TMI Blog2013 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... I 42 - BOMBAY HIGH COURT] - The distinct legal status of a Company, apart from its Directors and shareholders were rightly noticed and the Directors were absolved from being proceeded with for recovery of dues from the Company to the Government and this was on a specific finding that the Statute and the Rules framed thereunder provided only for recovery from the "defaulter" and for proceedings against the property of the "defaulter". Benami Transactions - The transaction between the husband and wife cannot, going by the declaration of law, be ever termed as a benami transaction, since the Benami Act itself saves such transaction entered into for the benefit of the wife, even if the consideration is paid by the husband - To prove otherwise was the burden of the Department. Recovery Rules - Sustainability of Notices and Proceedings - neither the Act nor the Rules provide for any such proceeding to be taken against the wife or the sons and recovery to be made from the properties owned and possessed by such other persons - the judgment of the learned Single Judge is not liable to be interfered with, at all. The provision under Rule 9 making any transfer or delivery of a proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness, in the course of which he imported CF Lamps from China into India. The goods were cleared as per Bill of Entry dated 28.12.2001 by paying the customs duty and not the Anti-Dumping Duty. Admittedly the Government of India had imposed Anti-Dumping Duty by a notification dated 21.12.2001, seven days before the actual clearance, which again admittedly was not even in the notice of the officials of the Department. It is clearly admitted that by an inadvertence triggered by ignorance the goods were cleared without imposition of Anti-Dumping Duty and later show cause notice for levy of such Anti-Dumping Duty was issued on 13.02.2003, imposing a duty of Rs.97 ,35,379 /- under Section 28(2) of the Act. The levy is not in dispute, since we are told that the same has attained finality with the dismissal of a Special Leave Petition filed by the defaulter. 4. The Department has not detailed the various proceedings before the different forums, being the adjudicating authorities or the Courts; with respect to the levy as such and whether there were any interim orders staying the recovery. The appellants for their part assert ignorance of any of the proceedings since the 'defaulter' thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the statute does not permit such a course of action. Hence, the impugned notices were set aside and liberty was left to the Department to take appropriate proceedings known to law, if the Department intended to proceed against the properties and sell the same. 7. We have heard Sri.Thomas Mathew Nellimoottil,learned Standing Counsel appearing for the appellants as also Sri.Devan Ramachandran appearing for the wife of the defaulter and Sri.C.K.Karunakaran appearing for the sons of the defaulter. 8. The learned Standing Counsel for the appellants would urge that the judgment of the learned Single Judge is contrary to the law declared by this Court and the Supreme Court with respect to the benami transactions and the fiduciary relationship existing between a husband and wife. Relying on the decision in Marcel Martins v. M.Printer [(2012) 5 SCC 342], the learned Standing Counsel contends that the wife stood in a fiduciary capacity with the husband and the property purchased with the money of the husband, though standing in the name of the wife, the latter is bound to account for the same to the former. It can only be understood that the husband himself was managing the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l with the contention raised by the Standing Counsel with regard to benami transactions and sham transactions. The reliance placed on Ouseph Chacko v. Raman Nair [AIR 1989 Kerala 317], in our opinion, is not at all relevant. A learned Single Judge, in the said case considered the difference between a ' benami transaction' and a 'sham transaction'. AIR 1957 SC 49 [ Sree Meenakshi Mills Ltd. v. I.T.Commr.] and AIR 1980 SC 727 [ Bhim Singh v. Kan Singh] were noticed to find that there are two kinds of benami transactions and in both, the real title is divorced from the ostensible title. In the first case there is a real transaction by an operative transfer by which the transferor divests himself of his title but does not intend to vest the title on the transferee named in the document; but does so in favour of a third person who provides the consideration and takes possession. The transferee therein is a mere name lender and is a ' benami '. In the second class there is no effective transfer, the transferor retains title and possession, and there is absolute lack of consideration. This would fall in the category of 'sham transaction', though loosely termed as ' benami '. The learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Section 51 of the Code of Civil Procedure, a Division Bench of this Court found that a plea of 'no means' would not help the husband in so far as clause (c) of proviso to Section 51 CPC enables the Court to execute the decree for payment of money by detention in prison if it is satisfied that "the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account". This Court observed that to attract proviso (c), the requirement is not only that there must be a fiduciary capacity or relationship between the decree holder and judgment debtor, but the judgment debtor also must be made liable, because he was bound in such fiduciary capacity "to account". On facts it was held that the article sought to be returned by the estranged wife were entrusted to the husband by the wife in a fiduciary capacity and the husband is always liable to account for such properties so entrusted, whenever the wife makes a demand. The instant case is not a circumstance in which the husband calls upon the wife to account for his property. He is nowhere in the picture and the Department rested contend with issuing a notice under Rule 4 of the Rules, that too only to the default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, it cannot be gainsaid that the transaction was a benami transaction hit by the provisions contained in Benami Act; the son was held to be holding such property in trust for his father and his siblings. 