Auction purchase funded via alleged lender-whether payments were benami u/s2(9)(D); provisional attachment upheld, appeals dismissed.

The dominant issue was whether the auction purchase funded through a lender constituted a benami transaction under the 1988 Act, justifying confirmation of the provisional attachment. The AT held that routing payments through banking channels does not negate benami character where the alleged lender lacked creditworthiness and the purchasers lacked capacity, and no credible pleadings or evidence disclosed the lender's legitimate source of funds, rendering the consideration and beneficial ownership untraceable and attracting s. 2(9)(D). The statutory exception to s. 2(9)(A) was held inapplicable to a case falling under s. 2(9)(D). Consequently, the provisional attachment was upheld and the appeals were dismissed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the acquisition of the attached agricultural land was a "benami transaction" falling under Section 2(9)(D) of the Prohibition of Benami Property Transactions Act, 1988, on the footing that the consideration was provided by a fictitious/untraceable/unknown person and the apparent purchasers lacked capacity.

2. Whether routing the purchase consideration through banking channels and describing it as a loan from a lender entity was sufficient to negate benami character, despite findings that the lender lacked creditworthiness and the source of its funds remained unexplained.

3. Whether the appellants could avoid the consequence of Section 2(9)(D) by invoking the exclusion/exception relating to fiduciary capacity under Section 2(9)(A), in the facts found by the Tribunal.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of Section 2(9)(D)-unknown/fictitious provider of consideration and lack of capacity

Legal framework: The Tribunal examined the case as framed and confirmed under Section 2(9)(D) of the Act of 1988, i.e., a transaction where the person providing consideration is fictitious or untraceable/unknown, resulting in the transaction being treated as benami.

Interpretation and reasoning: The Tribunal accepted the core factual foundation relied upon by the authorities: the apparent purchasers did not have means to pay the purchase consideration and claimed funding through a lender entity. On scrutiny, the Tribunal found the lender's ability to advance large loans was not established; the lender's turnover was found to be below Rs. 2 crores while the asserted lending exposure/payables ran into very large figures, and partners/persons connected with the lender were unaware of the alleged loan activities. Physical verification of the lender's office and recorded statements were treated as supporting circumstances showing the lender was not functioning as claimed. The Tribunal held that the loan was "beyond availability of funds" with the lender, and the source of the lender's funds was not demonstrated, leaving the real provider of consideration effectively unknown.

Conclusions: The Tribunal concluded that the source of consideration remained unknown/unexplained in substance and that the case correctly fell within Section 2(9)(D). On that basis, confirmation of the Provisional Attachment Order was upheld.

Issue 2: Effect of banking-channel payments and "loan" explanation on benami determination

Legal framework: The Tribunal considered the appellants' contention that payment through banking channels and disclosure of a loan source negated benami, and assessed it against the findings underpinning Section 2(9)(D).

Interpretation and reasoning: The Tribunal rejected the proposition that banking-channel routing, by itself, proves that funds belonged to the purchasers or that the transaction is non-benami. It reasoned that where the claimed lender lacks demonstrated creditworthiness and cannot explain the origin of funds, mere banking movement does not answer the statutory concern of an unknown beneficial owner/unknown provider of consideration. The Tribunal further noted that, despite being given an opportunity, the appellants failed to produce documents (including bank statements of persons asserted to have provided funds to the lender) and could not point to pleadings before the Adjudicating Authority or in the appeals establishing legitimate sourcing of funds in the lender's hands.

Conclusions: The Tribunal held that banking-channel payments did not rebut benami character in the present facts because the underlying source of consideration remained unproved and the lender's capacity was not established. The adverse inference drawn from non-production of supporting material was upheld, supporting continuation of attachment.

Issue 3: Non-applicability of fiduciary exception (Section 2(9)(A)) to a case decided under Section 2(9)(D)

Legal framework: The Tribunal addressed the appellants' reliance on the exclusion for fiduciary capacity mentioned in relation to Section 2(9)(A), while noting that the authorities had proceeded under Section 2(9)(D).

Interpretation and reasoning: The Tribunal determined that the appellants' attempted reliance on the exception tied to Section 2(9)(A) could not displace a finding recorded under Section 2(9)(D). Since the Tribunal affirmed that the case involved an unknown/unexplained provider of consideration and lack of lender capacity, it treated the matter as squarely governed by Section 2(9)(D), rendering the cited exception inapplicable on the Tribunal's accepted factual and legal characterization.

Conclusions: The Tribunal concluded that the fiduciary-capacity exception did not assist the appellants because the case was sustained under Section 2(9)(D), and therefore it declined interference with confirmation of the Provisional Attachment Order and dismissed the appeals.

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