Madras HC upholds provisional attachment orders under Section 24(3) of Benami Property Transactions Act despite petitioners' challenges

The Madras HC dismissed writ petitions challenging provisional attachment orders under Section 24(3) of the Prohibition of Benami Property Transactions Act. The petitioners, who were directors of a company and in judicial custody when the attachment order was passed, argued the order was invalid. The HC held that provisional attachment requires only prima facie suspicion of benami transaction, not stringent proof like civil attachment proceedings. The court noted that adequate safeguards exist within the Act's scheme, including show cause notices and adjudication processes. The provisional nature of the attachment and pending adjudication proceedings provided sufficient protection for the petitioners' rights.

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Issues Involved:
1. Validity of Provisional Attachments under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988.
2. Service of Notice under Section 24(1) of the Act.
3. Formation of Opinion by the Initiating Officer.
4. Approval by the Approving Authority.

Summary:

Issue 1: Validity of Provisional Attachments under Section 24(3) of the Prohibition of Benami Property Transactions Act, 1988
The petitioners challenged the provisional attachments made by the Initiating Officer under Section 24(3) of the Act. They argued that the properties could not be alienated as they were in judicial custody when the provisional order was made. The court held that the provisional attachment made by the initiating officer was not bad in law and was done as per statutory requirements. The attachment is provisional, and the matter is now pending before the Adjudicating Authority, where the petitioners have the opportunity to contest the attachment.

Issue 2: Service of Notice under Section 24(1) of the Act
The petitioners contended that the notice under Section 24(1) was not served on them as they were in judicial custody, and it should have been served on the Prison Superintendent. The respondents argued that they were unaware of the petitioners' judicial custody. The court noted that there was no indication that the Initiating Officer knew about the petitioners' judicial custody when the notice was issued and the provisional attachment was made.

Issue 3: Formation of Opinion by the Initiating Officer
The petitioners argued that the Initiating Officer did not apply his mind and formed an opinion without a rational basis. The court referred to the scheme of the Act, which requires only a suspicion that the property could be involved in a benami transaction for provisional attachment. The court found that the suspicion was sufficient for the Initiating Officer to form an opinion on provisional attachment.

Issue 4: Approval by the Approving Authority
The petitioners claimed that the approval by the Approving Authority was given after the provisional attachment was made, which is against the statutory requirement. The respondents submitted that the approval was given before the provisional attachment, and it was later extended. The court found that the provisional attachment was made as per the statute, and the approval process was followed correctly.

Conclusion:
The court dismissed all the writ petitions, finding no merit in the petitioners' arguments. The provisional attachments were upheld, and the petitioners were directed to approach the Adjudicating Authority to contest the attachments. No costs were awarded, and connected miscellaneous petitions were closed.

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