Kushal Chand Surana v. The Initiating Officer, Deputy Commissioner Of Incometax (Benami Prohibition) Jaipur, Room

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Civil Writ Petition No. 11176/2020 1. M/s. Shri Kalyan Buildmart Pvt. Ltd., 2339, Ramlala Ji KaRasta, Johri Bazar, Jaipur through its Director Shri RajeshJain S/o Shri Bhagchand Jain, aged about 39 Years, R/oA-17, Satya Nagar, Khatipura Road, Jhotwara, Jaipur.Rasta, Johri Bazar, Jaipur through its Director Shri RajeshJain S/o Shri Bhagchand Jain, aged about 39 Years, R/oA-17, Satya Nagar, Khatipura Road, Jhotwara, Jaipur. 2. Navrattan Kothari S/o Late Shri Ghisilal Kothari, agedabout 78 Years, R/o B-1, B-2 Prithviraj Road, C-Scheme,Jaipur.about 78 Years, R/o B-1, B-2 Prithviraj Road, C-Scheme,Jaipur. 3. Kushal Chand Surana S/o Late Shri Raj Mal Surana, agedabout 87 Years, R/o Surana Enclave, Sawai Ram SinghRoad, Opposite SMS Hospital, Jaipur.about 87 Years, R/o Surana Enclave, Sawai Ram SinghRoad, Opposite SMS Hospital, Jaipur. 4. Vimal Chand Surana S/o Late Shri Raj Mal Surana asKarta Of Vimal Chand Surana HUF, aged about 83 years,R/o Surana Enclave, Sawai Ram Singh Road, OppositeSMS Hospital, Jaipur.Karta Of Vimal Chand Surana HUF, aged about 83 years,R/o Surana Enclave, Sawai Ram Singh Road, OppositeSMS Hospital, Jaipur. ----Petitioners Versus 1. The Initiating Officer, Deputy Commissioner Of IncomeTax (Benami Prohibition) Jaipur, Room No. 250, NewCentral Revenue Building, Statue Circle, Jaipur.Tax (Benami Prohibition) Jaipur, Room No. 250, NewCentral Revenue Building, Statue Circle, Jaipur. 2. The Adjudicating Authority, The Prohibition Of BenamiProperty Transactions, Act 1988, Room No.26, 4[th] Floor,Jeevan Deep Building, Parliament Street, New Delhi-01Property Transactions, Act 1988, Room No.26, 4[th] Floor,Jeevan Deep Building, Parliament Street, New Delhi-01 ----Respondents For Petitioner(s): Mr. Swadeep Singh Hora For Respondent(s) : Mr. R.B. Mathur HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Judgment / Order RESERVED ON : 04/09/2021PRONOUNCED ON : 06/10/2021 1.The petitioners by way of this writ petition assail theprovisional attachment orders dated 12.01.2018 passed by the Initiating Officer under Section 24(4) of the Prohibition of BenamiProperty Transactions Act, 1988 and the confirmation orders dated30.01.2019 passed by the Adjudicating Authority under Section26(3) of the Prohibition of Benami Property Transactions Act, 1988(hereinafter referred to as “the Benami Act, 1988”). 2.In order to appreciate the controversy, it would be appositeto first notice the facts of the case as has come on record in brief. 2.1The petitioner No.1-company M/s. Shri Kalyan Buildmart Pvt.Ltd. was incorporated with two shareholders and Directors –Madan Mohan Gupta and Shashikala Gupta on 21.08.2006. Theagricultural land comprising Khasra Nos.406/148, 141/1 and 142situated at Village Chainpura, Tehsil Sanganer, District Jaipur ad-measuring 0.99 hectares was purchased by the company in itsname by executing four identical registered sale deeds. 2.2A reference was received from the Assistant Commissioner ofIncome Tax, Central Circle-1, Jaipur on 15.09.2017 with relationto information regarding Benami property transaction in the caseof Rajendra Kumar Jain and others. The necessary enquiries wereinitiated under Section 23 of the Benami Act, 1988 with referenceto the aforesaid land and the IO has stated that a search underSection 132 of the Income Tax Act, 1961 was carried out onRajendra Jain/Rajendra Bardiya group on 23.05.2013. During thecourse of search at the residence of one Madan Mohan Gupta, theincriminating documents including a pocket diary were seized. Inthe aforesaid diary, details of transactions relating to land locatednear Entertainment Paradise, Jaipur were found to have beenrecorded. It revealed that huge payments were made by RajendraKumar Jain, Navrattan Kothari, Vimal Chand Surana and KushalChand Surana for purchase of said land in the name of M/s. Shri Kalyan Buildmart Pvt. Ltd. The statement of Madan Mohan Guptawas recorded under Section 131 of the Income Tax Act, 1961 andcross-examination was also done. Madan Mohan Gupta hasdeposed that there was some dispute between Navrattan Kothariand Vimal Chand Surana on one hand and the owner farmers ofthis land on the other hand. The farmers did not want to sell theland to Navrattan Kothari and Vimal Chand Surana and therefore,they approached Rajendra Kumar Jain to purchase the said landfrom the farmers. Since Madan Mohan Gupta was closely known tofarmers as well as Rajendra Kumar Jain, Navrattan Kothari andVimal Chand Surana and was therefore engaged to arrange andexecute a deal on their behalf as their “Benamidar” and for thispurpose, the company-M/s. Shri Kalyan Buildmart Pvt. Ltd. wasincorporated. 2.3The Initiating Officer (“IO”) has further alleged that thecompany was incorporated only for the said purpose and MadanMohan Gupta and his wife, Shashikala Gupta were made dummyDirectors of the company by Rajendra Kumar Jain. The currentaccount was opened of the company and another account ofMadan Mohan Gupta was also opened in Allahabad Bank. Similarly,the accounts were opened of the company by Madan Mohan Guptaby Vimal Chand Surana and Navrattan Kothari in the Bank ofRajasthan (now ICICI Bank). These accounts were not operatedby Madan Mohan Gupta but were operated by Rajendra KumarJain and Navrattan Kothari and Vimal Chand Surana respectivelyfor which the introducers were their employees and themselves. 