Petition Dismissed on Benami Property Show Cause Notice; Adjudicating Authority to Decide Under Section 26

The HC dismissed the petition challenging the show cause notice and provisional attachment order issued under the Prohibition of Benami Property Transactions Act, 1988, on the ground that the alleged transaction predated the 2016 amendment. The court held that the adjudicating authority is best suited to determine the benami nature of the property and liability under the Act. The bench declined to interfere, allowing the petitioners to raise all relevant factual and legal grounds before the adjudicating authority under Section 26. The court emphasized the availability of statutory remedies and directed petitioners to rely on relevant judgments before the adjudicating and appellate authorities. The HC found no reason to entertain the petition given the alternative remedies provided under the Act.

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Issues Involved:

1. Validity of the show cause notice issued under \u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988.
2. Validity of the Provisional Attachment Order (PAO) issued under \u/s 24(3) of the Act of 1988.
3. Applicability of the amended provisions of the Act of 1988 to transactions prior to 01/11/2016.

Summary:

1. Validity of the Show Cause Notice:

The petitioner challenged the show cause notice dated 05/01/2024 under \u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988, on the grounds that the alleged benami transaction occurred before the amendment of the Act on 01/11/2016. The petitioner relied heavily on the Supreme Court's judgment in Union of India & another vs. M/s Ganpati Dealcom Private Limited (2023) 3 SCC 315, which declared Section 5 of the Act of 1988 unconstitutional. The petitioner argued that this judgment invalidates the show cause notice and that they should not be relegated to the in-house remedy under the Act of 1988.

The court, however, noted that the show cause notice is a preliminary step and interference at this stage is limited. The Apex Court in Special Director & Another Vs. Mohd. Gulam Ghouse & Another (2004) 3 SCC 440 held that writ petitions should not be entertained against show cause notices unless there is a total lack of jurisdiction. The court emphasized that the petitioners should respond to the notice and raise their legal and factual contentions before the adjudicating authority.

2. Validity of the Provisional Attachment Order (PAO):

The Provisional Attachment Order (PAO) dated 05/01/2024 issued under \u/s 24(3) of the Act of 1988 was also challenged on similar grounds. The petitioner argued that the Appellate Tribunal for SAFEMA in M/s. Prism Scan Express Pvt. Ltd. Vs. Initiating Officer (2023) held that actions are permissible if the property is held after the amendment. The court reiterated that the PAO is provisional and subject to judicial review by the adjudicating authority. The court referred to its previous decisions, including WP Nos. 3957/2019 and 3963/2019, where it declined to interfere with the PAO at the preliminary stage, emphasizing that the adjudicating authority is best suited to decide on the benami nature of the property.

3. Applicability of Amended Provisions:

The petitioner contended that the amended provisions of the Act of 1988 should not apply to transactions that occurred before the amendment date of 01/11/2016. The court acknowledged the petitioner's reliance on the Supreme Court's judgment in Ganpati Dealcom Private Limited and the decisions of other High Courts, including the High Court of Madras and the High Court for the State of Telangana, which supported the petitioner's view. However, the court maintained that the adjudicating authority should first consider these arguments and that the petitioners have the opportunity to present their case and judgments before the adjudicating and appellate authorities.

Conclusion:

The court concluded that there is no reason to entertain the petitions due to the availability of statutory alternative remedies. The petitioners were directed to avail the in-house remedies under the Act of 1988 and present their legal and factual contentions before the adjudicating authority. The petitions were disposed of without expressing any opinion on the merits of the case.

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