Case Law Details
Sri Rachakonda Srinivas Rao Vs Initiating Officer (Appellate Tribunal Under Safema At Delhi)
The Appellate Tribunal under the SAFEMA at Delhi overturned an order attaching a commercial property under the Prohibition of Benami Property Transactions Act (PBPTA). The case involved Shri Rachakonda Srinivas Rao, M/s. ICON Constructions, and Smt. Sarda Devi. The original order by the Adjudicating Authority had confirmed a Provisional Attachment Order (PAO) on a commercial unit in Secunderabad, alleging it was benami property. The property’s sale consideration was Rs. 70,77,000, of which Rs. 9,00,000 was allegedly paid through Smt. Sarda Devi, identified as the benamidar, with Shri Rao as the beneficial owner.
Shri Rao and M/s. ICON Constructions appealed the order, arguing that the property was never owned or held by Shri Rao. They contended that Smt. Sharda Devi, along with two others, had entered into an agreement of sale with M/s. ICON Constructions, but she had denied ownership and making any payments. The appellants further argued that the PBPTA provisions were inapplicable as the agreement of sale predated the amendment to the Act, which came into force on November 1, 2016. They also pointed out that the agreement was never finalized into a sale. M/s. ICON Constructions also maintained that Smt. Sarda Devi never acquired title to the property.
The respondent, the Initiating Officer, argued that information from the Anti Corruption Bureau suggested that though payments were made via cheques, cash was deposited into Smt. Sharda Devi’s account before being transferred to M/s. ICON Constructions. They claimed Smt. Devi, a relative of Shri Rao, had given signed blank cheques to him, which were used for the transaction. The respondent asserted that the Adjudicating Authority correctly identified Smt. Devi as the benamidar and Shri Rao as the beneficial owner, alleging he used unaccounted money for the purchase.
The Tribunal, after reviewing the arguments and evidence, emphasized that only a partial payment of Rs. 9,00,000 had been made towards the property. It cited Section 54 of the Transfer of Property Act, 1882, which clarifies that an agreement to sell does not create any interest or charge on the property. The Tribunal also referred to Supreme Court judgments, including Rambhau Namdeo Gajre versus Narayan Bapuji Dhotra and Namdeo versus Collector, which reiterate that an agreement of sale does not confer ownership or interest in the property to the proposed buyer. The Tribunal noted that M/s. ICON Constructions confirmed that Smt. Devi did not acquire any rights or title to the property and that they remained the owners.
The Tribunal concluded that the property was neither benami nor was the transaction a benami transaction. It highlighted the lack of evidence connecting Shri Rao to the alleged cash infusions into Smt. Devi’s account. Given the arguments and the cited legal precedents, the Tribunal set aside the Impugned Order and allowed the appeals, effectively overturning the attachment of the property.
FULL TEXT OF THE JUDGMENT/ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA AT DELHI
This Order disposes of the Appeal Nos. FPA-PBPT-874/HYD/2019 and FPA-PBPT-872/HYD/2019 filed under Section 46(1) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA) by Shri Rachakonda Srinivas Rao and M/s. ICON Constructions respectively against the Order dated 25.06.2019 (Impugned Order) under Section 26 (3) of PBPTA passed by the Ld. Adjudicating Authority in Reference No.R-885/2018. The Impugned Order confirmed the Provisional Attachment Order (PAO) dated 28.05.2018, under Section 24 (4) (b) (i) of the PBPTA passed by the Initiating Officer (IO) of the BPU, Hyderabad.
2. We note the following relevant details of the case:
Reference No: 885/2018
Benamidar: Sarda Devi
Beneficial owner: Rachakonda Srinivas
Interested Party: ICON Construction
Transaction amount: Rs.9,00,000/- paid out of sale consideration of Rs. 70,77,000/-.
