2025 (12) TMI 1685 - AT - Benami Property

Property purchases in another person's name with buyer funding: treated as benami u/s2(9)(A), attachment upheld

Whether the provisional attachment was sustainable by treating the properties as 'benami property' under s.2(9)(A) of the 1988 Act (as amended in 2016) ... Benami transaction - Provisional attachment - search and seizure u/s 132 - acquire the land - satisfaction of the ingredients of section 2(9)(A) - want of proper notice under section 24(1) and section 24(3) - All the landed properties were acquired much prior to the amendment in the Act of 1988 in 2016 - HELD THAT:- The fact on record rather shows the admission of the appellants for purchase of landed properties in the name of Gagan Bihari Malik for which consideration was passed on by the beneficial owner Soumendra Kumar Mohanty, the proprietor of M/s SM Consultants The appellants however failed to produce document for transfer of the landed properties in favour of M/s Posco India Limited and therefore argument in regard to the agreement between M/s S.M. Consultants and M/s Posco India also remained for the sake of it. We find satisfaction of the ingredients of section 2(9)(A) of the Act of 1988 as amended by the Amending Act 2016. The amendment should operate prospectively and therefore the respondents wrongly invoked section 2(9)(A) for causing provisional attachment. It was further submitted that even if section 2(9)(A) is made applicable retrospectively, then also its need satisfaction to the condition of transfer or/and “held”. The condition of transfer got satisfied prior to the amendment. Thus, it cannot be invoked and if it is, governed by applying word “held”, it could not have been applied in a case of transfer earlier. Both the words “transfer” and “held” can not apply together. It is in a given circumstances, when the amendment is not given retrospective effect, however the position of law is yet to be settled by the Apex Court after recall of the judgement in the case of Union of India & Anr. v/s M/s. Ganpati Dealcom Pvt. Ltd. [2022 (8) TMI 1047 - SUPREME COURT] The appellants have otherwise failed to show that on purchase of property in the name of benamidar, it was to be transferred to the State of Orissa and even if that is so, the appellants could not explain why the property was purchased in the name of Gagan Bihari Mallik having no means to pay the consideration. Thus, we don't find any reason to cause interference in the impugned order. Appeals accordingly fail and are dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the initiation of proceedings and provisional attachment were vitiated for want of proper notice under section 24(1) and section 24(3) of the Prohibition of Benami Property Transactions Act, 1988. (ii) Whether, on the facts found, the attached properties constituted a 'benami transaction', including determination of benamidar/beneficial owner and satisfaction of the essential ingredients of section 2(9)(A) (as amended in 2016). (iii) Whether proceedings could be sustained where the transfers/purchases were stated to be prior to the 2016 amendment, and whether the concept of property being 'held' after the amendment brought the transaction within the amended definition. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Validity of initiation and provisional attachment with reference to notices under section 24(1) and section 24(3) Legal framework (as discussed): The Tribunal addressed the requirement of notice under section 24(1) followed by action under section 24(3) leading to a provisional attachment, and subsequent reference to the Adjudicating Authority for confirmation. Interpretation and reasoning: Although lack of proper notice was urged, the Tribunal recorded as a fact that notice under section 24(1) was issued and was followed by section 24(3), after which the provisional attachment order was passed and sent for confirmation. Conclusion: The Tribunal rejected the challenge based on alleged non-compliance with section 24(1) and section 24(3) and found no procedural illegality on this ground warranting interference with confirmation of attachment. Issue (ii): Whether the transaction satisfied the ingredients of 'benami transaction' and justified confirmation of attachment Legal framework (as discussed): The Tribunal applied the ingredients reflected in section 2(9)(A) (as amended), focusing on property being transferred to or held by one person while consideration is provided or paid by another, and the evidentiary indicators of lack of means of the apparent holder. Interpretation and reasoning: The Tribunal relied on findings that (a) documents of multiple properties standing in one person's name were recovered from the residential premises of another person controlling the relevant business group; (b) the apparent holder had no demonstrated financial capacity to acquire numerous properties of the stated aggregate value and was not an income-tax payer until much later; and (c) the source of funds was found to be the other person/business, leading to the inference that consideration was provided by the beneficial owner while title stood in the benamidar's name. The Tribunal treated the appellants' own stance regarding funding (and the failure to show any independent source of funds of the title-holder) as supporting satisfaction of the statutory ingredients. The explanation that the properties were acquired for eventual transfer to a public authority was rejected because it was raised without pleading or supporting documents, and did not explain why acquisitions were made in the name of an individual with no means rather than in the name of the business entity said to be undertaking the project. Conclusion: The Tribunal held that the essential ingredients of a benami transaction stood satisfied: consideration was provided by the beneficial owner while properties were purchased/held in the name of a person lacking means, justifying confirmation of the provisional attachment. Issue (iii): Applicability of amended definition to properties purchased prior to the 2016 amendment; effect of post-amendment 'holding' Legal framework (as discussed): The Tribunal examined the amended definition's use of the expressions 'transferred to' and 'held by', and applied its own interpretation that 'benami transaction' covers not only transfer but also continuing holding of property where consideration was provided by another. Interpretation and reasoning: The Tribunal rejected the contention that the words 'transfer' and 'held' could not operate as alternatives within the definition, and declined an interpretation that would amount to re-writing the provision. It accepted the proposition that even where the acquisition/transfer occurred prior to the amendment, if the property continued to be held by the benamidar after the amendment, proceedings could be initiated and attachment could follow under the amended framework. On the facts, the Tribunal found no credible, documented basis to treat the acquisitions as having been completed for immediate onward transfer such that the benamidar was not holding the property in the relevant period; the asserted onward transfer narrative remained unsupported. Conclusion: The Tribunal upheld invocation of the amended definition on the basis that continued holding of the property after the 2016 amendment brings the arrangement within the scope of 'benami transaction', and found no merit in the non-retrospectivity objection as framed on the facts of continuing holding and lack of proof of the alleged onward transfer arrangement. Final disposition (as a consequence of the above determinations): Having found procedural compliance with section 24 notices and having affirmed that the transactions satisfied the benami ingredients within the applicable definition, the Tribunal found no ground to interfere with confirmation of the provisional attachment and dismissed the appeals.