Ashutosh Gupta and Gaurav Rana
One of the draconian facet of the amended Prohibition of Benami Property Transactions Act, 1988 (“PBPT Act”) is the provisional attachment provided under Section 24 of the PBPT Act. In this piece we will discuss the prerequisites for valid provisional attachment under Prohibition of Benami Property Transactions Act, 1988.
Section 24 of the PBPT Act provides interim and final provisional attachment by the concerned Initiating Officer (“IO”). The Interim is provided under Sub-Section 3 of the Section 24 of the PBPT Act and the final under sub-section 4 of Section 24 of the PBPT Act. Though, both are provisional but they are provided at the initial stage of inquiry and at the end of the inquiry by IO respectively. It would be profitable to reproduce herein Section 24 of the PBPT Act:
“24.Notice and attachment of property involved in benami transaction
1. Where the Initiating Officer, on the basis of material in his possession, has reason to believe that any person is a benamidar in respect of a property, he may, after recording reasons in writing, issue a notice to the person to show cause within such time as may be specified in the notice why the property should not be treated as benami property.
3. Where the Initiating Officer is of the opinion that the person in possession of the property held benami may alienate the property during the period specified in the notice, he may, with the previous approval of the Approving Authority, by order in writing, attach provisionally the property in the manner as may be prescribed, for a period not exceeding ninety days [from the last day of the month in which the notice under sub-section (1) is issued] from the date of issue of notice under sub-section (1).
4. The Initiating Officer, after making such inquires and calling for such reports or evidence as he deems fit and taking into account all relevant materials, shall, within a period of ninety days [from the last day of the month in which the notice under sub-section (1) is issued],—
(a) where the provisional attachment has been made under sub-section (3),—
(i) pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing 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 prior approval 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 prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under sub-section (3) of section 26; or
(ii) decide not to attach the property as specified in the notice, with the prior approval of the Approving Authority.
Before conducting inquiry it is incumbent on the IO to call all the interested parties to the case under Section 24(1) to show case their case as to why not benami proceedings should be proceeded against the property in question. Same was held by the Appellate Tribunal for PBPT in M/s. Kavita Infrastructure Pvt. Ltd. vs. IO CC FPA-PBPT-820/MUM/2019 date 03.09.2019, it would be profitable to reiterate the relevant para of the said order :
“15. The issue of serving notice u/s 24(1) to the interested party has been well settled in the order of this Tribunal as passed in the matter of M/s. Virgo Buildestate Pvt. Ltd. vs. Initiating Officer FPA PBPT285/JP/2019″, wherein it was stated that:
“It would have been fair and legal on part of the respondent to have noticed the appellant under Section 24(1) before taking a decision under Section 24(4)(a) because at the stage of 24(1) the appellant had already acquired certain legal rights by stepping into the shoe of alleged benamidar.”
It is evident from the plain reading of the provisions of Section 24, the mandatory prerequisites to be fulfilled before making attachment of a property u/s 24(3) are that:
1) The IO must know the person in possession of the property;
2) The said person is holding the property as benami and if no, further steps are meaningless;
3) The said person is likely to alienate the subject property in due course;
4) The alienation is likely to happen within the period specified in the notice issued u/s 24(1).
Further as per Section 24(4) of the Act, the IO after making inquiries and calling for such reports or evidence as he deems fit and after taking all this into consideration has to within a period of ninety days from the Section 24(1) notice: in cases wherein provisional attachment is made under Section 24(3), either order release or continuance of provisional attachment till further order by Adjudicating Authority;, while on the other hand in case of no provisional attachment under Section 24(3) has been made, order provisional attachment till order from adjudicating authority or not to make the provisional attachment of the concerned benami property.
In both the provision i.e. Section 24(3) and (4), prior approval of the Approving Authority is required to be obtained by the IO before making provisional attachment and only after recording his opinion and after relying on the evidences, reports, enquiries and cogent evidences.
In M/s. Kavita Infrastructure Pvt. Ltd. (supra) Appellate Tribunal for PBPT held that :
“21. Therefore, it is well-established that the burden of proof is on the I.O. at the initial stage to establish with cogent evidence that the purchase by of the subject property is not bona-fide.”
Further in M/s. Kavita Infrastructure Pvt. Ltd. (Supra) Appellate Tribunal for PBPT held that
“In the present case, it appears that the Respondent had passed the Provisional Attachment Order dated 23.03.2018, without conducting enquiry and ascertain the facts of the person in actual possession and holder of present title of the subject property, which is a fundamental and mandatory requirement as prescribed u/ s 24(3) of the PBPT Act, 1988 and a prerequisite for passing an attachment order is special act. All the provisions have to be applied very strictly. Different meaning cannot be given if the language of the section is plain simple and understandable.”
Thus, before adverting towards the draconian provisions of provisional attachment the IO is obligated to carry on such inquiry, investigation and form a concrete & irresistible conclusion supported with cogent evidence about the benami property in terms of Section 24. Post arriving to said conclusion he is required to follow the procedure provided under Rule 5 of the Prohibition of Benami Property Transactions Rule, 2016 (“Rules”), the same is recapitulated herein under:
“5. Provisional Attachment: For the purposes of sub-section (3) of the section 24, the initiating officer shall provisionally attach any property in the manner provided in the Second Schedule of Income tax Act, 1961 (43 of 1961).”
Part-III of Second Schedule of Income-Tax Act, 1961, containing rules dealing with attachment and sale of immovable property and for ready reference the rules are reproduced below:-
“48. Attachment- Attachment of the immovable property of the defaulter shall be made by an order prohibiting the defaulter from transferring or charging the property in any way and prohibiting all persons from taking any benefit under such transfer or charge.
49. Service of notice of attachment – A copy of the order of attachment shall be served on the defaulter.
50. Proclamation of attachment- The order of attachment shall be proclaimed at some place on or adjacent to the property attached by beat of drum or other customary mode, and a copy of the order shall be affixed on a conspicuous part of the property and on the notice board of the office of the Tax Recovery Officer.”
That the aforesaid procedures are sacrosanct and the IO is required to mandatorily follow them before a valid provisional attachment. As stated earlier procedures under special statute are required to be strictly followed. Further sanctity of the procedures in a statute has been discussed in the case of Ronald Wood Mathams v. State of West Bengal (AIR 1954 SC 455) wherein the Hon‟ble Supreme Court observed
“But it is essential that rules of procedure designed to ensure justice should be scrupulously followed, and Courts should be jealous in seeing that there is no breach of them”.
In the matters of proclamation u/s 87 of Criminal Procedure Code, the Hon’ble Punjab & Haryana High Court in the case of Pal Singh Santa Singh v. The State(AIR 1955 Punjab 18), has held that attachment without publication is invalid if publication of attachment was required under rules but not made.
Thus, provisional attachment made without due and proper inquiry required to be done under Section 24 of the Act, and/or made without complying the procedure provided will not be valid provisional attachment and will certainly fail to stand the test of the time.
Authors are advocates at New Delhi and Managing Partner & Partner respectively at Indo Legal Services a boutique law firm in New Delhi.
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