3. Counsel for the Appellants informed that the IO and Deputy Commissioner of Income Tax (Benami Prohibition), Hyderabad, filed Reference no. 885/2018 before the Ld. Adjudicating Authority on 08.06.2018 concerning Smt. Sarada Devi (Benamidar), Sh. Rachakonda Srinivas Rao (Beneficial Owner) and M/s ICON Construction (Interested Party) following the Provisional Attachment Order (PAO) dated 28.05.2018. The property with description as “Commercial unit bearing Shop no. 5 Ground Floor admeasuring 1011sq. ft. of built-up area with 2 car parking along with an undivided share of 43 sq. yards out of a total extent of 2608 sq. yards, bearing H. No. 1-7-392 to 394, in the building named “CVK PARK SQUARE” situated at Sarojini Devi Road, Secunderabad” was identified as Benami Property and was provisionally attached. The consideration of Rs.9,00,000/- out of total Sale consideration of Rs.70,77,000/- was paid vide cheque no.312285 of State Bank of India (SBI) for an amount of Rs.3,50,000/- on 29.10.2016 and vide cheque no.312288 of SBI for an amount of Rs.5,50,000/- on 05.12.2016.
4. Ld. Counsels for the Appellants argued that Sh. Rachakonda cannot be termed as beneficial owner as the impugned property was never owned or held by him. Smt. Sharda Devi jointly with two others entered into an Agreement of Sale with M/s ICON Construction on 27.10.2016 to purchase the impugned property worth Rs, 70,77,000/-. Smt. Sharda Devi categorically denied ownership and stated that she has not paid any advances or consideration to M/s ICON Construction for the purchase of the subject property.
5. Ld. Counsels for the Appellants have contended that the Ld. Adjudicating Authority has wrongly confirmed the Provisional Attachment of the impugned property. The alleged benamidar is not the owner of the said property u/s 26(3) of PBPTA. Moreover, Agreement to Sale is merely an executor contract. The title of the property and the possession is with M/s Icon Construction. Shri Rachakonda contended that the provisions of PBPTA are not applicable to the impugned property as there was only contemplation to purchase/invest in the same to be done jointly by 3 persons, one of whom was Smt. Sharada Devi and that too before the enactment of amendment to the Benami Act and made enforceable only from 1st November, 2016. Moreover, Agreement to Sale dated 27.01.2016 was not even signed by Smt. Sharada Devi and she wanted to opt out of this investment proposal and offer the other two joint owners to take up her share. It was also contended that the Respondent BPU, Hyderabad failed to establish that the funds for the said transaction were provided by Shri. Rachakonda. Ld. Counsel for the Appellants further contended that at all times the beneficial interest in the impugned property only vested with M/s ICON Constructions and the Respondent is fully cognizant of this fact.
6. Ld. Counsels for the Appellants submitted that the Reference No.885/2018 dated 08.06.2018 u/s 24(5) of the PBPTA, made by the IO is bad in law. Moreover, PBPTA is not applicable to this case as the agreement of sale for the purchase of the impugned property was executed on 27.10.2016 with all future benefits accruing to the prospective buyers only upon completion of construction and transfer of title. The agreement to sale was not finally executed and converted in the form of sale, till date. Since the amended PBPTA came into force only from 1st November 2016, hence, there is no scope for retrospective application of the punitive law. Ld. Counsels also contended that the alleged Benamidar directly entered in an Agreement of Sale with M/s ICON Constructions to purchase the property for which requisite consideration was paid from own sources through proper and valid banking channels. Ld. Counsel for Shri Rachakonda, the BO, submitted that the alleged Benamidar entered into direct agreement to sale with M/s ICON Constructions to purchase the impugned property for an agreed consideration. Ld. Counsel for M/s ICON Constructions further submitted that mere agreement to sell does not confer title on property. Since the alleged Benamidar has not paid the entire sale consideration, title has not been transferred to the said purchaser. Section 54 of the Transfer of Property Act, 1882 states that the Agreement to Sale neither creates any title nor any interest in the immovable property, which is also a settled law by the Hon‟ble Supreme Court of India in several cases. Ld. Counsels for the Appellants have prayed for the quashing of the impugned order.
