2019 (12) TMI 840 - HC - Benami Property

Court allows appeal, sets aside judgment, quashes show-cause notices under 1988 Act.

M/s. Ganpati Dealcom Pvt. Ltd. Versus Union of India & Anr.

M/s. Ganpati Dealcom Pvt. Ltd. Versus Union of India & Anr. - [2020] 421 ITR 483 (Cal) Issues Involved:1. Retrospective application of the Benami Transactions (Prohibition) Amendment Act, 2016.2. Validity of show-cause notices issued under the amended Act for transactions prior to the amendment.3. Requirement of procedural rules under the 1988 Act for its enforceability.Issue-wise Detailed Analysis:1. Retrospective Application of the Benami Transactions (Prohibition) Amendment Act, 2016:The appellant argued that the 2016 Amendment Act had no retrospective effect for transactions made in 2011. The show-cause notice dated 29th August 2017, issued under Section 24(1) of the amended 1988 Act, could not apply to past transactions. The court agreed, citing the principle that legislation is presumed not to have retrospective operation unless expressly stated. The court referenced the Supreme Court's decision in R. Rajagopal Reddy, which held that the 1988 Act created new offences and liabilities, thus having prospective operation. Additionally, the court noted that the 2016 amendment did not explicitly state its retrospective application.2. Validity of Show-Cause Notices Issued Under the Amended Act for Transactions Prior to the Amendment:The appellant contended that the show-cause notice issued under the amended Act for a transaction in 2011 was invalid. The court found merit in this argument, stating that the 2016 amendment could not be used to allege contraventions for transactions that occurred before its enactment. The court emphasized that the amendment introduced new definitions and provisions, which could not apply retrospectively without explicit legislative intent. The court quashed the show-cause notices dated 29th August 2017 and 9th October 2017, deeming them null and void.3. Requirement of Procedural Rules Under the 1988 Act for Its Enforceability:The appellant argued that the 1988 Act was inoperative due to the absence of procedural rules under Section 8, which were necessary for declaring property as benami and initiating acquisition or criminal proceedings. The court agreed, referencing the Supreme Court's decisions in Canbank Financial Services Ltd. and P. Kasilingam, which held that the absence of rules rendered the Act unenforceable. The court concluded that the Central Government's failure to frame rules under the 1988 Act resulted in a waiver of its rights to take action against alleged benami transactions during that period. Consequently, the rights accrued to the appellant under the 1988 Act could not be extinguished by the 2016 amendment.Conclusion:The court allowed the appeal, setting aside the impugned judgment and order dated 18th December 2018. The court quashed the show-cause notices issued by the respondents, emphasizing that the 2016 amendment did not have retrospective effect and that the 1988 Act was inoperative without procedural rules. The court clarified that the respondents could take appropriate steps in accordance with the law as advised.