Back
SUPREME COURT OF INDIA
Pamidighantam Sri Narasimha, Atul S. Chandurkar, JJ.
S. Rajendran – Appellant
Versus
The Deputy Commissioner of Income Tax (Benami Prohibition) & ors. – Respondent
Civil Appeal No. 7140 of 2022 With Civil Appeal No. 6971 of 2025 With Civil Appeal No. 6661 of 2023 With Civil Appeal No. 6662 of 2023
Decided On : 24-02-2026
(A) Prohibition of Benami Property Transactions Act, 1988 – Section 4 – Insolvency and Bankruptcy Code, 2016 – Section 14 – Provisional attachment orders – Orders passed under Benami Act cannot be questioned before authorities under Insolvency and Bankruptcy Code, 2016 – Both, Benami Act and IBC, are special legislations operating within distinct yet potentially intersecting fields – Benami Act is concerned with identifying and extinguishing benami holdings through a confiscatory mechanism, while IBC is directed at resolution and liquidation of assets belonging to a corporate debtor within a time-bound framework – Jurisdiction of authorities under IBC cannot be expansively construed so as to trench upon fields that are founded in public law domain – Where subject matter of dispute pertains to exercise of sovereign statutory power, particularly in relation to determination of legality of title, attachment, or confiscation and vesting thereof, Adjudicatory Fora under IBC must necessarily yield to specialized mechanism created by such statute. (Paras 19 and 20.6)
(B) Insolvency and Bankruptcy Code, 2016 – Section 60 – Prohibition of Benami Property Transactions Act, 1988 – Section 4 – Provisional attachment orders – Refusal to stay – Proceedings under Benami Act squarely fall within public law domain – They are not in nature of inter se disputes between private parties concerning proprietary rights, nor are they recovery proceedings capable of being subsumed within insolvency resolution – Benami Act represents a sovereign exercise aimed at identifying and extinguishing benami transactions – Attachment and eventual confiscation of property thereunder operate in rem and culminate in vesting of property in Central Government free from encumbrances – Such consequences are penal and deterrent, rooted in statutory illegality, and are enforced through a distinct adjudicatory hierarchy whose jurisdiction is expressly insulated from ordinary Civil Fora – Permitting NCLT to examine correctness of attachment or adjudication under Benami Act by invoking Section 60(5) of IBC would amount to elevating it to status of a judicial review forum over sovereign action – IBC does not provide indirect route to challenge sovereign acts validly undertaken under a penal statute – Appeals dismissed with costs quantified at Rs. 5 lakhs each. (Paras 20.6, 20.7, 20.8 and 28)
Facts of the case:
The question that arises for consideration is whether, the legality and validity of an order of attachment under Benami Act can be challenged before the statutory tribunals under IBC.
Findings of Court:
Appellants could not have challenged attachment order passed under Benami Act before statutory authorities under IBC. Such invocation is not bonafide and is actually intended to circumvent and interdict the procedures contemplated under the Benami Act.
Result : Appeals dismissed with exemplary costs.
The Supreme Court of India, in a batch of civil appeals arising from NCLAT orders dated 18.08.2022 and 13.03.2023, dismissed challenges by liquidators of corporate debtors (including M/s Padmaadevi Sugars Ltd. and M/s Senthil Papers and Board Pvt. Ltd.) against provisional attachment orders issued under Sections 24 and 27 of the Prohibition of Benami Property Transactions Act, 1988 (Benami Act). (!) The NCLT and NCLAT had concurrently held that they lacked jurisdiction to entertain such challenges, directing appellants to pursue remedies exclusively under the Benami Act. (!) (!) (!) (!)