7. Ld. Counsel for the Respondent argued that Information was received by Anti Corruption Bureau, Central Investigation Unit, Hyderabad, Telangana (ACB) with regard to the purchase of the aforementioned property in which Agreement of Sale was said to be made between Smt. Sharada Devi and M/s ICON Constructions on 27.10.2016. While the purchase consideration was paid through cheques, the investigation revealed the cash has been deposited in her bank account which was subsequently transferred to the account of M/s ICON Constructions through two cheques. Smt. Sharada Devi, in her statement recorded u/s 19(1) of the PBPTA reiterated that she did not know anything about the above-mentioned transaction as she had not signed any agreement. She also stated that her cousin Sri B.V. Bala Krishna along with his daughter, son in law Sri Kanishka and Sri Rachakonda Srinivas had come to her house and requested to give two cheques for the use of Sri Rachakonda Srinivas. Then she gave two cheques with her signature without mentioning any name or date on the cheques. She further stated that cash deposits to the extent of Rs.9,00,000 have been made in her SBI account without her knowledge and the same have been withdrawn in the name of M/s. ICON Constructions using her cheques given to Sri Rachakonda Srinivasa Rao.
8. Ld. Counsel for the Respondent contended that since Smt Sharda Devi is the distant relative of Shri Rachakonda Srinivasa Rao who is father of Shri Kanishka, the IO had correctly inferred that Smt Sharda Devi is the Benamidar and Shri Rachkonda Srinivasa Rao is the Beneficial Owner. Ld. Counsel contended that the Ld. Adjudicating Authority has clearly brought on record the background and the circumstances in which the whole transaction was made by Sri Rachakonda Srinivas Rao, who was a government servant. Shri Rao introduced his unaccounted/ill gotten money and parked the same in the name of Smt. Sarada Devi by giving it a color of genuine legitimate investment circumventing the law. In view of the above, Ld. Adjudicating Authority correctly confirmed the Provisional Attachment of the impugned property. Ld. Counsel for the Respondent prayed for dismissal of the Appeals.
9. We have considered the rival submissions and the material on record. It is an admitted fact that only partial payment has been made by the alleged Benamidar to the interested party M/s ICON Constructions. The partial payment was made on signing of Agreement of Sale. Section 54 of the Transfer of Property Act, 1882 is reproduced below: –
Section 54. “Sale” defined. —
“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Sale how made. —
Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.
In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Contract for sale. —
A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such property
It is therefore obvious that the contract of Agreement to Sale does not bestow any interest in or charge of such property.
10. We find that in several judgments the Hon‟ble Supreme Court has held that an Agreement to Sale does not create an interest or charge in favor of the proposed vendee in the suit property. In the Judgment dated 25.08.2004 the Hon’ble Supreme Court in the matter of Rambhau Namdeo Gajre versus Narayan Bapuji Dhotra (dead) through IRS. [(2004) 8 SCC 614] stated the aforementioned in the following paragraphs:-
“13. The agreement to sell does not create an interest of the proposed vendee in the suit property. As per Section 54 of the Act, the title in immovable property valued at more than Rs 100 can be conveyed only by executing a registered sale deed. Section 54 specifically provides that a contract for sale of immovable property is a contract evidencing the fact that the sale of such property shall take place on the terms settled between the parties, but does not, of itself, create any interest in or charge on such property. It is not disputed before us that the suit land sought to be conveyed is of the value of more than Rs 100. Therefore, unless there was a registered document of sale in favour of Pishorrilal (the proposed transferee) the title of the suit land continued to vest in Narayan Bapuji Dhotra (original plaintiff) and remain in his ownership. This point was examined in detail by this Court in State of U.P. v. District Judge [(1997) 1 SCC 496] and it was held thus : (SCC pp. 499500, para 7)
