Provisional attachment through SCN under Benami Act over transactions entered prior to 2016 amendments, is not illegal: Madras HC

Read Judgment: K. Nagarajan (I.A.S) vs. Adjudicating Authority &Ors

Pankaj Bajpai

Chennai, September 7, 2021: The Madras High Court has recently dismissed a Writ Petition challenging provisional attachment order and Show Cause Notice (SCN) under the Benami law covering transactions entered into prior to 2016 amendments.

The Single Judge Bench of Justice S.M. Subramaniam observed that investigations and search were conducted prior to coming into force of the amendments and the alleged benami transactions also occurred prior to the amendment, but the provisional attachment u/s 24 was made after the amendment which is certainly permissible u/s 1(3) of the Benami Transactions (Prohibition) Amendment Act, 2016.

The observation came pursuant to a petition filed by an IAS Officer, Managing Director, Tamil Nadu Warehousing Corporation, challenging the order passed u/s Section 24(4)(a)(i) of the Act, 2016 and SCN u/s 26(1) as per se illegal and violative of the principles of natural justice as it implicated the petitioner as the beneficial owner of the property in question without issuing any notice or giving any opportunity of being heard.

The petitioner contended that the amendments to the Benami Act came into force on November 1, 2016, and thus, would not apply to alleged transaction entered into on October 28, 2016, which would render the impugned order jurisdictionally defective.

The petitioner also contended that the proceedings under the Benami Act are required to be independent proceedings and an adverse finding of the Initiating Officer against the petitioner based on statements recorded u/s 131 in an income-tax proceeding in a different context is unsustainable.

After considering the evidence and arguments, Justice Subramaniam took note of the legal provisions and held that the Benami Act is unambiguous on provisional attachment of the property.

Justice Subramanium elaborated that provisional attachment of property shall be made in order to prevent the persons from encumbering the property during the process of adjudication and after passing the provisional attachment, if the proceedings are to be continued, then, an adjudication u/s 25 and thereafter Section 26(1), show-cause notice is to be issued.

It is only the commencement of proceedings under the Act where-after the petitioner has to respond to the SCN by submitting their explanations/objections along with the documents and evidences, added the Single Judge.

Therefore, the High Court opined that the authorities are bound to adjudicate the matter in the manner provided and take appropriate decision, and the petitioner has misconstrued the provisions based on certain incorrect interpretations.