2024 (1) TMI 1484 - HC - Benami Property

Section 5 of Amended Benami Act, 2016 not retrospective; earlier proceedings unaffected; pending review doesn't disturb orders

HC held that the Supreme Court's decision in the cited pronouncement governs and the appellants' contention that Section 5 of the Amended Benami Act, 2016 ... Prohibition of Benami Property Transaction - applicability of the Amended Act - effect of pendency of the Review Petition - transactions related to the period prior to the date of coming into force of the Amendment Act, 2016 - proceedings for prosecution and confiscation initiated prior to brought with effect from 01.01.2016 - Retrospective Or Prospective application of Section 5 of the Amended Act - HELD THAT:- Following the earlier order [2023 (12) TMI 620 - MADRAS HIGH COURT] passed by this Court, held that, this court is of the opinion that as on date, the decision of the Hon'ble supreme court in Union of India v. Ganapati Dealcom Pvt Ltd. [2022 (8) TMI 1047 - SUPREME COURT] holds the field and hence, the arguments advanced on the side of the appellants that the provisions of Section 5 of the Amended Act, 2016 have to be applied retrospectively, cannot be countenanced. Also noted that in the [2023 (1) TMI 1327 - SC ORDER] filed by the Department to review the order passed in Union of India vs. Ganapati Dealcom Pvt Ltd.[supra] delay was condoned and the application for oral hearing of the review petition was allowed, however, no stay order was granted. In such circumstances, pendency of the review of the decision in Union of India vs. Ganapati Dealcom Pvt. Ltd, cannot be a ground to interfere with the order passed by the Tribunal. It is also well settled that mere pendency of the Review Petition will not be a ground to assail the orders impugned in the appeals. All these civil miscellaneous appeals are disposed of, leaving it open to the appellants herein to proceed further on the basis of the outcome of the Review Petition filed by them before the Honourable Supreme Court. ISSUES PRESENTED AND CONSIDERED 1. Whether Section 5 of the Prohibition of Benami Property Transactions Act, 2016 (the Amended Act) can be applied retrospectively to transactions entered into before the Amended Act came into force. 2. Whether pendency of a review petition in the Supreme Court against the Supreme Court's earlier ruling on the retrospective application of the Amended Act is a ground for High Court interference with orders of the Appellate Tribunal that followed that Supreme Court ruling. ISSUE-WISE DETAILED ANALYSIS Issue 1: Retrospective application of Section 5 of the Amended Act Legal framework: The Amended Act (2016) introduced substantive changes, including an in rem forfeiture provision under Section 5. Constitutional protections (notably Article 20(1) concerns about retrospective punitive provisions) and principles distinguishing substantive from procedural amendments govern whether a statutory provision applies retrospectively or prospectively. Precedent Treatment: The Tribunal relied on the Supreme Court's ruling that the in rem forfeiture provision under Section 5 of the 2016 Act is punitive in nature and therefore can only be applied prospectively; as a corollary, authorities cannot initiate or continue prosecution or confiscation for transactions prior to the Amended Act's coming into force. That Supreme Court ruling also declared certain prior provisions manifestly arbitrary and left certain questions open for further adjudication. Interpretation and reasoning: The Court observed that the issue is narrow and is governed by the Supreme Court's authoritative finding that the 2016 Amendment is substantive rather than merely procedural and that Section 5 (being punitive and providing independent in rem forfeiture) cannot operate retrospectively. The Court further noted concordant High Court treatment which applied the same principle to invalidate or quash actions under the Amended Act for pre-Amendment transactions. Given that the Supreme Court's ruling remains binding and has been applied by subsequent courts, the Tribunal's reliance on it to set aside adjudicating authority orders was appropriate. Ratio vs. Obiter: The binding ratio identified and followed is that a punitive in rem forfeiture provision introduced by the 2016 Amendment cannot be applied retrospectively to transactions before the Amendment's commencement; authorities cannot initiate or continue proceedings in respect of pre-Amendment transactions. Observations about other constitutional or collateral questions left open by the Supreme Court are obiter or reserved, as the Supreme Court expressly left certain grounds open for future adjudication. Conclusions: The Court held that, as things stand, Section 5 of the Amended Act must be applied prospectively. The Tribunal's decision to quash or set aside actions taken in relation to alleged benami transactions prior to the Amended Act is sustained. The appellants' contention for retrospective application is unsustainable while the Supreme Court's ruling remains in force. Issue 2: Effect of pendency of a review petition in the Supreme Court on High Court's power to decide appeals that follow the Supreme Court's ruling Legal framework: Principle that lower courts must follow binding precedent of the Supreme Court; High Courts are not required to await outcome of a review petition or reference before deciding cases unless this Court specifically directs otherwise. Liberty to seek further relief following any change in the Supreme Court's position is generally preserved. Precedent Treatment: The Court relied on the authoritative proposition that the pendency of a review petition in the Supreme Court does not stay or alter the binding effect of the Supreme Court's judgment for purposes of decision-making by High Courts; High Courts should decide matters on the law as it stands and may not defer to pending review(s) except where expressly directed. Interpretation and reasoning: The Court observed that the Department's pending review petition (and delay-condonation orders in respect of that review) did not stay the operative Supreme Court ruling nor relieve lower tribunals and High Courts from applying the existing law. The Tribunal's clarification that the affected party could seek appropriate remedies if the Supreme Court reviewed its judgment was permissible, but the existence of a pending review does not furnish a basis for overturning or refusing to follow the controlling Supreme Court decision. Ratio vs. Obiter: Ratio - pendency of a review petition in the Supreme Court is not a ground for the High Court to refuse to follow the Supreme Court's decision or to withhold judgment; parties retain liberty to act on any subsequent change in law arising from the review. Observations permitting parties to seek remedies if the Supreme Court reverses or reviews its ruling are ancillary and not a basis for present deviation. Conclusions: The Court declined to interfere with the Tribunal's order on the basis that a review petition is pending in the Supreme Court. The appellants are left free to take further steps depending on the outcome of that review, but mere pendency does not justify departing from the binding Supreme Court precedent presently in force. Cross-References and Practical Outcome As the Tribunal's decision faithfully applied the binding Supreme Court precedent that Section 5 of the Amended Act is prospective in operation, the High Court affirmed the Tribunal's order. The Court reiterated that pending review proceedings do not preclude applying the existing Supreme Court ruling and left open the appellants' right to pursue remedies in the event of a different outcome on review.