2.4The IO has submitted that Madan Mohan Gupta was actingas per instructions of Rajendra Kumar Jain, Navrattan Kothari andVimal Chand Surana as their benamidar for execution of the deal. The property was purchased in the name of company solely withthe purpose to transfer shares of the company to Vimal ChandSurana, Navrattan Kothari and Kushal Chand Surana in order toavoid liability of payment of stamp duty and therefore, theproperty was a benami property originally acquired in the name ofbenamidar company through dummy Directors – Madan MohanGupta and Shashikala Gupta by petitioner Nos.2 to 4 andtherefore was liable for confiscation under the Benami Act, 1988. 2.5It was further submitted that subsequently shares of thecompany were transferred by Madan Mohan Gupta and ShashikalaGupta to petitioner Nos.2 to 4 which reflected that the property bythe company was benami and was actually bought by petitionernos.2 to 4. 3.Learned counsel for the petitioners submitted that thecompany purchased the land in its name while the Directors of thecompany at that time were Madan Mohan Gupta and ShashikalaGupta, who obtained loan from one Rajendra Kumar Jain for thepurpose of purchase of the agricultural land in 2006. The shares ofthe company were transferred to the petitioner Nos.2 to 4, whopurchased their shares in 2008. 4.The proceedings under Section 90B of the Rajasthan LandRevenue Act, 1956 were undertaken and the Authorised Officerpassed an order under Section 90B on 04.04.2007 whereby theland was vested with the JDA. The company further purchased anagricultural land comprising Khasra Nos.403/148 and 404/148 ad-measuring 0.58 hectares. For this land also, the recommendationfor conversion of land from agricultural to commercial purposeswas made on 05.11.2007 subject to petitioner surrendering 1953sq. mtrs. of land to JDA for developing 80 ft. and 60 ft. wide road. 4.The proceedings under Section 90B of the Rajasthan LandRevenue Act, 1956 were undertaken and the Authorised Officerpassed an order under Section 90B on 04.04.2007 whereby theland was vested with the JDA. The company further purchased anagricultural land comprising Khasra Nos.403/148 and 404/148 ad-measuring 0.58 hectares. For this land also, the recommendationfor conversion of land from agricultural to commercial purposeswas made on 05.11.2007 subject to petitioner surrendering 1953sq. mtrs. of land to JDA for developing 80 ft. and 60 ft. wide road. The said conversion was sanctioned by the State Government on17.11.2007 changing the nature of land from agriculture tocommercial. The amount of Rs.1,37,09,371/- was demanded bythe JDA as premium, one time lease and peripheral charges whichwere deposited by the company on 22.11.2007 and additionaldemand resulted in depositing a further sum of Rs.14,46,880/- on10.12.2007. Thereupon, a lease deed was issued by the JDA for13747 sq. metrs. vide order dated 18.12.2007. A sum of Rs.4 lacwas deposited by the petitioner-company for approval of buildingplans which were approved by the Building Plan Committee of JDAon 18.06.2010 and the JDA released the approved building planson 14.12.2011. A sum of Rs.75 crore was spent by the petitioner-company raising and constructing four towers of the project as perpermitted height between 2011 and 2014. The construction wasstarted as per building plan. 5.A notice was thereafter served under Section 24(1) of theBenami Act, 1988 to the petitioner No.1-company through itserstwhile Directors namely, Madan Mohan Gupta and ShashikalaGupta on 17.10.2017, whereafter provisional attachment orderswere passed on 12.01.2018 by the Initiating Officer and theAdjudicating Authority confirmed the attachment proceedings on30.01.2019. Challenging the said provisions, the present writpetition has been filed. 6.Learned counsel for the petitioner-company has submittedthat the entire proceedings are illegal and unjustified. 7.It is stated that the Chairman of the Appellate Tribunalretired and the appeal preferred before the Appellate Tribunalagainst the order dated 30.01.2019 passed by the AdjudicatingAuthority became otiose. The petitioners were caused great prejudice and financial loss on account of the attachment andeven as on today, the Appellate Tribunal is not functioning. In thecircumstances, it was prayed that the writ petition would bemaintainable. Learned counsel for the petitioners relied onjudgment passed in the case of Rojer Mathew Vs. South Indian Bank Ltd. & Ors., reported in 2020 (6) SCC 1 to submit thatthe writ petition was maintainable. 8.This court had issued notices, whereafter learned counsel forthe respondents have appeared and submitted that as perstatement recorded of Madan Mohan Gupta under the Income TaxAct, it is apparent that the money used for purchasing propertywas of Navrattan Kothari and Vimal Chand Surana and theproperty was thus a benami property and the said persons werethe beneficiaries. The respondents further submitted that theattachment has been done in order to protect the part of propertybeing alienated and the department does not propose toconfiscate or auction the property. Thereafter, the case was heardfinally. 