction of Mr. HitenSakhuja, a relative of the promoters and directors of the Wadhawan Group companies. 5. It is admitted on behalf of the appellant that the entire transaction of purchase of properties by the respondent no.1 from the aforementioned ten parties has been funded by M/s Dewan Housing Finance Limited (DHFL). The respondent no. 2 and DHFL are related to each other by means of common promoters and directors and also have common office addresses. The properties were purchased/registered by the respondent no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of property, thereby establishing that the respondent no. 2 is directly involved in the development of project in order to derive future benefits arising out of the same. The person providing the consideration i.e. DHFL and person reaping the benefits of such transaction i.e. respondent no. 2 are same as they are linked to each by means of common directors and promoters 8. It is submitted on behalf of appellant that the benefits to the beneficial owner arising out of property held in the name of the benamidar need not be direct and immediate and that indirect and future benefits are also covered under the definition of a benami transactions under section 2(9)(A) of the PBPT Act, 1988, therefore, the Adjudicating Authority thus erred in setting aside on merits the order u/s 24(4) of the PBPT Act 1988 passed by the IO holding respondent no 1 as the benamidar and respondent no 2 as beneficial owner. There being a statutory power vested with the adjudicating Authority by virtue of Section 11 PBPT Act, the strict rules of evidence may not apply, whilst the Authority needs to weigh and shift the material placed before it with preponderance of probabilities coupled with circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Real Estate and Infrastructure space. Midcity Group has completed around 28 projects till date in the City of Mumbai Suburban. Presently there are numerous other ongoing projects with saleable area admeasuring approximately 1.5 million sq. ft. c) In or about October 2016, Mr. Dhruv came to know about a property situated at Khar (West) which was available for redevelopment. Finding the property ideal and feasible, Mr. Dhruv decided to purchase the flats and initiate re-development on the said Property. d) At the relevant time, all the other entities in which Mr. Rajen Dhruv was either a partner/director were the entities/partnership forming part of the Midcity Group and were engaged in redevelopment of various other projects. Therefore, Mr. Dhruv thought that a separate entity, in which Mr. Dhruv and his relative Mr. Kishore Parekh would be partners, would be a suitable entity to undertake development of the said Property after purchasing the same. Mr. Kishore Parekh agreed to the aforesaid arrangement. e) Mr. Dhruv had raised funds from DHFL for his other projects also and in November 2016, Mr. Dhruv once again approached DHFL for the purpose of raising funds in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding on 13th January 2017 and registered the same on 17th January 2017. All the vendors were paid valuable consideration and requisite stamp duty was also paid on all the agreements. The total consideration paid by R-1 to all the flat owners and the owner of the land is approximately about ₹ 111,32,00,000/- (Rupees One Hundred and Eleven Crores Thirty Two Lakhs Only) and the total amount paid towards stamp duty by R-1 was approximately about ₹ 5,56,60,500/- (Rupees Five Crores Fifty Six Lakhs Sixty Thousand and Five Hundred Only ). i) That accordingly, on 19th January 2017, a mortgage deed (appended in the along with reply filed before the authority) was executed and registered by and between this R-1 (therein referred to as the Mortgagor) and DHFL (therein referred to as the Mortgagee) on the terms and conditions stated therein. j) Subsequent to the registration of the documents, R-1 took following steps towards redevelopment of the said Property: i) On 6th February 2017, R-1 through its Architect filed an application with the Chief Executive Officer, Slum Rehabilitation Authority and submitted a proposal under regulation 33(14) for acceptance (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference and hence order u/s 24(3) 24(4) are also invalid and illegal. ii) No explanation was given as to why the Provisional Attachment Order u/s 24(4)(a)(i) was not served to the R-2. iii) The IO has miserably failed to discharge the burden of proof cast upon him to prove the transaction as benami. iv) Genuine and Bona-fide transaction carried out by R-1 and Failure of the IO to establish connection between DHFL and RKW Developer Pvt. Ltd. (R-2). v) Transaction not carried out in stages as alleged as the R-1 has able proved that the land was purchased by it through genuine sources and for re-development. vi) The possession, control and enjoyment of the property is totally in the hands of the R-1 and therefore no proof that the property is held for the benefit of R-2 and thus crucial mandatory test to treat the property as benami failed. vii) Admission of IO that the funds were not given by the R-2 to R-1 for the purchase of property. 