Investigations under the Income Tax Act revealed benami transactions where promoters transferred 100% shareholding of the corporate debtors to a beneficial owner (V.K. Sasikala) via an intermediary, using demonetized high-value currency (approx. Rs. 450 crores). Incriminating documents, share certificates, and sworn statements confirmed the use of demonetized notes during November-December 2016. (!) (!) (!) Corporate insolvency resolution processes (CIRP) commenced (e.g., 15.10.2018 for Padmaadevi Sugars), leading to liquidation orders (e.g., 20.04.2021). Post-liquidation, authorities issued show-cause notices under Section 24(1) and provisional attachments under Section 24(3), characterizing corporate debtors as benamidars holding properties for the beneficial owner. (!) (!) (!) Liquidators' applications before NCLT for stay were rejected for want of jurisdiction. (!) (!)
The core issue was whether NCLT has jurisdiction under the Insolvency and Bankruptcy Code, 2016 (IBC) to adjudicate challenges to Benami Act attachments during IBC liquidation. (!) NCLT/NCLAT ruled: (i) Benami Act is a complete self-contained code with its own adjudicatory hierarchy (Initiating Officer, Adjudicating Authority, Appellate Tribunal, High Court); (ii) IBC moratorium (Section 14) shields against creditor recovery but not sovereign penal actions for confiscation; (iii) NCLT's residuary jurisdiction (Section 60(5)) excludes review of public law determinations like benami status. (!) (!) (!) (!)
Appellants contended IBC's primacy as a later comprehensive code (Section 238 non-obstante), moratorium applicability, Section 32A immunity post-resolution/liquidation sale, NCLT's exclusive jurisdiction over liquidation estate disputes, and Revenue's status as operational creditor under Section 53 waterfall. They argued attachments deplete estate value, frustrating IBC objectives. (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) Respondents countered that Benami Act (Sections 24-27, 46, 49-50, 67 non-obstante) provides exclusive remedies; benami-held property lacks beneficial ownership, excluding it from liquidation estate (Sections 36(3)(e), 36(4)(a)(i)); attachments are sovereign in rem actions vesting property in Central Government, unaffected by moratorium or IBC. (!) (!) (!) (!) (!) (!) (!) (!) (!)
Both enactments are special laws: Benami Act targets prohibition/penalization of benami holdings via structured attachment-adjudication-confiscation-vesting process (Sections 2(9), 3, 5, 24-27, 29, 45-46, 53, 60, 67); IBC focuses on time-bound insolvency resolution/maximization of debtor's beneficially owned assets. (!) (!) (!) (!) (!) (!) (!) In conflict, Benami Act prevails for benami determinations as its dominant public law purpose (confiscation of tainted property) cannot be subordinated to IBC; NCLT cannot exercise judicial review over such sovereign actions or bypass Benami Act's hierarchy. (!) (!) (!) (!) (!) (!) (!) (!) Benami property is not part of liquidation estate due to absence of beneficial ownership; moratorium/Section 32A inapplicable to penal confiscations (not creditor actions). (!) (!) (!) (!) Appellants' forum-shopping was an abuse of process. (!) (!)
Appeals dismissed; exemplary costs of Rs. 5 lakhs per appeal imposed, payable to Supreme Court Advocates on Record Association within four weeks. (!) (!)
| Table of Content |
|---|
| 1. background of appeals regarding benami property (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 2. arguments of appellants and respondents (Para 14 , 15) |
| 3. analysis of legislative frameworks of ibc and benami act (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26) |
| 4. conclusion and costs imposed on the appellants (Para 27 , 28) |
JUDGMENT :
1. The present batch of appeals arises out of the impugned judgments and orders dated 18.08.2022 and 13.03.2023 passed by the National Company Law Appellate Tribunal, Chennai bench (hereinafter referred to as “NCLAT”). By the said impugned orders, the NCLAT declined to interfere with the decision of the National Company Law Tribunal (hereinafter referred to as “NCLT”) and refused to adjudicate the appellant- liquidators' applications challenging the provisional attachment orders passed by the authorities under the Prohibition of Benami Property Transactions Act, 1988, (“Benami Act”), holding that the NCLT lacks jurisdiction to entertain such challenges and that the remedy lies exclusively before the competent forum constituted under the Benami Act. Accepting the concurrent findings of NCLT and NCLAT, we have held that orders passed under Benami Act cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016 (“IBC”). For the reasons to follow, we dismiss these appeals.