9.Learned counsel for the petitioners submits that theimpugned orders holding the petitioner-company No.1 is‘benamidar’ and the petitioner Nos.2 to 4 as ‘beneficial owners’, onthe ground that they are shareholders of petitioner No.1-company,are wholly erroneous. It is submitted that the company has itsown separate identification in law as a juristic person and therelation between the shareholders and the company cannot besaid to be benamidar and beneficial owners as shareholders. It isstated that the company has throughout owned the property andmere change of shareholding would not make the property of thecompany as ‘benami’. Learned counsel submits that the entire 9.Learned counsel for the petitioners submits that theimpugned orders holding the petitioner-company No.1 is‘benamidar’ and the petitioner Nos.2 to 4 as ‘beneficial owners’, onthe ground that they are shareholders of petitioner No.1-company,are wholly erroneous. It is submitted that the company has itsown separate identification in law as a juristic person and therelation between the shareholders and the company cannot besaid to be benamidar and beneficial owners as shareholders. It isstated that the company has throughout owned the property andmere change of shareholding would not make the property of thecompany as ‘benami’. Learned counsel submits that the entire premise of the case set up by the respondents is thus inherentlyimprobable and absurd and such proceedings of attachment are acomplete abuse of process and suffer from grave non-applicationof mind and therefore, deserve to be set aside. 10.Learned counsel took the court to the dates of events asnoticed above. It was further submitted that the shareholders donot hold the property of the company and in support thereof, herelied on the judgments of the Supreme Court in the case ofChiranjit Lal Chowdhuri Vs. Union of India & Ors., reportedin AIR 1951 SC 41 and in Bacha F. Guzdar, Bombay Vs.Commissioner of Income Tax, Bombay, reported in AIR1955 SC 74. 11.Secondly, it is submitted that the property was purchased asan agricultural land by the company which has been resumed interms of Section 90B of the Rajasthan Land Revenue Act, 1956 bythe JDA. As per Section 90B of the Rajasthan Land Revenue Act,1956 as it existed the khatedari rights of the petitioners wereterminated on 04.04.2007. Adjoining land bearing KhasraNos.403/148 and 404/148 had also been purchased by thepetitioner-company ad-measuring 0.58 hectares and in respect ofthe said land also, proceedings under Section 90B wereundertaken and rights of the khatedari of the petitioner-companywere terminated vide order dated 28.05.2007. 12.It is submitted that merely because the original Directors ofthe company have sold their shares subsequently to thepetitioners, the petitioners would not make transaction benami asthe company remains actual beneficial owner of the property. Afterresumption of land by the State under 90B proceedings, theproperty itself ceased to exist and the attachment and the confirmation are unsustainable in law. The JDA has alreadyconverted the land as commercial and a registered lease deed hasbeen executed by the JDA in favour of the company whichadmittedly has not been treated as a transaction under theBenami Act, 1988 by the authority while passing order underSection 24(4) of the Benami Act, 1988. A commercial complextherefore could not have been a subject matter of attachment andthe entire proceedings are without jurisdiction and infringe rightsunder Articles 14, 21 and 300A of the Constitution of India. 13.Learned counsel further submitted that the AdjudicatingAuthority in its long order of 73 pages has concluded in 9 lineswithout giving any finding that the attached property is a benamiproperty. 14.Learned counsel further submitted that there is an inordinatedelay of 10 years for issuing show cause notice under Section24(1) of the Benami Act, 1988 and the proceedings suffer fromlaches and delay and are outside the purview of reasonability. 15.Learned counsel relied on the judgments in the cases ofJoint Collector Ranga Reddy District Vs. D. Narsing Raoreported in 2015 (3) SCC 695, Nedungadi Bank Ltd Vs. K.P.Madha Vankutty reported in 2000 (2) SCC 455, U.P.S.R.T.C.Vs. Ram Singh reported in 2008 (17) SCC 627,Santoshkumar Shivgonda Patil Vs. Balasaheb TukaramShevale reported in 2009 (9) SCC 352, Mohamad KaviMohamad Amin Vs. Fatmabai Ibrahim reported in 1997 (6)SCC 71 and in State of Gujarat Vs. Patil Raghav Nathareported in 1969 (2) SCC 187. 14.Learned counsel further submitted that there is an inordinatedelay of 10 years for issuing show cause notice under Section24(1) of the Benami Act, 1988 and the proceedings suffer fromlaches and delay and are outside the purview of reasonability. 15.Learned counsel relied on the judgments in the cases ofJoint Collector Ranga Reddy District Vs. D. Narsing Raoreported in 2015 (3) SCC 695, Nedungadi Bank Ltd Vs. K.P.Madha Vankutty reported in 2000 (2) SCC 455, U.P.S.R.T.C.Vs. Ram Singh reported in 2008 (17) SCC 627,Santoshkumar Shivgonda Patil Vs. Balasaheb TukaramShevale reported in 2009 (9) SCC 352, Mohamad KaviMohamad Amin Vs. Fatmabai Ibrahim reported in 1997 (6)SCC 71 and in State of Gujarat Vs. Patil Raghav Nathareported in 1969 (2) SCC 187. 