Appellate Tribunal upholds provisional attachment order for Rs. 1 crore benami property under Section 24(4)

The Appellate Tribunal under SAFEMA upheld a provisional attachment order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988. The tribunal found that a property worth Rs. 1 crore was purchased in the name of one company lacking financial capacity (worth only Rs. 7 lakhs), while another company actually paid the consideration and held the property. Despite the transaction occurring pre-amendment, the tribunal applied post-amendment provisions, emphasizing the significance of the word "held" in the amended definition. The respondents did not contest factual issues, and the tribunal found sufficient grounds to interfere with the adjudicating authority's order.

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Issues Involved:

1. Validity of the Provisional Attachment Order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988.
2. Interpretation of the amended definition of "Benami transaction" under Section 2(9)(A) of the Act of 1988.
3. Retrospective application of the amendment to the Act of 1988 effective from 01.11.2016.
4. Legal capacity of M/s Seasons Warehousing Pvt. Ltd. to purchase the property.

Issue-wise Detailed Analysis:

1. Validity of the Provisional Attachment Order under Section 24(4) of the Prohibition of Benami Property Transactions Act, 1988:

The appeal was preferred against the order of the Adjudicating Authority dated 19.10.2022, which did not confirm the Provisional Attachment Order under Section 24(4) of the Act of 1988. The learned counsel for the Initiating Officer argued that the Adjudicating Authority passed a summary order without referring to the relevant provisions of the Act and the facts of the case. They contended that the property was purchased by a non-existent company, M/s Seasons Warehousing Pvt. Ltd., and the Provisional Attachment Order should have been confirmed.

2. Interpretation of the amended definition of "Benami transaction" under Section 2(9)(A) of the Act of 1988:

The appellant's counsel argued that the property was held by M/s Voltamp Controls (I) Pvt. Ltd. even after the amendment, making it a "Benami transaction" under the amended definition. They referred to the Tribunal's decision in M/s. Prism Scan Express Pvt. Ltd. vs. The Initiating Officer, which discussed the amended definition at length. The Tribunal emphasized that the word "held" in Section 2(9)(A) is significant and should be read with "transfer" to interpret the provision correctly. The Tribunal clarified that if a property is held by a person whose consideration was paid by another, it falls under the definition of "Benami transaction."

3. Retrospective application of the amendment to the Act of 1988 effective from 01.11.2016:

The Adjudicating Authority refused to confirm the attachment, citing that the property was purchased before the amendment date. The respondents relied on the Apex Court's judgment in Union of India Vs. Ganpati Dealcom Pvt. Ltd., which held that the amendment would not apply retrospectively. However, the Tribunal clarified that if the property is held by the Benamidar after the amendment, it would still fall under the definition of "Benami transaction." The Tribunal referenced the judgment in Nexus Feeds Limited & Others, which did not specifically address the holding of property by a person whose consideration was paid by another.

4. Legal capacity of M/s Seasons Warehousing Pvt. Ltd. to purchase the property:

The Tribunal noted that M/s Seasons Warehousing Pvt. Ltd. had no capacity to purchase the property worth Rs. 01 Crore, as its annual return showed a worth of around Rs. 7 lakhs in the Financial Year 1998-99. The property was held by M/s Voltamp Controls (I) Pvt. Ltd., and the address was reflected in their Income-tax return. The Tribunal found that the Adjudicating Authority ignored the amended definition of "Benami transaction" and the factual issues, leading to the conclusion that the property was purchased by M/s Voltamp Controls (I) Pvt. Ltd. using the name of M/s Seasons Warehousing Pvt. Ltd.

Conclusion:

The Tribunal set aside the impugned order, confirming the Provisional Attachment Order and the reference. The appeal was allowed, emphasizing the significance of the word "held" in the amended definition of "Benami transaction" and the prospective application of the amendment effective from 01.11.2016. The Tribunal concluded that the property held by M/s Voltamp Controls (I) Pvt. Ltd. after the amendment constituted a "Benami transaction" under the amended Act.

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