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TMI Blog2021 (10) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... nd adjacent to the plot owned by another company called Paradise Complex Ltd. and therefore, the petitioner No.1-company was set up, is clearly a misreading of the provisions of the Companies Act. Merely because the petitioner nos.2, 3 and 4 can be said to be shareholders of the company, the Paradise Complex Ltd. would not make them owners of land of the company. So far as the ownership of land is concerned, each company has right to purchase property. The Benami Act, 1988, in the opinion of this Court, would not extend to properties purchased by the company. The transactions of the company are independent transactions which are only for the purpose of benefit of the company alone. It is a different aspect altogether that on account of benefit accruing to the company, the shareholders would also receive benefit and they may be beneficiaries to a certain extent. This would however not make shareholders as beneficial owners in terms of the definition as provided under Section 2(12) of the Benami Act, 1988. 'Company' as defined under the Companies Act, 1956 and incorporated thereunder, therefore, cannot be treated as benamidar as defined under the Benami Act, 1988. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Initiating Officer under Section 24(4) of the Benami Act, 1988 and the orders passed by the Adjudicating Authority dated 30.01.2019 confirming the orders under Section 26(3) of the Benami Act, 1988 are set aside with all consequential benefits. The property shall be handed over to the company. - S. B. Civil Writ Petition No. 11176/2020 - - - Dated:- 6-10-2021 - HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA For the Petitioner : Mr. Swadeep Singh Hora For the Respondent : Mr. R.B. Mathur ORDER 1. The petitioners by way of this writ petition assail the provisional attachment orders dated 12.01.2018 passed by the Initiating Officer under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988 and the confirmation orders dated 30.01.2019 passed by the Adjudicating Authority under Section 26(3) of the Prohibition of Benami Property Transactions Act, 1988 (hereinafter referred to as the Benami Act, 1988 ). 2. In order to appreciate the controversy, it would be apposite to first notice the facts of the case as has come on record in brief. 2.1 The petitioner No.1-company M/s. Shri Kalyan Buildmart Pvt. Ltd. was incorporated with two shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Madan Mohan Gupta was also opened in Allahabad Bank. Similarly, the accounts were opened of the company by Madan Mohan Gupta by Vimal Chand Surana and Navrattan Kothari in the Bank of Rajasthan (now ICICI Bank). These accounts were not operated by Madan Mohan Gupta but were operated by Rajendra Kumar Jain and Navrattan Kothari and Vimal Chand Surana respectively for which the introducers were their employees and themselves. 2.4 The IO has submitted that Madan Mohan Gupta was acting as per instructions of Rajendra Kumar Jain, Navrattan Kothari and Vimal Chand Surana as their benamidar for execution of the deal. The property was purchased in the name of company solely with the purpose to transfer shares of the company to Vimal Chand Surana, Navrattan Kothari and Kushal Chand Surana in order to avoid liability of payment of stamp duty and therefore, the property was a benami property originally acquired in the name of benamidar company through dummy Directors - Madan Mohan Gupta and Shashikala Gupta by petitioner Nos.2 to 4 and therefore was liable for confiscation under the Benami Act, 1988. 2.5 It was further submitted that subsequently shares of the company were transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicating Authority confirmed the attachment proceedings on 30.01.2019. Challenging the said provisions, the present writ petition has been filed. 6. Learned counsel for the petitioner-company has submitted that the entire proceedings are illegal and unjustified. 7. It is stated that the Chairman of the Appellate Tribunal retired and the appeal preferred before the Appellate Tribunal against the order dated 30.01.2019 passed by the Adjudicating Authority became otiose. The petitioners were caused great prejudice and financial loss on account of the attachment and even as on today, the Appellate Tribunal is not functioning. In the circumstances, it was prayed that the writ petition would be maintainable. Learned counsel for the petitioners relied on judgment passed in the case of Rojer Mathew Vs. South Indian Bank Ltd. Ors., reported in 2020 (6) SCC 1 to submit that the writ petition was maintainable. 8. This court had issued notices, whereafter learned counsel for the respondents have appeared and submitted that as per statement recorded of Madan Mohan Gupta under the Income Tax Act, it is apparent that the money used for purchasing property was of Navrattan Kothari and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is submitted that merely because the original Directors of the company have sold their shares subsequently to the petitioners, the petitioners would not make transaction benami as the company remains actual beneficial owner of the property. After resumption of land by the State under 90B proceedings, the property itself ceased to exist and the attachment and the confirmation are unsustainable in law. The JDA has already converted the land as commercial and a registered lease deed has been executed by the JDA in favour of the company which admittedly has not been treated as a transaction under the Benami Act, 1988 by the authority while passing order under Section 24(4) of the Benami Act, 1988. A commercial complex therefore could not have been a subject matter of attachment and the entire proceedings are without jurisdiction and infringe rights under Articles 14, 21 and 300A of the Constitution of India. 13. Learned counsel further submitted that the Adjudicating Authority in its long order of 73 pages has concluded in 9 lines without giving any finding that the attached property is a benami property. 14. Learned counsel further submitted that there is an inordinate delay of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that in the case of Niharika Jain Vs. Union of India, reported in 2019 (3) RLW 1947, this Court has held that the proceedings under the Benami Act, 1988 cannot be treated as retrospective as it has been brought into force with effect from 01.11.2016. The Division Bench stayed the operation of order passed by the learned Single Judge on 26.08.2020. However, the Supreme Court stayed the part of the order and at the same time restrained the concerned owners from not alienating the property and not creating third party interest. 19. Learned counsel relied on the judgment passed by the Bombay High Court in the case of Joseph Isharat Vs. Rozy Nishikant Gaikwad, 2017 SCC Online Bom 10006 to submit that the provisions are prospective in nature and further submits that an SLP against the said judgment was dismissed by the Supreme Court vide order dated 28.04.2017. 