16.Learned counsel submitted that the orders have been passedwithout giving any opportunity of hearing to the petitioner- company. It is stated that the respondents issued provisionalattachment orders on 23.10.2017 to which preliminary objectionswere raised by the petitioner No.1-company and the documentswere sought for by the petitioner-company vide their letters dated02.11.2017 and on 10.01.2018 objections were rejected by therespondent/s, the documents were supplied and the petitionerNo.1-company was asked to submit its reply by 12.01.2018. Thepetitioner-company submitted its reply on 12.01.2018 and on thesame day, an order was passed with a pre-decided mindsetwithout giving opportunity to submit oral arguments in the case.Learned counsel submitted that the statement of one of theerstwhile Directors namely, Madan Mohan Gupta was relied uponalthough his statement was wholly unreliable. It is stated thatMadan Mohan Gupta filed five different affidavits wherein three ofhis statements support the petitioners and two of the statementssupport the respondents. No statement was recorded underSection 19(1)(b) of the Benami Act, 1988 and the affidavit filedunder Section 131 of the Income Tax Act, 1961 was taken intoconsideration. 17.Learned counsel submitted that contentions of the petitionercompany were upheld by the Income Tax Appellate Tribunal andnothing adverse was ultimately found against the petitioner-company and the statement of Madan Mohan Gupta was notaccepted but the respondents in the present proceedings haveproceeded to hold the property as benami on the basis of self-statement of Madan Mohan Gupta. 18.Learned counsel also submitted that in the case of NiharikaJain Vs. Union of India, reported in 2019 (3) RLW 1947, thisCourt has held that the proceedings under the Benami Act, 1988 cannot be treated as retrospective as it has been brought intoforce with effect from 01.11.2016. The Division Bench stayed theoperation of order passed by the learned Single Judge on26.08.2020. However, the Supreme Court stayed the part of theorder and at the same time restrained the concerned owners fromnot alienating the property and not creating third party interest. 19.Learned counsel relied on the judgment passed by theBombay High Court in the case of Joseph Isharat Vs. RozyNishikant Gaikwad, 2017 SCC Online Bom 10006 to submitthat the provisions are prospective in nature and further submitsthat an SLP against the said judgment was dismissed by theSupreme Court vide order dated 28.04.2017. 20.Learned counsel also relied on the judgment in the case ofMangathai Ammal Vs. Rajeshwari & Ors. reported in 2019SCC Online SC 717 to submit that that Supreme Court has alsoobserved that the amended provisions would not have aretrospective effect. 19.Learned counsel relied on the judgment passed by theBombay High Court in the case of Joseph Isharat Vs. RozyNishikant Gaikwad, 2017 SCC Online Bom 10006 to submitthat the provisions are prospective in nature and further submitsthat an SLP against the said judgment was dismissed by theSupreme Court vide order dated 28.04.2017. 20.Learned counsel also relied on the judgment in the case ofMangathai Ammal Vs. Rajeshwari & Ors. reported in 2019SCC Online SC 717 to submit that that Supreme Court has alsoobserved that the amended provisions would not have aretrospective effect. 21.Learned counsel appearing for the respondent/s alsosubmitted written statements and stated that two plots of landwere adjacent to each other, one of them was owned by acompany called ‘Paradise Complex Ltd.” in which the petitionerNos.2, 3 and 4 were shareholders. Another plot was owned bynative farmers which the petitioners wanted to buy so that theseplots of land can be combined into a large land and combinedpatta can be obtained from JDA. So, the petitioners took help ofone Rajendra Jain to execute the entire transaction throughcompany – M/s. Kalyan Buildmart Pvt. Ltd. through its dummyDirectors namely, Madan Mohan Gupta and Shashikala Gupta ashave been mentioned and noticed above. 22.Learned counsel further submitted that ‘benami transaction’would include such a transaction and the property can be treatedas benami property while the company would be termed as‘benamidar’ and the petitioner nos.2 to 4 are beneficial owners. Itis submitted that consideration was made by Rajendra Jain for thebenefit and on behalf of Vimal Chand Surana and NavrattanKothari and Kushal Chand Surana while the property was acquiredin the name of M/s. Kalyan Buildmart Pvt. Ltd. The shares of thecompany after transaction have been transferred to petitionersmaking them ultimate beneficial owners. 23.Learned counsel relied on Section 6 of the Benami Act, 1988to submit that such re-transfer of property by benamidar wasprohibited. He further relied on the statement made by MadanMohan Gupta in income tax proceedings. In support of hissubmissions, learned counsel relied on the following interimorders: “1. Interim Order dated 03.02.2020 passed by the Hon’bleApex Court in Special Leave to Appeal in the case of Union ofIndia V/s Ganpati Dealcom Pvt. Ltd., bearing No(s).2784/2020. 2. Interim Order dated 15.10.2019 passed by the Hon’bleRajasthan High Court in D.B. Special Appeal (Writ)No.1227/2019 and connected matters in the case of Dy.Commissioner (Benami Prohibition), Rajasthan And InitiatingOfficer V/s Smt. Pallavi Mishra. 3. Interim Order dated 26.08.2020 passed by the Hon’bleRajasthan High Court in D.B. Special Appeal (Writ)No.1227/2019 and connected matters in the case of Dy.Commissioner (Benami Prohibition), Rajasthan And InitiatingOfficer V/s Smt. Pallavi Mishra. 