Company fails to halt benami property proceedings under Section 24 of Prohibition Act 1988

BRC Construction Company Private Limited & Anr. Versus Union Of India & Ors.

BRC Construction Company Private Limited & Anr. Versus Union Of India & Ors. - TMI Issues: Challenge to initiation and reference of proceeding under The Prohibition of Benami Property Transactions Act, 1988 (1988 Act) by Initiating Officer (IO) under Sections 24(1) and 24(4) of the 1988 Act respectively.

Analysis:
1. Initiation of Proceedings: The writ petition challenged the initiation and reference of proceedings under the 1988 Act by the Initiating Officer (IO) under Sections 24(1) and 24(4) of the Act. The notice under Section 24(1) indicated that the consideration for the property in question was provided by unknown entities, satisfying the definition of a Benami transaction under Section 2(9) of the 1988 Act. The Company, in response, denied the applicability of the Act and argued that the IO's jurisdiction is limited to inquiries under the Income Tax Act. However, the IO, in his order under Section 24(4), found that the funds used to purchase the property belonged to undisclosed persons, indicating a potential Benami transaction.

2. Legal Arguments: The legal arguments presented by both parties focused on the applicability and interpretation of the 1988 Act. The Respondents argued that the process of adjudication was incomplete, and the Company could approach the Appellate Tribunal after adjudication by the Adjudicating Authority (AA). They contended that the Company was acting as a Benamdar or a shell company for undisclosed investors. The Petitioner argued that the proceedings initiated by the IO were misconceived and that the penal provisions of the 2016 Amendment Act cannot apply retrospectively.

3. Court's Findings: The Court analyzed the definitions of Benami property and transactions under Sections 2(8) and 2(9) of the 1988 Act. It noted that the IO had diligently collected facts and that factual adjudication was necessary at the level of the AA. The Court rejected the argument that shareholders had no interest in the Company's immovable assets, emphasizing the need for a detailed examination at the AA level. The Court upheld the provisional attachment by the IO, stating that the petitioners should not avoid adjudication by the AA if they believe they are on firm ground.

4. Retrospectivity of Penal Provisions: The Court addressed the argument against the retrospective application of the penal provisions in the 2016 Amendment Act. It observed that the 1988 Act, as amended, aimed to prevent Benami transactions and did not create vested rights. The Court found no reason to interfere with the IO's orders, emphasizing the procedural nature of the steps under Section 24 to identify Benami transactions.

5. Conclusion: The Court concluded that there was no jurisdictional violation in the exercise of powers under the 1988 Act. The writ petition was disposed of, and the Court upheld the orders of the IO. The Court clarified that the Act's penal clauses were prospective, and the IO's actions were in line with the statutory provisions.

6. Disposition: The Court disposed of the writ petition, stating that no affidavits were required. The urgent certified copy of the order was to be provided to the parties upon compliance with necessary formalities.