20. Learned counsel also relied on the judgment in the case of Mangathai Ammal Vs. Rajeshwari Ors. reported in 2019 SCC Online SC 717 to submit that that Supreme Court has also observed that the amended provisions would not have a retrospective effect. 21. Learned counsel appearing for the respondent/s also submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Pallavi Mishra V/s Dy. Commissioner (Benami Prohibition) Rajasthan And Initiating Officer Anr., bearing No(s).10545/2020. 5.Valliammal Vs Subramaniam, 2004 7 SCC 233. 6. Tulsiram Vs. Assistant Commissioner of Income Tax (Benami Prohibition), (2020) 270 TAXMAN 309 (Chattisgarh). 7. Simmant Kohli Vs. Union of India and Ors., W.P. No.3957/2019. 24. I have considered the submissions. It would be apposite to quote relevant definitions as provided under the Benami Act, 1988. 25. The definition of 'benami transaction' provided under Section 2(9) of the Benami Act, 1988 reads as under: 2(9) benami transaction means,-- (A) a transaction or an arrangement-- (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by-- (i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose name the benami property is transferred or held and includes a person who lends his name. 27. The definition of 'person' provided under Section 2(24) of the Benami Act, 1988 reads as under: 2(24) person shall include-- (i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not; (vi) every artificial juridical person, not falling under sub-clauses (i) to (v). 28. Section 3 of the Benami Act, 1988 reads as under: 3. Prohibition of benami transactions.--(1) No person shall enter into any benami transaction. (2) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. (3) Whoever enters into any benami transaction on and after the date of commencement of the Benami Transactions (Prohibition) Amendment Act, 2016 (43 of 2016) shall, notwithstanding anything contained in sub-section (2), be punishable in accordance with the provisions contained in Chapter VII. 29. Section 24 of the Benami Act, 1988 reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property under sub-clause (i) of clause (b) of that sub-section, he shall, within fifteen days from the date of the attachment, draw up a statement of the case and refer it to the Adjudicating Authority. Explanation: For the purposes of this section, in computing the period of limitation, the period during which the proceeding is stayed by an order or injunction of any court shall be excluded: PROVIDED that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub-section (4) available to the Initiating Officer for passing order of attachment is less than thirty days, such remaining period shall be deemed to be extended to thirty days: PROVIDED FURTHER that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub- section (5) available to the Initiating Officer to refer the order of attachment to Adjudicating Authority is less than seven days, such remaining period shall be deemed to be extended to seven days. 30. From the judgments, which have been cited by both the parties and the interim orders passed by the Supreme Court, in the opinion of this court, the question regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue Act and for setting up a commercial building, have been made in the name of the company. The contention of the respondents with regard to intentions of petitioner Nos.2, 3 and 4 to own the plot of land adjacent to the plot owned by another company called Paradise Complex Ltd. and therefore, the petitioner No.1-company was set up, is clearly a misreading of the provisions of the Companies Act. Merely because the petitioner nos.2, 3 and 4 can be said to be shareholders of the company, the Paradise Complex Ltd. would not make them owners of land of the company. It may be a different aspect altogether in relation to the evasion of income tax and for carrying out proceedings under the Income Tax Act. However, so far as the ownership of land is concerned, each company has right to purchase property. The Benami Act, 1988, in the opinion of this Court, would not extend to properties purchased by the company. 36. The very purpose of coming into force of the Benami Transactions (Prohibition) Act, 1988 was to implement the recommendations of Fifty-seventh Report of the Law Commission on benami transactions and was to curtail benami purchases i.e. purchase in false name of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y namely, the shareholders, their relatives or individuals who invest in the company by way of giving land or by way of gift or in any other manner, then such amounts/monies received, would be part of the net worth of the company and the company would be entitled to invest in any sector for which it has been formed. The persons who have put monies in the company, may be considered as their shareholders but such shareholders do not have right to own properties of the company nor it can be said that the shareholders have by virtue of their share in the company invested their amount as benamidars. The transactions of the company are independent transactions which are only for the purpose of benefit of the company alone. 40. It is a different aspect altogether that on account of benefit accruing to the company, the shareholders would also receive benefit and they may be beneficiaries to a certain extent. This would however not make shareholders as beneficial owners in terms of the definition as provided under Section 2(12) of the Benami Act, 1988. 'Company' as defined under the Companies Act, 1956 and incorporated thereunder, therefore, cannot be treated as benamidar as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the company, therefore, this Court is satisfied that a subsequent registered sale deed executed by the JDA does not warrant interference and it is not a case of proceeds from the property acquired through benami transaction on 24.08.2006. The approach of the respondents is thus found to be erroneous. 45. This Court also finds strength in the arguments made by learned counsel for the petitioners regarding provisions of Section 90B of the Rajasthan Land Revenue Act. Once the land has been surrendered and the order has been passed by the JDA under Section 90B of the Rajasthan Land Revenue Act, 1956 and the land has been converted from agriculture to commercial and registered lease deed has been executed by the JDA in favour of the company, the transaction is not a benami transaction. 46. In view of the above discussion, this Court concludes that action of the respondents in attaching commercial complex which has been leased out to the company by the JDA is illegal and unjustified and without jurisdiction. 47. Accordingly, the provisional attachment orders dated 12.01.2018 passed by the Initiating Officer under Section 24(4) of the Benami Act, 1988 and the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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