4. Interim Order passed by the Hon’ble Apex Court in SpecialLeave to Appeal in the case of Pallavi Mishra V/s Dy.Commissioner (Benami Prohibition) Rajasthan And InitiatingOfficer & Anr., bearing No(s).10545/2020. 6. Tulsiram Vs. Assistant Commissioner of Income Tax(Benami Prohibition), (2020) 270 TAXMAN 309 (Chattisgarh). 7. Simmant Kohli Vs. Union of India and Ors., W.P.No.3957/2019.” 24.I have considered the submissions. It would be apposite to quote relevant definitions as provided under the Benami Act, 1988. 25.The definition of ‘benami transaction’ provided under Section 2(9) of the Benami Act, 1988 reads as under: “2(9) “benami transaction” means,— (A) a transaction or an arrangement— (a) where a property is transferred to, or is held by, a person, and theconsideration for such property has been provided, or paid by,another person; and (b) the property is held for the immediate or future benefit, direct orindirect, of the person who has provided the consideration, except when the property is held by— 7. Simmant Kohli Vs. Union of India and Ors., W.P.No.3957/2019.” 24.I have considered the submissions. It would be apposite to quote relevant definitions as provided under the Benami Act, 1988. 25.The definition of ‘benami transaction’ provided under Section 2(9) of the Benami Act, 1988 reads as under: “2(9) “benami transaction” means,— (A) a transaction or an arrangement— (a) where a property is transferred to, or is held by, a person, and theconsideration for such property has been provided, or paid by,another person; and (b) the property is held for the immediate or future benefit, direct orindirect, of the person who has provided the consideration, except when the property is held by— (i) a Karta, or a member of a Hindu undivided family, as the casemay be, and the property is held for his benefit or benefit of othermembers in the family and the consideration for such property hasbeen provided or paid out of the known sources of the Hinduundivided family; (ii) a person standing in a fiduciary capacity for the benefit ofanother person towards whom he stands in such capacity andincludes a trustee, executor, partner, director of a company, adepository or a participant as an agent of a depository under theDepositories Act, 1996 (22 of 1996) and any other person as may benotified by the Central Government for this purpose; (iii) any person being an individual in the name of his spouse or inthe name of any child of such individual and the consideration forsuch property has been provided or paid out of the known sources ofthe individual; (iv) any person in the name of his brother or sister or linealascendant or descendant, where the names of brother or sister orlineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such propertyhas been provided or paid out of the known sources of theindividual; or (B) a transaction or an arrangement in respect of a property carriedout or made in a fictitious name; or (C) a transaction or an arrangement in respect of a property wherethe owner of the property is not aware of, or, denies knowledge of,such ownership; (D) a transaction or an arrangement in respect of a property wherethe person providing the consideration is not traceable or isfictitious; Explanation.—For the removal of doubts, it is hereby declared thatbenami transaction shall not include any transaction involving theallowing of possession of any property to be taken or retained in partperformance of a contract referred to in section 53A of the Transferof Property Act, 1882 (4 of 1882), if, under any law for the timebeing in force,— (i) consideration for such property has been provided by the personto whom possession of property has been allowed but the personwho has granted possession thereof continues to hold ownership of such property; (ii) stamp duty on such transaction or arrangement has been paid;and (iii) the contract has been registered.” 26.The definition of ‘benamidar’ as provided under Section 2(10) of the Benami Act, 1988 reads as under: “2(10) “benamidar” means a person or a fictitious person, as thecase may be, in whose name the benami property is transferred orheld and includes a person who lends his name.” 27.The definition of ‘person’ provided under Section 2(24) of the Benami Act, 1988 reads as under: “2(24) “person” shall include— (i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whetherincorporated or not; (vi) every artificial juridical person, not falling under sub-clauses (i)to (v).” 28.Section 3 of the Benami Act, 1988 reads as under: “3. Prohibition of benami transactions.—(1) No person shall enterinto any benami transaction. (2) Whoever enters into any benami transaction shall be punishablewith imprisonment for a term which may extend to three years orwith fine or with both. 27.The definition of ‘person’ provided under Section 2(24) of the Benami Act, 1988 reads as under: “2(24) “person” shall include— (i) an individual; (ii) a Hindu undivided family; (iii) a company; (iv) a firm; (v) an association of persons or a body of individuals, whetherincorporated or not; (vi) every artificial juridical person, not falling under sub-clauses (i)to (v).” 28.Section 3 of the Benami Act, 1988 reads as under: “3. Prohibition of benami transactions.