I. Factual Background:
2. For the sake of convenience, we shall refer to the factual matrix of the lead appeal. The facts in the connected appeals, though pertaining to distinct corporate entity, are substantially similar in their material particulars and give rise to identical questions of law.
3. When an illegal sale, in the nature of a benami transaction came to light, investigation by the authorities under the Benami Act revealed that the promoters of the corporate debtor, M/s Padmaadevi Sugars Ltd., formerly S.V. Sugar Mills Ltd., the "Patel Group," had transferred their 100% shareholding to the beneficial owner, V.K. Sasikala, through an intermediary, an advocate named Mr. S. Senthil, for a consideration of approximately Rs. 450 Crores, paid in demonetised high-value currency notes. As investigation concluded into commission of offence, authorities invoked Section 24 of the Benami Act and issued a show cause notice dated 01.11.2019.
4. The genesis of the controversy as portrayed in the show cause notice lies in search and seizure operation conducted under Section 132 of the Income Tax Act, 1961 in November 2017 against V.K. Sasikala and her associates. During these operations, incriminating documents that were unearthed contained explicit references to asset purchases made during the demonetization period i.e. November-December 2016, through entries marked "Patel: Sugar 386 + Bank Loan" and "Sugar Mill, Kancheepuram". Further, investigation identified advocate S. Senthil as the intermediary who, upon confrontation, admitted under oath to authoring these notes at the dictation of V.K. Sasikala for purchasing these properties using demonetised currency.
5. The documentary trail was further corroborated by a subsequent search on 18.11.2017 at a serviced apartment used by the intermediary, where authorities recovered the original share certificates of M/s S.V. Sugar Mills Ltd. now Padmaadevi Sugars Ltd. standing in the names of the Patel family members, alongside an unsigned Memorandum of Understanding (MoU). Confronted with this, Shri Hitesh Shivgan Patel, representing the management of the corporate debtor, recorded a sworn statement admitting that the Patel Group had negotiated the sale of the sugar factory and assumed bank liabilities for a total consideration of Rs. 450 Crores. Crucially, he admitted that this consideration was received entirely in demonetised currency between November and December 2016, and that they had signed a blank MoU to effectuate this transfer.
6. In the meanwhile, the corporate debtor M/s Padmaadevi Sugars Ltd. was subjected to corporate in
Provisional attachment orders – Orders passed under Benami Act cannot be questioned before authorities under Insolvency and Bankruptcy Code, 2016 – Where subject matter of dispute pertains to exercis....
Section 32A of IBC protects properties covered under a resolution plan from prior offences, allowing the new management to commence without liability.
NCLT has jurisdiction under IBC Section 60(5)(c) to defreeze demat accounts holding corporate debtor's undisputed shares, frozen for crystallized listing fee dues, as issue relates to insolvency proc....
Section 32A of the IBC, 2016 grants corporate debtors immunity from prosecution and asset attachment upon resolution plan approval, overriding provisions of the PMLA, 2002.
The Insolvency and Bankruptcy Code's moratorium precludes enforcement actions under the Prevention of Money Laundering Act, as both statutes serve distinct legislative purposes without infringing on ....
The court established that the nature of challenge under Article 226 and the absence of jurisdiction could trigger the invocation of the High Court's jurisdiction. The court also clarified that the f....
Properties of a corporate debtor under attachment for money laundering can still be utilized in insolvency resolution, emphasizing the non-conflict between IBC and PMLA.
Plaint disclosing benami transaction via meaningful reading liable to rejection under O VII r.11 despite Will framing; no employer-employee fiduciary exception; murderer disqualified succession; 2016....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
