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IN THE HIGH COURT AT CALCUTTA
SABYASACHI BHATTACHARYYA, J.
Krishna Sudama Marketing Private Limited – Appellants
Versus
Union of India & Ors. – Respondents
WPA NO. 16821 of 2022
Decided on : 22-03-2024
Benami Act - Jurisdictional Challenge - Section 19, 24 - Summary of Acts and Sections: The court discussed the provisions of The Prohibition of Benami Property Transactions Act, 1988, particularly Sections 19 and 24. The key legal provisions discussed include the definition of 'benami property' under Section 2(8) and 'benami transaction' under Section 2(9)(D), as well as the procedure for issuance of show-cause notices and provisional attachment orders under Section 24. The court emphasized the burden of proof, the retrospective application of the 2016 Amendment, and the principles of natural justice in the context of the Benami Act.
Fact of the Case:
The petitioner challenged summons and provisional attachment orders issued under the Benami Act, arguing lack of jurisdiction. The petitioner disclosed the source of purchase money and challenged the retrospective application of the 2016 Amendment. The respondents alleged that the petitioner acted as a conduit for unaccounted money through shell companies.
Finding of the Court:
The court found that the jurisdictional challenge was not sufficient to displace the legitimate opinion formed by the Investigating Authority. The court dismissed the petition without costs, emphasizing that the findings were tentative and without prejudice to the rights of the parties in the proceeding under Section 26 of the Benami Act.
Issues: The issues involved the jurisdiction of the authorities under the Benami Act, the burden of proof, and the application of the 2016 Amendment. The court also considered the propriety of challenging provisional orders and the principles of natural justice.
Ratio Decidendi: The court held that the petitioner's challenge did not demonstrate an ex facie erroneous assumption of jurisdiction by the authorities under the Benami Act. The court emphasized the need for a full-fledged enquiry on factual assessments based on evidence, which is unwarranted at the writ court stage.
Final Decision: The court dismissed the petition without costs, clarifying that the findings were tentative and without prejudice to the rights of the parties in the proceeding under Section 26 of the Benami Act.
JUDGMENT :
Sabyasachi Bhattacharyya, J.
1. The petitioner-Company has challenged summons issued under Section 19 of The Prohibition of Benami Property Transactions Act, 1988 (hereinafter referred as, “the Benami Act”) and the provisional order of attachment as well as extension of such order passed under Section 24 of the said Act.
2. The petitioner argues that the respondent-Authorities do not have any jurisdiction to initiate a proceeding under the Benami Act and, as such, the assumption of jurisdiction is required to be quashed under Article 226 of the Constitution of India in its entirety. Summons was issued under Section 19 of the said Act against the petitioner on December 20, 2021 and two replies were given to the same by the petitioner on January 5, 2021 and January 20, 2022 respectively. Subsequently, show-cause notices were issued under Section 24(1) of the Benami Act on March 28 and March 29, 2022 for 37 sale transactions entered into by the petitioner by separate registered sale-deeds.
3. Learned counsel argues that the basic ingredients for assumption of jurisdiction under the Benami Act are not fulfilled in the present case.
4. It is argued that the petitioner, in its replies, has disclosed the source from where the purchase money came, that is, from loans obtained from other companies. It is contended that, thus, the transactions do not fall within the purview of Section 2(9) of the said Act. The respondents particularly rely on sub-clause (D) of Section 2(9) which provides that a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious is also a benami transaction under the Act.
5. It is argued that the burden of showing that a transfer is benami lies with the person asserting the same which corresponds to Sections 91, 92, 101, 102 and 106 of the Indian Evidence Act, 1872. For such proposition, the petitioners cites Jaydayal Poddar (Deceased) Through L. Rs and another Vs. MST Bibi Hazra and others, reported at (1974) 1 SCC 3, P. Leelavathi (Deceased) Through L. Rs Vs. V. Shankarnarayana Rao (Deceased) Through L. Rs, reported at (2020) 19 SCC 816 and Mangathai Ammal (Deceased) Through L. Rs and others Vs. Rajeswari and others, reported at (2020) 17 SCC 496.
6. It is contended that in the present case, such burden was not discharged by the respondents.
7. Learned counsel for the petitioner next argues that there is no retrospective application of the 2016 Amendment to the Benami Act and cites Union of India and another Vs. Ganpati Dealcom Private Ltd., reported at (2023) 3 SCC 315 for such contention. It is argued that the very texture of the definition of “benami transactions” has been altered, introducing, inter alia, sub-clause (D). The funds for purchase of the 37 properties-in-issue have been generated through increase in share capital by issuance of shares at a premium purchase by alleged shell companies according to the respondents, but the respondents have not considered that the transaction was in the financial year 2011-12, thus, much prior to the coming into force of the 2016 Amendment.
8. It is further argued that the transactions-in-question underwent scrutiny before the Income Tax Authority. The assessment order passed for the assessment year 2012-13 on August 6, 2014 would reveal that the increase in share premium from Re. 1/- to Rs. 499/- per share while issuing 5 lakh equity shares of the petitioner-Company was examined and given a clean chit by the Income Tax Authorities.
9. Moreover, the properties-in-issue have been duly disclosed in the balance sheets of the company, which have been annexed to the writ petition. The flow of funds has also been clearly disclosed by the petitioner in its replies to the show-cause notice. The petitioner has clearly disclosed the names of the companies which paid the loans to the petitioner. A transfer from Rimjhim Construction on April 24, 2018 to the tune of Rs. 2 Cr. and a debit from the accoun
The main legal point established in the judgment is that a jurisdictional challenge under the Benami Act must demonstrate an ex facie erroneous assumption of jurisdiction by the authorities. The cour....
The court established that the issuance of a show cause notice under the Benami Transactions Act requires sufficient material to justify a 'reason to believe', and that mere statements without suppor....
The court emphasized that the proceedings under section 24 of the Act only require a recording of prima facie opinion as to the benami nature of the transaction and that the principles of natural jus....
The proceedings under Section 24 of the Prohibition of Benami Property Transactions Act, 1988, require a recording of prima facie opinion as to the benami nature of the transaction. The Act mandates ....
The exercise of cross-examination commences only after the proceedings for adjudication have commenced.
The burden of proof in benami transaction cases lies with the accusation, and failure to establish connection between beneficial ownership and shell companies results in dismissal of provisional atta....
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