—(1) No person shall enterinto any benami transaction. (2) Whoever enters into any benami transaction shall be punishablewith imprisonment for a term which may extend to three years orwith fine or with both. (3) Whoever enters into any benami transaction on and after the dateof commencement of the Benami Transactions (Prohibition)Amendment Act, 2016 (43 of 2016) shall, notwithstanding anythingcontained in sub-section (2), be punishable in accordance with theprovisions contained in Chapter VII.” 29.Section 24 of the Benami Act, 1988 reads as under: “24. Notice and attachment of property involved in benamitransaction (1) Where the Initiating Officer, on the basis of material in hispossession, has reason to believe that any person is a benamidar inrespect of a property, he may, after recording reasons in writing,issue a notice to the person to show cause within such time as maybe specified in the notice why the property should not be treated asbenami property. (2) Where a notice under sub-section (1) specifies any property asbeing held by a benamidar referred to in that sub-section, a copy ofthe notice shall also be issued to the beneficial owner if his identityis known. (3) Where the Initiating Officer is of the opinion that the person inpossession of the property held benami may alienate the propertyduring the period specified in the notice, he may, with the previousapproval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for aperiod not exceeding ninety days from the date of issue of noticeunder sub-section (1). (4) The Initiating Officer, after making such inquires and calling forsuch reports or evidence as he deems fit and taking into account allrelevant materials, shall, within a period of ninety days from thedate of issue of notice under sub-section (1),— (a) where the provisional attachment has been made under sub-section (3),— (i) pass an order continuing the provisional attachment of theproperty with the prior approval of the Approving Authority, till thepassing of the order by the Adjudicating Authority under sub-section (3) of section 26; or (ii) revoke the provisional attachment of the property with the priorapproval of the Approving Authority; (b) where provisional attachment has not been made under sub-section (3),— (i) pass an order provisionally attaching the property with the priorapproval of the Approving Authority, till the passing of the order bythe Adjudicating Authority under sub-section (3) of section 26; or (ii) decide not to attach the property as specified in the notice, withthe prior approval of the Approving Authority. (5) Where the Initiating Officer passes an order continuing theprovisional attachment of the property under sub-clause (i) of clause(a) of sub-section (4) or passes an order provisionally attaching theproperty under sub-clause (i) of clause (b) of that sub-section, heshall, within fifteen days from the date of the attachment, draw up astatement of the case and refer it to the Adjudicating Authority. Explanation: For the purposes of this section, in computing theperiod of limitation, the period during which the proceeding isstayed by an order or injunction of any court shall be excluded: PROVIDED that where immediately after the exclusion of theaforesaid period, the period of limitation referred to in sub-section(4) available to the Initiating Officer for passing order of attachmentis less than thirty days, such remaining period shall be deemed to beextended to thirty days: Explanation: For the purposes of this section, in computing theperiod of limitation, the period during which the proceeding isstayed by an order or injunction of any court shall be excluded: PROVIDED that where immediately after the exclusion of theaforesaid period, the period of limitation referred to in sub-section(4) available to the Initiating Officer for passing order of attachmentis less than thirty days, such remaining period shall be deemed to beextended to thirty days: PROVIDED FURTHER that where immediately after the exclusionof the aforesaid period, the period of limitation referred to in sub-section (5) available to the Initiating Officer to refer the order of attachment to Adjudicating Authority is less than seven days, suchremaining period shall be deemed to be extended to seven days.” 30.From the judgments, which have been cited by both theparties and the interim orders passed by the Supreme Court, inthe opinion of this court, the question regarding retrospectivity ofthe amendments made in the Benami Act, 1988 and brought intoforce w.e.f. 01.11.2016 is left open to be adjudicated only by theSupreme Court. Suffice it to notice that in some of the judgmentsi.e. Mangathai Ammal (supra) and Joseph Isharat (supra), theSupreme Court has observed benami transactions not to beapplicable retrospectively. However, as SLP No.2784/2020, Unionof India & Anr. Vs. M/s. Ganpati Dealcom Pvt. Ltd. is pendingwherein the order of High Court has been stayed, this Court wouldrefrain from making any observation with regard to applicability ofthe Act retrospectively or prospectively. 31.This Court would therefore only limit its adjudication to thefacts of the present case and examine whether the transaction canbe said to be benami transaction under the provisions of theBenami Act, 1988. 