14. The counsel appearing on behalf of R- 1 submits that R-1 is the true and sole owner of the said Property and all the benefits arising out of the said land accrues to R-1 only and as such no other person is beneficial ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that R-1 did not had the financial capacity to avail loan from DHFL or it has a control over to the financial institution. 18. The appellant has disputed the veracity of the loan agreement as executed between R-1 and DHFL, and has claimed that R-2 is exercising control over DHFL. DHFL i.e. Dewan Housing Financial Corporation Ltd. is a listed public company having substantial public holding. Therefore, submission of the appellant cannot be accepted to the effect that it is in control of a public listed company as the loan extended to the R-1 by DHFL was done on arm s length basis . The relevant disclosures for the payment of interest have been made in the Income Tax Return filed for the Assessment Year 2018-19. 19. It is not denied on behalf of the appellant that the designated partners of R-1 i.e. Mr. Rajen Dhruv and Mr. Kishore Parekh had given Irrevocable Personal Guarantee and therefore stood as guarantors for the loan taken by R-1. The sanction letter dated 18.01.2017, from DHFL containing therein names of Mr. Rajen Dhruv and Mr. Kishore Parekh as personal guarantors for the loan sanctioned to R-1. In the letter dated 06.04.2018 of DHFL, a copy was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, and a copy of the order shall be affixed on a conspicuous part of the property and on the notice board of the office of the Tax Recovery Officer. 22. Under these mandatory provisions, the IO was duly bound to follow the statutory procedure mandated in above rules. Though order of attachment was passed and served on the R-1 , the requirement of proclamation of attachment order at some place on or adjacent to the property attached by beat of drum or other customary mode and affixture of copy thereof on a conspicuous part of the property and on the notice board of the office of the Initiating Officer was not done.Certificate of confirmation of affixture of the order on the notice board of the Initiating Officer is also not found enclosed with the reference confirming that said mandatory step was taken at the relevant point of time. Thus, the rules were not followed. a) The Hon ble Supreme Court in the case of Ronald Wood Mathams v. State of West Bengal (AIR 1954 SC 455) observed But it is essential that rules of procedure designed to ensure justice should be scrupulously followed, and Courts should be jealous in seeing that there is no breach of them . b) On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with the submission of R-1 that the IO has miserably failed to discharge such burden of proof. Section 92 of Indian Evidence Act,1872 talks about the exclusion of evidence of oral agreement. 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. 28. Once the burden is shifted upon the IO,the principles of general law available prior to amendment would apply. The following judgements are referred on behalf of respondent no. 1 and 2:- a) Valiammal V. Subramaniam, AIR 2004 SC 4187 Circumstances which can be taken as a guide to determine the nature of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the person who has contributed the purchase money and ( 4) The question as to what his intention was has to be decided on the basis of the surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct etc. d) Andalammal V. Rajeswari Vedachallam AIR 1985 Mad 321 The next question to which we propose to advert is the issue relating to benami theory. It is by now well-settled that the burden is on the person who sets up the case of benami in the instant case the respondents and that if the burden is not discharged, the ostensible title will prevail. To substantiate a case of benami, the judicial pronouncements have laid down several factors have to be taken into consideration and on an over all assessment of such factors is the court to render a finding. The relevant factors are:- a) The consideration; b) Possession and enjoyment of property; c) Possession of the title deeds; d) Motive; and e) Mutation in the public records. e) Jayadayal Poddar V. Bibi Hazra AIR 1974 SC 171 The essence of a benami i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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