2026 (1) TMI 736 - AT - Benami Property

Benami transfers of loan and shares: payor control, sham repayments found; transactions held benami and appeals dismissed

Whether the transfers constituted a benami transaction: AT found the requisite indicia of benami (lack of genuine consideration and control by the real ... Benami transaction without satisfaction of three ingredients of the Section 2(9)(A) - fiduciary capacity - acquisition of shares and land - claim of loan repayment found non-genuine - EMC scheme - Non- compliance of the terms and conditions set out under the EMC Scheme and notifications/ guidelines - Whether the payment of consideration by OMIPL while registration of the land in the name of HEPL constitute a benami transaction - HELD THAT:- It is born out from the facts that the loan amount was repaid to the extent of 80% in the very next year. The fact aforesaid has been ignored by the Adjudicating Authority. The respondent contested the issue aforesaid and submitted that HEPL was having hardly any business after its incorporation and more specifically between 10.08.2018 and 14.06.2022. OMIPL gave loan of Rs.12 Crores on 27.06.2018 and remain outstanding for almost two years. It is only when Mr. Mohinder Singh Malik became the majority shareholder of HEPL, he started repaying the amount while the revenue of HEPL was zero till mid of years 2022-2023. OMIPL was, in fact, having 99.99% shareholding of TEGNA and therefore it was necessary for the OMIPL to reduce its shareholding because as per the condition of the EMC scheme, one unit was not entitled to retain more than 25% of the shareholding and otherwise the SPV was required to have seven constituents. Accordingly, the constituents were got involved with distribution of shares holding in SPV. The HEPL was one of its constituents in the cluster and if we now go back to the issue of advancement of land of Rs.12 Crores to be genuine or not, the fact remains that Mr. Mohinder Singh Malik was introduced by OMIPL to have its control of HEPL. Mr. Mohinder Singh Malik was the Director of the OMIPL and was deeply involved in the affairs of the OMIPL and also found authorized signatory of OMIPL. Thus, plea taken by the appellant that he was non-executive Director was not accepted. It is evident that prior to making payment to M/s OMIPL funds in the bank account of M/s HEPL were originated from the bank accounts of the personalities belonging to M/s OMIPL, which is clearly an arrangement' where no funds or loan was repaid in actual. In fact, the funds were just rotated among the connected entities and smoke screen was created by the concerned entities to hide the true nature of the transactions. Apart from above, various credits from M's Pacetel System Pvt Ltd. and M Perfect Handling (both entities being controlled by M/s OMIPL through Shri Mohinder Singh Malik) were noticed in the bank account of Shri Mohinder Singh Malik, out of which various FDs were created. This fact clearly indicates that the source of the FDs of Rs. 1.90 crore each, would have been arranged in the same manner. It is evident that the consideration for acquiring the impugned properties (land+shares) in the name of M/s HEPL was provided by M/s OMIPL and the claim of loan repayment is found non-genuine as this was an arrangement of the entities involved to misguide and deceive the Authorities. No loan was repaid in actual, just funds have been rotated among the same group of parties. Thus, we do not find any error in the impugned order and accordingly appeals are dismissed. Issues: (i) Whether the transactions between OMIPL and HEPL including advancement of Rs.12 crores, acquisition of shares and land in the name of HEPL, and subsequent repayments through inter-company and related party transfers constitute a benami transaction within the meaning of the Prohibition of Benami Property Transactions Act, 1988; and whether the Adjudicating Authority correctly confirmed the Provisional Attachment Order.Analysis: The material examined includes the loan of Rs.12 crores from OMIPL to HEPL, bank transfers showing HEPL transferring significant sums to the SPV (TEGNA) for acquisition of shares and land, the timing and source of repayments traced through the bank accounts of Mr. Mohinder Singh Malik and related entities, redemption of fixed deposits and credits from companies connected to OMIPL, and evidence that HEPL had negligible independent revenue while repayments were effected by funds traced to OMIPL-connected parties. The statutory standard under Section 2(9)(A) of the Prohibition of Benami Property Transactions Act, 1988 requires establishing that the consideration for the property was provided by one person while ownership stands in the name of another, and that the arrangement is not covered by recognised exceptions. The pattern of transfers, redemption of FDs, and credits from entities under OMIPL control were found to demonstrate that the consideration for the impugned properties (land and shares) originated from OMIPL and that repayments were effectuated by rotating funds among related parties rather than genuine independent repayment by HEPL or its principals. The evidence was held sufficient to satisfy the statutory ingredients of a benami arrangement and to justify confirmation of provisional attachment.Conclusion: The payment of consideration for the impugned properties was provided by OMIPL while ownership was recorded in the name of HEPL; the repayments were not bona fide but effected by rotation of funds among OMIPL-controlled entities. Therefore the transactions constitute a benami transaction and confirmation of the Provisional Attachment Order is upheld in favour of the respondent.