32.The first aspect is whether the company incorporated underthe Companies Act and holding any property in its name can besaid to be a benamidar on the basis that funds which were takenby the Directors and invested in the company by way ofshareholders which have been utilised for purchasing of theproperty of the company can be treated as a benami transactionand shareholders to be the actual beneficial owners. “Every private company, existing on the commencement of theCompanies (Amendment) Act, 2000, with a paid-up capital of lessthan one lakh rupees, shall, within a period of two years from suchcommencement, enhance its paid-up capital to one lakh rupees.” 34.A company has its own articles of association. The depositsare made to the company from its Directors or their relatives andif such deposits are allowed, they become part of capital of thecompany. The net worth of the company would mean the sumtotal of the paid-up capital and free reserves after deducting theprovisions or expenses as may be prescribed. It is a juristicperson. The Directors may buy properties in the name of companyand the company alone shall be its owner. 35.In the aforesaid backdrop, therefore, this Court finds that inthe present case, all the properties in question being in the nameof petitioner No.1-company and all applications which have beenmoved to the JDA authorities for surrendering land under Section90B of the Rajasthan Land Revenue Act and for setting up acommercial building, have been made in the name of thecompany. The contention of the respondents with regard tointentions of petitioner Nos.2, 3 and 4 to own the plot of landadjacent to the plot owned by another company called “ParadiseComplex Ltd.” and therefore, the petitioner No.1-company was setup, is clearly a misreading of the provisions of the Companies Act.Merely because the petitioner nos.2, 3 and 4 can be said to beshareholders of the company, the Paradise Complex Ltd. would notmake them owners of land of the company. It may be a different aspect altogether in relation to the evasion of income tax and forcarrying out proceedings under the Income Tax Act. However, sofar as the ownership of land is concerned, each company has rightto purchase property. The Benami Act, 1988, in the opinion of thisCourt, would not extend to properties purchased by the company.36.The very purpose of coming into force of the BenamiTransactions (Prohibition) Act, 1988 was to implement therecommendations of Fifty-seventh Report of the Law Commissionon benami transactions and was to curtail benami purchases i.e.purchase in false name of another person, who does not pay theconsideration but merely lends his name while the real title vestsin another person who actually purchased the property and he isthe beneficial owner essentially as mentioned in the introduction.It used to evade law of perpetuity because of parda system, toavoid annoyance, Zamindar’s desire to avoid indignity and legaldisability, mysterious desire etc. Such benami transactions abusedand defrauded public revenues and creditors. 37.The Parliament for the first time intervened in 1976 when itintroduced section 281A in the Income Tax Act, 1961 barring theinstitution of suit in relation to benami transactions. But this toodid not stop benami transactions and made it an offence also,prohibiting all suits, claims and actions based upon benamitransaction. The Parliament also in order to stop the abuse andfraud by the benami transaction property without compensationrepealed section 82 of Indian Trusts Act and section 281A of theIncome Tax Act alongwith other consequential repeal. The LawCommission was requested to examine the subject on benamitransactions in all its ramifications. The Law Commission (19 of 22) submitted its Fifty-seventh Report. To implement therecommendations of Fifty-seventh Report of the Law CommissionPresident promulgated the Benami Transactions (Prohibition of theRight to Recovery Property) Ordinance, 1988 on 19[th] May, 1988.In order to replace the said Ordinance by an Act of Parliament, theBenami Transactions (Prohibition) Bill was introduced in theParliament. 38.Upon reading provisions of the Benami Act, 1988 and thedefinitions as above, it is thus apparent that a benami transactionwould require one transaction made by one person in the name ofanother person where the funds are owned and paid by the firstperson to the seller while seller gets registered sale deed executedin favour of the second person i.e. from account of ‘A’, the amountis paid to ‘C’ who sells the property to ‘B’ and a registered saledeed is executed in favour of ‘B’. 39.While in the case of an individual, the aforesaid position maycontinue, however, in transaction for purchase of property by acompany in favour of any person or in their own name would notcome within the purview of benami transaction because the fundsof the company are its own assets. If promoters of the companynamely, the shareholders, their relatives or individuals who investin the company by way of giving land or by way of gift or in anyother manner, then such amounts/monies received, would be partof the net worth of the company and the company would beentitled to invest in any sector for which it has been formed. Thepersons who have put monies in the company, may be consideredas their shareholders but such shareholders do not have right toown properties of the company nor it can be said that the (20 of 22) shareholders have by virtue of their share in the companyinvested their amount as benamidars. The transactions of thecompany are independent transactions which are only for thepurpose of benefit of the company alone. (20 of 22) shareholders have by virtue of their share in the companyinvested their amount as benamidars. The transactions of thecompany are independent transactions which are only for thepurpose of benefit of the company alone. 