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TMI Blog2022 (7) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... for the records from the file of the first respondent pertaining to the orders dated 29.01.2020 passed under section 24(4) of the Prohibition of Benami Property Transactions Act, 1988 (hereinafter referred to as "the Act") and quash the same as illegal, arbitrary and without jurisdiction. 3.1. According to the appellants, they are involved in the business of real estate and developing infrastructure projects including ports, SEZ's, hotels, malls, etc. In the month of November, 2017, a search was conducted in the business premises of the appellants consequent to the search in the case of Mrs.V.K.Sasikala. During the course of the same, various documents were impounded and sworn statements were recorded. Consequently, the appellants received show cause notices dated 01.11.2019 issued by the first respondent under section 24(1) alleging that they are benamidars for the identified beneficial owner viz., Mrs.V.K.Sasikala with respect to their shares held in M/s. Digital Accelerators Limited and they were called upon to reply on or before 18.11.2019 as to why they should not be held to be benamidars. In response, the appellants raised objections to the proposal to treat the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it would be inappropriate to call the appellants, who are the rightful owners of the shares, to be benamidars, merely because the cash in demonetized currencies was thrust on during the fag end of the demonetization period to the promoters of the company. 4.2. The learned counsel for the appellants further contended that even though the appellants sought for the documents that have been relied upon by the first respondent for initiating the impugned proceedings and requested for providing an opportunity to cross examine the persons, whose statements have been referred to in the show cause notices, the first respondent has failed to consider the same, but passed the orders under section 24(4) of the Act, which were impugned in the writ petitions and proceeded further by making reference under section 24(5) to the second respondent. Such action of the first respondent is against the principles of natural justice and contrary to the provisions of law. However, the learned Judge erred in holding that the process and procedure as envisaged for provisional attachment under section 24 is of a narrower compass, when compared with the process of adjudication to follow thereafter. 4.3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this court. 6.Heard both sides and perused the materials available on record. 7.At the outset, it is but necessary to refer to the provisions of law for effective adjudication. The Benami Transactions (Prohibition) Act, 1988, was enacted to prohibit benami transactions and the right to recover property held benami. The said Act makes it clear that all the properties held benami shall be subject to acquisition by such authority in such manner and after following such procedure as may be prescribed; and no amount shall be payable for the acquisition of any property held benami. It also provides a mechanism and procedure for confiscation of property held benami. Section 24 deals with notice and attachment of property involved in benami transaction, which reads as follows: "24.Notice and attachment of property involved in benami transaction.- (1)Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as bena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] (5)Where the Initiating Officer passes an order continuing the provisional attachment of the property under sub-clause (i) of clause (a) of sub-section (4) or passes an order provisionally attaching the 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." A reading of the aforesaid provision would show that as per section 24(1), when the Initiating Officer based on the materials in his possession, has reason to believe that any person is a benamidar in respect of a property, he may after recording reasons in writing, issue a notice to the person to show cause as to why the property should not be treated as benami property. Sub section (3) to section 24 states that the Initiating Officer, who is of the opinion that the person in possession of the property held behami, may alienate the property during the period specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminary enquiry. 67..... 68.The thrust of the petitioner's case is the alleged insufficiency of materials as well as the fact that the evidences gathered are unreliable. However, and at the risk of repetition, the enquiry conducted under section 24 is only a preliminary enquiry and the use of the phrase 'reason to believe' only indicates a prima facie satisfaction that all was not well as regards a particular transaction. In the present case, the trajectory of events as has been noticed by me in the preceding paragraphs of this order do not lead to the conclusion that the respondents had no reasons at all to justify the invocation of section 24. 69.Yet another ground taken by the petitioners is as regards the denial of opportunity to cross examine the parties at the stage of investigation. As regards this, the respondents deny that such opportunity was sought for by all petitioners. In any event, they reiterate that opportunity for cross examination will be granted, as apporpriate, in the course of adjudication proceedings. 70.... 71.... 72.... 73.Thus, the process and procedure as envisaged for provisional attachment under section 24 is of a narrower comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the writ petitions, are arbitrary, illegal and violative of the principles of natural justice. Whereas, it is the specific stand of the respondents that they have supplied the required documents to the appellants and that, there is no provision for providing an opportunity to cross examine the witnesses from whom they have collected the information regarding benami properties, at the preliminary stage and therefore, the question of violation of the principles of natural justice does not arise herein. 