14. The principle stated in the said decision cannot clothe the Department with any power or authority or a legal right to step into the shoes of the husband/defaulter; as has been stated above. The transaction between the husband and wife cannot, going by the declaration of law in the decisions cited above, be ever termed as a benami transaction, since the Benami Act itself saves such transaction entered into for the benefit of the wife, even if the consideration is paid by the husband.To prove otherwise is the burden of the Department and we cannot but notice that the purchase in favour of the wife was long before the transaction upon which the additional duty was levied by the Department.With respect to the property standing in the name of the sons, again, it is the burden of the Department to establish before the appropriate forum that the same has been purchased in the name of the sons with the money of the father/defaulter. In one instance the Department's claim is agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecially so when no officer authorized under the Act and the Rules are conferred with such adjudicatory powers. In the absence of any such judicial or quasi-judicial powers conferred on the authorities, the same can only be exercised by the Courts on which the State has conferred its judicial powers. 16. The provisions relevant for consideration is Section 142 of the Act and Chapter II of the Rules relating to procedure for attachment of property. Section 142 of the Act deals with recovery of sums due to Government and provides for the procedure for the same, when any sum payable by a person under the Act is not paid. Section 142(1)(a) deals with the authority of the officer to deduct or require any other officer to deduct the amounts due from any money owing to such person, which may be under the control of such officers. Section 142(1)(b) clothes the Assistant Commissioner or Deputy Commissioner of Customs to require another officer of the Customs to so recover any amounts payable by detaining and selling any goods belonging to such person which are under the control of any such officers. Clause (c) of sub-section (1) of Section 142 speaks of recovery in the event of failure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessor at the time of such transfer or otherwise disposal or change". We are specifically concerned with sub-clause (ii) of clause (c) under which the impugned notices dated 6.12.2010 have been issued. 17. For procedure relating to such recovery, the Rules have been framed by the Central Government. Before going to Chapter II, we notice the definition of "defaulter" in the Rules, which is as under: " R.2 (vi) 'Defaulter' means any person from whom government dues are recoverable under the Act". Chapter II deals with the procedure for attachment of property and where any Government dues are not paid by any defaulter, Rule 3 confers power on the Assistant Commissioner or Deputy Commissioner of Customs to prepare a Certificate specifying the amount due from such person and to send the same to the Commissioner having jurisdiction over the place in which the defaulter owns any movable or immovable property or resides or carries on his business or has his bank accounts. Rule 4 deals with issue of notice, to be issued by the Commissioner on receipt of the Certificate mentioned in Rule 3, upon the defaulter, requiring him to pay the amounts specified in the Certificate within seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is purportedly made by the notice dated 06.12.2010 is to distrain transactions of the property by the Sub Registrar. 19. As we have noticed, while the distrain order dated 06.12.2010 speaks of a notice under Rule 4 to the defaulter, it lists out the properties belonging to the wife and children of the defaulter and distrain such property and interdict such other persons from dealing with their property. We are afraid, neither the Act nor the Rules provide for any such proceeding to be taken against the wife or the sons and recovery to be made from the properties owned and possessed by such other persons. 20. We have come across a decision of the High Court of Judicature at Bombay in Suman N.Agarwal v. Union of India [Laws ( Bom )-2013-1-34].A Division Bench, in the said judgment, was considering almost a similar situation, wherein the petitioner had been proceeded against for recovery of the dues on the basis of a Certificate under Section 142(1)(c)(ii) of the Act read with Rule 6 of the Rules for debts of a Company (defaulter) in which the petitioner and her husband were Directors. The proceedings were specifically made against a property, more specifically a residential flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coverable only from the person who is an assessee within the meaning of the definition and the assessee in the said case being a Company, it was held that the Act does not impose any obligation or liability on the former Director. Looking at the subordinate legislation, i.e., the Rules of 1995, and specifically the definition of "defaulter", it was held that the definition itself means any person from whom the Government dues are recoverable under the Act. 22. Vandana Bidyut Chaterjee (supra) was a case in which the daughter of the Director of a Company was proceeded against. The notice of demand was addressed to the father, being a notice to "defaulter" under Section 142(1)(c)(ii) of the Act. The father had, by a deed of gift, conveyed a property to the daughter which was in her possession and, hence, the daughter's property was proceeded against for recovery of the dues on the premise that in the Municipal records the property still stood in the name of the father. The petitioner in the said case, being the daughter, again, raised the issue of, herself or even her father being not liable to pay the dues of the Company, in her reply. The father of the petitioner having died duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property has been gifted, are completely without jurisdiction". 23. In the instant case also, the 'defaulter' was the person who was conducting the business and the notice of default under the Rules was also served only on him. While invoking Rule 9, which prohibits alienation of properties in any manner, the properties of the wife and children were sought to be distrained.As has been held by us as also in the above cited decisions, there is no power conferred on the officer to adjudicate on the ownership of a property held by another, deeming it to be ostensible ownership and find the defaulter to be the real owner. In all the afore-cited decisions of the High Court of Bombay, it is to be noticed that the Directors of a Company were sought to be proceeded against. The distinct legal status of a Company, apart from its Directors and shareholders were rightly noticed and the Directors were absolved from being proceeded with for recovery of dues from the Company to the Government and this was on a specific finding that the Statute and the Rules framed thereunder provided only for recovery from the "defaulter" and for proceedings against the property of the "defaulter". 24. The le ..... 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