Delhi High Court Upholds Validity of Benami Transactions Act Notices

Court Dismisses Petition Challenging Provisional Attachment Orders and Show Cause Notices

The Delhi High Court has dismissed a writ petition filed by Shyamsundar Sharma challenging the show cause notices and provisional attachment orders issued under the Prohibition of Benami Property Transactions Act, 1988. The court, comprising Justices V. Kameswar Rao and Vinod Kumar, ruled that the initiating officer had sufficient material and reasons to believe the transactions were benami, validating the provisional attachment orders.

The petitioner, Shyamsundar Sharma, argued that his business dealings with Vestige Marketing Pvt. Ltd. were legitimate and challenged the proceedings initiated by the authorities, claiming misidentification and lack of substantial evidence. However, the court found that the initiating officer possessed sufficient material in the form of Excel sheets detailing bogus transactions, which were corroborated by statements from the company's directors and employees.

The court emphasized that the requirement for issuing a show cause notice under Section 24 of the Benami Act does not necessitate proving a prima facie case, as the standard of belief required is less stringent than in criminal proceedings. Furthermore, the court clarified that there is no statutory obligation to provide a copy of the approving authority's approval along with the attachment order, although it must be provided upon request.

The petitioner's argument that the attachment order violated Article 300A of the Constitution was also dismissed, with the court noting that the provisional attachment under the Benami Act is justified given the evidence of benami transactions.

The court advised the petitioner to raise any grievances regarding financial hardship due to the attachment of bank accounts before the Adjudicating Authority under Section 26 of the Benami Act. 

The ruling reaffirms the authority's power to issue provisional attachment orders and show cause notices when there is material evidence suggesting benami transactions, even without prior hearing opportunities for the noticee. 

Bottom Line:

Provisional attachment orders and show cause notices under Section 24 of the Prohibition of Benami Property Transactions Act, 1988, are valid if the Initiating Officer has material in possession and reasons to believe the transactions are Benami, even without providing prior opportunity of hearing to the noticee.

Statutory provision(s): Prohibition of Benami Property Transactions Act, 1988 Sections 24(1), 24(3), 24(4), 26

Shyamsundar Sharma v. ACIT/Initiating Officer, (Delhi)(DB) : Law Finder Doc Id # 2813463