10.Concededly, in the notices dated 01.11.2019 issued under section 24(1) of the Act, the first respondent has set out the reasons for forming an opinion that the appellants are benamidars in respect of the properties in question; and they were called upon to show cause as to why the properties should not be treated as benami properties, on or before 18.11.2019. Though the appellants raised their objections to the same, failed to produce the documents called for by the first respondent, to show that the alleged transactions were reversed subsequently, but they complained that there is no fair play on the part of the respondent authorities, while passing orders under section 24(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was not the examination-in-chief for the sworn statements recorded under the Income-tax Act, the question of cross-examination does not arise. However, opportunities were given time and again, to furnish their material evidences which have not been utilised by them. It is placed on record that the entire proceedings have been initiated based on the evidences collected and sufficient opportunities have been given to the Beneficial Owner and Benamidar to offer their objections on those evidences. In addition to the above, the current proceedings under the PBPT Act are time bound one. The peculiar situation is that the Beneficial Owner is in Central Prison, Bengaluru." 12.At this juncture, it will be useful to refer to the following decisions, in which, it was categorically held that "the exercise of cross-examination commences only after the proceedings for adjudication have commenced"; and "a writ petition should not be entertained against a mere show cause notice". (i) The Hon'ble Supreme Court in K.L. Tripathi v. State Bank of India and Ors. [AIR 1984 SC 273], has observed as follows: "42. It is true that all actions against a party which involve penal or adverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 645 In our opinion, in the background of facts and circumstances of this case, the nature of investigation conducted in which the appellant was associated, there has been no infraction of that principle. In the premises, for the reasons aforesaid, there has been in the facts and circumstances of the case, no infraction of any principle of natural justice by the absence of a formal opportunity of cross-examination Neither cross-examination nor the opportunity to lead evidence by the delinquent is an integral part of all quasi judicial adjudications." (ii) In an order dated 29.11.2010 passed in Special Appeal No.741 of 2010 (MANU/UP/2113/2010) in the case of Commissioner of Central Excise v. Parmarth Iron Pvt Ltd, it was observed by the Allahabad High Court as follows: "15.The question, however, before us is, does the Respondent have a right to call upon the Appellants to make available the witnesses for cross-examination even before they being examined or their statements relied upon by the Department in proceedings in adjudication.... Is, therefore, an Assessee entitled to cross examine the witnesses at the stage of filing a reply to the show cause notice? A show cause not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, their statements cannot be considered as evidence. However, if the Revenue choose to rely on the statements, then in that event, the persons whose statements are relied upon have to be made available for cross-examination for the evidence or statement to be considered. 17.We are, therefore, clearly of the opinion that there is no right, procedurally or substantively or in compliance with natural justice and fair play, to make available the witnesses whose statements were recorded for cross examination before the reply to the show cause notice is filed and before adjudication commences. The exercise of cross-examination commences only after the proceedings for adjudication have commenced." (iii) In Century NF Castings v. Union of India [2011 SCC Online P&H 17614 : (2011) 269 ELT 221], it was held by the Punjab and Haryana High Court as follows: "6.We are unable to accept the submission. No doubt cross-examination is a valuable right, the effect of not permitting the cross examination depends upon the facts and circumstances of each case. At this interim stage when decision on merits is yet to be taken, we do not find any ground to adjudicate upon the question whether ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by the Initiating Officer under section 24(4) of the Prohibition of Benami Property Transaction Act, 1988 and the same was rejected. The relevant portion of the order, reads as follows: "6....In my view, the principles of natural justice are codified in terms of sub section (6) of section 26 of the Act. The impugned order is subject to judicial review before the adjudicating authority. The order passed by the adjudicating authority can be assailed before the appellate tribunal constituted under section 31 of the Act. The order of the appellate tribunal can also be called in question by preferring appeal to the High Court within a period of 60 days. A microscopic reading of provisions make it clear that principles of natural justice are reduced in writing in the shape of amendment in the said Act. The amended provisions contains a complete code in itself. 7.In this backdrop, it is to be seen whether at this stage any interference is warranted by this court. In C.B.Gautam the order of compulsory purchase under section 269-UD(1) of Income Tax Act was served on the petitioner without issuing any show cause notice and without giving any opportunity to him. The Apex C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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