40.It is a different aspect altogether that on account of benefitaccruing to the company, the shareholders would also receivebenefit and they may be beneficiaries to a certain extent. Thiswould however not make shareholders as beneficial owners interms of the definition as provided under Section 2(12) of theBenami Act, 1988. ‘Company’ as defined under the CompaniesAct, 1956 and incorporated thereunder, therefore, cannot betreated as benamidar as defined under the Benami Act, 1988. Thecompany cannot be said to be a benamidar and its shareholderscannot be said to be beneficial owners within the meaning of theBenami Act, 1988. 41.The entire fulcrum of this case, therefore, rests onmisinterpretation of the provisions of the Benami Act, 1988. Allthe transactions in the corporate world made by the companywould become benami transaction if the interpretation of definitionas understood by the respondents is accepted by this Court. Inview of the aforesaid, the entire proceedings initiated under theBenami Act, 1988 deserve to be quashed and set aside. 42.This Court also finds that that the proceedings initiated after10 years of the said purchase made in 2007 are highly belated.Ordinarily, any proceeding relating to benami transactions oughtto be taken up immediately or atleast within reasonable period oflimitation of three years as generally provided under the LimitationAct, 1963. 43.The proceedings initiated under the Benami Act, 1988 arefound to be based on income tax proceedings initiated and thestatement recorded of one Madan Mohan Gupta. As per record, itis noticed that statement of Madan Mohan Gupta has not beenaccepted by the Income Tax Authorities for initiating anyproceeding of evasion as against Rajendra Kumar Jain. Theaffidavits given by Madan Mohan Gupta are also not found to bereliable and he has changed his version from time to time.Transferring of shares by Madan Mohan Gupta to the petitionernos.2, 3 and 4 could not be a ground to draw inference of benamitransaction. It is opinion of the Court, the transactions donelegally under the Companies Act of transferring shares of oneshareholder to another, the benefit, if any, which may accrue onaccount of legally allowed transactions cannot be made as aground to draw presumption of benami transaction under theBenami Act, 1988. The strict proof is required to be produced andthere is no room for surmises or conjectures nor presumption canbe made as the Benami Act has penal consequence. 44.The submission of learned counsel for the respondents ofpower of lifting veil to examine the original sale deed dated24.08.2006 in relation to Benami Act, 1988 although is correct butas this Court has already noticed that the original transaction of2006 was between the company and the sellers and the sale deedwas executed in favour of the company, therefore, this Court issatisfied that a subsequent registered sale deed executed by theJDA does not warrant interference and it is not a case of proceedsfrom the property acquired through benami transaction on 24.08.2006. The approach of the respondents is thus found to beerroneous. 45.This Court also finds strength in the arguments made bylearned counsel for the petitioners regarding provisions of Section90B of the Rajasthan Land Revenue Act. Once the land has beensurrendered and the order has been passed by the JDA underSection 90B of the Rajasthan Land Revenue Act, 1956 and theland has been converted from agriculture to commercial andregistered lease deed has been executed by the JDA in favour ofthe company, the transaction is not a benami transaction. 24.08.2006. The approach of the respondents is thus found to beerroneous. 45.This Court also finds strength in the arguments made bylearned counsel for the petitioners regarding provisions of Section90B of the Rajasthan Land Revenue Act. Once the land has beensurrendered and the order has been passed by the JDA underSection 90B of the Rajasthan Land Revenue Act, 1956 and theland has been converted from agriculture to commercial andregistered lease deed has been executed by the JDA in favour ofthe company, the transaction is not a benami transaction. 46.In view of the above discussion, this Court concludes thataction of the respondents in attaching commercial complex whichhas been leased out to the company by the JDA is illegal andunjustified and without jurisdiction. 47.Accordingly, the provisional attachment orders dated12.01.2018 passed by the Initiating Officer under Section 24(4) ofthe Benami Act, 1988 and the orders passed by the AdjudicatingAuthority dated 30.01.2019 confirming the orders under Section26(3) of the Benami Act, 1988 are set aside with all consequentialbenefits. The property shall be handed over to the company. 48.Accordingly, the writ petition is allowed in the aforesaidterms. No costs. 49.All pending applications, if any, shall also stand disposed of. (SANJEEV PRAKASH SHARMA),J