“7. Having given our anxious consideration to the rival contentions we find that the High Court with respect had patently erred in taking the view that because of Section 53-A of the Transfer of Property Act the proposed transferees of the land had acquired an interest in the lands which would result in exclusion of these lands from the computation of the holding of the tenure-holder transferor on the appointed day. It is obvious that an agreement to sell creates no interest in land. As per Section 54 of the Transfer of Property Act, the property in the land gets conveyed only by registered sale deed. It is not in dispute that the lands sought to be covered were having value of more than Rs 100. Therefore, unless there was a registered document of sale in favour of the proposed transferee agreement-holders, the title of the lands would not get divested from the vendor and would remain in his ownership. There is no dispute on this aspect. However, strong reliance was placed by learned counsel for Respondent 3 on Section 53-A of the Transfer of Property Act. We fail to appreciate how that section can at all be relevant against the third party like the appellant State. That section provides for a shield of protection to the proposed transferee to remain in possession against the original owner who has agreed to sell these lands to the transferee if the proposed transferee satisfies other conditions of Section 53-A. That protection is available as a shield only against the transferor, the proposed vendor, and would disentitle him from disturbing the possession of the proposed transferees who are put in possession pursuant to such an agreement. But that has nothing to do with the ownership of the proposed transferor who remains full owner of the said lands till they are legally conveyed by sale deed to the proposed transferees. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party like the appellant State when it seeks to enforce the provisions of the Act against the tenure-holder, proposed transferor of these lands.”
(emphasis supplied)
There was no agreement between the appellant and the respondent in connection with the suit land. The doctrine of part-performance could have been availed of by Pishorrilal against his proposed vendor subject, of course, to the fulfilment of the conditions mentioned above. It could not be availed of by the appellant against the respondent with whom he has no privity of contract. The appellant has been put in possession of the suit land on the basis of an agreement of sale not by the respondent but by Pishorrilal, therefore, the privity of contract is between Pishorrilal and the appellant and not between the appellant and the respondent. The doctrine of part-performance as contemplated in Section 53-A can be availed of by the proposed transferee against his transferor or any person claiming under him and not against a third person with whom he does not have a privity of contract.”
11. In the Judgment dated 22.08.1995, the Hon’ble Supreme Court in the matter of Namdeo versus Collector, East Neemar, Khandwa & Ors. [(1995) 5 SCC 598] held that an agreement of sale does not convey any right, title or interest. The relevant paragraph is reproduced below: –
“6. The further contention is that there was an agreement of sale by Devi Prasad with the appellant in the year 1969 and that sale deed was executed in 1974, it dates back to the date of agreement and, therefore, the Act is inapplicable. We find no force in the contention. An agreement of sale does not convey any right, title or interest. It would create only an enforceable right in a court of law and parties could act thereon. The right, title and interest in the land of Devi Prasad stood extinguished only on execution and registration of the sale deed and admittedly it was done in 1974. Therefore, the sale deeds are within the prohibited period.”
12. We note that out of the total sale consideration of Rs.70.77 Lakhs for the impugned property only Rs.9 Lakhs was paid by the alleged Benamidar. The interested party M/s ICON Constructions has also maintained that the Benamidar has not acquired any rights, interest and title to the impugned property. Therefore, M/s ICON Constructions continue to remain owner and in possession of the impugned property. In view of this, the applicability of Section 2 (9) (A) is doubtful as neither the impugned property was transferred to the alleged Benamidar nor the impugned property was held by the alleged Benamidar. Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidar, there is no evidence on record as to show that such infusions were made by the Beneficial Owner.
13. In view of the aforementioned discussions, we find that neither the property which has been provisionally attached is Benami nor the transaction which has occurred with respect to the impugned property is Benami. We therefore set aside the Impugned Order.
14. We allow the Appeals Nos. FPA-PBPT-874/HYD/2019 and FPA-PBPT-872/HYD/2019 and dispose of the Applications accordingly.
Author Bio
Dear Sir,
in the 12th para it is written by appellate tribunal that there is no evidence on record as to show that such infusions were made by the Beneficial Owner. But in para no. 7 it is mentioned that benamidar has given statement u/s 19(1). Then how can Appellate Tribunal say that they have nothing on record?