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2021 (10) TMI 343 - RAJASTHAN HIGH COURTBenami transaction - provisional attachment orders passed by the Initiating Officer u/s 24(4) of the Prohibition of Benami Property Transactions Act, 1988 - Real owners of property - transaction under the Companies Act of transferring shares of one shareholder to another - commercial complex as been leased out to the company by the JDA - HELD THAT:- As in the present case, all the properties in question being in the name of petitioner No.1-company and all applications which have been moved to the JDA authorities for surrendering land under Section 90B of the Rajasthan Land Revenue Act and for setting up a commercial building, have been made in the name of the company. The contention of the respondents with regard to intentions of petitioner Nos.2, 3 and 4 to own the plot of land adjacent to the plot owned by another company called "Paradise Complex Ltd." and therefore, the petitioner No.1-company was set up, is clearly a misreading of the provisions of the Companies Act. Merely because the petitioner nos.2, 3 and 4 can be said to be shareholders of the company, the Paradise Complex Ltd. would not make them owners of land of the company. So far as the ownership of land is concerned, each company has right to purchase property. The Benami Act, 1988, in the opinion of this Court, would not extend to properties purchased by the company. The transactions of the company are independent transactions which are only for the purpose of benefit of the company alone. It is a different aspect altogether that on account of benefit accruing to the company, the shareholders would also receive benefit and they may be beneficiaries to a certain extent. This would however not make shareholders as beneficial owners in terms of the definition as provided under Section 2(12) of the Benami Act, 1988. 'Company' as defined under the Companies Act, 1956 and incorporated thereunder, therefore, cannot be treated as benamidar as defined under the Benami Act, 1988. The company cannot be said to be a benamidar and its shareholders cannot be said to be beneficial owners within the meaning of the Benami Act, 1988. The entire fulcrum of this case, therefore, rests on misinterpretation of the provisions of the Benami Act, 1988. All the transactions in the corporate world made by the company would become benami transaction if the interpretation of definition as understood by the respondents is accepted by this Court. The entire proceedings initiated under the Benami Act, 1988 deserve to be quashed and set aside. The proceedings initiated under the Benami Act, 1988 are found to be based on income tax proceedings initiated and the statement recorded of one Madan Mohan Gupta. As per record, it is noticed that statement of Madan Mohan Gupta has not been accepted by the Income Tax Authorities for initiating any proceeding of evasion as against Rajendra Kumar Jain. The affidavits given by Madan Mohan Gupta are also not found to be reliable and he has changed his version from time to time. Transferring of shares by Madan Mohan Gupta to the petitioner nos.2, 3 and 4 could not be a ground to draw inference of benami transaction. It is opinion of the Court, the transactions done legally under the Companies Act of transferring shares of one shareholder to another, the benefit, if any, which may accrue on account of legally allowed transactions cannot be made as a ground to draw presumption of benami transaction under the Benami Act, 1988. The strict proof is required to be produced and there is no room for surmises or conjectures nor presumption can be made as the Benami Act has penal consequence. This Court also finds strength in the arguments made by learned counsel for the petitioners regarding provisions of Section 90B of the Rajasthan Land Revenue Act. Once the land has been surrendered and the order has been passed by the JDA under Section 90B of the Rajasthan Land Revenue Act, 1956 and the land has been converted from agriculture to commercial and registered lease deed has been executed by the JDA in favour of the company, the transaction is not a benami transaction. This Court concludes that action of the respondents in attaching commercial complex which has been leased out to the company by the JDA is illegal and unjustified and without jurisdiction. The provisional attachment orders dated 12.01.2018 passed by the Initiating Officer under Section 24(4) of the Benami Act, 1988 and the orders passed by the Adjudicating Authority dated 30.01.2019 confirming the orders under Section 26(3) of the Benami Act, 1988 are set aside with all consequential benefits. The property shall be handed over to the company.
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